<PAGE>
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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK
ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<CAPTION>
COMMISSION REGISTRANT; STATE OF INCORPORATION; IRS EMPLOYER
FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO.
----------- ----------------------------------- ------------------
<C> <S> <C>
1-11375 UNICOM CORPORATION 36-3961038
(an Illinois corporation)
37th Floor, 10 South Dearborn Street
Post Office Box A-3005
Chicago, Illinois 60690-3005
312/394-7399
1-1839 COMMONWEALTH EDISON COMPANY 36-0938600
(an Illinois corporation)
37th Floor, 10 South Dearborn Street
Post Office Box 767
Chicago, Illinois 60690-0767
312/394-4321
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF
EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
--------------------------- -------------------------
UNICOM CORPORATION
------------------
Common Stock, without par value New York, Chicago and Pacific
COMMONWEALTH EDISON COMPANY
---------------------------
(Listed on inside cover)
INDICATE BY CHECK MARK WHETHER THE REGISTRANTS (1) HAVE FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS, AND (2) HAVE BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES X*. No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
*Unicom Corporation was formed in connection with the restructuring of
Commonwealth Edison Company into a holding company structure. Unicom
Corporation became subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended, on August 30, 1994, when its Registration
Statement on Form 8-B was declared effective by the Securities and Exchange
Commission.
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<PAGE>
COMMONWEALTH EDISON COMPANY Securities Registered Pursuant to Section 12(b) of
the Act:
NAME OF
TITLE OF EACH EXCHANGE
EACH CLASS ON WHICH REGISTERED
-------------------------- -------------------------
First Mortgage Bonds:
7 5/8% Series 25, due June 1, 2003
8% Series 26, due October 15, 2003
8 1/8% Series 35, due January 15, 2007 New York
8 1/8% Series 36, due June 1, 2007
8 1/4% Series 37, due December 1, 2007
Sinking Fund Debentures:
3%, due April 1, 1999
2 7/8%, due April 1, 2001 New York
7 5/8% Series 1, due February 15, 2003
2 3/4%, due April 1, 1999 New York and Chicago
Cumulative Preference Stock, without
par value:
$1.90; $2.00; $7.24; $8.40; $8.38; New York, Chicago and
and $8.40 Series B Pacific
$2.425 New York
THE ESTIMATED AGGREGATE MARKET VALUE OF UNICOM CORPORATION'S 214,522,778 shares
of outstanding Common Stock, without par value, was approximately
$5,400,000,000 as of February 28, 1995. In excess of 99.93% of Unicom
Corporation's voting stock was owned by non-affiliates as of that date.
THE ESTIMATED AGGREGATE MARKET VALUE OF COMMONWEALTH EDISON COMPANY'S
outstanding $1.425 Convertible Preferred Stock and Cumulative Preference Stock
was approximately $800,000,000 as of February 28, 1995. Unicom Corporation held
in excess of 99.99% of the 214,191,595 shares of outstanding Common Stock,
$12.50 par value, of Commonwealth Edison Company as of that date.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of Unicom Corporation's Current Report on Form 8-K dated January 27,
1995 are incorporated by reference into Parts I, II and IV of the Unicom
Corporation Annual Report on Form 10-K and portions of its definitive Proxy
Statement relating to its Annual Meeting of shareholders to be held on May 24,
1995 are incorporated by reference into Part III of the Unicom Corporation
Annual Report on Form 10-K.
Portions of Commonwealth Edison Company's Current Report on Form 8-K/A-1
dated January 27, 1995 are incorporated by reference into Parts I, II and IV of
the Commonwealth Edison Company Annual Report on Form 10-K and portions of its
definitive Information Statement relating to its Annual Meeting of shareholders
to be held on May 24, 1995 are incorporated by reference into Part III of the
Commonwealth Edison Company Annual Report on Form 10-K.
<PAGE>
UNICOM CORPORATION
AND
COMMONWEALTH EDISON COMPANY
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
This document contains the Annual Reports on Form 10-K for the fiscal year
ended December 31, 1994 for each of Unicom Corporation and Commonwealth Edison
Company. Information contained herein relating to an individual registrant is
filed by such registrant on its own behalf. Accordingly, except for its
subsidiaries, Commonwealth Edison Company makes no representation as to
information relating to any other companies affiliated with Unicom Corporation.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Definitions............................................................... 1
ANNUAL REPORT ON FORM 10-K FOR UNICOM CORPORATION:
Part I
Item 1. Business........................................................ 2
General............................................................... 2
Net Electric Generating Capability.................................... 3
Construction Program.................................................. 4
Rate Proceedings...................................................... 6
Fuel Supply........................................................... 7
Regulation............................................................ 8
Employees............................................................. 14
Interconnections...................................................... 15
Franchises............................................................ 15
Business and Competition.............................................. 15
Executive Officers of the Registrant.................................. 17
Operating Statistics.................................................. 18
Item 2. Properties...................................................... 19
Item 3. Legal Proceedings............................................... 20
Item 4. Submission of Matters to a Vote of Security Holders............. 20
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters................................................................ 21
Item 6. Selected Financial Data......................................... 22
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 22
Item 8. Financial Statements and Supplementary Data..................... 22
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................ 22
Part III
Item 10. Directors and Executive Officers of the Registrant............. 23
Item 11. Executive Compensation......................................... 23
Item 12. Security Ownership of Certain Beneficial Owners and
Management..................................................... 23
Item 13. Certain Relationships and Related Transactions................. 23
</TABLE>
i
<PAGE>
UNICOM CORPORATION
AND
COMMONWEALTH EDISON COMPANY
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
TABLE OF CONTENTS (CONCLUDED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ANNUAL REPORT ON FORM 10-K FOR COMMONWEALTH EDISON COMPANY:
Part I
Item 1. Business........................................................ 24
Item 2. Properties...................................................... 25
Item 3. Legal Proceedings............................................... 25
Item 4. Submission of Matters to a Vote of Security Holders............. 25
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters....................................................... 25
Item 6. Selected Financial Data......................................... 25
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................... 25
Item 8. Financial Statements and Supplementary Data..................... 26
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.......................................... 26
Part III
Item 10. Directors and Executive Officers of the Registrant............. 26
Item 11. Executive Compensation......................................... 26
Item 12. Security Ownership of Certain Beneficial Owners and Management. 26
Item 13. Certain Relationships and Related Transactions................. 26
ANNUAL REPORTS ON FORM 10-K FOR UNICOM CORPORATION AND COMMONWEALTH EDISON
COMPANY:
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K................................................................... 27
Report of Independent Public Accountants on Supplemental Schedule to
Unicom Corporation.................................................... 34
Report of Independent Public Accountants on Supplemental Schedule to
Commonwealth Edison Company........................................... 35
Schedule II--Valuation and Qualifying Accounts.......................... 36
Signature Page to Unicom Corporation Annual Report on Form 10-K......... 37
Signature Page to Commonwealth Edison Company Annual Report on Form
10-K.................................................................. 38
</TABLE>
ii
<PAGE>
DEFINITIONS
The following terms are used in the text of this document with the following
meanings:
<TABLE>
<CAPTION>
TERM MEANING
----------------------- ------------------------------------------------------
<C> <S>
AFUDC Allowance for funds used during construction
CERCLA Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended
CFC Chlorofluorocarbon
Circuit Court Circuit Court of Cook County, Illinois
Clean Air Amendments Clean Air Act Amendments of 1990
ComEd Commonwealth Edison Company, which is a majority-owned
subsidiary of Unicom.
Congress U.S. Congress
Cotter Cotter Corporation, which is a wholly-owned subsidiary
of ComEd.
DOE U.S. Department of Energy
EMFs Electric and magnetic fields
FERC Federal Energy Regulatory Commission
Fuel Matters Settlement A settlement relating to the ICC fuel reconciliation
proceedings involving ComEd for the period from 1985
through 1988 and to future challenges by the settling
parties to the prudency of ComEd's western coal costs
for the period from 1989 through 1992.
IBEW International Brotherhood of Electrical Workers
(AFL-CIO)
ICC Illinois Commerce Commission
IDNS Illinois Department of Nuclear Safety
Illinois EPA Illinois Environmental Protection Agency
Indiana Company Commonwealth Edison Company of Indiana, Inc., which is
a wholly-owned subsidiary of ComEd.
IPCB Illinois Pollution Control Board
MAIN Mid-America Interconnected Network
MGP Manufactured gas plant
NPDES National Pollutant Discharge Elimination System
NPL National Priorities List
NRC Nuclear Regulatory Commission
PCBs Polychlorinated biphenyls
PRPs Potentially responsible parties under CERCLA
Rate Matters Settlement A settlement concerning the proceedings relating to
ComEd's 1985 and 1991 ICC rate orders (which orders
relate to, among other things, the recovery of costs
associated with ComEd's four most recently completed
nuclear generating units), the proceedings relating
to the reduction in the difference between ComEd's
summer and non-summer residential rates that was
effected in the summer of 1988, outstanding issues
relating to the appropriate interest rate and rate
design to be applied to a refund made by ComEd during
1990 relating to a 1988 ICC rate order, and matters
related to a rider to ComEd's rates that it was
required to file as a result of the change in the
federal corporate tax rate made by the Tax Reform Act
of 1986.
Rate Order ICC rate order issued on January 9, 1995, as
subsequently modified
Remand Order ICC rate order issued on January 6, 1993, as
subsequently modified
SEC Securities and Exchange Commission
Unicom Unicom Corporation
Unicom Enterprises Unicom Enterprises Inc., which is a wholly-owned
subsidiary of Unicom.
Unicom Thermal Unicom Thermal Technologies Inc., which is a wholly-
owned subsidiary of Unicom Enterprises.
Units ComEd's nuclear generating units known as Byron Unit 2
and Braidwood Units 1 and 2
U.S. EPA U.S. Environmental Protection Agency
Westinghouse Westinghouse Electric Corporation
</TABLE>
1
<PAGE>
ANNUAL REPORT ON FORM 10-K FOR UNICOM CORPORATION
PART I
ITEM 1. BUSINESS.
GENERAL
Unicom was organized in the state of Illinois on January 28, 1994. On
September 1, 1994, a corporate restructuring took place in which Unicom became
the parent holding company of ComEd and Unicom Enterprises, an unregulated
subsidiary engaged, through a subsidiary, in energy service activities. The
primary purpose of the restructuring was to permit Unicom Enterprises to engage
in energy service activities without the prior approval of, or being regulated
by, the ICC, in part to permit timely responses to competitive activities which
could adversely affect ComEd's utility business and in part to permit Unicom
Enterprises to take advantage of unregulated business opportunities. Unicom's
principal executive offices are located at 10 South Dearborn Street, Post
Office Box A-3005, Chicago, Illinois 60690-3005, and its telephone number is
312/394-7399.
Notwithstanding the restructuring, ComEd will continue to represent
substantially all of the assets, revenues and net income of Unicom; and
Unicom's resources and results of operations will be largely dependent on, and
will reflect, those of ComEd. Unicom Enterprises' sole subsidiary, Unicom
Thermal, is a development stage company and is not expected to make a material
contribution to the revenues or results of operations of Unicom in the near
future. Consequently, the descriptions that follow focus on the utility
operations of ComEd, although information is provided with respect to the
unregulated operations of Unicom Enterprises.
Utility Operations
ComEd is engaged principally in the production, purchase, transmission,
distribution and sale of electricity to a diverse base of residential,
commercial and industrial customers in northern Illinois. ComEd was organized
in the state of Illinois on October 17, 1913 as a result of the merger of
Cosmopolitan Electric Company into the original corporation named Commonwealth
Edison Company. The latter had been incorporated on September 17, 1907. ComEd's
electric service territory has an area of approximately 11,540 square miles and
an estimated population of approximately 8.2 million as of December 31, 1992,
approximately 8.1 million as of December 31, 1993 and approximately 8.2 million
as of December 31, 1994. It includes the city of Chicago, an area of about 225
square miles with an estimated population of three million from which ComEd
derived approximately one-third of its ultimate consumer revenues in 1994.
ComEd had approximately 3.3 million electric customers at December 31, 1994.
ComEd's principal executive offices are located at 10 South Dearborn Street,
Post Office Box 767, Chicago, Illinois 60690-0767, and its telephone number is
312/394-4321.
ComEd's financial condition will continue to depend on its ability to
generate revenues to cover its costs and to maintain adequate debt and
preferred and preference stock coverages and common stock equity earnings.
ComEd has no significant revenues other than from the sale of electricity.
ComEd's management recognizes that competitive and regulatory circumstances in
Illinois may limit its ability to raise its rates. Consequently, ComEd's
financial condition will be affected by, and ComEd's management is addressing,
actions to maintain and increase sales, to control operating and capital
expenditures and to anticipate competitive activities. See "Rate Proceedings"
and "Business and Competition" below.
During the past several years, ComEd has instituted cost reduction plans
including various workforce reductions. ComEd reached agreement in August 1993
with its unions regarding certain cost reduction actions. The agreement
provided for a wage freeze until April 1, 1994, changes to reduce health care
plan costs, increased use of part-time employment and changes in holiday
provisions. The agreement also included a continuation of negotiations relative
to other issues.
2
<PAGE>
ComEd and union representatives reached agreement in February 1994 and
announced an offer of a voluntary early retirement program. This program is
available to ComEd and the Indiana Company management, non-union and union
employees eligible to retire or who would become eligible to retire after
December 31, 1993 and before April 1, 1995. The period for most eligible
employees to elect to participate in the program expired on April 20, 1994. The
charge to income related to the program in 1994 was approximately $20 million
(net of income tax effects) related to employees who accepted the program
during 1994. ComEd estimates that, in total, approximately $21 million (net of
income tax effects) will be charged to income as a result of the program. See
"Regulation" below and Note 12 of Notes to Financial Statements in Unicom's
Current Report on Form 8-K dated January 27, 1995 and ComEd's Current Report on
Form 8-K/A-1 dated January 27, 1995 (the "January 27, 1995 Form 8-K Reports").
See "Fuel Supply," "Regulation" and "Item 3. Legal Proceedings" herein for
information concerning administrative and legal proceedings and certain other
matters involving ComEd, the Indiana Company and Cotter. The outcome of certain
of the proceedings or matters described or referred to therein, if not
favorable to ComEd and the Indiana Company, could have a material adverse
effect on the future business and operating results of Unicom, ComEd and the
Indiana Company.
Unregulated Operations
Unicom's wholly-owned subsidiary, Unicom Enterprises, intends, through
subsidiaries, to engage in energy-related businesses which will not be subject
to utility regulation by state or federal agencies. As of February 28, 1995,
Unicom Enterprises had only one subsidiary, Unicom Thermal, which will provide
district cooling services to office and other buildings from central locations
in the city of Chicago. District cooling involves, in essence, the production
of chilled water at a central location and its circulation from such location
to customers' buildings in a closed circuit of piping. Such water is used to
chill air in customers' air conditioning systems without the use of CFCs. As a
result of the Clean Air Amendments, the manufacture and use of CFCs will be
curtailed, commencing in 1996, thereby creating an excellent marketing
opportunity for non-CFC based systems, such as district cooling. Unicom Thermal
and the city of Chicago have entered into a franchise agreement. Unicom Thermal
is currently a development stage enterprise and, as such, has generated no
sales revenues. Unicom Thermal has secured several long-term contracts and
expects to begin serving customers in the summer of 1995. Unicom Thermal is in
the process of negotiating with additional potential customers.
NET ELECTRIC GENERATING CAPABILITY
ComEd and the Indiana Company consider their owned (non-summer) generating
capability to be 22,522,000 kilowatts. After deducting summer limitations of
557,000 kilowatts, ComEd and the Indiana Company consider their net summer
generating capability to be 21,965,000 kilowatts. The net generating capability
available for operation at any time may be less due to regulatory restrictions,
fuel restrictions, efficiency of cooling facilities and to generating units
being temporarily out of service for inspection, maintenance, refueling,
repairs or modifications required by regulatory authorities. See "Item 2.
Properties."
ComEd's highest peak load experienced to date occurred on July 5, 1994 and
was 17,928,000 kilowatts; and the highest peak load experienced to date during
a winter season occurred on January 18, 1994 and was 14,179,000 kilowatts.
ComEd's kilowatthour sales and generation are generally higher (primarily
during the summer periods but also during the winter periods) when temperature
extremes create demand for either summer cooling or winter heating.
3
<PAGE>
CONSTRUCTION PROGRAM
Utility Operations
ComEd and its electric utility subsidiary, the Indiana Company, have a
construction program for the three-year period 1995-97 which consists
principally of improvements to ComEd's and the Indiana Company's existing
nuclear and other electric production, transmission and distribution
facilities. It does not include funds (other than for planning) to add new
generating capacity to ComEd's system. The program, as approved by Unicom and
ComEd in December 1994, calls for electric plant and equipment expenditures of
approximately $2,750 million (excluding nuclear fuel expenditures of
approximately $800 million). It is estimated that such construction
expenditures, with cost escalation computed at 3.5% annually, will be as
follows:
<TABLE>
<CAPTION>
THREE-YEAR
1995 1996 1997 TOTAL
---- ---- ---- ----------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Production................................. $415 $395 $360 $1,170
Transmission and Distribution.............. 410 445 455 1,310
General.................................... 95 90 85 270
---- ---- ---- ------
Total.................................. $920 $930 $900 $2,750
==== ==== ==== ======
</TABLE>
In October 1994, ComEd made a commitment to provide for the replacement of
the steam generators at its Braidwood Unit 1 and Byron Unit 1 nuclear
generating plants, for service in the years 1998 and 1999, respectively, at a
total estimated cost of approximately $470 million. Approximately $170 million
of this estimated cost is included in the construction expenditures shown
above. See "Regulation," subcaption "Nuclear" below for additional information.
ComEd and the Indiana Company's construction expenditures during 1994 were
approximately $721 million.
ComEd's gross investment in nuclear generating capacity (excluding nuclear
fuel) is approximately $14 billion at December 31, 1994, and ComEd expects that
investment to be approximately $14.5 billion by the end of 1997 as a result of
improvements. Gross additions to and retirements from utility property,
excluding nuclear fuel, of ComEd and the Indiana Company for the five years
ended December 31, 1994 were $4,313 million and $431 million, respectively.
ComEd periodically reviews its projection of probable future demand for
electricity in its service territory. It currently projects an average annual
growth of 2% in annual peak load and 1.75% in annual output through 1998;
thereafter, due in part to implementation of national energy efficiency
standards, ComEd projects long-term average annual growth of 1.75% in annual
peak load and 1.5% in annual output. ComEd's forecasts of peak load indicate a
need for additional resources to meet demand, either through generating
capacity or through equivalent purchased power or demand-side management
resources, in 1997 and each year thereafter through the year 2000. The
projected resource needs reflect the current planning reserve margin
recommendations of MAIN, the reliability council of which ComEd is a member.
ComEd's forecasts indicate that the need for additional resources during this
period would exist only during the summer months. ComEd does not expect to make
expenditures for additional capacity to the extent the need for capacity can be
met through cost-effective demand-side management resources, non-utility
generation or other power purchases. To assess the market potential to provide
such cost-effective resources, ComEd solicited proposals in 1992 to supply it
with cost-effective demand-side management resources, non-utility generation
resources and other-utility power purchases sufficient to meet forecasted
requirements through the year 2000. The responses to the solicitation
suggested, at that time, that adequate resources to meet ComEd's needs could be
obtained from those sources. Based on its most recent load forecast and the
current wholesale power market, ComEd cannot conclude that those sources
represent the most
4
<PAGE>
economical alternative. If ComEd were to build additional capacity to meet its
needs, it would need to make additional expenditures during the 1995-97 period.
ComEd's construction program will be reviewed and modified as necessary to
adapt to changing economic conditions, rate levels and other relevant factors
including changing business and legal needs and requirements. ComEd cannot
anticipate all such possible needs and requirements. ComEd has not budgeted for
a number of projects, particularly at generating stations, which could be
required, but which ComEd does not expect to be required during the budget
period. In particular, ComEd has not budgeted for the construction of scrubbers
at its Kincaid station or for the replacement of major amounts of piping at its
boiling water reactor nuclear stations. While regulatory needs in particular
are more likely, on balance, to require increases in construction expenditures
than decreases, financial constraints may require compensating or greater
reductions in other construction expenditures. See "Regulation" below for
additional information.
The 1995-97 construction program includes approximately $38 million for
environmental control facilities, of which approximately $6 million, $14
million and $18 million is budgeted for 1995, 1996 and 1997, respectively.
Expenditures on such facilities were $22 million, $28 million and $24 million
during 1992, 1993 and 1994, respectively.
Purchase commitments for ComEd and the Indiana Company, principally related
to construction and nuclear fuel, approximated $1,210 million at December 31,
1994. In addition, ComEd has substantial commitments for the purchase of coal
as indicated in the following table.
<TABLE>
<CAPTION>
CONTRACT PERIOD COMMITMENT(1)
-------- --------- -------------
<S> <C> <C>
Black Butte Coal Co..................................... 1995-2007 $1,119
Decker Coal Co. ........................................ 1995-2015 $ 822
Big Horn Coal Co. ...................................... 1998 $ 21
Other commitments....................................... 1995-1996 $ 31
</TABLE>
--------
(1) Estimated costs in millions of dollars FOB mine. No estimate of future cost
escalation has been made.
For additional information concerning these coal contracts and ComEd's fuel
supply, see "Fuel Supply" below and Notes 1 and 19 of Notes to Financial
Statements in the January 27, 1995 Form 8-K Reports.
ComEd has forecast that internal sources will provide more than three-fourths
of the funds required for ComEd's construction program and other capital
requirements, including nuclear fuel expenditures, contributions to nuclear
decommissioning funds, sinking fund obligations and refinancing of scheduled
debt maturities (the annual sinking fund requirements for ComEd preference
stock and for ComEd and the Indiana Company long-term debt are summarized in
Notes 7 and 8, respectively, of Notes to Financial Statements in the
January 27, 1995 Form 8-K Reports). The forecast assumes the rate levels
reflected in the Rate Order (described below) remain in effect. See "Rate
Proceedings" herein for additional information.
See Note 1 of Notes to Financial Statements and "Results of Operations"
subcaption "Other Items" in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the January 27, 1995 Form 8-K Reports
for information concerning AFUDC.
Unregulated Operations
Unicom Thermal has forecasted capital expenditures for the years 1995-97 of
approximately $95 million, primarily representing the construction costs of its
district cooling facilities and piping system. Construction of its first
district cooling facility is expected to be completed by May 1995 and is
expected to cost approximately $30 million. As of December 31, 1994, Unicom
Thermal's purchase commitments, principally related to construction, were
approximately $24 million. Unicom Thermal's construction expenditures during
1994 were approximately $19 million.
5
<PAGE>
Unicom expects to obtain funds to invest in Unicom Enterprises and its
subsidiaries principally from dividends that it receives on its ComEd common
stock and from bank borrowings by Unicom Enterprises. While the amount of
dividends on ComEd common stock is expected to be greater than the amount of
dividends on Unicom common stock, the availability of such dividends is
dependent on ComEd's financial performance and cash position. Other forms of
financing by ComEd of Unicom or its other subsidiaries, such as loans or
additional equity investments (none of which is expected), would be subject to
the prior approval of the ICC.
Unicom Enterprises has a $200 million credit facility which will expire in
1997 of which $180 million was unused as of February 28, 1995. The credit
facility can be used by Unicom Enterprises to finance investments in
unregulated energy-related businesses and projects, including Unicom Thermal,
and for general corporate purposes. The credit facility is guaranteed by Unicom
and includes certain covenants with respect to Unicom's and Unicom Enterprises'
operations. Interest rates for borrowings under the credit facility would be
set at the time of a borrowing and would be based on either a prime interest
rate or a floating rate bank index plus a spread which will vary with the
credit rating of ComEd's outstanding first mortgage bonds. See Note 9 of Notes
to Financial Statements in Unicom's January 27, 1995 Form 8-K Report for
additional information regarding certain covenants with respect to Unicom's and
Unicom Enterprises' operations.
RATE PROCEEDINGS
ComEd's revenues, net income, cash flows and plant carrying costs have been
affected directly by various rate-related proceedings. During the periods
presented in the consolidated financial statements, ComEd was involved in a
number of proceedings concerning its rates. The uncertainties associated with
such proceedings and related issues, among other things, led to the Rate
Matters Settlement and the Fuel Matters Settlement (which are discussed below).
Settlements Relating to Certain Rate Matters
Under the Rate Matters Settlement, effective as of November 4, 1993, ComEd
reduced its rates by approximately $339 million annually and commenced
refunding approximately $1.26 billion (including revenue taxes), plus interest
at five percent on the unpaid balance, through temporarily reduced rates over
an initial refund period which ended in November 1994 (to be followed by a
reconciliation period of no more than five months). ComEd had previously
deferred the recognition of revenues during 1993 as a result of developments in
the proceedings related to the 1991 ICC rate order, which resulted in a
reduction to 1993 net income of approximately $160 million or $0.75 per common
share. The recording of the effects of the Rate Matters Settlement in October
1993 reduced 1993 net income by approximately $292 million or $1.37 per common
share, in addition to the approximately $160 million effect of the deferred
recognition of revenues and after the partially offsetting effect of recording
approximately $269 million or $1.26 per common share in deferred carrying
charges, net of income taxes, authorized in the Remand Order. The deferred
recognition of revenues was eliminated in October 1993 at the time the
provisions for revenue refunds related to the Rate Matters Settlement, which
reflected those deferred revenues, were recorded.
Under the Fuel Matters Settlement, effective as of December 2, 1993, ComEd
commenced paying approximately $108 million (including revenue taxes) to its
customers through temporarily reduced collections under its fuel adjustment
clause over a twelve-month period which ended in November 1994. The recording
of the effects of the Fuel Matters Settlement in October 1993 reduced 1993 net
income by approximately $62 million or $0.29 per common share.
Other Rate Matters
On January 9, 1995, the ICC issued the Rate Order in the proceedings relating
to ComEd's February 10, 1994 rate increase request. The Rate Order provides,
among other things, for (i) an
6
<PAGE>
increase in ComEd's total revenues of approximately $301.8 million (excluding
add-on revenue taxes) or 5.2%, on an annual basis, including a $303.2 million
increase in base rates, (ii) the collection of municipal franchise costs as an
adder to base rates until May 1, 1995, when such costs will be collected
prospectively on an individual municipality basis through a rider, and (iii)
the use of a rider, with annual review proceedings, to pass on to ratepayers
increases or decreases in estimated costs associated with the decommissioning
of ComEd's nuclear generating units. See "Depreciation and Decommissioning" in
Note 1 of Notes to Financial Statements in the January 27, 1995 Form 8-K
Reports for information related to the level of decommissioning cost
collections allowed in the Rate Order. The rates provided in the Rate Order
became effective on January 14, 1995; however, they are being collected subject
to refund as a result of subsequent judicial action. Intervenors and ComEd have
filed appeals of the Rate Order with the Illinois Appellate Court.
In the Rate Order, the ICC determined that the Units were 100% "used and
useful" and that the previously determined reasonable costs of such Units, as
depreciated, should be included in full in ComEd's rate base.
FUEL SUPPLY
The kilowatthour generation of ComEd and the Indiana Company for 1994 was
provided from the following fuel sources: nuclear 71%, coal 25%, oil 1% and gas
3%.
Nuclear Fuel
ComEd has uranium concentrate inventory, supply contracts and subsidiary
resources sufficient to meet the majority of its uranium concentrate
requirements through 1995 and portions of its requirements for periods beyond
1995. ComEd's contracted conversion services are sufficient to meet most of its
uranium conversion requirements through 1996. All of ComEd's enrichment
requirements have been contracted for through 1999. Commitments for fuel
fabrication have been obtained for ComEd's nuclear units at least through 1999.
ComEd does not anticipate that it will have any difficulty in negotiating
contracts for uranium concentrates, conversion, enrichment and fuel fabrication
services for its remaining requirements.
See "Regulation," subcaption "Nuclear" herein for information concerning the
disposal of radioactive waste.
Coal
ComEd burns low sulfur western coal at all its coal-fired stations. ComEd's
present policy is to maintain a coal inventory of at least 30 days of high
utilization. As of February 28, 1995, coal inventories approximated 33 days.
The average cost per ton of coal consumed by ComEd and the Indiana Company for
the years 1992, 1993 and 1994, including transportation charges, was $52.57,
$49.42 and $39.50, respectively.
Compared to other utilities, ComEd has relatively low average fuel costs.
This results from ComEd's reliance predominantly on lower cost nuclear
generation. ComEd's coal costs, however, are high compared to those of other
utilities. ComEd's western coal contracts and its rail contracts for the
delivery of the western coal were renegotiated during 1992 effective as of
January 1, 1993, to provide, among other things, for significant reductions in
the delivered price of the coal over the duration of the contracts. However,
the renegotiated contracts provide for the purchase of certain coal at prices
substantially above currently prevailing market prices and ComEd has
significant purchase commitments under its contracts. Coal costs (including
costs of reserve coal) which are not recoverable in rates, if any, will have to
be charged to income. For additional information concerning ComEd's coal
purchase commitments, see "Construction Program," subcaption "Utility
Operations" above. For additional information regarding ComEd's fuel
reconciliation proceedings and coal
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reserves, see "Fuel Adjustment Clause" below and Notes 1 and 2 of Notes to
Financial Statements in the January 27, 1995 Form 8-K Reports.
Oil and Gas
ComEd's fast-start peaking units use middle distillate oils. Approximately
half of this capacity can also be fueled with natural gas. ComEd's 2,698,000
kilowatt Collins station is fueled with natural gas and residual oil. ComEd
purchases oil and gas in the spot market as needed. The conversion of three of
the five units at Collins station to dual fuel capability (residual oil and
natural gas) was completed during 1994. ComEd has a contract for the delivery
and storage of natural gas from gas pipelines to Collins station which expires
in 2003.
Fuel Adjustment Clause
Through its fuel adjustment clause, ComEd recovers from its customers the
cost of the fuel used to generate electricity and of purchased power as
compared to fuel costs included in base rates. The amounts collected under the
fuel adjustment clause are subject to review by the ICC, which, under the
Illinois Public Utilities Act, is required to hold annual public hearings to
reconcile the collected amounts with the actual cost of fuel and power
prudently purchased. In the event that the collected amounts exceed such actual
cost, then the ICC can order that the excess be refunded.
For additional information concerning ComEd's fuel reconciliation proceedings
and coal reserves, see Notes 1 and 2 of Notes to Financial Statements in the
January 27, 1995 Form 8-K Reports.
REGULATION
ComEd and the Indiana Company are subject to state and federal regulation in
the conduct of their respective businesses, including the operations of Cotter.
Such regulation includes rates, securities issuance, nuclear operations,
environmental and other matters. Particularly in the cases of nuclear
operations and environmental matters, such regulation can and does affect
operational and capital expenditures. ComEd is subject to regulation by the ICC
as to rates and charges, issuance of securities (other than debt securities
maturing in not more than twelve months), service and facilities,
classification of accounts, transactions with affiliated interests as defined
in the Illinois Public Utilities Act and other matters. In addition, the ICC in
certain of its rate orders has exercised jurisdiction over ComEd's
environmental control program.
ComEd is subject to the jurisdiction of the FERC with respect to the issuance
of debt securities maturing in not more than twelve months. ComEd is also
subject to the jurisdiction of the FERC and the DOE under the Federal Power Act
with respect to certain other matters, including the sale for resale of
electric energy and the transmission of electric energy in interstate commerce,
and to the jurisdiction of the DOE with respect to the disposal of spent
nuclear fuel and other radioactive wastes.
On September 1, 1994, a corporate restructuring took place in which Unicom
became the parent holding company of ComEd and Unicom Enterprises, an
unregulated subsidiary engaged, through a subsidiary, in energy service
activities. The primary purpose of the restructuring was to permit Unicom
Enterprises to engage in energy service activities without the prior approval
of, or being regulated by, the ICC, in part to permit timely responses to
competitive activities which could adversely affect ComEd's utility business
and in part to permit Unicom Enterprises to take advantage of unregulated
business opportunities.
Unicom is a public utility holding company as defined by the Public Utility
Holding Company Act of 1935 because of its majority ownership of common stock
of ComEd, and ComEd is a public utility holding company as defined in such Act
because of its ownership of the Indiana Company. However, both Unicom and ComEd
are exempt from most provisions of such Act.
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The Indiana Company, an "affiliated interest" of ComEd within the meaning of
the Illinois Public Utilities Act, is subject to regulation by the Indiana
Utility Regulatory Commission and to the jurisdiction of the FERC, the DOE and
federal and state of Indiana pollution control and other agencies.
Nuclear
The IDNS has jurisdiction over certain activities in Illinois relating to
nuclear power and safety, and radioactive materials. Effective June 1, 1987,
the IDNS replaced the NRC as the regulator and licensor of certain source, by-
product and special nuclear material in quantities not sufficient to form a
critical mass, including such material contained in various measuring devices
used at fossil-fuel power plants. The IDNS has promulgated regulations which
are substantially similar to the corresponding federal regulations. The IDNS
also has authority to license a low-level radioactive waste disposal facility
and to regulate alternative methods for disposing of materials which contain
only trace amounts of radioactivity.
Under the Nuclear Waste Policy Act of 1982, the DOE is responsible for the
selection and development of repositories for, and the disposal of, spent
nuclear fuel and high-level radioactive waste. ComEd, as required by that Act,
has signed a contract with the DOE to provide for the disposal of spent nuclear
fuel and high-level radioactive waste from ComEd's nuclear generating stations
beginning not later than January 1998; however, this delivery schedule is
expected to be delayed significantly. It is not certain when the DOE will
accept high-level radioactive waste from ComEd and other operators of nuclear
power plants. Extended delays or a default by the DOE would lead to
consideration of costly alternatives involving serious siting and environmental
issues. The contract with the DOE requires ComEd to pay the DOE a one-time fee
applicable to nuclear generation through April 6, 1983 of approximately $277
million, with interest to date of payment, and a fee payable quarterly equal to
one mill per kilowatthour of nuclear-generated and sold electricity after April
6, 1983. ComEd has elected to pay the one-time fee, with interest, just prior
to the first scheduled delivery of spent nuclear fuel to the DOE. The costs
incurred by the DOE for disposal activities will be paid out of fees charged to
owners and generators of spent nuclear fuel and high-level radioactive waste.
ComEd has primary responsibility for the interim storage of its spent nuclear
fuel. ComEd's capability to store spent fuel is more than adequate for some
years to come. All stations except Dresden and Zion stations will have spent
fuel capacity at least through the year 2009. Dresden station has capacity
through 2001. Zion station has capacity through 2005. Meeting spent fuel
storage requirements beyond the years described above could require new and
separate storage facilities, the costs for which have not been determined.
The federal Low-Level Radioactive Waste Policy Act of 1980 provides that
states may enter into compacts to provide for regional disposal facilities for
low-level radioactive waste and restrict use of such facilities to waste
generated within the region. Since July 1, 1994, there have been no commercial
operating sites in the United States for the disposal of low-level radioactive
waste available to ComEd. Illinois has entered into a compact with the state of
Kentucky, which has been approved by Congress as required by the Waste Policy
Act. Neither Illinois nor Kentucky currently has an operational site, and one
is currently not expected to be operational until after the year 2000. ComEd
has temporary on-site storage capacity at its nuclear generating stations for a
limited amount of low-level radioactive waste and is planning additional such
capacity pending development of disposal facilities by the state of Illinois.
ComEd anticipates the possibility of serious difficulties in disposing of low-
level radioactive waste.
ComEd is subject to the jurisdiction of the NRC with respect to its nuclear
generating stations. The NRC regulations control the granting of permits and
licenses for the construction and operation of nuclear generating stations and
subject such stations to continuing review and regulation. The
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NRC review and regulatory process covers, among other things, operations,
maintenance, and environmental and radiological aspects of such stations. The
NRC may modify, suspend or revoke licenses and impose civil penalties for
failure to comply with the Atomic Energy Act, the regulations under such Act or
the terms of such licenses.
During the past several years, the NRC has placed two of ComEd's nuclear
generating stations, Zion station and Dresden station, on its list of plants to
be monitored closely. Although Zion station (which was placed on the list in
early 1991) was removed from that list in February 1993, Dresden station (which
was placed on the list in early 1992) remains on the list. The NRC concern with
Dresden station was that, although processes and programs were in place to make
improvements, the rate of improvement needed to accelerate. In February 1995,
the NRC reported that a sense of progress at Dresden is evident, but that more
time is needed to determine if the improving trend will continue. Because of
the age of the Zion, Dresden and Quad-Cities stations, ComEd anticipates
continued expenditures in order to improve reliability and to meet NRC
regulatory expectations. Beginning in late 1992, ComEd restructured its
management of its nuclear operations division and since that time has committed
additional resources to the stations' operations.
In January 1994, ComEd was notified by the NRC that ComEd's LaSalle County
and Quad-Cities stations were placed on the list of plants with adverse
performance trends. ComEd was informed that the NRC concerns about LaSalle
County station included, among other matters, deficient radiation worker
practices. The NRC concerns with Quad-Cities station included, among other
matters, deficiencies in the condition of certain station equipment and the
effectiveness of the operators of the units in identifying and responding to
certain operational problems. ComEd has provided written and verbal responses
to the NRC and is working to resolve the concerns. In the February 1995 report,
the NRC concluded that LaSalle County had arrested the adverse trends in most
areas and "normal" designation should be returned. Like Dresden and LaSalle
County, the NRC noted that positive developments had been observed at Quad-
Cities but additional time was required to determine if those developments had
been effective in arresting the adverse trends and thus Quad-Cities remains on
the list of plants with adverse performance trends. As noted above, ComEd
anticipates continued expenditures in order to improve reliability and to meet
NRC regulatory expectations in connection with the Zion, Dresden and Quad-
Cities stations. In addition, generating station availability and performance
during a year may be issues in fuel reconciliation proceedings in assessing the
prudence of fuel and power purchases during such year. Final ICC orders have
been issued in fuel reconciliation proceedings for years prior to 1993;
however, certain intervenors have appealed the ICC order in the 1989 fuel
reconciliation proceedings on issues relating to nuclear station performance.
In accordance with a commitment to the NRC, ComEd examined its operating
boiling water nuclear generating units in 1983 to determine the existence or
extent of inter-granular stress corrosion in certain of the large diameter
piping in those units. Inter-granular stress corrosion was discovered in the
Dresden and Quad-Cities units. ComEd replaced the stainless steel piping
susceptible to stress corrosion at Dresden Unit 3 and is taking alternative
remedial actions which are intended to minimize the need to replace such piping
at Dresden Unit 2, Quad-Cities Units 1 and 2 and LaSalle County Units 1 and 2.
If ComEd is required to replace all of such piping, the estimated construction
expenditures, in current-year (1995) dollars, would be approximately $645
million.
ComEd has studied the possibility of having to replace the steam generators
at its Zion station. The initial studies were completed in June 1991 and
additional follow-up studies are continuing. Based on the most recent findings
of these studies, it will not be necessary to replace the Zion steam generators
until at least the year 2005 and ComEd believes that the potential exists that
replacement will not be necessary during the original operating license life,
which expires in 2013. ComEd has also studied the replacement of the steam
generators at Byron Unit 1 and Braidwood Unit 1. The studies indicate that,
from a technical standpoint, the steam generators should be replaced and, from
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an economic standpoint, the replacements should be performed at the earliest
possible time. The steam generator replacements are currently planned to be
completed in 1998 for Braidwood Unit 1 and in 1999 for Byron Unit 1. The
estimated replacement costs, including the costs of removal of the existing
steam generators, are approximately $235 million for each unit. Approximately
$170 million of expenditures are included in the current 1995-97 construction
program. See "Item 3. Legal Proceedings" herein concerning litigation by ComEd
against Westinghouse concerning steam generators.
During the year 1994, civil penalties were imposed on ComEd by the NRC on
eight occasions for violations of NRC regulations in amounts aggregating
$867,500. Since January 1, 1995, there have been no violations of NRC
regulations identified which have resulted in civil penalties. There are two
potentially enforceable issues currently outstanding and under review by the
NRC.
The uranium mining and milling operations of Cotter are subject to regulation
by the state of Colorado and the NRC.
Environmental
ComEd and the Indiana Company are subject to regulation regarding
environmental matters by the United States and by the states of Illinois,
Indiana, Iowa and, in the case of Cotter, Colorado, and by local jurisdictions
where ComEd and the Indiana Company operate their facilities. The IPCB has
jurisdiction over environmental control in the state of Illinois, which
includes authority to regulate air, water and noise emissions and solid waste
disposal, together with the Illinois EPA, which enforces regulations of the
IPCB and issues permits in connection with environmental control. The U.S. EPA
administers certain federal statutes relating to such matters. The IPCB has
published a proposed rule under which it would have the power to regulate
radioactive air pollutants under the Illinois Environmental Protection Act and
the Federal Clean Air Act Amendments of 1977.
Air quality regulations, promulgated by the IPCB as well as the Indiana and
Hammond Departments of Environmental Management in accordance with federal
standards, impose restrictions on the emission of particulates, sulfur dioxide,
nitrogen oxides and other air pollutants and require permits from the
respective state and local environmental protection agencies for the operation
of emission sources. Permits authorizing operation of ComEd's fossil-fueled
generating facilities subject to this requirement have been obtained and, where
such permits are due to expire, ComEd has, in a timely manner, filed
applications for renewal or requested extensions of the existing permits.
Under the Federal Clean Water Act, NPDES permits for discharges into
waterways are required to be obtained from the U.S. EPA or from the state
environmental agency to which the permit program has been delegated. Those
permits must be renewed periodically. ComEd and the Indiana Company either have
NPDES permits for all of their generating stations or have filed applications
for renewals of such permits under the current delegation of the program to the
Illinois EPA or the Indiana Department of Environmental Management. ComEd is
also subject to the jurisdiction of certain pollution control agencies of the
state of Iowa with respect to the discharge into the Mississippi River from the
Quad-Cities station. Reissued NPDES permits for several generating facilities
establish schedules by which the facilities must meet tighter discharge limits
when using certain biocides in condenser cooling water systems. ComEd has
embarked on a program to obtain compliance with the new permit requirements by
the April 1995 compliance date.
On August 10, 1990, the Sierra Club filed suit in the U.S. District Court
under Section 505 of the Federal Clean Water Act alleging violations of state
of Illinois water quality standards with respect to thermal effluents at
ComEd's Fisk, Crawford, Will County, Joliet and Dresden generating stations. In
July 1991, the Sierra Club and ComEd reached a settlement of this suit which
was approved by the Court on November 1, 1991. Under the settlement, ComEd has
agreed to perform an ecological
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study of the thermal effluents discharged from the generating stations.
Ultimately, this study, which is currently underway, may determine whether the
installation of closed cycle cooling facilities or operational restrictions are
necessary at one or more of these stations.
The Great Lakes Critical Programs Act of 1990 requires that, following the
issuance of guidance by the U.S. EPA, the states of Illinois and Indiana, among
others, adopt water quality standards, policies and procedures to assure
protection of the water quality of the Great Lakes. Water quality standards and
procedures that the states would be required to adopt are to be based on the
U.S. EPA's final guidance issued on March 13, 1995. ComEd is presently
evaluating the final guidance to assess the extent to which it may impact
certain ComEd facilities. Ultimately, the new rules may require that ComEd
install additional pollution control equipment or restrict operations at its
facilities that discharge, either directly or indirectly, into Lake Michigan.
The Clean Air Amendments require reductions in sulfur dioxide emissions from
ComEd's Kincaid station. The Clean Air Amendments also bar future utility
sulfur dioxide emissions except to the extent utilities hold allowances for
their emissions. Allowances which authorize their holder to emit sulfur dioxide
have been issued by the U.S. EPA based largely on historical levels of sulfur
dioxide emissions. These allowances are transferable and marketable. ComEd's
ability to increase generation in the future to meet expected increased demand
for electricity will depend in part on ComEd and the Indiana Company's ability
to acquire additional allowances or to reduce emissions below otherwise
allowable levels from their existing generating plants. In addition, the Clean
Air Amendments require studies to determine what controls, if any, should be
imposed on utilities to control air toxic emissions, including mercury. ComEd's
Clean Air Compliance Plan for Kincaid station was approved by the ICC on July
8, 1993. In late 1993, however, a federal court declared the Illinois law under
which the approval was received to be unconstitutional and compliance plans
prepared and approved in reliance on the law to be void. In January 1995, the
federal court's decision was affirmed by the U.S. Court of Appeals. It is not
known whether a petition for rehearing or further appeals will be filed. Under
the Compliance Plan approved by the ICC, ComEd would have been allowed to burn
low sulfur Illinois coal at Kincaid station without the installation of
pollution control equipment for the years 1995 through 1999, and to purchase
any necessary emission allowances that are expected to be available under the
Clean Air Amendments during this period. Also, under the Plan, ComEd expected
to install pollution control equipment for Kincaid station by the year 2000.
ComEd is currently burning Utah coal at Kincaid station to meet Clean Air Act
Phase I requirements. When the final outcome of the federal litigation is
known, ComEd will determine whether any changes are required.
The Clean Air Amendments also require reductions in nitrogen oxide emissions
from ComEd and the Indiana Company's fossil fuel generating units. The Illinois
EPA has proposed rules with respect to such emissions which would require
modifications to certain of ComEd's boilers inside the Chicago ozone non-
attainment area. On March 6, 1995, the U.S. EPA issued a proposed rule
exempting existing sources from further nitrogen oxide emission reductions. The
Illinois EPA is now considering nitrogen oxide emission reductions at ComEd
generating stations outside the Chicago ozone non-attainment area due to ozone
transport. Under the Acid Rain program, the U.S. EPA will prepare nitrogen
oxide emission regulations for all of ComEd's boilers with a compliance date of
January 1, 2000.
CERCLA provides for immediate response and removal actions coordinated by the
U.S. EPA to releases of hazardous substances into the environment and
authorizes the U.S. Government either to clean up sites at which hazardous
substances have created actual or potential environmental hazards or to order
persons responsible for the situation to do so. Under CERCLA, generators and
transporters of hazardous substances, as well as past and present owners and
operators of hazardous waste sites, are made strictly, jointly and severally
liable for the cleanup costs of waste at sites, most of which are listed by the
U.S. EPA on the NPL. These responsible parties can be ordered to perform
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a cleanup, can be sued for costs associated with a U.S. EPA directed cleanup,
or may voluntarily settle with the U.S. Government concerning their liability
for cleanup costs, or may voluntarily begin a site investigation and site
remediation prior to listing on the NPL under state oversight. Various states,
including Illinois, have enacted statutes which contain provisions
substantially similar to CERCLA. ComEd and its subsidiaries are or are likely
to become parties to proceedings initiated by the U.S. EPA, state agencies
and/or other responsible parties under CERCLA with respect to a number of
sites, including MGP sites, or may voluntarily undertake to investigate and
remediate sites for which they may be liable under CERCLA.
MGPs manufactured gas in Illinois from approximately 1850 to 1950. ComEd
generally did not operate MGPs as a corporate entity but did, however, acquire
MGP sites as part of the absorption of smaller utilities. Approximately half of
these sites were transferred to Northern Illinois Gas Company as part of a
general conveyance in 1954. ComEd also acquired former MGP sites as vacant real
estate on which ComEd facilities have been constructed. To date, ComEd has
identified 44 former MGP sites for which it may be liable for remediation.
ComEd presently estimates that its costs of former MGP site investigation and
remediation will aggregate from $25 million to $150 million in current-year
(1995) dollars. It is expected that the costs associated with investigation and
remediation of former MGP sites will be incurred over a period of approximately
20 to 30 years. Because ComEd is not able to determine the most probable
liability for such MGP costs, in accordance with accounting standards, ComEd
has a reserve as of December 31, 1994 of approximately $25 million, which
reflects the low end of the range of its estimate of the liability associated
with former MGP sites. In addition, as of December 31, 1994, ComEd has a
reserve of $8 million, representing its estimate of the liability associated
with cleanup costs of remediation sites other than former MGP sites. Unicom and
ComEd presently estimate that ComEd's costs of investigating and remediating
the former MGP and other remediation sites pursuant to CERCLA and state
environmental laws will not have a material impact on the financial position or
results of operations of Unicom or ComEd. These cost estimates are based on
currently available information regarding the responsible parties likely to
share in the costs of responding to site contamination, the extent of
contamination at sites for which the investigation has not yet been completed
and the cleanup levels to which sites are expected to have to be remediated.
On July 17, 1991, the U.S. Government filed a complaint in U.S. District
Court alleging that ComEd and four other defendants are PRPs for remediation
costs associated with surface, soil and groundwater contamination alleged to
have occurred from the disposal by other persons of hazardous wastes at a site
located near ComEd's Byron station in Byron, Illinois. The U.S. Government
alleges that a portion of the site is owned by ComEd. The U.S. Government is
presently seeking reimbursement from the PRPs for past study and response costs
associated with the site of approximately $7 million. ComEd is currently
pursuing a negotiated settlement and is not actively pursuing cost recovery
from other PRPs at this time.
On October 16, 1992, the U.S. EPA notified ComEd and four other companies,
including the site operator, that they were PRPs for the costs associated with
the investigation and removal of contaminated soil at the Elgin Salvage and
Supply site in Elgin, Illinois. On April 19, 1993, the U.S. EPA issued an order
under Section 106 of CERCLA to ComEd and the other parties to investigate and
remove the contamination from the site. ComEd sent substantial amounts of scrap
cable and other scrap metal to the site. The site investigation and remediation
is currently estimated to be approximately $8 to $9 million. The site operator
claims to be unable to fund more than a small share of the removal costs.
Consequently, the other parties have agreed to an interim allocation of the
removal costs. The interim agreement allocates 55% of the removal costs to
ComEd. ComEd and the other PRPs have filed a cost recovery action against the
site operator and the site owners to require that they provide their share of
the remediation costs. ComEd and the site owner are in litigation with several
insurance companies for claims. Additional PRPs are being sought.
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In the operation of its electric distribution system, ComEd utilized
equipment containing PCBs. Such equipment included transformers located in
customer-owned buildings and in sidewalk vaults. Under regulations adopted by
the U.S. EPA, these transformers containing PCBs were required to be modified
(with non-PCB fluid) or be replaced. ComEd has completed the replacement of
over 2,000 PCB fluid transformers that were located in or near commercial
buildings and were subject to the federal regulations. The estimated cost to
ComEd of replacing or modifying these transformers and disposing of the PCB
fluid was approximately $120 million, which had been expended through the end
of 1993. Some of ComEd's electrical equipment containing PCBs was sent to scrap
and salvage facilities and, as a result, ComEd may be liable for penalties and
for the costs of cleanup of those facilities. An accident or spill involving
PCB oil-filled electrical equipment, resulting in exposure of persons or
property to PCBs or their by-products, could result in material liability
claims against ComEd.
In September 1990, the IPCB replaced existing landfill regulations with new,
more stringent design and performance standards. These regulations are expected
to increase the cost to ComEd for disposal of coal combustion by-products at
its Joliet station. At Joliet, an existing landfill utilized for disposal of
coal ash may require the installation by 1997 of engineered retrofits designed
to protect groundwater. ComEd intends to request exemptions from certain of the
new regulations from the IPCB. If its request is denied, then alternative
landfill siting, commercial disposal, or retrofitting of the existing facility
could result in significant increases in disposal expenditures.
The outcome of many of the regulatory proceedings referred to above, if not
favorable, could have a material adverse effect on Unicom and ComEd's future
business and operating results.
An unresolved issue is whether exposure to EMFs may result in adverse health
effects or damage to the environment. EMFs are produced by virtually all
devices carrying or utilizing electricity, including transmission and
distribution lines as well as home appliances. If regulations are adopted
related to EMFs, they could affect the construction and operation of electrical
equipment, including transmission and distribution lines and the cost of such
equipment. ComEd cannot predict the effect on the cost of such equipment or
operations if new regulations related to EMFs are adopted. In the absence of
such regulations, EMFs have nonetheless become an issue in siting facilities
and in other land use contexts. Litigation has been filed in a variety of
locations against a variety of defendants (including ComEd) alleging that the
presence or use of electrical equipment has had an adverse effect on the health
of persons. If plaintiffs are successful in litigation of this type and it
becomes widespread, the impact on ComEd and on the electric utility industry is
not predictable, but could be severe.
From time to time, Unicom and its subsidiaries are, or are claimed to be, in
violation of or in default under orders, statutes, rules or regulations
relating to environmental controls and other matters, compliance plans imposed
upon or agreed to by them or permits issued by various state and federal
agencies for the construction or operation of their facilities. Unicom and
ComEd do not believe, so far as they now foresee, that such violations or
defaults will have a material adverse effect on their future business and
operating results, except for events otherwise described in this Annual Report
on Form 10-K which could have such an effect.
EMPLOYEES
The total number of employees of Unicom and its subsidiary companies was
approximately 18,460 (of which 18,451 employees were employed by ComEd and the
Indiana Company) at December 31, 1994. Of that amount, about 10,864 employees
of ComEd are represented by the IBEW, Local 15, and about 169 employees of the
Indiana Company are represented by the United Steelworkers of America, Local
12502. Effective May 1, 1994, the 17 local unions of the IBEW reorganized into
one
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local union. Collective bargaining agreements with the unions are effective
through March 31, 1995. Supplemental agreements covering pension, life
insurance, savings and investment, medical, dental and vision care plans are
effective through March 31, 1995. See "General," subcaption "Utility
Operations," above for information relating to certain changes to union
agreements during 1994.
INTERCONNECTIONS
ComEd has interconnections for the transmission of electricity with Central
Illinois Light Company, Central Illinois Public Service Company, Illinois Power
Company, Indiana Michigan Power Company (a subsidiary of American Electric
Power Company), Interstate Power Company, Iowa-Illinois Gas and Electric
Company, Northern Indiana Public Service Company, Wisconsin Electric Power
Company and Wisconsin Power and Light Company for the purpose of exchanging
energy and for other forms of mutual assistance.
ComEd and 13 other Midwest power systems are regular members of MAIN (which
also includes six associate members and one affiliate member). The members have
entered into an agreement to work together to ensure the reliability of
electric power production and transmission throughout the area they serve.
FRANCHISES
ComEd's franchises are in general deemed adequate to permit it to engage in
the business it now conducts.
In the city of Chicago, ComEd operates under a nonexclusive electric
franchise ordinance effective January 1, 1992, and continuing in force until
December 31, 2020. ComEd derives approximately one-third of its ultimate
consumer revenues from the city of Chicago.
The electric business outside of the city of Chicago is conducted in
municipalities under nonexclusive franchises and, where required, under
certificates of convenience and necessity granted by the ICC. The following
tabulation summarizes as of December 31, 1994 the expiration dates of the
electric franchises held in 395 of the 396 municipalities outside of the city
of Chicago capable of granting franchises and in which ComEd currently provides
electric service.
<TABLE>
<CAPTION>
FRANCHISE ESTIMATED
EXPIRATION NUMBER OF AGGREGATE
PERIODS MUNICIPALITIES POPULATION
---------- -------------- ----------
<S> <C> <C>
1996-2006....... 4 108,000
2007-2017....... 13 111,000
2018-2028....... 4 5,000
</TABLE>
<TABLE>
<CAPTION>
FRANCHISE ESTIMATED
EXPIRATION NUMBER OF AGGREGATE
PERIODS MUNICIPALITIES POPULATION
---------- -------------- ----------
<S> <C> <C>
2029-2039....... 1 *
2040 and subse-
quent years.... 369 3,997,000
No stated time
limit.......... 4 71,000
</TABLE>
*Less than one thousand people.
BUSINESS AND COMPETITION
The electric utility business has historically been characterized by retail
service monopolies in state or locally franchised service territories.
Investor-owned electric utilities have tended to be vertically integrated with
all aspects of their business subject to pervasive regulation. Although
customers have normally been free to supply their electric power needs through
self-generation, they have not had a choice of electric suppliers and self-
generation has not generally been economical.
15
<PAGE>
The market in which electric utilities like ComEd operate has become more
competitive as a result of technological and regulatory changes and many
observers believe competition will intensify. Self-generation can be economical
for certain customers, depending on how and when they use electricity and other
customer-specific considerations. A number of competitors are currently seeking
to identify and do business with those customers. In addition, suppliers of
other forms of energy are increasingly competing to supply energy needs which
historically were supplied primarily or exclusively by electricity.
The Energy Policy Act of 1992 will likely have a significant effect on
companies engaged in the generation, transmission, distribution, purchase and
sale of electricity. This Act, among other things, expands the authority of the
FERC to order electric utilities to transmit or "wheel" wholesale power for
others, and facilitates the creation of non-utility electric generating
companies. Although ComEd cannot now predict the full impact of this Act, it
will likely create and increase competition to supply the power needs of large
users of electricity.
ComEd is facing increased competition from several non-utility businesses
which seek to provide energy services to users of electricity, especially
larger customers such as industrial, commercial and wholesale customers. Such
suppliers include independent power producers and unregulated energy services
companies. In this regard, natural gas utilities operating in ComEd's service
area have established subsidiary ventures to provide heating, ventilating and
air conditioning services, attempting to attract ComEd's customers. Also,
several utilities in the United States have established unregulated energy
services subsidiaries which pursue business opportunities wherever they exist.
In addition, cogeneration and energy services companies have begun soliciting
ComEd's customers to provide alternatives to using ComEd's electricity. In
October 1993, the ICC granted ComEd the authority to negotiate special discount
contract rates with new or existing industrial customers for up to a total of
400 megawatts of added load, where the customers would not have chosen service
from ComEd for the increased load in the absence of the discount rates. In
addition, in June 1994, the ICC granted ComEd the authority to negotiate
special discount contract rates with up to 25 of its largest existing
customers, where such contracts would be necessary to retain the customers'
existing load on ComEd's system.
ComEd recently negotiated amendments to existing contracts with three of its
wholesale municipal customers, which extended the contracts for an additional
ten-year period past the 1997 expiration dates. ComEd was one of a number of
bidders for providing service to these customers. The contracts became
effective upon FERC approval.
The ICC formed a task force for the purpose of conducting a broad-based and
open examination of the expanding presence of market components within the
electric utility industry. Participants from more than forty organizations,
including representatives from the electric utility industry, are meeting to
examine three broad issues: effects of regulation, competition and future
regulatory and legislative changes. A report examining all sides of the issues
is planned for release in the first half of 1995 to the ICC, the legislature,
the Governor and other Illinois constitutional officers.
There also exists the possibility of legislation being introduced in the
Illinois General Assembly suggesting changes in the regulatory framework under
which Illinois electric utilities operate. ComEd is aware of discussions
regarding proposals that include structures for forms of retail wheeling of
power and alternative rate regulation. ComEd cannot predict whether, or in what
form, any such proposals might be introduced or what, if anything, or when
something might be enacted. Retail wheeling, if enacted, could adversely affect
the ability of ComEd to recover certain of its investment in generation,
transmission and distribution equipment.
16
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
EFFECTIVE DATE OF ELECTION
NAME AGE POSITION TO PRESENT POSITION
----------------- --- ------------------------------------ --------------------------
<S> <C> <C> <C>
James J. O'Connor 58 Chairman and Chief Executive Officer January 28, 1994
Samuel K. Skinner 56 President January 28, 1994
John C. Bukovski 52 Vice President January 28, 1994
Roger F. Kovack 46 Comptroller January 28, 1994
Dennis F. O'Brien 49 Treasurer January 28, 1994
David A. Scholz 53 Secretary January 28, 1994
</TABLE>
The present term of office of each of the above executive officers extends to
the first meeting of Unicom's Board of Directors after the next annual election
of Directors scheduled to be held on May 24, 1995.
Each of the above executive officers has been employed by ComEd for more than
five years, except for Mr. Skinner, and by Unicom since January 28, 1994 in
executive or management positions. Since January 1, 1990 and prior to his
election as President of ComEd effective February 1, 1993, Mr. Skinner was
Secretary of the United States Department of Transportation prior to December
1991, Chief of Staff to the President of the United States from December 1991
to August 1992, and General Chairman of the Republican National Committee from
August 1992 to January 1993. Since January 1, 1990, the Unicom officers listed
above, except for Mr. Skinner, held and continue to hold the following present
positions at ComEd: Mr. O'Connor is Chairman and Chief Executive Officer; Mr.
Bukovski is Vice President; Mr. Kovack is Comptroller; Mr. O'Brien is
Treasurer; and Mr. Scholz is Secretary.
There are no family relationships among the executive officers, directors and
nominees for director of Unicom.
17
<PAGE>
OPERATING STATISTICS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Electric Operating Revenues (thousands of
dollars)(1):
Residential............................... $2,273,763 $2,341,155 $2,146,523
Small commercial and industrial........... 1,917,084 1,962,662 1,874,393
Large commercial and industrial........... 1,381,251 1,437,680 1,373,939
Public authorities........................ 452,512 474,034 452,508
Electric railroads........................ 26,179 27,593 27,633
Provisions for revenue refunds--ultimate
consumers................................ (15,909) (1,281,788) (18,372)
Sales for resale (net of provisions for
revenue refunds)......................... 187,147 237,573 113,603
Other revenues............................ 55,494 61,531 56,094
---------- ---------- ----------
Total.................................. $6,277,521 $5,260,440 $6,026,321
========== ========== ==========
Sales (millions of kilowatthours):
Residential............................... 21,376 20,818 19,269
Small commercial and industrial........... 24,320 23,463 22,662
Large commercial and industrial........... 23,450 22,917 22,163
Public authorities........................ 6,885 6,741 6,562
Electric railroads........................ 397 405 410
Sales for resale.......................... 8,743 13,417 4,614
---------- ---------- ----------
Total.................................. 85,171 87,761 75,680
========== ========== ==========
Sources of Electric Energy (millions of
kilowatthours):
Generation--
Nuclear.................................. 63,795 70,403 66,683
Fossil................................... 26,361 23,839 13,188
Fast-start peaking units................. 87 24 18
---------- ---------- ----------
Net generation......................... 90,243 94,266 79,889
Purchased power........................... 2,071 644 2,555
Company use and losses.................... (7,143) (7,149) (6,764)
---------- ---------- ----------
Total.................................. 85,171 87,761 75,680
========== ========== ==========
Cost of Fuel Consumed (per million Btu):
Nuclear................................... $0.53 $0.52 $0.52
Coal...................................... $2.31 $2.89 $2.96
Oil....................................... $2.89 $3.03 $3.02
Natural gas............................... $2.27 $2.70 $2.36
Average all fuels......................... $1.08 $1.15 $0.97
Peak Load (kilowatts)...................... 17,928,000 17,771,000 15,994,000
Number of Customers (at end of year):
Residential............................... 3,047,354 3,009,508 2,981,141
Small commercial and industrial........... 286,793 283,764 282,092
Large commercial and industrial........... 1,528 1,503 1,527
Public authorities........................ 12,059 12,023 11,886
Electric railroads and resale............. 20 19 18
---------- ---------- ----------
Total.................................. 3,347,754 3,306,817 3,276,664
========== ========== ==========
Average Annual Revenue Per Residential
Customer (excludes light bulb service).... $748.10 $779.54 $721.27
Average Use Per Residential Customer
(kilowatthours)........................... 7,056 6,954 6,497
Average Revenue Per Kilowatthour(2):
Residential (excludes light bulb
service)................................. 10.60c 11.21c 11.10c
Small commercial and industrial........... 7.88c 8.36c 8.27c
Large commercial and industrial........... 5.89c 6.27c 6.20c
</TABLE>
--------
(1) See "Rate Proceedings" above.
(2) Average revenue per kilowatthour after reflecting provisions for revenue
refunds and after reflecting revenue refunds and related interest credited
to customers in 1994, 1993 and 1992, respectively, were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------------- -------------------------------- --------------------------------
AFTER DEDUCTIONS FOR AFTER DEDUCTIONS FOR AFTER DEDUCTIONS FOR
-------------------------------- -------------------------------- --------------------------------
PROVISIONS FOR REVENUE PROVISIONS FOR REVENUE PROVISIONS FOR REVENUE
REVENUE REFUNDS REFUNDS CREDITED REVENUE REFUNDS REFUNDS CREDITED REVENUE REFUNDS REFUNDS CREDITED
--------------- ---------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Residential 10.57cent 8.22cent 8.61cent 10.78cent 10.90cent 10.45cent
Small commercial and
industrial 7.86cent 6.43cent 6.80cent 8.16cent 8.20cent 8.02cent
Large commercial and
industrial 5.88cent 4.76cent 5.07cent 6.10cent 6.13cent 5.97cent
</TABLE>
18
<PAGE>
ITEM 2. PROPERTIES.
ComEd's electric properties are located in Illinois and the Indiana Company's
electric facilities are located in Indiana. In management's opinion, ComEd and
the Indiana Company's operating properties are adequately maintained and are
substantially in good operating condition. The electric generating,
transmission, distribution and general facilities of ComEd and the Indiana
Company represent approximately 68%, 9%, 20% and 3%, respectively, of their
gross investment in electric plant and equipment in service.
The electric generating stations, substations and a portion of the
transmission rights of way of ComEd and the Indiana Company are owned in fee.
A significant portion of the electric transmission and distribution facilities
is located over or under highways, streets, other public places or property
owned by others, for which permits, grants, easements or licenses (deemed
satisfactory by ComEd, but without examination of underlying land titles) have
been obtained. The principal plants and properties of ComEd are subject to the
lien of ComEd's Mortgage dated July 1, 1923, as amended and supplemented, under
which ComEd's first mortgage bonds are issued.
The net generating capability of ComEd and the Indiana Company is derived
from the following electric generating facilities:
<TABLE>
<CAPTION>
NET GENERATING
CAPABILITY
STATION LOCATION (KILOWATTS)
------- ---------------- --------------
<S> <C> <C>
Nuclear--
Zion Zion 2,080,000
Dresden Near Morris 1,588,000
Quad-Cities Near Cordova 1,183,000(1)
LaSalle County Near Seneca 2,156,000
Byron Near Byron 2,240,000
Braidwood Near Braidwood 2,240,000
Fossil--
Collins Near Morris 2,698,000
Powerton Near Pekin 1,400,000
Joliet 6 Near Joliet 302,000
Joliet 7 & 8 Near Joliet 1,025,000
Kincaid Near Taylorville 1,108,000
Will County Near Lockport 1,092,000
Waukegan Waukegan 725,000
Crawford Chicago 542,000
State Line Hammond, Indiana 490,000
Fisk Chicago 321,000
Fast-Start Peaking Units(2) Various 1,332,000
----------
Net non-summer generating capability 22,522,000
Deduct--Summer limitations 557,000
----------
Net summer generating capability 21,965,000
----------
----------
</TABLE>
--------
(1) Excludes the 25% undivided interest of Iowa-Illinois Gas and Electric
Company in the Quad-Cities station.
(2) Generating units normally designed for use only during the maximum load
period of a designated time interval. Such units are capable of starting
and coming on-line quickly.
Major electric transmission lines owned and in service are as follows:
<TABLE>
<CAPTION>
VOLTAGE CIRCUIT
(VOLTS) MILES
------- -------
<S> <C>
765,000........................................................... 90
345,000........................................................... 2,513
138,000........................................................... 2,705
</TABLE>
ComEd's electric distribution system includes 37,518 pole line miles of
overhead lines and 30,496 cable miles of underground lines. A total of
approximately 1,317,059 poles are included in ComEd's distribution system, of
which about 590,307 poles are owned jointly with telephone companies.
19
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
During 1989 and 1991, actions were brought in federal and state courts in
Colorado against ComEd and its subsidiary, Cotter, seeking unspecified damages
and injunctive relief based on allegations that Cotter has permitted
radioactive and other hazardous material to be released from its mill into
areas owned or occupied by the plaintiffs resulting in property damage and
potential adverse health effects. In February 1994, a federal jury returned
nominal dollar verdicts on eight bellwether plaintiffs' claims in these cases.
Plaintiffs have appealed those judgments. Although the remaining cases will
necessarily involve the resolution of numerous contested issues of fact and
law, Unicom and ComEd's determination is that these actions will not have a
material impact on their financial position or results of operations.
In October 1990, ComEd filed a complaint in the Circuit Court against
Westinghouse and certain of its employees. The complaint alleges that the
defendants knowingly concealed information regarding the durability of the
metal used in the steam generators (a major component of the nuclear steam
supply systems) at ComEd's Zion, Byron and Braidwood stations. The complaint
further alleges that the defects in the steam generators will prevent the
plants from maintaining their full power output through their forty-year design
life without costly remanufacture or replacement of the steam generators.
Damages, including punitive damages, in an unspecified amount are claimed.
Westinghouse has filed a counterclaim against ComEd which seeks recovery of
Westinghouse's costs of defense and damages of approximately $13 million.
Shareholder derivative lawsuits were filed on October 1, 1992 and on April
14, 1993 in the Circuit Court against current and former directors of ComEd
alleging that they breached their fiduciary duty and duty of care to ComEd in
connection with the management of the activities associated with the
construction of ComEd's four most recently completed nuclear generating units.
The lawsuits sought restitution to ComEd by the defendants for unquantified and
undefined losses and costs alleged to have been incurred by ComEd. Both
lawsuits were dismissed by the Circuit Court; however, appeals are pending
before the Illinois Appellate Court.
A number of complaints have been filed by former employees with the Equal
Employment Opportunity Commission, and several lawsuits have been filed by
former employees in the U.S. District Court, alleging that the employees'
terminations (which occurred as part of ComEd's management workforce reductions
that were implemented in the second half of 1992) involved discrimination on
the basis of age, race, sex, national origin and/or disabilities, in violation
of applicable law. The complainants in these various cases are seeking, among
other things, awards of back pay and lost benefits, reinstatement, pecuniary
damages, and costs and attorneys' fees. Discovery in these cases is proceeding,
and ComEd does not view these cases as having a material impact on its
financial position or results of operations.
See "Item 1. Business," subcaptions "Rate Proceedings," "Fuel Supply--Fuel
Adjustment Clause" and "Regulation" above for information concerning other
legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
20
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The current ratings of ComEd's securities by three principal securities
rating agencies are as follows:
<TABLE>
<CAPTION>
STANDARD DUFF &
MOODY'S & POOR'S PHELPS
------- -------- ------
<S> <C> <C> <C>
First mortgage and secured pollution control bonds.. Baa2 BBB BBB
Publicly-held debentures and unsecured pollution
control obligations................................ Baa3 BBB- BBB-
Convertible preferred stock......................... baa3 BBB- BB+
Preference stock.................................... baa3 BBB- BB+
Commercial paper.................................... P-2 A-2 Duff 2
</TABLE>
On October 27, 1993, Standard & Poor's changed its "outlook" on ComEd's
ratings from stable to negative as part of its larger assessment of the
electric utility industry. In January 1995, following the issuance of the Rate
Order, Standard & Poor's affirmed its ratings of ComEd's securities, with its
ratings "outlook" remaining negative. In March 1995, following an in-depth
review of ComEd's nuclear operations, Standard & Poor's again affirmed its
ratings of ComEd's securities with its ratings "outlook" remaining negative. In
December 1993, Moody's and Duff & Phelps affirmed their ratings of ComEd's
securities, and Moody's rating outlook on ComEd remained stable.
The above ratings reflect only the views of such rating agencies and each
rating should be evaluated independently of any other rating. Generally,
rating agencies base their ratings on information furnished to them by the
issuing company and on investigations, studies and assumptions by the rating
agencies. There is no assurance that any particular rating will continue for
any given period of time or that it will not be changed or withdrawn entirely
if in the judgment of the rating agency circumstances so warrant. Such ratings
are not a recommendation to buy, sell or hold securities.
The following is a brief summary of the meanings of the above ratings and the
relative rank of the above ratings within each rating agency's classification
system.
Moody's top four long-term debt ratings (Aaa, Aa, A and Baa) are generally
considered "investment grade." Obligations rated Baa are considered as medium
grade obligations, neither highly protected nor poorly secured. Such
obligations lack outstanding investment characteristics and in fact have
speculative characteristics. (A numerical modifier in Moody's system shows
relative standing within the principal rating category, with 1 indicating the
high end of that category, 2 the mid-range and 3 the low end.) Standard &
Poor's top four bond ratings (AAA, AA, A and BBB) are generally considered to
describe obligations in which investment characteristics predominate.
Obligations rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Such obligations normally exhibit adequate
protection parameters, but adverse economic conditions or changing
circumstances are more likely to lead to weakened capacity to pay. (A plus or
minus sign in Standard & Poor's system shows relative standing within the major
rating categories.)
Both Moody's and Standard & Poor's preferred stock ratings represent relative
security of dividends. Moody's top four preferred stock ratings (aaa, aa, a
and baa) are generally considered "investment grade." Moody's baa rating
describes a medium grade preferred stock, neither highly protected nor poorly
secured. Standard & Poor's top four preferred stock ratings (AAA, AA, A and
BBB) are generally considered "investment grade." Standard & Poor's BBB rating
applies to medium grade preferred stock which is below A ("sound") and above BB
("lower grade").
21
<PAGE>
Duff & Phelps' credit rating scale has 17 alphabetical categories, of which
ratings AAA through BBB (with AAA being the highest rating) represent
investment grade securities. Ratings of BBB+, BBB and BBB- represent the
lowest category of "investment grade" rating. This category describes
securities with below average protection factors but which are considered
sufficient for institutional investment. Considerable variability in risk
occurs during economic cycles. Ratings of BB+, BB and BB- describe below
investment grade securities which are deemed likely to meet obligations when
due. Present or prospective financial protection factors of these securities
fluctuate according to industry conditions or company fortunes.
Moody's Prime-2 (P-2) rating of commercial paper is the second highest of
three possible ratings; P-2 describes a strong capacity for repayment of short-
term promissory obligations. Standard & Poor's rates commercial paper in four
basic categories with A-2 being the second highest category. Duff & Phelps
rates commercial paper in three basic categories, with Duff 2 indicating the
middle category.
Further explanations of the significance of ratings may be obtained from the
rating agencies.
Additional information required by Item 5 is incorporated herein by reference
to the "Price Range and Dividends Paid Per Share of Common Stock" on page 16 of
Unicom's January 27, 1995 Form 8-K Report.
ITEM 6. SELECTED FINANCIAL DATA.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by Items 6, 7 and 8 is incorporated herein by
reference to the "Summary of Selected Consolidated Financial Data" on page 16,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 3 through 14, and the audited consolidated financial
statements and notes thereto on pages 15 and 17 through 43 of Unicom's January
27, 1995 Form 8-K Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
22
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by Item 10 relating to directors and nominees for
election as directors at Unicom's Annual Meeting of shareholders to be held on
May 24, 1995 is incorporated herein by reference to pages 2 and 3 and the last
two paragraphs under the heading "Security Ownership of Certain Beneficial
Owners and Management" on page 6 of Unicom's definitive Proxy Statement (1995
Proxy Statement) filed with the SEC pursuant to Regulation 14A under the
Securities Exchange Act of 1934. The information required by Item 10 relating
to executive officers is set forth in Part I of Unicom's Annual Report on Form
10-K under "Item 1. Business," subcaption "Executive Officers of the
Registrant" and incorporated herein by reference to the last two paragraphs
under the heading "Security Ownership of Certain Beneficial Owners and
Management" on page 6 of Unicom's 1995 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by Item 11 is incorporated herein by reference to
the paragraph labelled "Compensation of Directors" on page 4 and the paragraphs
under the heading "Executive Compensation" on pages 7 through 10 (other than
the paragraphs appearing on page 10 under the heading "Compensation Committee
Report on Executive Compensation") of Unicom's 1995 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by Item 12 is incorporated herein by reference to
the stock ownership information under the heading "Security Ownership of
Certain Beneficial Owners and Management" on pages 5 and 6 of Unicom's 1995
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
23
<PAGE>
ANNUAL REPORT ON FORM 10-K FOR COMMONWEALTH EDISON COMPANY
PART I
ITEM 1. BUSINESS.
See Unicom's "Item 1. Business" (other than the paragraphs under the headings
"General--Unregulated Operations," "Construction Program--Unregulated
Operations" and "Executive Officers of the Registrant"), which is incorporated
herein by this reference.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
EFFECTIVE DATE OF ELECTION
NAME AGE POSITION TO PRESENT POSITION
---------------------- --- ------------------------ --------------------------
<S> <C> <C> <C>
James J. O'Connor 58 Chairman and
Chief Executive Officer March 1, 1980
Samuel K. Skinner 56 President February 1, 1993
Thomas J. Maiman 56 Senior Vice President June 10, 1992
Robert J. Manning 52 Senior Vice President June 10, 1992
Donald A. Petkus 53 Senior Vice President June 10, 1992
Cordell Reed 57 Senior Vice President June 5, 1987
Michael J. Wallace 47 Senior Vice President December 9, 1993
John C. Bukovski 52 Vice President February 1, 1989
Louis O. DelGeorge 47 Vice President April 22, 1992
Harlan M. Dellsy 47 Vice President September 15, 1986
William H. Downey 50 Vice President June 10, 1992
William H. Dunbar, Jr. 54 Vice President May 10, 1994
J. Stanley Graves 58 Vice President June 5, 1987
Emerson W. Lacey 53 Vice President November 17, 1992
Paul D. McCoy 44 Vice President June 10, 1992
Robert A. Paul 51 Vice President January 26, 1994
J. Stephen Perry 56 Vice President May 10, 1994
James A. Small 51 Vice President July 1, 1993
Pamela B. Strobel 42 Vice President and
General Counsel June 1, 1993
Roger F. Kovack 46 Comptroller February 1, 1989
Dennis F. O'Brien 49 Treasurer February 1, 1989
David A. Scholz 53 Secretary February 1, 1989
</TABLE>
The present term of office of each of the above executive officers extends to
the first meeting of ComEd's Board of Directors after the next annual election
of Directors scheduled to be held on May 24, 1995.
Each of the above executive officers (except for Messrs. Skinner, Paul, Perry
and Small and Ms. Strobel) has been employed by ComEd for more than five years
in executive or management positions. Since January 1, 1990 and prior to his
election as President of ComEd, Mr. Skinner was Secretary of the United States
Department of Transportation prior to December 1991, Chief of Staff to the
President of the United States from December 1991 to August 1992, and General
Chairman of
24
<PAGE>
the Republican National Committee from August 1992 to January 1993. Since
January 1, 1990 and prior to his election as Vice President, Mr. Paul was
employed at Digital Equipment Corporation in the following capacities: prior to
1992 as Corporate Technology and Business Acquisition Manager and from 1992 to
January 1994 as Corporate Purchasing Manager. Since January 1, 1990 and prior
to his election as Vice President, Mr. Perry was employed at Illinois Power
Company in the following capacities: prior to 1992 as Vice President of Nuclear
Operations and from 1992 to April 1994 as Senior Vice President. Since January
1, 1990 and prior to his election as Vice President, Mr. Small was General
Manager of Fuel Services at Georgia Power Company. Since January 1, 1990 and
prior to her election as Vice President and General Counsel, Ms. Strobel was a
partner in the law firm of Sidley & Austin. Since January 1, 1990 and prior to
election to the positions shown above, the following officers held other
positions in ComEd: Messrs. Maiman, Manning and Petkus were Vice Presidents;
Mr. Wallace was Manager of Engineering and Construction Services prior to July
1990 and Vice President thereafter; Mr. DelGeorge was Assistant Vice President;
Mr. Downey was Operating Manager prior to September 1990 and Manager of
Marketing and Customer Services thereafter; Mr. Dunbar was Division Vice
President--Chicago North prior to December 1992 and Manager of Quality
thereafter; Mr. Lacey was Fossil Engineering and Construction Manager; and Mr.
McCoy was Division Operating Manager--Northern prior to September 1990,
Operating Manager from September 1990 to September 1991 and Manager of
Transmission and Distribution Operations thereafter.
There are no family relationships among the executive officers, directors and
nominees for director of ComEd.
ITEM 2. PROPERTIES.
See Unicom's "Item 2. Properties," which is incorporated herein by this
reference.
ITEM 3. LEGAL PROCEEDINGS.
See Unicom's "Item 3. Legal Proceedings," which is incorporated herein by
this reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE BY SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
See Unicom's "Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters" (other than the last paragraph thereof), which is
incorporated herein by reference.
Additional information required by Item 5 is incorporated herein by reference
to the "Price Range and Dividends Paid Per Share of Common Stock" on page 15 of
ComEd's January 27, 1995 Form 8-K/A-1 Report.
ITEM 6. SELECTED FINANCIAL DATA.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
25
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by Items 6, 7 and 8 is incorporated herein by
reference to the "Summary of Selected Consolidated Financial Data" on page 15,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 3 through 13, and the audited consolidated financial
statements and notes thereto on pages 14 and 16 through 43 of ComEd's January
27, 1995 Form 8-K/A-1 Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by Item 10 relating to directors and nominees for
election as directors at ComEd's Annual Meeting of shareholders to be held on
May 24, 1995 is incorporated herein by reference to pages 2 and 3 and the last
two paragraphs under the heading "Security Ownership of Certain Beneficial
Owners and Management" on page 6 of ComEd's definitive Information Statement
(1995 Information Statement) filed with the SEC pursuant to Regulation 14C
under the Securities Exchange Act of 1934. The information required by Item 10
relating to executive officers is set forth in Part I of ComEd's Annual Report
on Form 10-K under "Item 1. Business," subcaption "Executive Officers of the
Registrant" and incorporated herein by reference to the last two paragraphs
under the heading "Security Ownership of Certain Beneficial Owners and
Management" on page 6 of ComEd's 1995 Information Statement.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by Item 11 is incorporated herein by reference to
the paragraph labelled "Compensation of Directors" on page 4 and the paragraphs
under the heading "Executive Compensation" on pages 7 through 10 (other than
the paragraphs appearing on page 10 under the heading "Compensation Committee
Report on Executive Compensation") of ComEd's 1995 Information Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by Item 12 is incorporated herein by reference to
the stock ownership information under the heading "Security Ownership of
Certain Beneficial Owners and Management" on pages 5 and 6 of ComEd's 1995
Information Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
26
<PAGE>
ANNUAL REPORTS ON FORM 10-K FOR UNICOM CORPORATION AND
COMMONWEALTH EDISON COMPANY
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS:
<TABLE>
<CAPTION>
PAGE OF
JANUARY 27,
1995 FORM
8-K REPORT
------------
UNICOM COMED
------ -----
<S> <C> <C>
The following financial statements are incorporated into the
Unicom Annual Report on Form 10-K by reference to the indi-
cated page or pages of Unicom's January 27, 1995 Form 8-K Re-
port, and into the ComEd Annual Report on Form 10-K by refer-
ence to the indicated page or pages of ComEd's January 27,
1995 Form 8-K/A-1 Report:
Report of Independent Public Accountants.................... 15 14
Statements of Consolidated Income for each of the three
years in the period ended December 31, 1994................ 17 16
Consolidated Balance Sheets--December 31, 1994 and December
31, 1993................................................... 18-19 17-18
Statements of Consolidated Capitalization--December 31, 1994
and December 31, 1993...................................... 20 19
Statements of Consolidated Retained Earnings for each of the
three years in the period ended December 31, 1994.......... 21 20
Statements of Consolidated Premium on Common Stock and Other
Paid-In Capital for each of the three years in the period
ended December 31, 1994.................................... NA 20
Statements of Consolidated Cash Flows for each of the three
years in the period ended December 31, 1994................ 22 21
Notes to Financial Statements............................... 23-43 22-43
</TABLE>
<TABLE>
<CAPTION>
ANNUAL
REPORT ON
PAGE OF FORM 10-K
THIS ------------
DOCUMENT UNICOM COMED
-------- ------ -----
<S> <C> <C> <C>
The following supplemental schedules are included in
the indicated Annual Report on Form 10-K:
Report of Independent Public Accountants on
Supplemental Schedule.............................. 34 x
Report of Independent Public Accountants on
Supplemental Schedule.............................. 35 x
Schedule II--Valuation and Qualifying Accounts for
each of the three years in the period
ended December 31, 1994................ 36 x x
</TABLE>
The following schedules are omitted as not applicable or not required
under rules of Regulation S-X: I, III, IV and V.
The individual financial statements and schedules of Unicom Enterprises
have been omitted from Unicom's Annual Report on Form 10-K because the
investment in Unicom Enterprises,
27
<PAGE>
included in Unicom's consolidated financial statements, is not material in
relation to Unicom's financial position or results of operations. As of
December 31, 1994, the assets of Unicom Enterprises in the aggregate were
less than 1% of Unicom's consolidated assets and for the year 1994 Unicom
Enterprises had no sales revenues.
The individual financial statements and schedules of ComEd's
nonconsolidated wholly-owned subsidiaries have been omitted from Unicom's
and ComEd's Annual Report on Form 10-K because the investments are not
material in relation to ComEd's financial position or results of
operations. As of December 31, 1994, the assets of the nonconsolidated
subsidiaries in the aggregate approximated 1% of ComEd's consolidated
assets and for the year 1994 annual revenues of the nonconsolidated
subsidiaries in the aggregate were less than 1% of ComEd's consolidated
annual revenues.
The following exhibits are filed with the indicated Annual Report on Form
10-K or incorporated therein by reference. Documents indicated by an
asterisk (*) are incorporated by reference to the File No. indicated.
Documents indicated by a plus sign (+) identify management contracts or
compensatory plans or arrangements.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
------- ------------------------------------------------- ------ -----
<C> <S> <C> <C>
(3)-1 Articles of Incorporation of Unicom effective
January 28, 1994. x
(3)-2 Restated Articles of Incorporation of ComEd ef-
fective February 20, 1985, including Statements
of Resolution Establishing Series, relating to
the establishment of three new series of ComEd
preference stock known as the "$9.00 Cumulative
Preference Stock," the "$6.875 Cumulative Pref-
erence Stock" and the "$2.425 Cumulative Prefer-
ence Stock." x
(3)-3 By-Laws of Unicom, effective January 28, 1994 as
amended through March 9, 1995. x
(3)-4 By-Laws of ComEd, effective September 2, 1988 as
amended through March 9, 1995. x
*(4)-1 Mortgage of ComEd to Illinois Merchants Trust
Company, Trustee (Continental Illinois National
Bank and Trust Company of Chicago, successor
Trustee), dated July 1, 1923, Supplemental In-
denture thereto dated August 1, 1944, and amend-
ments and supplements thereto dated, respective-
ly, August 1, 1946, April 1, 1953, April 1,
1966, November 1, 1966, December 1, 1966, March
31, 1967, April 1, 1967, February 1, 1968, July
1, 1968, October 1, 1968, February 28, 1969, May
29, 1970, January 1, 1971, June 1, 1971, May 31,
1972, June 1, 1973, June 15, 1973, October 15,
1973, May 31, 1974, July 1, 1974, June 13, 1975,
May 28, 1976, January 15, 1977, June 1, 1977 and
June 3, 1977 (File No. 2-60201, Form S-7, Ex-
hibit 2-1). x
*(4)-2 Supplemental Indentures to Mortgage dated July 1,
1923 dated, respectively, December 1, 1977, May
17, 1978, August 31, 1978, June 18, 1979, June
20, 1980, April 16, 1981, April 30, 1982, April
15, 1983, April 13, 1984, March 1, 1985 and
April 15, 1985 (File No. 2-99665, Form S-3, Ex-
hibit (4)-3). x
*(4)-3 Supplemental Indentures to Mortgage dated July 1,
1923 dated, respectively, April 15, 1986 and May
1, 1986 (File No. 33-6879, Form S-3, Exhibit
(4)-9). x
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
------- --------------------------------------------- ------ -----
<C> <S> <C> <C>
*(4)-4 Supplemental Indenture to Mortgage dated July
1, 1923 dated January 12, 1987 (File No. 33-
13193, Form S-3, Exhibit (4)-6). x
*(4)-5 Supplemental Indenture to Mortgage dated July
1, 1923 dated June 30, 1989 (File No. 33-
32929, Form S-3, Exhibit (4)-11). x
*(4)-6 Supplemental Indentures to Mortgage dated
July 1, 1923 dated, respectively, February
15, 1990 and June 15, 1990 (File No. 33-
38232, Form S-3, Exhibits (4)-11 and (4)-
12). x
*(4)-7 Supplemental Indentures to Mortgage dated
July 1, 1923 dated, respectively, June 1,
1991, October 1, 1991 and October 15, 1991
(File No. 33-44018, Form S-3, Exhibits (4)-
12, (4)-13 and (4)-14). x
*(4)-8 Supplemental Indenture to Mortgage dated July
1, 1923 dated February 1, 1992 (File No. 1-
1839, Form 10-K for the year ended December
31, 1991, Exhibit (4)-18). x
*(4)-9 Supplemental Indenture to Mortgage dated July
1, 1923 dated May 15, 1992 (File No. 33-
48542, Form S-3, Exhibit (4)-14). x
*(4)-10 Supplemental Indentures to Mortgage dated
July 1, 1923 dated, respectively, July 15,
1992, September 15, 1992 and October 1, 1992
(File No. 33-53766, Form S-3, Exhibits (4)-
13, (4)-14 and (4)-15). x
*(4)-11 Supplemental Indentures to Mortgage dated
July 1, 1923 dated, respectively, February
1, 1993 and March 1, 1993 (File No. 1-1839,
Form 10-K for the year ended December 31,
1992, Exhibits (4)-14 and (4)-15). x
*(4)-12 Supplemental Indentures to Mortgage dated
July 1, 1923 dated, respectively, April 1,
1993 and April 15, 1993 (File No. 33-64028,
Form S-3, Exhibits (4)-12 and (4)-13). x
*(4)-13 Supplemental Indentures to Mortgage dated
July 1, 1923 dated, respectively, June 15,
1993 and July 1, 1993 (File No. 1-1839, Form
8-K dated May 21, 1993, Exhibits (4)-1 and
(4)-2). x
*(4)-14 Supplemental Indenture to Mortgage dated July
1, 1923 dated July 15, 1993 (File No. 1-
1839, Form 10-Q for the quarter ended June
30, 1993, Exhibit (4)-1). x
*(4)-15 Supplemental Indenture to Mortgage dated July
1, 1923 dated January 15, 1994 (File No. 1-
1839, Form 10-K for the year ended December
31, 1993, Exhibit (4)-15). x
(4)-16 Supplemental Indenture to Mortgage dated July
1, 1923 dated December 1, 1994. x
*(4)-17 Indentures of ComEd to The First National
Bank of Chicago, Trustee (Harris Trust and
Savings Bank, successor Trustee), dated
April 1, 1949, October 1, 1949, October 1,
1950, October 1, 1954, January 1, 1958, Jan-
uary 1, 1959 and December 1, 1961 (File No.
1-1839, Form 10-K for the year ended Decem-
ber 31, 1982, Exhibit (4)-20). x
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
------- --------------------------------------------- ------ -----
<C> <S> <C> <C>
*(4)-18 Indenture of ComEd dated February 15, 1973 to
The First National Bank of Chicago, Trustee
(LaSalle National Bank, successor Trustee),
and Supplemental Indenture thereto dated
July 13, 1973 (File No. 2-66100, Form S-16,
Exhibit (b)-2). x
*(4)-19 Indenture dated as of September 1, 1987 be-
tween ComEd and Citibank, N.A., Trustee re-
lating to Notes (File No. 33-20619, Form
S-3, Exhibit (4)-13). x
*(4)-20 Supplemental Indenture to Indenture dated
September 1, 1987 dated September 15, 1987
(File No. 33-20619, Form S-3, Exhibit (4)-
14). x
*(4)-21 Supplemental Indenture to Indenture dated
September 1, 1987 dated May 18, 1988 (File
No. 33-23036, Form S-3, Exhibit (4)-14). x
*(4)-22 Supplemental Indenture to Indenture dated
September 1, 1987 dated July 14, 1989 (File
No. 33-32929, Form S-3, Exhibit (4)-16). x
*(4)-23 Supplemental Indenture to Indenture dated
September 1, 1987 dated April 1, 1991 (File
No. 33-44018, Form S-3, Exhibit (4)-21). x
*(4)-24 Supplemental Indenture to Indenture dated
September 1, 1987 dated April 15, 1992 (File
No. 33-48542, Form S-3, Exhibit (4)-22). x
*(4)-25 Supplemental Indenture to Indenture dated
September 1, 1987 dated July 15, 1992 (File
No. 33-53766, Form S-3, Exhibit (4)-24). x
*(4)-26 Supplemental Indenture to Indenture dated
September 1, 1987 dated October 15, 1993
(File No. 1-1839, Form 10-Q for the quarter
ended September 30, 1993, Exhibit (4)-1). x
*(4)-27 Supplemental Indenture to Indenture dated
September 1, 1987 dated April 1, 1994 (File
No. 1-1839, Form 10-Q for the quarter ended
March 31, 1994, Exhibit (4)-1). x
*(4)-28 Credit Agreement dated as of October 1, 1991,
among Commonwealth Edison Company, as bor-
rower, the Banks named therein and the other
Lenders from time to time parties thereto,
and Citibank, N.A. (File No. 1-1839, Form
10-K for the year ended December 31, 1991,
Exhibit (4)-27). x
*(4)-29 Credit Agreement dated as of October 1, 1991,
among Commonwealth Edison Company, as bor-
rower, the Banks named therein and the other
Lenders from time to time parties thereto,
and Citibank, N.A. (File No. 1-1839, Form
10-K for the year ended December 31, 1991,
Exhibit (4)-28). x
*(4)-30 Letter Agreement dated as of October 4, 1993,
among Commonwealth Edison Company and cer-
tain of the Banks party to the Credit Agree-
ment dated as of October 1, 1991 (File No.
1-1839, Form 10-K for the year ended Decem-
ber 31, 1993, Exhibit (4)-28). x
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
------- --------------------------------------------- ------ -----
<C> <S> <C> <C>
*(4)-31 Term Loan Agreement dated as of January 7,
1992, between Commonwealth Edison Company,
as borrower, and The First National Bank of
Chicago, individually and as agent (File No.
1-1839, Form 10-K for the year ended Decem-
ber 31, 1992, Exhibit (4)-28). x
(4)-32 First Amendment to Term Loan Agreement dated
as of January 9, 1995, by and among Common-
wealth Edison Company, The First National
Bank of Chicago, individually and as agent,
and the banks party thereto. x
*(4)-33 Term Loan Agreement dated as of January 15,
1992, between Commonwealth Edison Company,
as borrower, and Westpac Banking Corpora-
tion, Chicago Branch, individually and as
agent (File No. 1-1839, Form 10-K for the
year ended December 31, 1992, Exhibit (4)-
29). x
*(4)-34 Term Loan Agreement dated as of January 16,
1992, between Commonwealth Edison Company,
as borrower, and The Bank of New York, indi-
vidually and as agent (File No. 1-1839, Form
10-K for the year ended December 31, 1992,
Exhibit (4)-29). x
(4)-35 Credit Agreement dated as of November 22,
1994, among Unicom Enterprises Inc., the
Banks Named Therein and Citibank, N.A. x
(4)-36 Guaranty dated November 22, 1994, by Unicom
Corporation in favor of the Lenders and LC
Banks parties to the aforementioned Credit
Agreement with Unicom Enterprises Inc. x
(4)-37 Guaranty dated November 22, 1994, by Unicom
Corporation in favor of Citibank, N.A. x
*(10)-1 Nuclear Fuel Lease Agreement dated as of No-
vember 23, 1993, between CommEd Fuel Compa-
ny, Inc., as Lessor, and Commonwealth Edison
Company, as Lessee (File No. 1-1839, Form
10-K for the year ended December 31, 1993,
Exhibit (10)-1). x
+*(10)-2 Unicom Corporation Long-Term Incentive Plan
(File No. 1-1839, ComEd Proxy Statement
dated March 26, 1993, Exhibit A). x
+*(10)-3 Amendment to Unicom Corporation Long-Term In-
centive Plan, effective September 1, 1994
(File No. 33-56991, Form S-8, Exhibit (4)-
4). x
+*(10)-4 1994 Long-Term Performance Unit Award for Ex-
ecutive and Group Level Employes Payable in
1996 under the 1993 Long-Term Incentive Plan
(File No. 1-1839, Form 10-K/A-1 for the year
ended December 31, 1993, Exhibit (10)-4). x x
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
-------- --------------------------------------------- ------ -----
<C> <S> <C> <C>
+*(10)-5 1994 Long-Term Performance Unit Award for Ex-
ecutive and Group Level Employes Payable in
1997 under the 1993 Long-Term Incentive Plan
(File No. 1-1839, Form 10-K/A-1 for the year
ended December 31, 1993, Exhibit (10)-5). x x
+ (10)-6 1995 Long-Term Performance Unit Award for Ex-
ecutive and Group Level Employees Payable in
1998 under the Unicom Corporation Long-Term
Incentive Plan. x x
+ (10)-7 1995 Variable Compensation Award for Manage-
ment Employees under the Unicom Corporation
Long-Term Incentive Plan. x x
+ (10)-8 1995 Award to Mr. O'Connor and Mr. Skinner
under the Unicom Corporation Long-Term In-
centive Plan. x x
+ (10)-9 Unicom Corporation Deferred Compensation Unit
Plan, as amended. x x
+*(10)-10 Deferred Compensation Plan (included in Arti-
cle Five of Exhibit (3)-2 above). x
+*(10)-11 Management Incentive Compensation Plan, ef-
fective January 1, 1989 (File No. 1-1839,
Form 10-K for the year ended December 31,
1988, Exhibit (10)-4). x
+*(10)-12 Amendments to Management Incentive Compensa-
tion Plan, dated December 14, 1989 and March
21, 1990 (File No. 1-1839, Form 10-K for the
year ended December 31, 1989, Exhibit (10)-
5). x
+*(10)-13 Amendment to Management Incentive Compensa-
tion Plan, dated March 21, 1991 (File No. 1-
1839, Form 10-K for the year ended December
31, 1991, Exhibit (10)-6). x
+ (10)-14 Retirement Plan for Directors, effective Sep-
tember 1, 1994. x
+*(10)-15 Retirement Plan for Directors, effective Jan-
uary 1, 1987 (File No. 1-1839, Form 10-K for
the year ended December 31, 1988, Exhibit
(10)-5). x
+ (10)-16 Unicom Corporation Outside Director Stock
Award Plan. x
+*(10)-17 Executive Group Life Insurance Plan (File No.
1-1839, Form 10-K for the year ended Decem-
ber 31, 1980, Exhibit (10)-3). x
+*(10)-18 Amendment to the Executive Group Life Insur-
ance Plan (File No. 1-1839, Form 10-K for
the year ended December 31, 1981, Exhibit
(10)-4). x
+*(10)-19 Amendment to the Executive Group Life Insur-
ance Plan dated December 12, 1986 (File No.
1-1839, Form 10-K for the year ended Decem-
ber 31, 1986, Exhibit (10)-6). x
+*(10)-20 Amendment of Executive Group Life Insurance
Plan to implement program of "split dollar
life insurance" dated December 13, 1990
(File No. 1-1839, Form 10-K for the year
ended December 31, 1990, Exhibit (10)-10). x
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
------- --------------------------------------------- ------ -----
<C> <S> <C> <C>
+*(10)-21 Commonwealth Edison Company Supplemental Man-
agement Retirement Plan (File No. 1-1839,
Form 10-K for the year ended December 31,
1985, Exhibit (10)-6). x
+*(10)-22 Amendment of Executive Group Life Insurance
Plan to stabilize the death benefit applica-
ble to participants dated July 22, 1992
(File No. 1-1839, Form 10-K for the year
ended December 31, 1992, Exhibit (10)-13). x
+*(10)-23 Letter Agreement dated December 16, 1992 be-
tween Commonwealth Edison Company and Samuel
K. Skinner (File No. 1-1839, Form 10-K for
the year ended December 31, 1992, Exhibit
(10)-14). x
+*(10)-24 Commonwealth Edison Company Excess Benefit
Savings Plan (File No. 1-1839, Form 10-Q for
the quarter ended June 30, 1994, Exhibit
(10)-2). x
(12) Statement re computation of ratios of earn-
ings to fixed charges and ratios of earnings
to fixed charges and preferred and prefer-
ence stock dividend requirements for ComEd. x
(21)-1 Subsidiaries of Unicom Corporation. x
(21)-2 Subsidiaries of Commonwealth Edison Company. x
(23)-1 Consent of experts for Unicom Corporation. x
(23)-2 Consent of experts for Commonwealth Edison
Company. x
(24)-1 Powers of attorney of Directors whose names
are signed to the Unicom Corporation Annual
Report on Form 10-K pursuant to such powers. x
(24)-2 Powers of attorney of Directors whose names
are signed to the Commonwealth Edison Com-
pany Annual Report on Form 10-K pursuant to
such powers. x
(99)-1 Unicom Corporation's Current Report on Form
8-K dated January 27, 1995. x
(99)-2 Commonwealth Edison Company's Current Report
on Form 8-K/A-1 dated January 27, 1995. x
</TABLE>
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Unicom and ComEd
hereby agree to furnish to the SEC, upon request, any instrument
defining the rights of holders of long-term debt of ComEd not filed as
an exhibit herein. No such instrument authorizes securities in excess
of 10% of the total assets of ComEd.
(B) REPORTS ON FORM 8-K:
None.
33
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL SCHEDULE
To Unicom Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Unicom Corporation and subsidiary
companies incorporated by reference in this Annual Report on Form 10-K, and
have issued our report thereon dated January 27, 1995. Our report on the
financial statements includes an explanatory paragraph that describes the
Company's change in its method of accounting for postretirement health care
benefits and income taxes as discussed in Notes 13 and 14, respectively, to the
financial statements.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed on page 27, Item
14.(a), is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Chicago, Illinois
January 27, 1995
34
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL SCHEDULE
To Commonwealth Edison Company:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Commonwealth Edison Company and subsidiary
companies incorporated by reference in this Annual Report on Form 10-K, and
have issued our report thereon dated January 27, 1995. Our report on the
financial statements includes an explanatory paragraph that describes the
Company's change in its method of accounting for postretirement health care
benefits and income taxes as discussed in Notes 13 and 14, respectively, to the
financial statements.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed on page 27, Item
14.(a), is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Chicago, Illinois
January 27, 1995
35
<PAGE>
SCHEDULE II
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(THOUSANDS OF DOLLARS)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
---------------------------- --------- ------------------ ---------- --------
ADDITIONS
------------------
BALANCE CHARGED
AT TO COSTS CHARGED BALANCE
BEGINNING AND TO OTHER AT END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS OF YEAR
---------------------------- --------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31, 1992
----------------------------
Reserve Deducted From Assets
in Consolidated Balance
Sheet:
Provision for uncollectible
accounts (a).............. $ 7,400 $ 5,576 $ -- $ -- $12,976
======= ======= ====== ======== =======
Other Reserves:
Estimated liabilities asso-
ciated with remediation
costs and former manufac-
tured gas plant sites..... $25,000 $ -- $ -- $ (478)(b) $24,522
======= ======= ====== ======== =======
Accumulated provision for
injuries and damages...... $66,411 $18,390 $6,090 $(26,379)(c) $64,512
======= ======= ====== ======== =======
FOR THE YEAR ENDED
DECEMBER 31, 1993
----------------------------
Reserve Deducted From Assets
in Consolidated Balance
Sheet:
Provision for uncollectible
accounts (a).............. $12,976 $(2,066) $ -- $ -- $10,910
======= ======= ====== ======== =======
Other Reserves:
Estimated liabilities asso-
ciated with remediation
costs and former manufac-
tured gas plant sites..... $24,522 $ 6,020 $ -- $ (1,020)(b) $29,522
======= ======= ====== ======== =======
Accumulated provision for
injuries and damages...... $64,512 $13,963 $7,795 $(29,536)(c) $56,734
======= ======= ====== ======== =======
FOR THE YEAR ENDED
DECEMBER 31, 1994
----------------------------
Reserve Deducted From Assets
in Consolidated Balance
Sheet:
Provision for uncollectible
accounts (a).............. $10,910 $ (190) $ -- $ -- $10,720
======= ======= ====== ======== =======
Other Reserves:
Estimated liabilities asso-
ciated with remediation
costs and former manufac-
tured gas plant sites..... $29,522 $ 5,039 $ -- $ (2,039)(b) $32,522
======= ======= ====== ======== =======
Accumulated provision for
injuries and damages...... $56,734 $20,270 $7,802 $(29,494)(c) $55,312
======= ======= ====== ======== =======
</TABLE>
Notes:
(a) Bad debt losses, net of recoveries, and provisions for uncollectible
accounts were charged to operating expense and amounted to $33,708, $28,867
and $25,287 in 1992, 1993 and 1994, respectively.
(b) Expenditures for site investigation and cleanup costs.
(c) Payments of claims and related costs.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
36
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS
REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO AND STATE OF ILLINOIS ON THE 30TH
DAY OF MARCH 1995.
UNICOM CORPORATION
James J. O'Connor
By_____________________________
James J. O'Connor, Chairman
and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF
OF THE REGISTRANT AND IN THE CAPACITIES INDICATED ON THE 30TH DAY OF
MARCH 1995.
SIGNATURE TITLE
---------------------------- ---------------------
James J. O'Connor Chairman and Chief
---------------------------- Executive Officer and
James J. O'Connor Director (principal
executive officer)
John C. Bukovski
---------------------------- Vice President
John C. Bukovski (principal financial officer)
Roger F. Kovack Comptroller
---------------------------- (principal accounting officer)
Roger F. Kovack
Jean Allard* Director
James W. Compton* Director
Sue L. Gin* Director
Donald P. Jacobs* Director
Edgar D. Jannotta* Director
George E. Johnson* Director
Harvey Kapnick* Director
Byron Lee, Jr.* Director
Edward A. Mason* Director
Frank A. Olson* Director
Samuel K. Skinner* President and Director
David A. Scholz
*By____________________________
David A. Scholz,
Attorney-in-fact
[Signature page to Unicom Corporation Annual Report on Form 10-K]
37
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS
REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO AND STATE OF ILLINOIS ON THE 30TH
DAY OF MARCH 1995.
COMMONWEALTH EDISON COMPANY
James J. O'Connor
By_____________________________
James J. O'Connor, Chairman
and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF
OF THE REGISTRANT AND IN THE CAPACITIES INDICATED ON THE 30TH DAY OF
MARCH 1995.
SIGNATURE TITLE
---------------------------- ---------------------
James J. O'Connor
---------------------------- Chairman and Chief
James J. O'Connor Executive Officer and Director
(principal executive officer)
John C. Bukovski
---------------------------- Vice President (principal
John C. Bukovski financial officer)
Roger F. Kovack
---------------------------- Comptroller
Roger F. Kovack (principal accounting officer)
Jean Allard* Director
James W. Compton* Director
Sue L. Gin* Director
Donald P. Jacobs* Director
Edgar D. Jannotta* Director
George E. Johnson* Director
Harvey Kapnick* Director
Byron Lee, Jr.* Director
Edward A. Mason* Director
Frank A. Olson* Director
Samuel K. Skinner* President and Director
David A. Scholz
*By____________________________
David A. Scholz,
Attorney-in-fact
[Signature page to Commonwealth Edison Company Annual Report on Form 10-K]
38
<PAGE>
EXHIBIT INDEX
The following exhibits are filed with the indicated Annual Report on Form
10-K or incorporated therein by reference. Documents indicated by an
asterisk (*) are incorporated by reference to the File No. indicated.
Documents indicated by a plus sign (+) identify management contracts or
compensatory plans or arrangements.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
------- ------------------------------------------------- ------ -----
<C> <S> <C> <C>
(3)-1 Articles of Incorporation of Unicom effective
January 28, 1994. x
(3)-2 Restated Articles of Incorporation of ComEd ef-
fective February 20, 1985, including Statements
of Resolution Establishing Series, relating to
the establishment of three new series of ComEd
preference stock known as the "$9.00 Cumulative
Preference Stock," the "$6.875 Cumulative Pref-
erence Stock" and the "$2.425 Cumulative Prefer-
ence Stock." x
(3)-3 By-Laws of Unicom, effective January 28, 1994 as
amended through March 9, 1995. x
(3)-4 By-Laws of ComEd, effective September 2, 1988 as
amended through March 9, 1995. x
*(4)-1 Mortgage of ComEd to Illinois Merchants Trust
Company, Trustee (Continental Illinois National
Bank and Trust Company of Chicago, successor
Trustee), dated July 1, 1923, Supplemental In-
denture thereto dated August 1, 1944, and amend-
ments and supplements thereto dated, respective-
ly, August 1, 1946, April 1, 1953, April 1,
1966, November 1, 1966, December 1, 1966, March
31, 1967, April 1, 1967, February 1, 1968, July
1, 1968, October 1, 1968, February 28, 1969, May
29, 1970, January 1, 1971, June 1, 1971, May 31,
1972, June 1, 1973, June 15, 1973, October 15,
1973, May 31, 1974, July 1, 1974, June 13, 1975,
May 28, 1976, January 15, 1977, June 1, 1977 and
June 3, 1977 (File No. 2-60201, Form S-7, Ex-
hibit 2-1). x
*(4)-2 Supplemental Indentures to Mortgage dated July 1,
1923 dated, respectively, December 1, 1977, May
17, 1978, August 31, 1978, June 18, 1979, June
20, 1980, April 16, 1981, April 30, 1982, April
15, 1983, April 13, 1984, March 1, 1985 and
April 15, 1985 (File No. 2-99665, Form S-3, Ex-
hibit (4)-3). x
*(4)-3 Supplemental Indentures to Mortgage dated July 1,
1923 dated, respectively, April 15, 1986 and May
1, 1986 (File No. 33-6879, Form S-3, Exhibit
(4)-9). x
*(4)-4 Supplemental Indenture to Mortgage dated July 1,
1923 dated January 12, 1987 (File No. 33-13193,
Form S-3, Exhibit (4)-6). x
*(4)-5 Supplemental Indenture to Mortgage dated July 1,
1923 dated June 30, 1989 (File No. 33-32929,
Form S-3, Exhibit (4)-11). x
*(4)-6 Supplemental Indentures to Mortgage dated July 1,
1923 dated, respectively, February 15, 1990 and
June 15, 1990 (File No.
33-38232, Form S-3, Exhibits (4)-11 and (4)-12). x
*(4)-7 Supplemental Indentures to Mortgage dated July 1,
1923 dated, respectively, June 1, 1991, October
1, 1991 and October 15, 1991 (File No. 33-44018,
Form S-3, Exhibits (4)-12, (4)-13 and (4)-14). x
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
------- ------------------------------------------------- ------ -----
<C> <S> <C> <C>
*(4)-8 Supplemental Indenture to Mortgage dated July 1,
1923 dated February 1, 1992 (File No. 1-1839,
Form 10-K for the year ended December 31, 1991,
Exhibit (4)-18). x
*(4)-9 Supplemental Indenture to Mortgage dated July 1,
1923 dated May 15, 1992 (File No. 33-48542, Form
S-3, Exhibit (4)-14). x
*(4)-10 Supplemental Indentures to Mortgage dated July 1,
1923 dated, respectively, July 15, 1992, Septem-
ber 15, 1992 and October 1, 1992 (File No. 33-
53766, Form S-3, Exhibits (4)-13, (4)-14 and
(4)-15). x
*(4)-11 Supplemental Indentures to Mortgage dated July 1,
1923 dated, respectively, February 1, 1993 and
March 1, 1993 (File No.
1-1839, Form 10-K for the year ended December
31, 1992, Exhibits (4)-14 and (4)-15). x
*(4)-12 Supplemental Indentures to Mortgage dated July 1,
1923 dated, respectively, April 1, 1993 and
April 15, 1993 (File No. 33-64028, Form S-3, Ex-
hibits (4)-12 and (4)-13). x
*(4)-13 Supplemental Indentures to Mortgage dated July 1,
1923 dated, respectively, June 15, 1993 and July
1, 1993 (File No. 1-1839, Form 8-K dated May 21,
1993, Exhibits (4)-1 and (4)-2). x
*(4)-14 Supplemental Indenture to Mortgage dated July 1,
1923 dated July 15, 1993 (File No. 1-1839, Form
10-Q for the quarter ended June 30, 1993, Ex-
hibit (4)-1). x
*(4)-15 Supplemental Indenture to Mortgage dated July 1,
1923 dated January 15, 1994 (File No. 1-1839,
Form 10-K for the year ended December 31, 1993,
Exhibit (4)-15). x
(4)-16 Supplemental Indenture to Mortgage dated July 1,
1923 dated December 1, 1994. x
*(4)-17 Indentures of ComEd to The First National Bank of
Chicago, Trustee (Harris Trust and Savings Bank,
successor Trustee), dated April 1, 1949, October
1, 1949, October 1, 1950, October 1, 1954, Janu-
ary 1, 1958, January 1, 1959 and December 1,
1961 (File No. 1-1839, Form 10-K for the year
ended December 31, 1982, Exhibit (4)-20). x
*(4)-18 Indenture of ComEd dated February 15, 1973 to The
First National Bank of Chicago, Trustee (LaSalle
National Bank, successor Trustee), and Supple-
mental Indenture thereto dated July 13, 1973
(File No. 2-66100, Form S-16, Exhibit (b)-2). x
*(4)-19 Indenture dated as of September 1, 1987 between
ComEd and Citibank, N.A., Trustee relating to
Notes (File No. 33-20619, Form S-3, Exhibit (4)-
13). x
*(4)-20 Supplemental Indenture to Indenture dated Septem-
ber 1, 1987 dated September 15, 1987 (File No.
33-20619, Form S-3, Exhibit (4)-14). x
*(4)-21 Supplemental Indenture to Indenture dated Septem-
ber 1, 1987 dated May 18, 1988 (File No. 33-
23036, Form S-3, Exhibit (4)-14). x
*(4)-22 Supplemental Indenture to Indenture dated Septem-
ber 1, 1987 dated July 14, 1989 (File No. 33-
32929, Form S-3, Exhibit (4)-16). x
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
------- ------------------------------------------------- ------ -----
<C> <S> <C> <C>
*(4)-23 Supplemental Indenture to Indenture dated Septem-
ber 1, 1987 dated April 1, 1991 (File No. 33-
44018, Form S-3, Exhibit (4)-21). x
*(4)-24 Supplemental Indenture to Indenture dated Septem-
ber 1, 1987 dated April 15, 1992 (File No. 33-
48542, Form S-3, Exhibit
(4)-22). x
*(4)-25 Supplemental Indenture to Indenture dated Septem-
ber 1, 1987 dated July 15, 1992 (File No. 33-
53766, Form S-3, Exhibit (4)-24). x
*(4)-26 Supplemental Indenture to Indenture dated Septem-
ber 1, 1987 dated October 15, 1993 (File No. 1-
1839, Form 10-Q for the quarter ended September
30, 1993, Exhibit (4)-1). x
*(4)-27 Supplemental Indenture to Indenture dated Septem-
ber 1, 1987 dated April 1, 1994 (File No. 1-
1839, Form 10-Q for the quarter ended March 31,
1994, Exhibit (4)-1). x
*(4)-28 Credit Agreement dated as of October 1, 1991,
among Commonwealth Edison Company, as borrower,
the Banks named therein and the other Lenders
from time to time parties thereto, and Citibank,
N.A. (File No. 1-1839, Form 10-K for the year
ended December 31, 1991, Exhibit (4)-27). x
*(4)-29 Credit Agreement dated as of October 1, 1991,
among Commonwealth Edison Company, as borrower,
the Banks named therein and the other Lenders
from time to time parties thereto, and Citibank,
N.A. (File No. 1-1839, Form 10-K for the year
ended December 31, 1991, Exhibit (4)-28). x
*(4)-30 Letter Agreement dated as of October 4, 1993,
among Commonwealth Edison Company and certain of
the Banks party to the Credit Agreement dated as
of October 1, 1991 (File No. 1-1839, Form 10-K
for the year ended December 31, 1993, Exhibit
(4)-28). x
*(4)-31 Term Loan Agreement dated as of January 7, 1992,
between Commonwealth Edison Company, as borrow-
er, and The First National Bank of Chicago, in-
dividually and as agent (File No. 1-1839, Form
10-K for the year ended December 31, 1992, Ex-
hibit (4)-28). x
(4)-32 First Amendment to Term Loan Agreement dated as
of January 9, 1995, by and among Commonwealth
Edison Company, The First National Bank of Chi-
cago, individually and as agent, and the banks
party thereto. x
*(4)-33 Term Loan Agreement dated as of January 15, 1992,
between Commonwealth Edison Company, as borrow-
er, and Westpac Banking Corporation, Chicago
Branch, individually and as agent (File No. 1-
1839, Form 10-K for the year ended December 31,
1992, Exhibit (4)-29). x
*(4)-34 Term Loan Agreement dated as of January 16, 1992,
between Commonwealth Edison Company, as borrow-
er, and The Bank of New York, individually and
as agent (File No. 1-1839, Form 10-K for the
year ended December 31, 1992, Exhibit (4)-29). x
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
------- ------------------------------------------------- ------ -----
<C> <S> <C> <C>
(4)-35 Credit Agreement dated as of November 22, 1994,
among Unicom Enterprises Inc., the Banks Named
Therein and Citibank, N.A. x
(4)-36 Guaranty dated November 22, 1994, by Unicom Cor-
poration in favor of the Lenders and LC Banks
parties to the aforementioned Credit Agreement
with Unicom Enterprises Inc. x
(4)-37 Guaranty dated November 22, 1994, by Unicom Cor-
poration in favor of Citibank, N.A. x
*(10)-1 Nuclear Fuel Lease Agreement dated as of November
23, 1993, between CommEd Fuel Company, Inc., as
Lessor, and Commonwealth Edison Company, as Les-
see (File No. 1-1839, Form 10-K for the year
ended December 31, 1993, Exhibit (10)-1). x
+*(10)-2 Unicom Corporation Long-Term Incentive Plan (File
No. 1-1839, ComEd Proxy Statement dated March
26, 1993, Exhibit A). x
+*(10)-3 Amendment to Unicom Corporation Long-Term Incen-
tive Plan, effective September 1, 1994 (File No.
33-56991, Form S-8, Exhibit (4)-4). x
+*(10)-4 1994 Long-Term Performance Unit Award for Execu-
tive and Group Level Employes Payable in 1996
under the 1993 Long-Term Incentive Plan (File
No. 1-1839, Form 10-K/A-1 for the year ended De-
cember 31, 1993, Exhibit (10)-4). x x
+*(10)-5 1994 Long-Term Performance Unit Award for Execu-
tive and Group Level Employes Payable in 1997
under the 1993 Long-Term Incentive Plan (File
No. 1-1839, Form 10-K/A-1 for the year ended De-
cember 31, 1993, Exhibit (10)-5). x x
+ (10)-6 1995 Long-Term Performance Unit Award for Execu-
tive and Group Level Employees Payable in 1998
under the Unicom Corporation Long-Term Incentive
Plan. x x
+ (10)-7 1995 Variable Compensation Award for Management
Employees under the Unicom Corporation Long-Term
Incentive Plan. x x
+ (10)-8 1995 Award to Mr. O'Connor and Mr. Skinner under
the Unicom Corporation Long-Term Incentive Plan. x x
+ (10)-9 Unicom Corporation Deferred Compensation Unit
Plan, as amended. x x
+*(10)-10 Deferred Compensation Plan (included in Article
Five of Exhibit (3)-2 above). x
+*(10)-11 Management Incentive Compensation Plan, effective
January 1, 1989 (File No. 1-1839, Form 10-K for
the year ended December 31, 1988, Exhibit (10)-
4). x
+*(10)-12 Amendments to Management Incentive Compensation
Plan, dated December 14, 1989 and March 21, 1990
(File No. 1-1839, Form 10-K for the year ended
December 31, 1989, Exhibit
(10)-5). x
+*(10)-13 Amendment to Management Incentive Compensation
Plan, dated March 21, 1991 (File No. 1-1839,
Form 10-K for the year ended December 31, 1991,
Exhibit (10)-6). x
+ (10)-14 Retirement Plan for Directors, effective Septem-
ber 1, 1994. x
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
--------- ------------------------------------------------- ------ -----
<C> <S> <C> <C>
+*(10)-15 Retirement Plan for Directors, effective January
1, 1987 (File No. 1-1839, Form 10-K for the year
ended December 31, 1988, Exhibit (10)-5). x
+ (10)-16 Unicom Corporation Outside Director Stock Award
Plan. x
+*(10)-17 Executive Group Life Insurance Plan (File No. 1-
1839, Form 10-K for the year ended December 31,
1980, Exhibit (10)-3). x
+*(10)-18 Amendment to the Executive Group Life Insurance
Plan (File No. 1-1839, Form 10-K for the year
ended December 31, 1981, Exhibit (10)-4). x
+*(10)-19 Amendment to the Executive Group Life Insurance
Plan dated December 12, 1986 (File No. 1-1839,
Form 10-K for the year ended December 31, 1986,
Exhibit (10)-6). x
+*(10)-20 Amendment of Executive Group Life Insurance Plan
to implement program of "split dollar life in-
surance" dated December 13, 1990 (File No. 1-
1839, Form 10-K for the year ended December 31,
1990, Exhibit (10)-10). x
+*(10)-21 Commonwealth Edison Company Supplemental Manage-
ment Retirement Plan (File No. 1-1839, Form 10-K
for the year ended December 31, 1985, Exhibit
(10)-6). x
+*(10)-22 Amendment of Executive Group Life Insurance Plan
to stabilize the death benefit applicable to
participants dated July 22, 1992 (File No. 1-
1839, Form 10-K for the year ended December 31,
1992, Exhibit (10)-13). x
+*(10)-23 Letter Agreement dated December 16, 1992 between
Commonwealth Edison Company and Samuel K. Skin-
ner (File No. 1-1839, Form 10-K for the year
ended December 31, 1992, Exhibit (10)-14). x
+*(10)-24 Commonwealth Edison Company Excess Benefit Sav-
ings Plan (File No. 1-1839, Form 10-Q for the
quarter ended June 30, 1994, Exhibit (10)-2). x
(12) Statement re computation of ratios of earnings to
fixed charges and ratios of earnings to fixed
charges and preferred and preference stock divi-
dend requirements for ComEd. x
(21)-1 Subsidiaries of Unicom Corporation. x
(21)-2 Subsidiaries of Commonwealth Edison Company. x
(23)-1 Consent of experts for Unicom Corporation. x
(23)-2 Consent of experts for Commonwealth Edison
Company. x
(24)-1 Powers of attorney of Directors whose names are
signed to the Unicom Corporation Annual Report
on Form 10-K pursuant to such powers. x
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
------- ------------------------------------------------- ------ -----
<C> <S> <C> <C>
(24)-2 Powers of attorney of Directors whose names are
signed to the Commonwealth Edison Company Annual
Report on Form 10-K pursuant to such powers. x
(99)-1 Unicom Corporation's Current Report on Form 8-K
dated January 27, 1995. x
(99)-2 Commonwealth Edison Company's Current Report on
Form
8-K/A-1 dated January 27, 1995. x
</TABLE>
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Unicom and ComEd
hereby agree to furnish to the SEC, upon request, any instrument
defining the rights of holders of long-term debt of ComEd not filed as
an exhibit herein. No such instrument authorizes securities in excess
of 10% of the total assets of ComEd.
6
<PAGE>
Exhibit (3)-1
Unicom Corporation
Form 10-K File No. 1-11375
UNICOM CORPORATION
ARTICLES OF INCORPORATION
ARTICLE ONE The name of the corporation is Unicom Corporation
ARTICLE TWO The name and address of the registered agent and its registered
office are:
Registered Agent: David A. Scholz
Registered Office: 10 South Dearborn Street
Post Office Box 767
Chicago, Illinois 60690-0767
Cook County
ARTICLE THREE The purpose or purposes for which the corporation is organized
are to transact any or all lawful businesses for which
corporations may be incorporated under the Business Corporation
Act of 1983, as amended from time to time.
ARTICLE FOUR Paragraph 1. The number of shares which the corporation is
authorized to issue is 400,000,000 shares of Common Stock,
without par value.
Paragraph 2. Initially, the corporation proposes to issue 100
shares of Common Stock for an aggregate consideration of $1,000.
Paragraph 3. The shares of Common Stock shall entitle the
holders thereof to one vote for each share upon all matters upon
which shareholders have the right to vote and to cumulate voting
in all elections of directors by vote of shareholders.
ARTICLE FIVE Paragraph 1. A director of the corporation shall not be
personally liable to the corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty
of loyalty to the corporation or its shareholders, (ii) for acts
or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (iii) under Section
8.65 of the Business Corporation Act of the State of Illinois,
or (iv) for any transaction from which the director derived an
improper personal benefit. If the Business Corporation Act of
the State of Illinois is amended to authorize corporate action
further
<PAGE>
eliminating or limiting the personal liability of Directors,
then the liability of a director of the corporation shall be
eliminated or limited to the full extent permitted by the
Business Corporation Act of the State of Illinois, as so
amended. Any repeal or modification of this Paragraph 1 by the
shareholders of the corporation shall not adversely affect any
right or protection of a director of the corporation existing at
the time of such repeal or modification.
Paragraph 2. Each person who is or was or had agreed to become
a director or officer of the corporation, and each person who is
or was serving or who had agreed to serve at the request of the
Board of Directors or an officer of the corporation as an
employe or agent of the corporation or as a director, officer,
employe, or agent, trustee or fiduciary of another corporation,
partnership, joint venture, trust or other enterprise (including
the heirs, executors, administrators or estate of such person),
shall be indemnified by the corporation to the full extent
permitted by the Business Corporation Act of the State of
Illinois or any other applicable laws as presently or hereafter
in effect. Without limiting the generality of the foregoing,
the corporation may enter into one or more agreements with any
person which provide for indemnification greater or different
than that provided in this Paragraph 2. Any repeal or
modification of this Paragraph 2 shall not adversely affect any
right or protection existing hereunder immediately prior to such
repeal or modification.
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE SIX (a) It is estimated that the value of all
property to be owned by the corporation
for the following year wherever
located will be: $5,476,000,000
--------------
(b) It is estimated that the value of the
property to be located within the
State of Illinois during the following
year will be: $ 50,000,000
--------------
(c) It is estimated that the gross amount
of business that will be transacted by
the corporation during the following
year will be: $ 221,000,000
--------------
(d) It is estimated that the gross amount
of business that will be transacted from
places of business in the State of Illinois
during the following year will be: $ 221,000,000
--------------
</TABLE>
-2-
<PAGE>
ARTICLE SEVEN The undersigned incorporated hereby declares, under penalties of
perjury, that the statements made in the foregoing Articles of
Incorporation are true.
Dated January 28, 1994
Signature and Name Address
------------------ -------
Ashok K. Lalwani Sidley & Austin
------------------------ One First National Plaza
Ashok K. Lalwani Suite 4400
Chicago, Illinois 60603
-3-
<PAGE>
Exhibit (3)-2
Commonwealth Edison Company
Form 10-K File 1-1839
COMMONWEALTH EDISON COMPANY
RESTATED ARTICLES OF INCORPORATION
(REFLECTING AMENDMENTS THRU FEBRUARY 28, 1995)
ARTICLE ONE: The name of the corporation (hereinafter referred to as
the "Company") is:
COMMONWEALTH EDISON COMPANY
ARTICLE TWO: The duration of the Company is perpetual.
ARTICLE THREE: The purposes for which the Company is organized are:
To manufacture, generate, produce, purchase or otherwise acquire, exchange,
distribute and sell electricity and gas for lighting, power, heating, fuel and
any and all other purposes; to purchase or otherwise acquire, distribute and
sell water for any and all purposes; to produce, distribute and sell steam or
hot water for heating or other purposes; to purchase, sell and otherwise dispose
of and deal in apparatus, appliances, commodities, goods, wares and merchandise
necessary or convenient for such purposes or any of them; to acquire, construct,
install, own, manage, maintain and operate plants, buildings, structures, works,
mains, pipes, wires, conduits, conductors, apparatus and any and all other
property necessary or convenient for or incidental to such purposes or any of
them; and to acquire, own, use, convey, and otherwise dispose of and deal in
real property or any interest therein.
ARTICLE FOUR: The Shares which the Company shall have authority to
issue shall consist of:
(a) 850,000 shares of Prior Preferred Stock of the par value of $100
per share (the "Prior Preferred Stock");
(b) 99,864 shares of $1.425 Convertible Preferred Stock without par
value (the "Convertible Preferred Stock");
(c) 23,423,205 shares of Preference Stock without par value (the
"Preference Stock"); and
(d) 250,000,000 shares of Common Stock of the par value of $12.50 per
share (the "Common Stock").
The term "subordinate stock," when hereinafter used with reference to
stock junior to the Prior Preferred Stock, means the Convertible Preferred
Stock, the Preferred Stock, the Common Stock and stock of any other class, which
may hereafter be authorized, ranking junior to the Prior Preferred Stock with
respect to the payment of dividends or the distribution of assets; when
hereinafter used with reference to stock junior to the Convertible Preferred
Stock, means the Preference Stock, the Common Stock and stock of any class,
which may hereafter be authorized, ranking junior to the Convertible Preferred
Stock with respect to the payment of dividends or the distribution of
<PAGE>
assets; and, when hereinafter used with reference to stock junior to the
Preference Stock, means the Common Stock and stock of any other class, which may
hereafter be authorized, ranking junior to the Preference Stock with respect to
the payment of dividends or the distribution of assets.
The preferences, qualifications, limitations, restrictions, and the
special and relative rights in respect of the shares of each class are as
follows:
DIVISION I
Provisions Relating to Prior Preferred Stock
(a) Issue of Prior Preferred Stock in Series. Authority is hereby
expressly vested in the Board of Directors to divide, and to provide for the
issue from time to time of, the Prior Preferred Stock in series and to fix and
determine as to each such series:
(1) the designation of, and the number of shares to be issuable
in, such series; provided, however, that if the Board of Directors, at any
time after the initial issue of shares of any series issued with the
privilege of conversion into shares of the Common Stock, shall provide for
the issue of additional shares of such series, such additional shares shall
not be offered by the Company at a price per share less than that at which
the shares of such series initially issued shall have been offered;
(2) the dividend rate per annum for the shares of such series,
expressed either as a dollar amount per share or as a percentage of the par
value thereof;
(3) the price or prices at which, and the terms and conditions
on which, such shares may be redeemed;
(4) the amount payable upon each of such shares in the event of
voluntary dissolution, liquidation or winding up of the Company;
(5) the amount payable upon each of such shares in the event of
involuntary dissolution, liquidation or winding up of the Company;
(6) sinking fund provisions, if any, for the redemption or
purchase of such shares (the terms "sinking fund," as used herein,
including any analogous fund, however designated); and
(7) if such shares are to be issued with the privilege of
conversion into shares of the Common Stock, the
-2-
<PAGE>
terms and conditions on which such shares may be so converted.
In all other respects shares of the Prior Preferred Stock of all series shall be
identical.
So long as any shares of any series of the Prior Preferred Stock shall
be outstanding, the resolution of the Board of Directors establishing such
series shall not be amended so as to affect any of the preferences or other
rights of the holders of the shares of such series without the affirmative vote
or the written consent of the holders of at least two-thirds of the shares of
such series outstanding at the time or as of a record date fixed by the Board of
Directors, but such resolution may be so amended with such vote or consent.
(b) Dividends. Holders of the Prior Preferred Stock of each series
shall be entitled to receive cash dividends, out of funds legally available
therefor, when and as declared by the Board of Directors, at such rate per annum
as shall have been fixed by the Board of Directors for the shares of such
series. Dividends on the Prior Preferred Stock of all series shall be payable
quarterly on the first day of each of the months of February, May, August and
November in each year, each such quarterly payment to be in respect of the
quarterly period ending with the next preceding the date of such payment, except
in the case of the first dividend payable on shares of any series issued between
quarterly dividend payment dates, in which case such dividend shall be for the
period beginning with the date of issue of such shares or with the next
preceding quarterly dividend payment date for the Prior Preferred Stock, as
determined by the Board of Directors, and ending with the day next preceding
either, as determined by the Board of Directors, the first or the second
quarterly dividend payment date for the Prior Preferred Stock succeeding the
date of issue of such shares. Dividends on the Prior Preferred Stock of each
series shall be cumulative with respect to each share from the beginning date of
the period for which the first dividend thereon was payable. Accumulations of
dividends shall not bear interest. Whenever there shall be paid on the shares
of any series of the Prior Preferred Stock the full amount or any part of the
dividends payable thereon, there shall also be paid at the same time on the
shares of each other series, if any, then outstanding the full amount or a like
proportionate part, as the case may be, of the dividends payable thereon.
No funds shall be paid into or set aside for any sinking fund created
for any series of the Prior Preferred Stock or for any subordinate stock or
stock of any class ranking on a parity with the Prior Preferred Stock with
respect to the payment of dividends or the distribution of assets, unless all
dividends on the Prior Preferred Stock for all past quarterly dividend periods,
and (subject to the limitation hereinafter stated) for the current quarterly
dividend period, shall have been paid or
-3-
<PAGE>
shall have been declared and funds sufficient for such payment set aside by the
Company, separate and apart from its other funds.
No dividend shall be paid or other distribution made on any
subordinate stock, other than a dividend or distribution solely of shares of
subordinate stock, and no subordinate stock shall be purchased or otherwise
acquired by the Company for a consideration, unless (1) all dividends on the
Prior Preferred Stock for all past quarterly dividend periods, and (subject to
the limitation hereinafter stated) for the current quarterly dividend period,
shall have been paid or shall have been declared and funds sufficient for such
payment set aside by the Company, separate and apart from its other funds, and
(2) all funds then and theretofore required to be paid into or set aside for any
sinking fund or funds created for one or more series of the Prior Preferred
Stock shall have been so paid or set aside.
If the date of any payment or setting aside of funds, referred to in
the second preceding paragraph, or the date of payment of any dividend or making
of any other distribution or any purchase or other acquisition, referred to in
the next preceding paragraph, shall be a quarterly dividend payment date, the
references in such paragraphs to "the current quarterly dividend period" shall
be inapplicable for all of the purposes thereof.
(c) Redemption of Prior Preferred Stock. Subject to the limitations
stated in subdivision (d) hereof and except as may be otherwise provided by the
Board of Directors in respect of the shares of a particular series, shares of
any one or more series of the Prior Preferred Stock may be called for redemption
and redeemed, at the option of the Company, in whole at any time or in part from
time to time, upon the notice hereinafter provided for, by the payment therefor
in cash of the then applicable optional redemption price or prices fixed by the
Board of Directors for the shares which are to be redeemed.
If at any time less than all shares of any series of the Prior
Preferred Stock shall be called for redemption, the shares so called shall be
selected by lot in such manner, or pro rata, all as may be determined by the
Board of Directors.
Notice of any proposed redemption shall be given by the Company by
mail, or caused by the Company to be so given, not more than 60 nor less than 30
days prior to the redemption date, to the holders of record of the shares to be
redeemed at their respective addresses then appearing on the records of the
Company.
If notice of redemption shall have been duly given as hereinabove
provided and if, on or before the redemption date, the funds necessary for such
redemption shall have been set aside
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by the Company, separate and apart from its other funds, then, on and after the
redemption date, all shares for the redemption of which such funds shall have
been so set aside shall, whether or not the certificates for such shares shall
have been surrendered for cancellation, be deemed to be no longer outstanding
for any purpose and all rights with respect to such shares shall cease and
terminate on the redemption date, except only the right of the holders of the
certificates for such shares to receive, out of the funds so set aside, the
amount payable upon the redemption thereof, without interest.
At any time before the redemption date the Company may deposit in
trust the funds necessary for such redemption with a bank or trust company, to
be designated in the notice of such redemption, doing business in the City of
Chicago, State of Illinois, or in the Borough of Manhattan, The City of New
York, State of New York, and having capital, surplus and undivided profits
aggregating at least $5,000,000. In the event such deposit is made so that the
deposited funds shall be forthwith available to the holders of the shares to be
redeemed upon surrender of the certificates evidencing such shares, then, upon
the giving of the notice of such redemption, as hereinabove provided, or upon
the earlier delivery to such bank or trust company of irrevocable authorization
and direction so to give such notice, all shares with respect to the redemption
of which such deposit shall have been made and the giving of such notice
effected or authorization therefor given shall, whether or not the certificates
for such shares shall have been surrendered for cancellation, be deemed to be no
longer outstanding for any purpose and all rights with respect to such shares
shall thereupon cease and terminate, except only the right of the holders of the
certificates for such shares (1) to receive, out of the funds so deposited in
trust, from and after the time of such deposit, the amount payable upon the
redemption thereof, without interest, or (2) to exercise any privilege of
conversion which shall not theretofore have terminated. Any funds so deposited,
which shall not be required for the payment of the redemption price of such
shares by reason of the exercise of any right of conversion subsequent to the
date such deposit, shall be paid over to the Company forthwith. At the
expiration of six years after the redemption date, any such funds then remaining
on deposit with such bank or trust company shall be paid over to the Company,
free of trust, and thereafter the holders of the certificates for such shares
shall have no claims against such bank or trust company, but only claims as
unsecured creditors against the Company for amounts equal to their pro rata
portions of the funds so paid over, without interest. Any interest on or other
accretions to funds deposited with such bank or trust company shall belong to
the Company.
The provisions of this subdivision (c) with respect to the method and
effect of redemption shall be applicable to the redemption of shares pursuant to
any sinking fund created for any
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<PAGE>
series of the Prior Preferred Stock as well as to the optional redemption of
shares, except to the extent, if any, that the terms of such sinking fund, as
fixed and determined by the Board of Directors, shall expressly otherwise
provide.
(d) Limitations on Redemption and Purchase of Prior Preferred Stock.
If and so long as the Company shall be in default in the payment of any
quarterly dividend on shares of any series of the Prior Preferred Stock, or
shall be in default in the payment of funds into or the setting aside of funds
for any sinking fund created for any series of the Prior Preferred Stock, the
Company shall not (other than by the use of unapplied funds, if any, paid into
or set aside for a sinking fund or funds prior to such default):
(1) redeem any shares of the Prior Preferred Stock unless all
shares thereof are redeemed; or
(2) purchase or otherwise acquire for a consideration any shares
of the Prior Preferred Stock, except pursuant to offers of sale made by
holders of the Prior Preferred Stock in response to an invitation for
tenders given simultaneously by the Company by mail to the holders of
record of all shares of the Prior Preferred Stock then outstanding at their
respective addresses then appearing on the records of the Company.
(e) Status of Prior Preferred Stock Redeemed or Purchased. All
shares of the Prior Preferred Stock which shall be redeemed pursuant to any
sinking fund created for any series of the Prior Preferred Stock, all shares of
the Prior Preferred Stock which shall be purchased pursuant to any such sinking
fund or applied in lieu of the payment of funds into or the setting aside of
funds for any such sinking fund, and all shares of the Prior Preferred Stock of
any series, issued with the privilege of conversion into shares of the Common
Stock, which shall be so converted, shall be retired and cancelled and shall not
be reissued. Shares of the Prior Preferred Stock otherwise redeemed, purchased
or acquired by the Company shall have the status of authorized and unissued
shares or shall be retired and cancelled as may be determined by the Board of
Directors.
(f) Liquidation Preferences. In the event of dissolution,
liquidation or winding up of the Company, whether voluntary or involuntary,
holders of the Prior Preferred Stock of each series shall be entitled to receive
out of the assets of the Company, before any payment or distribution shall be
made to the holders of any subordinate stock, such amount per share as shall
have been fixed by the Board of Directors as the voluntary liquidation price or
the involuntary liquidation price, as the case may be, for the shares of such
series. If upon any such dissolution, liquidation or winding up the assets of
the Company available for payment to stockholders are not sufficient to make
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<PAGE>
payment in full to holders of the Prior Preferred Stock, payment shall be made
to such holders ratably in accordance with the numbers of shares held by them
respectively, and, in case there shall be outstanding more than one series of
the Prior Preferred Stock, ratably in accordance with the respective
distributive amounts to which such holders shall be entitled.
Neither a consolidation or merger of the Company with or into any
other corporation, nor a merger of any other corporation into the Company, nor
the redemption or purchase by the Company of all or a part of the outstanding
shares of any class or classes of its stock, nor a sale or transfer of the
property and business of the Company as or substantially as an entirety, shall
be considered a dissolution, liquidation or winding up of the Company within the
meaning of the foregoing provisions.
(g) Restrictions on Certain Corporate Action. So long as any shares
of the Prior Preferred Stock shall be outstanding the Company shall not, without
the affirmative vote or the written consent of the holders of at least two-
thirds of the shares of the Prior Preferred Stock outstanding at the time or as
of a record date fixed by the Board of Directors:
(1) create or authorize any stock of any class ranking prior to
or on a parity with the Prior Preferred Stock with respect to the payment
of dividends or the distribution of assets; or
(2) amend the Articles of Incorporation of the Company so as to
affect any of the preferences or other rights of the holders of the Prior
Preferred Stock; provided, however, that if any such amendment would affect
any of the preferences or other rights of the holders of one or more, but
less than all, of the series of the Prior Preferred Stock then outstanding,
the affirmative vote or the written consent of, and only of, the holders of
at least two-thirds of the shares of each series so affected shall be
required.
So long as any shares of the Prior Preferred Stock shall be
outstanding the Company shall not, without the affirmative vote or the written
consent of the holders of a majority of the shares of the Prior Preferred Stock
outstanding at the time or as of a record date fixed by the Board of Directors:
(1) issue any shares of the Prior Preferred Stock, which may
hereafter be authorized, in addition to the 850,000 shares thereof now
authorized, or any shares of stock of any other class, which may hereafter
be authorized, ranking prior to or on a parity with the Prior Preferred
Stock with respect to the payment of dividends or the distribution of
assets (other than for the purpose of effecting the retirement, by
redemption, exchange or otherwise, of
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<PAGE>
outstanding shares ranking at least on a parity with, and representing an
aggregate amount of stated capital at least equal to the aggregate amount
of the stated capital to be represented by, the shares proposed to be
issued), if the aggregate amount of the stated capital represented by all
Prior Preferred Stock and all prior and parity stock to be outstanding
after the proposed issue, after giving effect to the retirement of any
Prior Preferred Stock of any prior or parity stock to be retired in
connection with such issue, would exceed 75% of the sum of (i) the
aggregate amount of the stated capital represented by all subordinate stock
then outstanding and (ii) the amount of the consolidated retained earnings
of the Company and its consolidated subsidiaries, if any, as of the end of
the preceding fiscal year (the term "stated capital," as used in this
paragraph (1), including any related paid-in surplus); or
(2) consolidate with or merge into any other corporation, under
applicable statutory procedure, or make any sale or transfer of the
property and business of the Company as or substantially as an entirety;
provided, however, that this restriction shall not apply to (i) a
consolidation of the Company with or its merger into any corporation 50% or
more of the voting securities of which are owned by the Company directly,
or indirectly through one or more other corporations, or the sale or
transfer of the property and business of the Company as or substantially as
an entirety to a corporation 50% or more of the voting securities of which
are so owned by the Company, or (ii) any consolidation of the Company with
or its merger into any other corporation or any sale or transfer of the
property and business of the Company as or substantially as an entirety,
which may be required by order or regulation of any commission or other
governmental agency having jurisdiction in the premises. The term "sale or
transfer," as used in this paragraph (2), includes a lease or exchange but
does not include a mortgage or pledge.
(h) Preemptive Rights. Holders of the Prior Preferred Stock shall
have no preemptive rights.
DIVISION II
Provisions Relating to Convertible Preferred Stock
(a) Dividends. Subject to the preferential rights of the holders of
the Prior Preferred Stock with respect to the payment of dividends, holders of
the Convertible Preferred Stock shall be entitled to receive cash dividends, out
of funds legally available therefor, when and as declared by the Board of
Directors, at the rate of $1.425 per share per annum, payable quarterly on the
first day of each of the months of February, May,
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<PAGE>
August and November of each year, each such quarterly payment to be in respect
of the quarterly period ending with the day next preceding the date of such
payment, except that the first dividend on shares of the Convertible Preferred
Stock shall be for the period beginning either with the date of issue of such
shares or with a specified date subsequent to the date of issue and ending with
the day next preceding either the first or the second succeeding quarterly
dividend payment date, all as determined by the Board of Directors. Dividends
on the Convertible Preferred Stock shall be cumulative with respect to each
share from the beginning date of the period for which the first dividend thereon
was payable. Accumulations of dividends shall not bear interest.
No dividend shall be paid or other distribution made on any
subordinate stock, other than a dividend or distribution solely of shares of
subordinate stock, and no subordinate stock shall be purchased or otherwise
acquired by the Company for a consideration, unless all dividends on the
Convertible Preferred Stock for all past quarterly dividend periods, and
(subject to the limitation hereinafter stated) for the current quarterly
dividend period, shall have been paid or shall have been declared and funds
sufficient for such payment set aside by the Company, separate and apart from
its other funds.
If the date of payment of any dividend or making of any other
distribution or any purchase or other acquisition, referred to in the preceding
paragraph, shall be a quarterly dividend payment date, the reference in such
paragraph to "the current quarterly dividend period" shall be inapplicable for
all of the purposes thereof.
(b) Redemption of Convertible Preferred Stock. Subject to the
limitation stated in subdivision (c) hereof, shares of the Convertible Preferred
Stock may be called for redemption and redeemed, at the option of the Company,
in whole at any time or in part from time to time on or after December 9, 1971,
by the payment therefor in cash of the redemption price of $42 per share, plus
an amount equal to the accrued and unpaid dividends, if any, thereon to the
redemption date, each redemption to be effected upon notice the same as that
provided in subdivision (c) of Division I in respect of the redemption of shares
of the Prior Preferred Stock. All other provisions of said subdivision (c) with
respect to the method and effect of redemption of shares of the Prior Preferred
Stock shall be applicable to the redemption of shares of the Convertible
Preferred Stock in the same manner and with the same force and effect as though
such provisions were set forth in full in this subdivision (b).
(c) Limitation on Redemption and Purchase of Convertible Preferred
Stock. If and so long as the Company shall be in default in the payment of any
quarterly dividend on shares of the Convertible Preferred Stock, the Company
shall not:
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<PAGE>
(1) redeem any shares of the Convertible Preferred Stock unless
all shares thereof are redeemed; or
(2) purchase or otherwise acquire for a consideration any shares
of the Convertible Preferred Stock except pursuant to offers of sale made
by the holders of the Convertible Preferred Stock in response to an
invitation for tenders given simultaneously by the Company by mail to the
holders of record of all shares of the Convertible Preferred Stock then
outstanding at their respective addresses then appearing on the records of
the Company.
(d) Status of Convertible Preferred Stock Converted, Redeemed or
Purchased. All shares of the Convertible Preferred Stock which shall be
converted into shares of the Common Stock, or which shall be redeemed or
purchased, shall be retired and cancelled and shall not be reissued.
(e) Restrictions on Certain Corporate Action. So long as any shares
of the Convertible Preferred Stock shall be outstanding the Company shall not,
without the affirmative vote or the written consent of the holders of at least
two-thirds of the shares of the Convertible Preferred Stock outstanding at the
time or as of a record date fixed by the Board of Directors:
(1) create or authorize any stock of any class, other than the
Prior Preferred Stock, ranking prior to or on a parity with the Convertible
Preferred Stock with respect to the payment of dividends or the
distribution of assets; or
(2) amend the Articles of Incorporation of the Company so as to
affect any of the preferences or other rights of the holders of the
Convertible Preferred Stock.
So long as any shares of the Convertible Preferred Stock shall be
outstanding the Company shall not, without the affirmative vote or the written
consent of the holders of a majority of the shares of the Convertible Preferred
Stock outstanding at the time or as of a record date fixed by the Board of
Directors, consolidate with or merge into any other corporation, under
applicable statutory procedure, or make any sale or transfer of the property and
business of the Company as or substantially as an entirety; provided, however,
that this restriction shall not apply to any consolidation, merger, or sale or
transfer of the character specified in clauses (i) and (ii) of the second
paragraph (2) of subdivision (g) of Division I. The term "sale or transfer," as
above used, includes a lease or exchange but does not include a mortgage or
pledge.
(f) Liquidation Preferences. In the event of dissolution,
liquidation or winding up of the Company, holders of the Convertible Preferred
Stock shall be entitled to receive out of
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<PAGE>
the assets of the Company the amount of $42 per share in the case of voluntary
dissolution, liquidation or winding up, and the amount of $31.80 per share in
the case of involuntary dissolution, liquidation or winding up, in each case
plus an amount equal to the accrued and unpaid dividends, if any, thereon to the
date fixed for payment; provided, however, that no such payment to holders of
the Convertible Preferred Stock shall be made until payment in full shall have
been made to the holders of the Prior Preferred Stock, or funds or other assets
sufficient for such payment shall have been set aside by the Company, separate
and apart from its other assets, in accordance with the provisions of
subdivision (f) of Division I. If upon any such dissolution, liquidation or
winding up the assets of the Company available for payment to stockholders are
not sufficient to make payment in full to holders of the Convertible Preferred
Stock as above provided, payment shall be made to such holders ratably in
accordance with the numbers of shares held by them respectively.
(g) Conversion Provisions. (1) The shares of the Convertible
Preferred Stock shall be convertible at the option of the respective holders
thereof, at any time or from time to time, into fully paid and nonassessable
shares of the Common Stock of the Company, calculated to the nearest (or if
there shall be no nearest, then to the next higher) 1/100th of a share, at the
conversion price of $53 per share of Common Stock, taking the shares of the
Convertible Preferred Stock at $31.80 per share, that is, at the rate of 6/10ths
of a share of Common Stock for each share of Convertible Preferred Stock;
provided, however, that:
(i) as provided in paragraphs (2) and (3) of this subdivision (g),
such conversion price shall be subject to adjustment or change in certain
cases;
(ii) as provided in paragraphs (4) and (5) of this subdivision (g),
shares or other securities or property, other than shares of the Common
Stock, may in certain cases become issuable upon conversion of shares of
the Convertible Preferred Stock;
(iii) whenever the Company shall call for redemption any shares of
the the Convertible Preferred Stock, the conversion rights of the holders
thereof shall terminate at the close of business on the tenth day prior to
the redemption date (except that if the funds necessary for such redemption
shall not be set aside or deposited on or before the redemption date, as
provided by subdivision (b) of this Division II, such conversion rights
shall be reinstated on the redemption date); and
(iv) in case of any dissolution, liquidation or winding up of the
Company, whether voluntary or involuntary, or in case the Company shall be
required, by order or regula-
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<PAGE>
tion of any commission or other governmental agency having jurisdiction in
the premises, to consolidate with or merge into another corporation, and
such order or regulation shall not permit the provisions of paragraph (5)
of this subdivision (g) to become effective, then and in any such case the
conversion rights of the holders of shares of the Convertible Preferred
Stock shall terminate on such date as shall be fixed by the Board of
Directors, but not earlier than the close of business on the thirtieth day
following the mailing by the Company to the holders of record of the
shares of the Convertible Preferred Stock of the statement required by
paragraph (8) of this subdivision (g) to be so mailed.
(2) In case the Company shall at any time or from time to time issue
any shares of the Common Stock in addition to the 41,735,174 shares thereof
outstanding at the close of business on January 21, 1966 (other than additional
shares issued upon conversion of shares of the Convertible Preferred Stock and
additional shares which may be issued by the Company pursuant to its existing
employe stock purchase plan or other plan or plans hereafter adopted providing
for the purchase of stock of the Company by employes) and such additional shares
shall be so issued without consideration or for a consideration per share less
than the per share conversion price of the Common Stock in effect immediately
prior to the time of such issue, then upon such issue such conversion price
shall (until a further adjustment thereof shall be required by the provisions of
this paragraph (2)) be reduced to a price, calculated to the nearest (or if
there shall be no nearest, then to the next lower) cent, determined by dividing:
(i) an amount equal to the sum of (x) the number of shares of the
Common Stock outstanding (determined as hereinafter provided) immediately
prior to such issue multiplied by the per share conversion price of the
Common Stock then effective, and (y) the consideration (determined as
hereinafter provided) received by the Company upon such issue; by
(ii) the total number of shares of the Common Stock outstanding
(determined as hereinafter provided) immediately after such issue;
provided, however, that if such conversion price would, by the application of
the foregoing formula, be reduced by an amount less than 50 cents, no adjustment
of such conversion price shall be made, but in that event the adjustment which,
except for this provision, would be required to be made shall be carried forward
and made at the time of and together with the next subsequent adjustment which,
together with any adjustment or adjustments so carried forward, shall amount to
a reduction of such conversion price by 50 cents or more.
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<PAGE>
The term "employes", as hereinabove used in this paragraph (2), means
employes (including officers) of the Company or of any corporation, designated
by the Board of Directors, 50% or more of the voting securities of which are
owned by the Company directly, or indirectly through one or more other
corporations.
In determining, for the purposes of this paragraph (2), the number of
shares of the Common Stock outstanding at any particular time, there shall be
included, without limiting the generally accepted meaning of the term
"outstanding" (i) any shares issued on conversion of shares of the Convertible
Preferred Stock, (ii) any shares issuable in respect of scrip certificates
evidencing fractional interests in shares of the Common Stock, (iii) any shares
which, pursuant to subparagraph (A) of this paragraph (2), shall be deemed to
have been issued but which shall not actually have been issued, and (iv) any
shares owned or held by the Company.
In determining, for the purposes of this paragraph (2), what constitutes
the issue of additional shares of the Common Stock by the Company and the
consideration received therefor, the following provisions shall be applicable:
(A) In case the Company shall issue any shares (other than shares of
the Convertible Preferred Stock) convertible into shares of the Common
Stock or any obligations so convertible, all shares of the Common Stock
into which such convertible shares or obligations shall be initially
convertible shall, on the earliest date on which such convertible shares or
obligations shall by their terms be convertible, be deemed to be additional
shares of the Common Stock issued as of such date, and the Company shall be
deemed to have received, as of such date, for such shares of the Common
Stock so deemed to have been issued an aggregate consideration equal to the
sum of (i) the consideration received by the Company for such convertible
shares of obligations, and (ii) such additional consideration, if any, as
would be receivable by the Company for or upon issuance of such shares of
the Common Stock so deemed to have been issued if issued on the earliest
date on which such convertible shares or obligations shall by their terms
be convertible.
(B) In case the Company shall issue any rights to subscribe for or
purchase, or any options to purchase, shares of the Common Stock, and if
any of such rights or options shall be exercised and shares of the Common
Stock shall be issued upon such exercise, the Company shall be deemed to
have received for such shares of the Common Stock so issued an aggregate
consideration equal to the sum of (i) the consideration received by the
Company for such shares upon the issuance thereof, and
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<PAGE>
(ii) such additional consideration, if any, as shall have been received by
the Company for such rights or options; provided, however, that if such
rights or options shall be exercisable over a stated period of time, a
recomputation of the conversion price by reason of the exercise thereof
need not be made upon each such exercise but may be made at such time or
times as shall be determined by the Board of Directors, subject only to the
condition that if the period of time during which such rights or options
shall be exercisable shall not exceed 30 days, such recomputation shall be
made within 10 days following the expiration of such period, and that if
such period shall exceed 30 days, such recomputation shall be made at least
once in the month next succeeding each month, within such period, during
which any such exercise shall occur.
(C) In case the Company shall issue or sell, for cash, any additional
shares of the Common Stock or any shares (other than shares of the
Convertible Preferred Stock) convertible into shares of the Common Stock or
any obligations so convertible, or any rights to subscribe for or purchase,
or any options to purchase, shares of the Common Stock, the consideration
received by the Company therefor shall be deemed to be the amount of cash
received therefor, plus the amount of any discount (below the public or
other offering price) at which such issue or sale shall have been made by
the Company, and before deducting the amount of any commissions or other
expenses paid or incurred by the Company for any underwriting of, or
otherwise in connection with, such issue or sale. In case the Company shall
issue or sell, for a consideration other than cash, any such additional
shares of the Common Stock or any such convertible shares or obligations or
any such rights or options, the consideration received by the Company
therefor shall be deemed to be the fair value of such consideration as
determined by the Board of Directors.
(D) In case any shares of the Common Stock shall be issued by the
Company as a dividend on the then outstanding Common Stock or other
subordinate stock, the shares so issued shall be deemed to have been issued
without consideration.
(E) In case any shares of the Common Stock shall, in lieu of a cash
dividend, be issued by the Company as a dividend on the Convertible
Preferred Stock or on shares of stock of any class ranking prior to or on a
parity with the Convertible Preferred Stock with respect to the payment of
dividends and the distribution of assets, the Company shall be deemed to
have received
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<PAGE>
for the shares so issued a consideration equal to the amount of cash
otherwise payable as such dividend.
(3) In case the shares of the Common Stock at any time outstanding
shall be subdivided, by reclassification or otherwise, into a greater number of
shares, the per share conversion price of the Common Stock then effective shall
be reduced proportionately. In case the shares of the Common Stock at any time
outstanding shall be combined, by reclassification or otherwise, into a lesser
number of shares, the per share conversion price of the Common Stock then
effective shall be increased proportionately.
(4) In case of any reclassification of the Common Stock or any capital
reorganization of the Company involving a change in the Common Stock, other than
a reclassification or reorganization involving merely a subdivision or
combination of outstanding shares of the Common Stock, the shares of the
Convertible Preferred Stock shall thereafter be convertible into the number and
class of shares or other securities or property of the Company to which the
shares of the Common Stock otherwise issuable upon conversion of the shares of
the Convertible Preferred Stock would have been entitled upon such
reclassification or reorganization if outstanding at the time thereof; and in
any such case appropriate adjustment, as determined by the Board of Directors,
shall be made in the application of the provisions of this subdivision (g) with
respect to the conversion rights thereafter of the holders of the shares of the
Convertible Preferred Stock, to the end that such provisions shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares or other
securities or property thereafter issuable or deliverable upon the conversion of
shares of the Convertible Preferred Stock.
(5) Subject to the limitation hereinafter stated in this paragraph
(5), in case of any consolidation of the Company with or its merger into another
corporation, the shares of the Convertible Preferred Stock (or any shares issued
in exchange therefor upon such consolidation or merger) shall thereafter be
convertible into the number and class of shares or other securities or property
of the corporation resulting from such consolidation or merger to which the
shares of the Common Stock otherwise issuable upon conversion of the shares of
the Convertible Preferred Stock would have been entitled upon such consolidation
or merger if outstanding at the time thereof; and in any such case appropriate
adjustment shall be made in the application of the provisions of this
subdivision (g) with respect to the conversion rights thereafter of the holders
of the shares of the Convertible Preferred Stock, to the end that such
provisions shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares or other securities or property thereafter issuable or
deliverable upon the conversion of shares of the Convertible Preferred Stock (or
any shares issued in exchange
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<PAGE>
therefor upon such consolidation or merger); and appropriate provision, as
determined by the Board of Directors, shall be made as a part of the terms of
any such consolidation or merger whereby the conversion rights of the holders of
the shares of the Convertible Preferred Stock shall be protected and preserved
in accordance with the provisions of this paragraph (5).
In the case of any such consolidation or merger which may be required by
order or regulation of any commission or other governmental agency having
jurisdiction in the premises, the provisions of this paragraph (5) shall be
effective only if permitted by such order or regulation.
(6) No payment or adjustment with respect to dividends on shares of
the Convertible Preferred Stock or on the Common Stock shall be made in
connection with any conversion.
(7) Whenever the per share conversion price of the Common Stock shall
be adjusted or changed as provided in paragraph (2) or (3) of this subdivision
(g), the Company shall promptly file with each Transfer Agent for the shares of
the Convertible Preferred Stock and, as soon as practicable after such
adjustment or change and in no event later than 10 full business days
thereafter, shall mail to the holders of record of such shares at their
respective addresses then appearing on the records of the Company a statement
signed by an officer of the Company, stating the adjusted or changed conversion
price determined as provided in said paragraph (2) or (3), as the case may be,
and setting forth in reasonable detail the facts requiring such adjustment or
change. Each Transfer Agent for the shares of the Convertible Preferred Stock
shall be fully protected in relying on such statement and shall be under no duty
to examine into the accuracy thereof. If any questions shall at any time arise
with respect to an adjusted or changed conversion price, such question shall be
determined by a firm of independent certified public accountants selected by the
Company and acceptable to the Transfer Agents for the shares of the Convertible
Preferred Stock, and such determination shall be binding upon the Company and
the holders of such shares.
(8) In case:
(i) the Company shall propose to pay any dividend on the Common
Stock payable in shares of the Common Stock or to make any other
distribution, other than cash dividends, to the holders of the Common
Stock; or
(ii) the Company shall propose to offer for subscription to the
holders of the Common Stock any additional shares of any class or any
other rights or options; or
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(iii) the Company shall propose to effect any reclassification of
the Common Stock or any capital reorganization involving a change in
the Common Stock, other than a reclassification or reorganization
involving merely a subdivision or combination of outstanding shares of
the Common Stock; or
(iv) the Company shall propose to consolidate with or merge into
another corporation, or to sell or transfer its property and business
as or substantially as an entirety, or shall propose to dissolve,
liquidate or wind up;
then, in each such case, the Company shall file with each Transfer Agent for the
shares of the Convertible Preferred Stock and shall mail to the holders of
record of such shares at their respective addresses then appearing on the
records of the Company a statement, signed by an officer of the Company, with
respect to the proposed action, such statement to be so filed and mailed at
least 10 days, if subparagraph (i) or (ii) of this paragraph (8) shall be
applicable, and at least 40 days, if subparagraph (iii) or (iv) of this
paragraph (8) shall be applicable, prior to the date of the taking of such
action or the record date for holders of the Common Stock for the purposes
thereof, whichever is earlier. If such statement relates to any proposed action
referred to in subparagraph (iii) or (iv) of this paragraph (8), it shall set
forth such facts with respect thereto as shall reasonably be necessary to inform
each Transfer Agent for the shares of the Convertible Preferred Stock and the
holders of such shares as to the effect of such action upon the conversion
rights of such holders.
(9) In order to effect the conversion of shares of the Convertible
Preferred Stock the holder of the certificate or certificates therefor shall
surrender such certificate or certificates to the Company or to any Transfer
Agent for the shares of the Convertible Preferred Stock, with request for
conversion. If the shares of the Common Stock issuable upon such conversion are
to be issued in a name other than that in which the shares of the Convertible
Preferred Stock to be converted are registered, such certificate or certificates
shall be duly endorsed for transfer or accompanied by a duly executed stock
transfer power, and shall be accompanied by necessary stock transfer stamps, if
any, or equivalent funds.
Upon such surrender of such certificate or certificates, the Company shall
issue and deliver or cause to be issued and delivered to the person entitled
thereto a certificate or certificates for the number of full shares of the
Common Stock issuable upon such conversion, together with, if the shares of the
Convertible Preferred Stock represented by the certificate or certificates
therefor surrendered for conversion are not evenly convertible, cash or a scrip
certificate as provided in paragraph (10) of this
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subdivision (g). The Company shall pay all original issue taxes, if any,
payable upon the issue of such shares of the Common Stock and upon the issue of
any scrip certificates issued in respect of fractions of a share.
Such conversion shall be deemed to have been effected on the date of the
surrender of such certificate or certificates for shares of the Convertible
Preferred Stock, and the person in whose name the certificate or certificates
for the shares of the Common Stock issuable upon such conversion are to be
issued shall be deemed to be the holder of record of such shares as of such
date.
(10) The Company shall not be required to issue a fraction of a share
of the Common Stock upon any conversion of shares of the Convertible Preferred
Stock but in lieu thereof may, at its option, make payment in cash in the amount
obtained by multiplying such fraction by the per share conversion price of the
Common Stock then effective, or issue and deliver a scrip certificate in respect
of such fraction, or may make payment in cash of a portion of such amount and
issue and deliver a scrip certificate in respect of the remaining portion of
such fraction. Such scrip certificate, if issued, shall be in bearer form and,
when surrendered, within a specified time fixed by the Board of Directors, with
other scrip certificates evidencing in the aggregate rights to receive one or
more full shares of the Common Stock, shall be exchangeable for a certificate
representing such full share or shares. Such scrip certificate shall not entitle
the bearer thereof to exercise any voting rights, to receive dividends, to
participate in any distribution of assets of the Company, or to exercise any
other rights as a stockholder of the Company. Such scrip certificate shall
otherwise be in such form and shall contain such provisions as shall be
determined by the Board of Directors consistently with the provisions of
applicable law.
(11) The Company shall at all times have authorized but unissued, or
in its treasury, a number of shares of the Common Stock sufficient for the
conversion of all shares of the Convertible Preferred Stock from time to time
outstanding.
(h) Preemptive Rights. Holders of the Convertible Preferred Stock
shall have no preemptive rights.
DIVISION III
Provisions Relating to Preference Stock
(a) Issue of Preference Stock in Series. Authority is hereby expressly
vested in the Board of Directors to divide, and to provide for the issue from
time to time of, the Preference Stock in series and to fix and determine as to
each such series:
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(1) the designation of, and the number of shares to be issuable in,
such series; provided, however, that if the Board of Directors, at any time
after the initial issue of shares of any series issued with the privilege
of conversion into shares of the Common Stock, shall provide for the issue
of additional shares of such series, such additional shares shall not be
offered by the Company at a price per share less than that at which the
shares of such series initially issued shall have been offered;
(2) the dividend rate per annum for the shares of such series;
(3) the price or prices at which, and the terms and conditions on
which, such shares may be redeemed;
(4) the amount payable upon each of such shares in the event of
voluntary dissolution, liquidation or winding up of the Company;
(5) the amount payable upon each of such shares in the event of
involuntary dissolution, liquidation or winding up of the Company;
(6) sinking fund provisions, if any, for the redemption or purchase of
such shares (the term "sinking fund," as used herein, including any
analogous fund, however designated); and
(7) if such shares are to be issued with the privilege of conversion
into shares of the Common Stock, the terms and conditions on which such
shares may be so converted.
In all other respects the shares of Preference Stock of all series shall be
identical.
So long as any shares of any series of the Preference Stock
established by resolution of the Board of Directors shall be outstanding, such
resolution shall not be amended so as to affect any of the preferences or other
rights of the holders of the shares of such series without the affirmative vote
or the written consent of the holders of at least two-thirds of the shares of
such series outstanding at the time or as of a record date fixed by the Board of
Directors, but such resolution may be so amended with such vote or consent.
(b) Dividends. Subject to the preferential rights of the holders of
the Prior Preferred Stock and the Convertible Preferred Stock with respect to
the payment of dividends, as set forth in subdivision (b) of Division I and
subdivision (a) of Division II, respectively, holders of the Preference Stock of
each series shall be entitled to receive cash dividends, out of funds legally
available therefor, when and as declared by the
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Board of Directors, at such rate per annum as shall have been fixed by the Board
of Directors for the shares of such series, Dividends on the Preference Stock of
all series shall be payable quarterly on the first day of each of the months of
February, May, August and November in each year, each such quarterly payment to
be in respect of the quarterly period ending with the day next preceding the
date of such payment, except in the case of the first dividend payable on shares
of any series issued between quarterly dividend payment dates, in which case
such dividend shall be for the period beginning with the date of issue of such
shares or the next preceding quarterly dividend payment date for the Preference
Stock, as determined by the Board of Directors, and ending with the day next
preceding either, as determined by the Board of Directors, the first or the
second quarterly dividend payment date for the Preference Stock succeeding the
date of issue of such shares. Dividends on the Preference Stock of each series
shall be cumulative with respect to each share from the beginning date of the
period for which the first dividend thereon was payable. Accumulations of
dividends shall not bear interest. Whenever there shall be paid on the shares
of any series of the Preference Stock the full amount or any part of the
dividends payable thereon, there shall also be paid at the same time on the
shares of each other series, if any, then outstanding the full amount or a like
proportionate part, as the case may be, of the dividends payable thereon.
No funds shall be paid into or set aside for any sinking fund created
for any series of the Preference Stock or for any subordinate stock or stock of
any class ranking on a parity with the Preference Stock with respect to the
payment of dividends or the distribution of assets, unless all dividends on the
Preference Stock for all past quarterly dividend periods, and (subject to the
limitation hereinafter stated) for the current quarterly dividend period, shall
have been paid or shall have been declared and funds sufficient for such payment
set aside by the Company, separate and apart from its other funds.
No dividend shall be paid or other distribution made on any
subordinate stock, other than a dividend or distribution solely of shares of
subordinate stock, and no subordinate stock shall be purchased or otherwise
acquired by the Company for a consideration, unless (1) all dividends on the
Preference Stock for all past quarterly dividend periods, and (subject to the
limitation hereinafter stated) for the current quarterly dividend period, shall
have been paid or shall have been declared and funds sufficient for such payment
set aside by the Company, separate and apart from its other funds, and (2) all
funds then and theretofore required to be paid into or set aside for any sinking
fund or funds created for one or more series of the Preference Stock shall have
been so paid or set aside.
If the date of any payment or setting aside of funds, referred to in
the second preceding paragraph, or the date of
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payment of any dividend or making of any other distribution or any purchase or
other acquisition, referred to in the next preceding paragraph, shall be a
quarterly dividend payment date, the references in such paragraphs to "the
current quarterly dividend period" shall be inapplicable for all of the purposes
thereof.
(c) Redemption of Preference Stock. Subject to the limitations stated
in subdivision (d) of this Division III, and except as may be otherwise provided
by the Board of Directors in respect of the shares of a particular series
established by resolution of the Board of Directors, shares of any one or more
series of the Preference Stock may be called for redemption and redeemed, at the
option of the Company, in whole at any time or in part from time to time, by the
payment therefor in cash of the then applicable optional redemption price fixed
by the Board of Directors for the shares of such series, each redemption to be
effected upon notice the same as that provided in subdivision (c) of Division I
in respect of the redemption of shares of the Prior Preferred Stock. All other
provisions of said subdivision (c) with respect to the method and effect of
redemption of shares of the Prior Preferred Stock shall be applicable to the
redemption of shares of the Preference Stock in the same manner and with the
same force and effect as though such provisions were set forth in full in this
subdivision (c).
(d) Limitations on Redemption and Purchase of Preference Stock. If
and so long as the Company shall be in default in the payment of any quarterly
dividend on shares of any series of the Preference Stock, or shall be in default
in the payment of funds into or the setting aside of funds for any sinking fund
created for any series of the Preference Stock, the Company shall not (other
than by the use of unapplied funds, if any, paid into or set aside for a sinking
fund or funds prior to such default):
(1) redeem any shares of the Preference Stock unless all shares
thereof are redeemed; or
(2) purchase or otherwise acquire for a consideration any shares of
the Preference Stock, except pursuant to offers of sale made by holders of
the Preference Stock in response to an invitation for tenders given
simultaneously by the Company by mail to the holders of record of all
shares of the Preference Stock then outstanding at their respective
addresses then appearing on the records of the Company.
(e) Status of Preference Stock Redeemed or Purchased. All shares of
the Preference Stock which shall be redeemed pursuant to any sinking fund
created for any series of the Preference Stock, all shares of the Preference
Stock which shall be purchased pursuant to any such sinking fund or applied in
lieu of the payment of funds into or the setting aside of funds for
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any such sinking fund, and all shares of the Preference Stock of any series,
issued with the privilege of conversion into shares of the Common Stock, which
shall be so converted, shall be retired and cancelled and shall not be reissued.
Shares of the Preference Stock otherwise redeemed, purchased or acquired by the
Company shall have the status of authorized and unissued shares or shall be
retired and cancelled as may be determined by the Board of Directors.
(f) Liquidation Preferences. In the event of dissolution, liquidation
or winding up of the Company, whether voluntary or involuntary, holders of the
Preference Stock of each series shall be entitled to receive out of the assets
of the Company, before any payment or distribution shall be made to the holders
of any subordinate stock, such amount per share as shall have been fixed by the
Board of Directors as the voluntary liquidation price or the involuntary
liquidation price, as the case may be, for the shares of such series; provided,
however, that no such payment to holders of the Preference Stock shall be made
until payment in full shall have been made to the holders of the Prior Preferred
Stock and the Convertible Preferred Stock, or funds or other assets sufficient
for such payment shall have been set aside by the Company, separate and apart
from its other assets, in accordance with the provisions of subdivision (f) of
Division I and subdivision (f) of Division II. If upon any such dissolution,
liquidation or winding up the assets of the Company available for payment to
stockholders are not sufficient to make payment in full to holders of the
Preference Stock as above provided, payment shall be made to such holders
ratably in accordance with the numbers of shares held by them respectively, and,
in case there shall then be outstanding more than one series of the Preference
Stock, ratably in accordance with the respective distributive amounts to which
such holders shall be entitled.
(g) Restrictions on Certain Corporation Action. So long as any shares
of the Preference Stock shall be outstanding the Company shall not, without the
affirmative vote or the written consent of the holders of at least two-thirds of
the shares of the Preference Stock outstanding at the time or as of a record
date fixed by the Board of Directors:
(1) create or authorize any stock of any class, other than the Prior
Preferred Stock, ranking prior to or on a parity with the Preference Stock
with respect to the payment of dividends or the distribution of assets; or
(2) amend the Articles of Incorporation of the Company so as to affect
any of the preferences or other rights of the holders of the Preference
Stock; provided, however, that if any such amendment would affect any of
the preferences or other rights of the holders of one or more, but less
than all, of the series of the Preference Stock then outstanding,
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the affirmative vote or the written consent of, and only of, the holders of
at least two-thirds of the shares of each series so affected shall be
required.
So long as any shares of the Preference Stock shall be outstanding the
Company shall not, without the affirmative vote or the written consent of the
holders of a majority of the shares of the Preference Stock outstanding at the
time or as of a record date fixed by the Board of Directors, consolidate with or
merge into any other corporation, under applicable statutory procedure, or make
any sale or transfer of the property and business of the Company as or
substantially as an entirety; provided, however, that this restriction shall not
apply to any consolidation, merger, or sale or transfer of the character
specified in clauses (i) and (ii) of the second paragraph (2) of subdivision (g)
of Division I. The term "sale or transfer," as above used, includes a lease or
exchange but does not include a mortgage or pledge.
(h) Preemptive Rights. Holders of the Preference Stock shall have no
preemptive rights.
DIVISION IV
Provisions Relating to Common Stock
(a) Dividends. Subject to the preferential rights of the holders of the
Prior Preferred Stock, the Convertible Preferred Stock and the Preference Stock
with respect to the payment of dividends, as set forth in subdivision (b) of
Division I, subdivision (a) of Division II and subdivision (b) of Division III,
respectively, holders of the Common Stock shall be entitled to receive
dividends, out of funds legally available therefor, when and as declared by the
Board of Directors.
(b) Liquidation Preferences. In the event of dissolution, liquidation or
winding up of the Company, whether voluntary or involuntary, holders of the
Common Stock shall be entitled to receive, ratably in accordance with the
numbers of shares held by them respectively, the assets of the Company,
available for payment to stockholders, remaining after payment in full shall
have been made to holders of the Prior Preferred Stock, the Convertible
Preferred Stock and the Preference Stock in accordance with the provisions of
subdivision (f) of Division I, subdivision (f) of Division II and subdivision
(f) of Division III.
(c) Preemptive Rights. Holders of the Common Stock shall have no
preemptive rights.
ARTICLE FIVE: In order to assure continuity of efficient management, the
Board of Directors (hereinafter called the "Board") is hereby authorized to
establish a Deferred Compensation Plan (hereinafter called the "Plan") for
selected key
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executive and managerial employes of the Company and its wholly-owned
subsidiaries.
The Board shall have complete authority to act upon and determine all
matters related to the establishment, conduct, utilization, terms and conditions
of the Plan, within the following limitations:
(1) Administration. The Board shall provide for the regular administration
of the Plan by a Compensation Committee to be composed of not less than five
Directors chosen by the Board from its members who are not officers of the
Company, and shall empower the Committee to award "current compensation units,"
wholly or partly in lieu of salary increases, to key executive and managerial
employes of the Company and its wholly-owned subsidiaries selected from time to
time by the Committee and to award "retirement compensation units" to qualifying
holders of current compensation units or their spouses as herein provided. The
number of active officers and employes to whom current compensation units may be
so awarded in any one calendar year shall be limited to such number fixed by the
Board of Directors annually, but shall be so limited that the Plan shall remain
primarily for the purpose of providing deferred compensation for a select group
of management employes within the meaning of the Employee Retirement Income
Security Act of 1974.
(2) Current Compensation Units. Each current compensation unit shall
entitle the holder to payments following the award and during the continued
employment of the holder by the Company or a wholly-owned subsidiary of the
Company equal to and made on the payment dates of the cash dividends he would
have received if on the day of the award one share of the Company's Common Stock
had been issued to him.
(3) Award of Current Compensation Units. The total number of current
compensation units awarded in any calendar year shall be limited so that the
compensation payable thereon would not exceed one-tenth of one per cent of
consolidated net income on the Common Stock of the Company for the preceding
calendar year. To compute this limitation, the "compensation payable thereon"
shall be deemed to be the amount which would have been paid in the preceding
calendar year either (a) on an equivalent number of units awarded on the record
date for the first cash dividend on the Common Stock paid in that year, or (b)
at a rate per unit equal to five per cent of the book value per share of the
Common Stock at the end of that year, whichever results in the lower number of
available units. No current compensation units shall be awarded in any calendar
year if total payments during the preceding calendar year on current and
retirement compensation units had reduced consolidated net income on the Common
Stock of the Company for such year by as much as two per cent. As herein used,
the term "consolidated net income on the Common Stock of the Company" shall
mean, for any calendar year, such net income
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(after all Federal income and excess profits tax provisions) of the Company and
its subsidiary companies consolidated, or of the Company alone if there be no
consolidated subsidiary Company, as shown in the Annual Report to the
Stockholders of the Company for such year.
(4) Retirement Compensation Units. Each retirement compensation unit shall
entitle the holder to payments following the award and continuing for life equal
to and made on the payment dates of the cash dividends he would have received if
on the day of the award one share of the Company's Common Stock had been issued
to him; provided, however, that payments per retirement compensation unit in any
calendar year shall not in any event be (a) less than the average amount of the
payments per current compensation unit during the five calendar years preceding
the termination of employment which gave rise to the award of such retirement
compensation unit, or (b) more than such average amount (or the amount of the
payments per current compensation unit in the calendar year preceding such
termination, if greater), increased at the compound annual rate of two per cent
to the end of the calendar year of payment.
The foregoing proviso shall not apply to any retirement compensation unit
based upon a current compensation unit awarded prior to April 26, 1973, unless
an election for such application was made before January 1, 1974. The
Compensation Committee shall determine the means of applying the maximum and
minimum limits of such proviso.
(5) Award of Retirement Compensation Units. Upon the termination, by death
or otherwise, of the employment of a holder of current compensation units, he
(or, in the case of death, his surviving spouse) shall be awarded that number of
retirement compensation units equal to the number of current compensation units
held by him immediately prior to such termination, subject to paragraph (7).
(6) Effect of Stock Dividends, Etc. For the purpose of computing payments
hereunder, fractional shares, as well as full shares, resulting from stock
dividends, stock splits or other changes in the Company's Common Stock shall be
treated as though actually issued.
(7) Effect of Resignation. If any holder of current compensation units
should at any time resign from employ of the Company and all of its wholly-owned
subsidiaries his payments shall thereupon be discontinued and all rights to
receive retirement compensation units under the plan will terminate.
(8) Noncompetition Agreement. If any holder of current or retirement
compensation units should at any time engage in competitive business, his
payments shall thereupon be discontinued.
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(9) Death Benefits. Upon the death of any holder of retirement
compensation units, leaving a spouse surviving, payments on account of such
units shall continue to be made to the spouse for life, but only if (i) such
units had originated from the deceased's employment by the Company or a wholly-
owned subsidiary of the Company and (ii) the surviving spouse was married to
such holder when his period of service with the Company and all of its wholly-
owned subsidiaries terminated.
(10) Amendment and Termination. The Board shall have the right to modify
or discontinue the Plan at any time, and to establish a trust fund to ensure the
payment of benefits thereunder, provided that the rights of persons entitled to
payments on account of compensation units previously awarded shall in nowise be
thereby impaired.
(11) Effective Date and Transition Rules with Respect to Retirement Units.
The Plan, as amended, shall be effective May 3, 1983. Compensation units held
immediately prior to July 1, 1979 shall be deemed to be current compensation
units if originally issued with respect to employment which has not terminated
on such date and to be retirement compensation units if originally issued with
respect to employment which has terminated on or prior to such date.
ARTICLE SIX: The number of directors of the Company shall be as fixed by
the By-Laws of the Company.
ARTICLE SEVEN: (a) A director of the Company shall not be personally
liable to the company or its shareholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its shareholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) under Section 8.65 of the Business Corporation Act of
the State of Illinois, or (iv) for any transaction from which the director
derived an improper personal benefit. If the Business Corporation Act of the
State of Illinois is amended to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of a
director of the Company shall be eliminated or limited to the full extent
permitted by the Business Corporation Act of the State of Illinois, as so
amended. Any repeal or modification of this paragraph (a) by the shareholders
of the Company shall not adversely affect any right or protection of a director
of the Company existing at the time of such repeal or modification.
(b) Each person who is or was or had agreed to become a director or
officer of the Company, and each person who is or was serving or who had agreed
to serve at the request of the Board or an officer of the Company as an employe
or agent of the Company or as a director, officer, employe, or agent, trustee or
fiduciary of another corporation, partnership, joint venture,
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trust or other enterprise (including the heirs, executors, administrators or
estate of such person), shall be indemnified by the Company to the full extent
permitted by the Business Corporation Act of the State of Illinois or any other
applicable laws as presently or hereafter in effect. Without limiting the
generality of the foregoing, the Company may enter into one or more agreements
with any person which provide for indemnification greater or different than that
provided in this paragraph (b). Any repeal or modification of this paragraph
(b) shall not adversely affect any right or protection existing hereunder or
under any such agreement immediately prior to such repeal or modification.
____________________
PURSUANT TO AUTHORITY EXPRESSLY VESTED IN THE BOARD OF DIRECTORS BY
SUBDIVISION(A) OF DIVISION 3 OF ARTICLE FOUR, THE BOARD OF DIRECTORS HAS BY
RESOLUTION PROVIDED FOR THE ISSUANCE OF THE FOLLOWING OUTSTANDING SERIES OF
PREFERENCE STOCK:
$1.90 CUMULATIVE PREFERENCE STOCK
THE BOARD OF DIRECTORS OF THE COMPANY ADOPTED THE FOLLOWING RESOLUTION,
EFFECTIVE APRIL 14, 1971:
RESOLVED, that pursuant to authority expressly vested in the Board of
Directors by the Company's Articles of Incorporation, as amended, there be and
there hereby is established a series of the Preference Stock, without par value,
of the Company, the designation of such series, the number of shares to be
issuable therein, and certain of the terms and provisions thereof to be as
follows:
I. Designation of Series and Number of Shares to Be Issuable Therein.
The series of the Preference Stock established hereby shall be designated
$1.90 Cumulative Preference Stock (hereinafter called the "$1.90 Series"),
in which 4,249,549 shares shall be issuable.
II. Dividends. Dividends shall be payable on the shares of the $1.90
Series at the rate of $1.90 per share per annum, and no more. The first
dividend payable on shares, if any, of the $1.90 Series issued prior to
August 1, 1971, shall accrue from the initial date of issue of any of such
shares, and the first dividend payable on shares, if any, of the $1.90
Series, issued between quarterly dividend payment dates and subsequent to
August 1, 1971, shall accrue from the quarterly dividend payment date next
preceding the date of issue of such shares.
III. Redemption. Prior to May 1, 1976, none of the shares of the
$1.90 Series may be redeemed through refunding, directly or indirectly, by
or in anticipation of the
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incurring of any debt or the issuance of any shares of the Preference Stock
or of any other stock ranking prior to or on a parity with the Preference
Stock with respect to the payment of dividends or the distribution of
assets, if such debt has an interest cost to the Company, or such shares
have a dividend cost to the Company, less than the dividend cost to the
Company of the shares of the $1.90 Series. The term "interest cost to the
Company", with respect to any debt, means the yield to stated maturity of
such debt at the net price to the Company therefor, determined by reference
to a standard table of bond yields, using straight-line interpolation if
necessary, and the term "dividend cost to the Company", with respect to any
shares, means the percentage yield of such shares obtained by dividing the
annual dividend rate per share by the net price to the Company per share
(in either case "net price to the Company" is to be determined after
allowing for all discounts, commissions, finder's or negotiator's fees,
standby or commitment charges and any other compensation received or
receivable directly from the Company by underwriters, investment bankers or
other financing agents, or purchasers). Subject to the foregoing, the
shares of the $1.90 Series may be called for redemption and redeemed, at
the option of the Company, in whole at any time or in part from time to
time, at the redemption prices hereinafter set forth and upon the notice
and in the manner prescribed in the applicable provisions of the Company's
Articles of Incorporation, as amended,
The per share redemption prices of the shares of the $1.90 Series
shall be $27.50 if redeemed on or before April 30, 1976, $26.00 if redeemed
on or after May 1, 1976 but before May 1, 1981, and $25.25 if redeemed on
or after May 1, 1981, in each case plus the amount of accrued and unpaid
dividends, if any, thereon to the redemption date.
IV. Liquidation Prices. The amount payable on each share of the
$1.90 Series in the event of voluntary dissolution, liquidation or winding
up of the Company shall be an amount equal to the optional redemption price
thereof applicable at the date fixed for payment, and no more. The amount
payable on each share of the $1.90 Series in the event of involuntary
dissolution, liquidation or winding up of the Company shall be $25 plus the
amount of accrued and unpaid dividends, if any, thereon to the date fixed
for payment, and no more.
$2.00 CUMULATIVE PREFERENCE STOCK
THE BOARD OF DIRECTORS OF THE COMPANY ADOPTED THE FOLLOWING RESOLUTION,
EFFECTIVE NOVEMBER 16, 1971:
RESOLVED, that pursuant to authority expressly vested in the Board of
Directors by the Company's Articles of Incorporation, as
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amended, there be and there hereby is established a series of the Preference
Stock, without par value, of the Company, the designation of such series, the
number of shares to be issuable therein, and certain of the terms and provisions
thereof to be as follows:
I. Designation of Series and Number of Shares to Be Issuable Therein.
The series of Preference Stock established hereby shall be designated $2.00
Cumulative Preference Stock (hereinafter called the "$2.00 Series"), in
which 2,000,000 shares initially shall be issuable.
II. Dividends. Dividends shall be payable on the shares of the $2.00
Series at the rate of $2.00 per share per annum, and no more. The first
dividend payable on shares, if any, of the $2.00 Series issued on or prior
to February 1, 1972, shall accrue from the date of issue of the first
issued shares of the $2.00 Series and the first dividend payable on shares,
if any, of the $2.00 Series, issued between quarterly dividend payment
dates and subsequent to February 1, 1972, shall accrue from the quarterly
dividend payment date next preceding the date of issue of such shares.
III. Redemption. Prior to December 1, 1976, none of the shares of
the $2.00 Series may be redeemed through refunding, directly or indirectly,
by or in anticipation of the incurring of any debt or the issuance of any
shares of the Preference Stock or of any other stock ranking prior to or on
a parity with the Preference Stock with respect to the payment of dividends
or the distribution of assets, if such debt has an interest cost to the
Company, or such shares have a dividend cost to the Company, less than the
highest dividend cost to the Company of shares of the $2.00 Series issued
prior to the date shares thereof are called for redemption. The term
"interest cost to the Company," with respect to any debt, means the yield
to stated maturity of such debt at the net price to the Company therefor,
determined by reference to a standard table of bond yields, using straight-
line interpolation if necessary, and the term "dividend cost to the
Company," with respect to any shares, means the percentage yield of such
shares obtained by dividing the annual dividend rate per share by the net
price to the Company per share (in either case "net price to the Company"
is to be determined after allowing for all discounts, commissions, finder's
or negotiator's fees, standby or commitment charges and any other
compensation received or receivable directly from the Company by
underwriters, investment bankers or other financing agents, or purchasers).
Subject to the foregoing, the shares of the $2.00 Series may be called for
redemption and redeemed, at the option of the Company, in whole at any time
or in part from time to time, at the redemption prices hereinafter set
forth and upon the notice and in the manner prescribed in the applicable
provi-
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sions of the Company's Articles of Incorporation, as amended.
The per share redemption prices of the shares of the $2.00 Series
shall be $28.36 if redeemed on or before November 30, 1976, $26.81 if
redeemed on or after December 1, 1976 but before December 1, 1981, and
$26.04 if redeemed on or after December 1, 1981, in each case plus the
amount of accrued and unpaid dividends, if any, thereon to the redemption
date.
IV. Liquidation Prices. The amount payable on each share of the
$2.00 Series in the event of voluntary dissolution, liquidation or winding
up of the Company shall be an amount equal to the optional redemption price
thereof applicable at the date fixed for payment, and no more. The amount
payable on each share of the $2.00 Series in the event of involuntary
dissolution, liquidation or winding up of the Company shall be $25.00 plus
the amount of accrued and unpaid dividends, if any, thereon to the date
fixed for payment, and no more.
V. Amendment of Resolution. The Board of Directors may, from time to
time, amend this resolution to (i) increase the number of shares of
Preference Stock issuable in the $2.00 Series, (ii) substitute later dates
for any or all of the respective dates specified in Division III, (iii)
increase any or all of the redemption prices specified in Division III, and
(iv) increase the amount payable on each share of the $2.00 Series in the
event of the involuntary dissolution, liquidation or winding up of the
Company.
$1.96 CUMULATIVE PREFERENCE STOCK
THE BOARD OF DIRECTORS OF THE COMPANY ADOPTED THE FOLLOWING RESOLUTION,
EFFECTIVE NOVEMBER 13, 1972:
RESOLVED, that pursuant to authority expressly vested in the Board of
Directors by the Company's Articles of Incorporation, as amended, there be and
there hereby is established a series of the Preference Stock, without par value,
of the Company, the designation of such series, the number of shares to be
issuable therein, and certain of the terms and provisions thereof to be as
follows:
I. Designation of Series and Number of Shares to Be Issuable Therein.
The series of Preference Stock established hereby shall be designated $1.96
Cumulative Preference Stock (hereinafter called the "$1.96 Series"), in
which 2,000,000 shares shall be issuable.
II. Dividends. Dividends shall be payable on the shares of the $1.96
Series at the rate of $1.96 per share per annum, and no more. The first
dividend payable on
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shares, if any, of the $1.96 Series issued on or prior to February 1, 1973,
shall accrue from the date of issue of the first issued shares of the $1.96
Series and the first dividend payable on shares, if any, of the $1.96
Series issued between quarterly dividend payment dates and subsequent to
February 1, 1973, shall accrue from the quarterly dividend payment date
next preceding the date of issue of such shares.
III. Redemption. Prior to December 1, 1977, none of the shares of
the $1.96 Series may be redeemed. On or after December 1, 1977, the shares
of the $1.96 Series may be called for redemption and redeemed, at the
option of the Company, in whole at any time or in part from time to time,
at the redemption prices hereinafter set forth and upon the notice and in
the manner prescribed in the applicable provisions of the Company's
Articles of Incorporation, as amended.
The per share redemption prices of the shares of the $1.96 Series
shall be $27.65 if redeemed on or after December 1, 1977 but before
December 1, 1982, and $27.00 if redeemed on or after December 1, 1982, in
each case plus the amount of accrued and unpaid dividends, if any, thereon
to the redemption date.
IV. Liquidation Prices. The amount payable on each share of the
$1.96 Series in the event of voluntary dissolution, liquidation or winding
up of the Company shall be $27.65 prior to December 1, 1982 and $27.11 on
or after December 1, 1982, in each case plus the amount of accrued and
unpaid dividends, if any, thereon to the date fixed for payment, and no
more. The amount payable on each share of the $1.96 Series in the event of
involuntary dissolution, liquidation or winding up of the Company shall be
$25.00 plus the amount of accrued and unpaid dividends, if any, thereon to
the date fixed for payment, and no more.
V. Amendment of Resolution. The Board of Directors may, from time to
time, amend this resolution to (i) increase the number of shares of
Preference Stock issuable in the $1.96 Series, (ii) substitute later dates
for any or all of the dates specified in Divisions III and IV, and (iii)
increase any or all of the prices specified in Divisions III and IV.
$7.24 CUMULATIVE PREFERENCE STOCK
THE BOARD OF DIRECTORS OF THE COMPANY ADOPTED THE FOLLOWING RESOLUTION,
EFFECTIVE FEBRUARY 13, 1973:
RESOLVED, that pursuant to authority expressly vested in the Board of
Directors by the Company's Articles of Incorporation, as
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<PAGE>
amended, there be and there hereby is established a series of the Preference
Stock, without par value, of the Company, the designation of such series, the
number of shares to be issuable therein, and certain of the terms and provisions
thereof to be as follows:
I. Designation of Series and Number of Shares to Be Issuable Therein.
The series of Preference Stock established hereby shall be designated $7.24
Cumulative Preference Stock (hereinafter called the "$7.24 Series"), in
which 750,000 shares shall be issuable.
II. Dividends. Dividends shall be payable on the shares of the $7.24
Series at the rate of $7.24 per share per annum, and no more. The first
dividend payable on shares, if any, of the $7.24 Series issued on or prior
to May 1, 1973, shall accrue from the date of issue of the first issued
shares of the $7.24 Series and the first dividend payable on shares, if
any, of the $7.24 Series, issued between quarterly dividend payment dates
and subsequent to May 1, 1973, shall accrue from the quarterly dividend
payment date next preceding the date of issue of such shares.
III. Redemption. Prior to March 1, 1978, none of the shares of the
$7.24 Series may be redeemed. On or after March 1, 1978, the shares of the
$7.24 Series may be called for redemption and redeemed, at the option of
the Company, in whole at any time or in part from time to time, at the
redemption prices hereinafter set forth and upon the notice and in the
manner prescribed in the applicable provisions of the Company's Articles of
Incorporation, as amended.
The per share redemption prices of the shares of the $7.24 Series
shall be $103.00 if redeemed on or after March 1, 1978 but before March 1,
1983, and $101.00 if redeemed on or after March 1, 1983, in each case plus
the amount of accrued and unpaid dividends, if any, thereon to the
redemption date.
IV. Liquidation Prices. The amount payable on each share of the
$7.24 Series in the event of voluntary dissolution, liquidation or winding
up of the Company shall be $103.00 prior to March 1, 1983, and $101.00 on
or after March 1, 1983, in each case plus the amount of accrued and unpaid
dividends, if any, thereon to the date fixed for payment, and no more. The
amount payable on each share of the $7.24 Series in the event of
involuntary dissolution, liquidation or winding up of the Company shall be
$99.12 plus the amount of accrued and unpaid dividends, if any, thereon to
the date fixed for payment, and no more.
V. Amendment of Resolution. The Board of Directors may, from time to
time, amend this resolution to (i) increase the number of shares of
Preference Stock issuable in
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the $7.24 Series, (ii) substitute later dates for any or all of the dates
specified in Divisions III and IV, and (iii) increase any or all of the
prices specified in Divisions III and IV.
$8.40 CUMULATIVE PREFERENCE STOCK
THE BOARD OF DIRECTORS OF THE COMPANY ADOPTED THE FOLLOWING RESOLUTION,
EFFECTIVE JANUARY 24, 1974:
RESOLVED, that pursuant to authority expressly vested in the Board of
Directors by the Company's Articles of Incorporation, as amended, there be and
there hereby is established a series of the Preference Stock, without par value,
of the Company, the designation of such series, the number of shares to be
issuable therein, and certain of the terms and provisions thereof to be as
follows:
I. Designation of Series and Number of Shares to Be Issuable Therein.
The series of Preference Stock established hereby shall be designated $8.40
Cumulative Preference Stock (hereinafter called the "$8.40 Series"), in
which 750,000 shares shall be issuable.
II. Dividends. Dividends shall be payable on the shares of the $8.40
Series at the rate of $8.40 per share per annum, and no more. The first
dividend payable on shares, if any, of the $8.40 Series issued on or prior
to May 1, 1974, shall accrue from the date of issue of the first issued
shares of the $8.40 Series and the first dividend payable on shares, if
any, of the $8.40 Series, issued between quarterly dividend payment dates
and subsequent to May 1, 1974, shall accrue from the quarterly dividend
payment date next preceding the date of issue of such shares.
III. Redemption. Prior to February 1, 1979, none of the shares of
the $8.40 Series may be redeemed. On or after February 1, 1979, the shares
of the $8.40 Series may be called for redemption and redeemed, at the
option of the Company, in whole at any time or in part from time to time,
at the redemption prices hereinafter set forth and upon the notice and in
the manner prescribed in the applicable provisions of the Company's
Articles of Incorporation, as amended.
The per share redemption prices of the shares of the $8.40 Series
shall be $103.00 if redeemed on or after February 1, 1979 but before
February 1, 1984, and $101.00 if redeemed on or after February 1, 1984, in
each case plus the amount of accrued and unpaid dividends, if any, thereon
to the redemption date.
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<PAGE>
IV. Liquidation Prices. The amount payable on each share of the
$8.40 Series in the event of voluntary dissolution, liquidation or winding
up of the Company shall be $103.00 prior to February 1, 1984, and $101.00
on or after February 1, 1984, in each case plus the amount of accrued and
unpaid dividends, if any, thereon to the date fixed for payment, and no
more. The amount payable on each share of the $8.40 Series in the event of
involuntary dissolution, liquidation or winding up of the Company shall be
$98.90 plus the amount of accrued and unpaid dividends, if any, thereon to
the date fixed for payment, and no more.
V. Amendment of Resolution. The Board of Directors may, from time to
time, amend this resolution to (i) increase the number of shares of
Preference Stock issuable in the $8.40 Series, (ii) substitute later dates
for any or all of the dates specified in Divisions III and IV, and (iii)
increase any or all of the prices specified in Divisions III and IV.
$8.38 CUMULATIVE PREFERENCE STOCK
THE BOARD OF DIRECTORS OF THE COMPANY ADOPTED THE FOLLOWING RESOLUTION,
EFFECTIVE MARCH 23, 1977:
RESOLVED, that pursuant to authority expressly vested in the Board of
Directors by the Company's Articles of Incorporation, as amended, there be and
there hereby is established a series of the Preference Stock, without par value,
of the Company, the designation of such series, the number of shares to be
issuable therein, and certain of the terms and provisions thereof to be as
follows:
I. Designation of Series and Number of Shares to Be Issuable Therein.
The series of Preference Stock established hereby shall be designated $8.38
Cumulative Preference Stock (hereinafter called the "$8.38 Series"), in
which 750,000 shares shall be issuable.
II. Dividends. Dividends shall be payable on the shares of the $8.38
Series at the rate of $8.38 per share per annum, and no more. The first
dividend payable on shares, if any, of the $8.38 Series issued on or prior
to August 1, 1977, shall accrue from the date of issue of the first issued
shares of the $8.38 Series. The first dividend payment date for the shares
of the $8.38 Series shall be August 1, 1977.
III. Optional Redemption. Prior to April 1, 1982, none of the shares
of the $8.38 Series may be redeemed. On or after April 1, 1982, shares of
the $8.38 Series may be called for redemption and redeemed, at the option
of the Company, in whole at any time or in part from time to time,
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<PAGE>
at the redemption prices hereinafter set forth and upon the notice and in
the manner prescribed in the applicable provisions of the Company's
Articles of Incorporation, as amended.
Such per share optional redemption prices of the shares of the $8.38
Series shall be $102.15 from April 1, 1982 through March 31, 1987, and
$100.16 on and after April 1, 1987, in each case plus the amount of accrued
and unpaid dividends, if any, thereon to the redemption date.
IV. Liquidation Prices. The amount payable on each share of the
$8.38 Series in the event of voluntary dissolution, liquidation or winding
up of the Company shall be $102.15 through March 31, 1987, and $100.16 on
and after April 1, 1987, plus the amount of accrued and unpaid dividends,
if any, thereon to the date fixed for payment, and no more. The amount
payable on each share of the $8.38 Series in the event of involuntary
dissolution, liquidation or winding up of the Company shall be $98.09, plus
the amount of accrued and unpaid dividends, if any, thereon to the date
fixed for payment, and no more.
$8.20 CUMULATIVE PREFERENCE STOCK
THE BOARD OF DIRECTORS OF THE COMPANY ADOPTED THE FOLLOWING RESOLUTION,
EFFECTIVE SEPTEMBER 21, 1977:
RESOLVED, that pursuant to authority expressly vested in the Board of
Directors by the Company's Articles of Incorporation, as amended, there be and
there hereby is established a series of the Preference Stock, without par value,
of the Company, the designation of such series, the number of shares to be
issuable therein, and certain of the terms and provisions thereof to be as
follows:
I. Designation of Series and Number of Shares to Be Issuable Therein.
The series of Preference Stock established hereby shall be designated $8.20
Cumulative Preference Stock (hereinafter called the "$8.20 Series"), in
which 750,000 shares shall be issuable.
II. Dividends. Dividends shall be payable on the shares of the $8.20
Series at the rate of $8.20 per share per annum, and no more. The first
dividend payable on shares of the $8.20 Series issued on or prior to
November 1, 1977, shall accrue from the first date of issue of any such
shares and such dividend shall be payable on November 1, 1977.
III. Sinking Fund. At or before the opening of business on November
1, 1982, and at or before the opening of business on each November 1
thereafter through November 1, 2001, the Company shall set aside, separate
and apart from
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<PAGE>
its other funds, as a sinking fund payment for the retirement of 35,715
shares of the $8.20 Series, the sum of $3,571,500, and at or before the
opening of business on November 1, 2002, the Company shall so set aside as
a sinking fund payment for the retirement of 35,700 shares of the $8.20
Series the sum of $3,570,000, plus, in each case, a sum equal to the amount
of accrued and unpaid dividends, if any, on the shares to be retired to the
redemption date (each such November 1 being referred to in this Section III
as a "sinking fund payment date"). The requirement in respect of sinking
fund payments shall be cumulative, so that if the Company shall fail to set
aside in full the amount of any sinking fund payment, the amount of the
deficiency shall be added to the next succeeding sinking fund payment or
payments until such deficiency shall be made good.
The Company shall apply all cash set aside by it pursuant to this
Section III and held by it on any sinking fund payment date to the
redemption on such date of outstanding shares of the $8.20 Series at the
sinking fund redemption price ($100 per share, plus an amount equal to
accrued and unpaid dividends, if any, on such shares to the redemption
date), such redemption to be effected upon the notice and in the manner
prescribed in the applicable provisions of the Company's Articles of
Incorporation, as amended.
The Company shall not be entitled to take credit for the satisfaction
of all or any part of any sinking fund payment by the application of any
previously issued shares of the $8.20 Series acquired by the Company or
redeemed by it otherwise than pursuant to this Section III.
Notwithstanding any of the other provisions of this Section III, if
any November 1, referred to above, shall be a Saturday, a Sunday or a legal
holiday for banking institutions in the State of Illinois, the term
"sinking fund payment date", as used in this Section III, shall be
construed to mean the next succeeding day which is not a Saturday, a Sunday
or such a legal holiday.
IV. Optional Redemption. Prior to November 1, 1987, none of the
shares of the $8.20 Series may be redeemed except through sinking fund
payments provided for in Section III above. On or after November 1, 1987,
shares of the $8.20 Series may be called for redemption and redeemed,at the
option of the Company, in whole at any time or in part from time to time,
at the redemption prices hereinafter set forth and upon the notice and in
the manner prescribed in the applicable provisions of the Company's
Articles of Incorporation, as amended.
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<PAGE>
Such per share optional redemption prices of the shares of the $8.20
Series shall be $105 from November 1, 1987 through October 31, 1992, $103
from November 1, 1992 through October 31, 1997, and $101 on and after
November 1, 1997, in each case plus the amount of accrued and unpaid
dividends, if any, on the shares to be redeemed to the redemption date.
All shares of the $8.20 Series redeemed pursuant to this Section IV or
otherwise acquired shall be retired and cancelled and shall not be
reissued.
V. Pro Rata Redemption. In case of the redemption at any time of
less than all the outstanding shares of the $8.20 Series, pursuant to
Section III or Section IV hereof, the particular shares of the $8.20 Series
to be redeemed shall be selected by the Company from such outstanding
shares as nearly as practicable pro rata according to the respective
numbers of such outstanding shares then held of record by the holders of
shares of the $8.20 Series.
VI. Liquidation Prices. The amount payable on each share of the
$8.20 Series in the event of voluntary dissolution, liquidation or winding
up of the Company shall be $108.20 through October 31, 1987, $105 from
November 1, 1987 through October 31, 1992, $103 from November 1, 1992
through October 31, 1997, and $101 on and after November 1, 1997, in each
case plus the amount of accrued and unpaid dividends, if any, thereon to
the date fixed for payment, and no more. The amount payable on each share
of the $8.20 Series in the event of involuntary dissolution, liquidation or
winding up of the Company shall be $100, plus the amount of accrued and
unpaid dividends, if any, thereon to the date fixed for payment, and no
more.
$8.40 CUMULATIVE PREFERENCE STOCK, SERIES B
THE BOARD OF DIRECTORS OF THE COMPANY ADOPTED THE FOLLOWING RESOLUTION,
EFFECTIVE APRIL 19, 1978:
RESOLVED, that pursuant to authority expressly vested in the Board of
Directors by the Company's Articles of Incorporation, as amended, there be and
there hereby is established a series of the Preference Stock, without par value,
of the Company, the designation of such series, the number of shares to be
issuable therein, and certain of the terms and provisions thereof to be as
follows:
I. Designation of Series and Number of Shares to Be Issuable Therein.
The series of Preference Stock established hereby shall be designated $8.40
Cumulative Preference Stock, Series B, (hereinafter called the $8.40 Series
B"), in which 750,000 shares shall be issuable.
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<PAGE>
II. Dividends. Dividends shall be payable on the shares of the $8.40
Series B at the rate of $8.40 per share per annum, and no more. The first
dividend payable on shares, if any, of the $8.40 Series B, issued on or
prior to August 1, 1978, shall accrue from the date of issue of the first
issued shares of the $8.40 Series B.
III. Sinking Fund. (a) At or before the opening of business on May
1 in each year commencing May 1, 1983 (each such May 1 being referred to in
this Section III as a "sinking fund payment date"), the Company shall set
aside, separate and apart from its other funds, as a mandatory sinking fund
payment for the retirement of 30,000 shares of the $8.40 Series B, the sum
of $3,000,000 ($100 per share), plus a sum equal to the amount of accrued
and unpaid dividends, if any, on such shares to the redemption date. The
requirement in respect of mandatory sinking fund payments shall be
cumulative, so that if the Company shall fail to set aside in full the
amount of any mandatory sinking fund payment, the amount of the deficiency
shall be added to the next succeeding mandatory sinking fund payment or
payments until such deficiency shall be made good.
(b) In addition to the mandatory sinking fund payments provided for
by subsection (a) above, the Company shall have the right, on any sinking
fund payment date, to set aside, separate and apart from its other funds,
as an optional sinking fund payment for the retirement of shares of the
$8.40 Series B, at the sinking fund redemption price, a sum not in excess
of $3,000,000, exclusive of accrued and unpaid dividends. The right of the
Company to make optional sinking fund payments shall not be cumulative.
(c) In satisfaction of all or any part of any mandatory sinking fund
payment, the Company may elect to take credit, at the sinking fund
redemption price, for any previously issued shares of the $8.40 Series B
acquired or redeemed by the Company (otherwise than through the application
of mandatory sinking fund payments), which have not theretofore been used
for the purpose of any such credit.
(d) The Company shall apply all cash set aside by it pursuant to
subsections (a) and (b) above and held by it on any sinking fund payment
date to the redemption on such date of outstanding shares of the $8.40
Series B at the sinking fund redemption price ($100 per share, plus an
amount equal to accrued and unpaid dividends, if any, on such shares to the
redemption date), such redemption to be effected upon the notice and in the
manner prescribed in the applicable provisions of the Company's Articles of
Incorporation, as amended.
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<PAGE>
(e) Notwithstanding any of the other provisions of this Section III,
if any May 1, referred to in subsection (a) above, shall be a Saturday, a
Sunday or a legal holiday for banking institutions in the State of
Illinois, the term "sinking fund payment date", as used in this Section
III, shall be construed to mean the next succeeding day which is not a
Saturday, a Sunday or such a legal holiday.
IV. Optional Redemption. Prior to May 1, 1983, none of the shares of
the $8.40 Series B may be redeemed. On or after May 1, 1983, shares of the
$8.40 Series B may be called for redemption and redeemed, at the option of
the Company in whole at any time or in part from time to time, at the
redemption prices hereinafter set forth and upon the notice and in the
manner prescribed in the applicable provisions of the Company's Articles of
Incorporation, as amended.
Such per share optional redemption prices of the shares of the $8.40
Series B shall be $103 from May 1, 1983 through April 30, 1988, and on and
after May 1, 1988, $101 per share, in each case plus the amount of accrued
and unpaid dividends, if any, thereon to the redemption date.
V. Liquidation Prices. The amount payable on each share of the $8.40
Series B in the event of voluntary dissolution, liquidation or winding up
of the Company shall be $103 through April 30, 1988, and on and after May
1, 1988, $101, plus the amount of accrued and unpaid dividends, if any,
thereon to the date fixed for payment, and no more. The amount payable on
each share of the $8.40 Series B in the event of involuntary dissolution,
liquidation or winding up of the Company shall be $99.326, plus the amount
of accrued and unpaid dividends, if any, thereon to the date fixed for
payment, and no more.
$8.85 CUMULATIVE PREFERENCE STOCK
THE BOARD OF DIRECTORS OF THE COMPANY ADOPTED THE FOLLOWING RESOLUTION,
EFFECTIVE JULY 21, 1978:
RESOLVED, that pursuant to authority expressly vested in the Board of
Directors by the Company's Articles of Incorporation, as amended, there be and
there hereby is established a series of the Preference Stock, without par value,
of the Company, the designation of such series, the number of shares to be
issuable therein, and certain of the terms and provisions thereof to be as
follows:
I. Designation of Series and Number of Shares to Be Issuable Therein.
The series of Preference Stock established hereby shall be designated $8.85
Cumulative Prefer-
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<PAGE>
ence Stock (hereinafter called the "$8.85 Series"), in which 750,000 shares
shall be issuable.
II. Dividends. Dividends shall be payable on the shares of the $8.85
Series at the rate of $8.85 per share per annum, and no more. The first
dividend payable on shares of the $8.85 Series issued on or prior to
November 1, 1978, shall accrue from the first date of issue of any such
shares and such dividend shall be payable on November 1, 1978.
III. Sinking Fund. At or before the opening of business on August 1,
1984, and at or before the opening of business on each August 1 thereafter
through August 1, 2003, the Company shall set aside, separate and apart
from its other funds, as a sinking fund payment for the retirement of
37,500 shares of the $8.85 Series, the sum of $3,750,000, plus in each
case, a sum equal to the amount of accrued and unpaid dividends, if any, on
the shares to be retired to the redemption date (each such August 1 being
referred to in this Section III as a "sinking fund payment date"). The
requirement in respect of sinking fund payments shall be cumulative, so
that if the Company shall fail to set aside in full the amount of any
sinking fund payment, the amount of the deficiency shall be added to the
next succeeding sinking fund payment or payments until such deficiency
shall be made good.
The Company shall apply all cash set aside by it pursuant to this
Section III and held by it on any sinking fund payment date to the
redemption on such date of outstanding shares of the $8.85 Series at the
sinking fund redemption price ($100 per share, plus an amount equal to
accrued and unpaid dividends, if any, on such shares to the redemption
date), such redemption to be effected upon the notice and in the manner
prescribed in the applicable provisions of the Company's Articles of
Incorporation, as amended.
The Company shall not be entitled to take credit for the satisfaction
of all or any part of any sinking fund payment by the application of any
previously issued shares of the $8.85 Series acquired by the Company or
redeemed by it otherwise than pursuant to this Section III.
Notwithstanding any of the other provisions of this Section III, if
any August 1, referred to above, shall be a Saturday, a Sunday or a legal
holiday for banking institutions in the State of Illinois, the term
"sinking fund payment date", as used in this Section III, shall be
construed to mean the next succeeding date which is not a Saturday, a
Sunday or such a legal holiday.
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<PAGE>
IV. Optional Redemption. Prior to August 1, 1988, none of the shares
of the $8.85 Series may be redeemed except through sinking fund payments
provided for in Section III above. On or after August 1, 1988, shares of
the $8.85 Series may be called for redemption and redeemed, at the option
of the Company, in whole at any time or in part from time to time, at the
redemption prices hereinafter set forth and upon the notice and in the
manner prescribed in the applicable provisions of the Company's Articles of
Incorporation, as amended.
Such per share optional redemption prices of the shares of the $8.85
Series shall be $105 from August 1, 1988 through July 31, 1993, $103 from
August 1, 1993 through July 31, 1998, and $101 on and after August 1, 1998,
in each case plus the amount of accrued and unpaid dividends, if any, on
the shares to be redeemed to the redemption date.
All shares of the $8.85 Series redeemed pursuant to this Section IV or
otherwise acquired shall be retired and cancelled and shall not be
reissued.
V. Pro Rata Redemption. In case of the redemption at any time or
less than all the outstanding shares of the $8.85 Series, pursuant to
Section III or Section IV hereof, the particular shares of the $8.85 Series
to be redeemed shall be selected by the Company from such outstanding
shares as nearly as practicable pro rata according to the respective
numbers of such outstanding shares then held of record by the holders of
shares of the $8.85 Series.
VI. Liquidation Prices. The amount payable on each share of the
$8.85 Series in the event of voluntary dissolution, liquidation or winding
up of the Company shall be $108.85 through July 31, 1988, $105 from August
1, 1988 through July 31, 1993, $103 from August 1, 1993 through July 31,
1998, and $101 on and after August 1, 1998, in each case plus the amount of
accrued and unpaid dividends, if any, thereon to the date fixed for
payment, and no more. The amount payable on each share of the $8.85 Series
in the event of involuntary dissolution, liquidation or winding up of the
Company shall be $100, plus the amount of accrued and unpaid dividends, if
any, thereon to the date fixed for payment and no more.
$9.25 CUMULATIVE PREFERENCE STOCK
THE BOARD OF DIRECTORS OF THE COMPANY ADOPTED THE FOLLOWING RESOLUTION,
EFFECTIVE MARCH 29, 1979:
RESOLVED, that pursuant to authority expressly vested in the Board of
Directors by the Company's Articles of Incorporation, as
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amended, there be and there hereby is established a series of the Preference
Stock, without par value, of the Company, the designation of such series, the
number of shares to be issuable therein, and certain of the terms and provisions
thereof to be as follows:
I. Designation of Series and Number of Shares to Be Issuable Therein.
The series of Preference Stock established hereby shall be designated $9.25
Cumulative Preference Stock (hereinafter called the "$9.25 Series"), in
which 1,500,000 shares shall be issuable.
II. Dividends. Dividends shall be payable on the shares of the $9.25
Series at the rate of $9.25 per share per annum, and no more. The first
dividend payable on shares of the $9.25 Series issued on or prior to May 1,
1979, shall accrue from the first date of issue of any such shares and such
dividend shall be payable on August 1, 1979.
III. Sinking Fund. At or before the opening of business on August 1,
1985, and at or before the opening of business on each August 1 thereafter
through August 1, 2004, the Company shall set aside, separate and apart
from its other funds, as a sinking fund payment for the retirement of
75,000 shares of the $9.25 Series, the sum of $7,500,000, plus, in each
case, a sum equal to the amount of accrued and unpaid dividends, if any, on
the shares to be retired to the redemption date (each such August 1 being
referred to in this Section III as a "sinking fund payment date"). The
requirement in respect of sinking fund payments shall be cumulative, so
that if the Company shall fail to set aside in full the amount of any
sinking fund payment, the amount of the deficiency shall be added to the
next succeeding sinking fund payment or payments until such deficiency
shall be made good.
The Company shall apply all cash set aside by it pursuant to this
Section III and held by it on any sinking fund payment date to the
redemption on such date of outstanding shares of the $9.25 Series at the
sinking fund redemption price ($100 per share, plus an amount equal to
accrued and unpaid dividends, if any, on such shares to the redemption
date), such redemption to be effected upon the notice and in the manner
prescribed in the applicable provisions of the Company's Articles of
Incorporation, as amended.
The Company shall not be entitled to take credit for the satisfaction
of all or any part of any sinking fund payment by the application of any
previously issued shares of the $9.25 Series acquired by the Company or
redeemed by it otherwise than pursuant to this Section III.
Notwithstanding any of the other provisions of this Section III, if
any August 1, referred to above, shall be a
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Saturday, a Sunday or a legal holiday for banking institutions in the State
of Illinois, the term "sinking fund payment date", as used in this Section
III, shall be construed to mean the next succeeding date which is not a
Saturday, a Sunday or such a legal holiday.
IV. Optional Redemption. Prior to August 1, 1989, none of the shares
of the $9.25 Series may be redeemed except through sinking fund payments
provided for in Section III above. On or after August 1, 1989, shares of
the $9.25 Series may be called for redemption and redeemed, at the option
of the Company, in whole at any time or in part from time to time, at the
redemption prices hereinafter set forth and upon the notice and in the
manner prescribed in the applicable provisions of the Company's Articles of
Incorporation, as amended.
Such per share optional redemption prices of the shares of the $9.25
Series shall be $105 from August 1, 1989 through July 31, 1994, $103 from
August 1, 1994 through July 31, 1999, and $101 on and after August 1, 1999,
in each case plus the amount of accrued and unpaid dividends, if any, on
the shares to be redeemed to the redemption date.
All shares of the $9.25 Series redeemed pursuant to this Section IV or
otherwise acquired shall be retired and cancelled and shall not be
reissued.
V. Pro Rata Redemption. In case of the redemption at any time or
less than all the outstanding shares of the $9.25 Series, pursuant to
Section III or Section IV hereof, the particular shares of the $9.25 Series
to be redeemed shall be selected by the Company from such outstanding
shares as nearly as practicable pro rata according to the respective
numbers of such outstanding shares then held of record by the holders of
shares of the $9.25 Series.
VI. Liquidation Prices. The amount payable on each share of the
$9.25 Series in the event of voluntary dissolution, liquidation or winding
up of the Company shall be $109.25 through July 31, 1989, $105 from August
1, 1989 through July 31, 1994, $103 from August 1, 1994 through July 31,
1999, and $101 on and after August 1, 1999, in each case plus the amount of
accrued and unpaid dividends, if any, thereon to the date fixed for
payment, and no more. The amount payable on each share of the $9.25 Series
in the event of involuntary dissolution, liquidation or winding up of the
Company shall be $100, plus the amount of accrued and unpaid dividends, if
any, thereon to the date fixed for payment and no more.
$9.00 CUMULATIVE PREFERENCE STOCK
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<PAGE>
THE BOARD OF DIRECTORS OF THE COMPANY ADOPTED THE FOLLOWING RESOLUTION,
EFFECTIVE JULY 25, 1990:
RESOLVED, that, pursuant to authority expressly vested in the Board of
Directors by the Company's Restated Articles of Incorporation, as amended, there
be, and there hereby is, established a series of the Preference Stock, without
par value, of the Company, the designation of such series, the number of shares
to be issuable therein, and certain of the terms and provisions thereof to be as
follows:
I. Designation of Series and Number of Shares to Be Issuable Therein.
The series of Preference Stock established hereby shall be designated $9.00
Cumulative Preference Stock (hereinafter called the "$9.00 Series"), in
which 650,000 shares shall be issuable.
II. Dividends. Dividends shall be payable on the shares of the $9.00
Series at the rate of $9.00 per share per annum, and no more. The first
dividend payable on shares, if any, of the $9.00 Series issued on or prior
to November 1, 1990, shall accrue from the date of issue of the first
issued shares of the $9.00 Series. The first dividend payment date for the
shares of the $9.00 Series shall be November 1, 1990.
III. Sinking Fund. (a) At or before the opening of business on
August 1, 1996, and at or before the opening of business on each August 1
thereafter through August 1, 2000, the Company shall set aside, separate
and apart from its other funds, as a sinking fund payment for the
retirement of 130,000 shares of the $9.00 Series, the sum of $13,000,000
plus, in each case, a sum equal to the amount of accrued and unpaid
dividends, if any, on the shares to be retired to the redemption date (each
such August 1 being referred to in this Section III as a "Sinking fund
payment date"). The requirement in respect of sinking fund payments shall
be cumulative, so that if the Company shall fail to set aside in full the
amount of any sinking fund payment, the amount of the deficiency shall be
added to the next succeeding sinking fund payment or payments until such
deficiency shall be made good.
(b) In addition to the mandatory sinking fund payments provided for
by subsection (a) above, the Company shall have the right, on any sinking
fund payment date, to set aside, separate and apart from its other funds,
as an optional sinking fund payment for the retirement of shares of the
$9.00 Series, at the sinking fund redemption price, a sum not in excess of
$13,000,000, exclusive of accrued and
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unpaid dividends. The right of the Company to make optional sinking fund
payments shall not be cumulative.
(c) In satisfaction of all or any part of any mandatory sinking fund
payment, the Company may elect to take credit, at the sinking fund
redemption price, for any previously issued shares of the $9.00 Series
acquired or redeemed by the Company (otherwise than through the application
of mandatory sinking fund payments), which have not theretofore been used
for the purpose of any such credit.
(d) The Company shall apply all cash set aside by it pursuant to this
Section III and held by it on any sinking fund payment date to the
redemption on such date of outstanding shares of the $9.00 Series at the
sinking fund redemption price ($100 per share, plus an amount equal to
accrued and unpaid dividends, if any, on such shares to the redemption
date), such redemption to be effected upon the notice and in the manner
prescribed in the applicable provisions of the Company's Restatement
Articles of Incorporation, as amended.
(e) Notwithstanding any of the provisions of this Section III, if any
August 1, referred to above, shall be a Saturday, a Sunday or a legal
holiday for banking institutions in the State of Illinois, the term
"sinking fund payment date" as used in this Section III, shall be construed
to mean the next succeeding date which is not a Saturday, a Sunday or such
a legal holiday.
IV. Liquidation Prices. The amount payable on each share of the
$9.00 Series in the event of voluntary dissolution, liquidation or winding
up the Company shall be $109.00 through July 31, 1991, $108.00 from August
1, 1991 through July 31, 1992, $107.00 from August 1, 1992 through July 31,
1993, $106.00 from August 1, 1993 through July 31, 1994, $105.00 from
August 1, 1994 through July 31, 1995, $104.00 from August 1, 1995 through
July 31, 1996, $103.00 from August 1, 1996 through July 31, 1997, $102.00
from August 1, 1997 through July 31, 1998, $101.00 from August 1, 1998
through July 31, 1999, and $100.00 on and after August 1, 1999, in each
case plus the amount of accrued and unpaid dividends, if any, thereon to
the date fixed for payment, and no more. The amount payable on each share
of the $9.00 Series in the event of involuntary dissolution, liquidation or
winding up of the Company shall be $99.125, plus the amount of accrued and
unpaid dividends, if any, thereon to the date fixed for payment, and no
more.
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<PAGE>
$6.875 CUMULATIVE PREFERENCE STOCK
THE BOARD OF DIRECTORS OF THE COMPANY ADOPTED THE FOLLOWING
RESOLUTION, EFFECTIVE MAY 21, 1993:
RESOLVED, that, pursuant to authority expressly vested in the Board of
Directors by the Company's Restated Articles of Incorporation, as amended, there
be, and there hereby is, established a series of the Preference Stock, without
par value, of the Company, the designation of such series, the number of shares
to be issuable therein, and certain of the terms and provisions thereof to be as
follows:
I. Designation of Series and Number of Shares to Be Issuable Therein.
The series of Preference Stock established hereby shall be designated
$6.875 Cumulative Preference Stock (hereinafter called the "$6.875
Series"), in which 700,000 shares shall be issuable.
II. Dividends. Dividends shall be payable on the shares of the
$6.875 Series at the rate of $6.875 per share per annum, and no more. The
first dividend payable on shares, if any, of the $6.875 Series issued on or
prior to August 1, 1993, shall accrue from the date of issue of the first
issued shares of the $6.875 Series. The first dividend payment date for
the shares of the $6.875 Series shall be August 1, 1993.
III. Sinking Fund. (a) At or before the opening of business on May
1, 2000, the Company shall set aside, separate and apart from its other
funds, as a sinking fund payment for the retirement of all the outstanding
700,000 shares of the $6.875 Series, the sum of $70,000,000 plus a sum
equal to the amount of accrued and unpaid dividends, if any, on the shares
to be retired on the redemption date (such May 1 being referred to in this
Section III as the "sinking fund payment date").
(b) In satisfaction of all or any part of the mandatory sinking fund
payment, the Company shall take credit, at the sinking fund redemption
price, for any previously issued shares of the $6.875 Series acquired by
the Company prior to May 1, 2000.
(c) The Company shall apply all cash set aside by it pursuant to this
Section III and held by it on the sinking fund payment date to the
redemption on such date of all of the outstanding shares of the $6.875
Series at the sinking fund redemption price ($100 per share, plus an amount
equal to accrued and unpaid dividends, if any, on such shares to the
redemption date), such redemption to be effected upon the notice and in the
manner prescribed in the applicable
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<PAGE>
provisions of the Company's Restated Articles of Incorporation, as amended.
(d) Notwithstanding any of the other provisions of this Section III,
if the May 1 referred to above shall be a legal holiday for banking
institutions in the State of Illinois, the term "sinking fund payment date"
as used in this Section III, shall be construed to mean the next succeeding
date which is not a legal holiday and which is not a Saturday or a Sunday.
IV. Liquidation Prices. The amount payable on each share of the
$6.875 Series in the event of voluntary dissolution, liquidation or winding
up of the Company shall be $106.875 through April 30, 1994, $105.75 from
May 1, 1994 through April 30, 1995, $104.625 from May 1, 1995 through April
30, 1996, $103.50 from May 1, 1996 through April 30, 1997, $102.375 from
May 1, 1997 through April 30, 1998, $101.25 from May 1, 1998 through April
30, 1999, and $100 on and after May 1, 1999, in each cash plus accrued and
unpaid dividends, if any, thereon to the date fixed for payment, and no
more. The amount payable on each share of the $6.875 Series in the event
of the involuntary dissolution, liquidation or winding up of the Company
shall be $99.25, plus the amount of accrued and unpaid dividends, if any,
thereon to the date fixed for payment, and no more.
$2.425 CUMULATIVE REFERENCE STOCK
THE BOARD OF DIRECTORS OF THE COMPANY ADOPTED THE FOLLOWING
RESOLUTION, EFFECTIVE JULY 1, 1994:
RESOLVED, that, pursuant to authority expressly vested in the Board of
Directors by the Company's Restated Articles of Incorporation, as amended, there
be, and there hereby is, established a series of the Preference Stock, without
par value, of the Company, the designation of such series, the number of shares
to be issuable therein, and certain of the terms and provisions thereof to be as
follows:
I. Designation of Series and Number of Shares to Be Issuable Therein.
The series of Preference Stock established hereby shall be designated
$2.425 Cumulative Preference Stock (hereinafter called the "$2.425
Series"), in which 3,000,000 shares shall be issuable.
II. Dividends. Dividends shall be payable on the shares of the
$2.425 Series at the rate of $2.425 per share per annum, and no more. The
first dividend payable on shares, if any, of the $2.425 Series issued on or
prior to August 1, 1994, shall accrue from the date of issue of the first
issued shares of the $2.425 Series. The first divi-
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<PAGE>
dend payment date for the shares of the $2.425 Series shall be August 1,
1994.
III. Redemption. The $2.425 Series will not be redeemable prior to
August 1, 1999. On and after that date, shares of the $2.425 Series may be
called for redemption and redeemed, at the option of the Company, in whole
at any time or in part from time to time, at a redemption price of $25 per
share, plus accrued and unpaid dividends to the date of redemption, and
upon the notice and in the manner prescribed in the applicable provisions
of the Company's Articles of Incorporation, as amended.
IV. Liquidation Prices. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders of the
$2.425 Series at the time outstanding will be entitled to receive out of
assets of the Company available for distribution to shareholders, before
any distribution of assets is made to holders of Common Stock or any other
class of stock ranking junior to the $2.425 Series upon liquidation,
liquidating distributions in the amount of $25 per share, plus accrued and
unpaid dividends, if any, thereon to the date fixed for payment and no
more.
____________________
ADDITIONAL INFORMATION PURSUANT TO SECTION 10.30
OF THE BUSINESS CORPORATION ACT OF 1983
Commonwealth Edison Company was formed by the consolidation of Chicago
Edison Company and Commonwealth Electric Company, pursuant to Articles of
Consolidation effective September 17, 1907. The following companies were
subsequently merged into Commonwealth Edison Company: Cosmopolitan Electric
Company, pursuant to An Agreement of Consolidation effective October 17, 1913;
Public Service Company of Northern Illinois, pursuant to Articles of Merger
effective March 17, 1953; Central Illinois Electric and Gas Co., pursuant to
Articles of Merger effective December 9, 1966; and CECo Merging Corporation,
pursuant to Articles of Merger effective September 1, 1994.
The address of the Company's registered office on the date hereof is One
First National Plaza, Chicago, Illinois, 60690. The Company's registered agent
on the date hereof is David A. Scholz.
The number of shares of each class issued on the date hereof is a follows:
(a) Prior Preferred Stock of the par value of $100 per share: none;
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(b) $1.425 Convertible Preferred Stock without par value: 99,864 shares;
(c) Preference Stock without par value: 16,612,754 shares; and
(d) Common Stock of the par value of $12.50 per share: 214,191,595
shares.
The amount of paid in capital on the date hereof is $5,702,199,758.70.
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Exhibit (3)-3
Unicom Corporation
Form 10-K File No. 1-11375
UNICOM CORPORATION
BY-LAWS
EFFECTIVE JANUARY 28, 1994
AS AMENDED THROUGH
MARCH 9, 1995
<PAGE>
CONTENTS
Page
Number
------
ARTICLE I. Stock...................................... 1
ARTICLE II. Meetings of Shareholders................... 3
ARTICLE III. Board of Directors......................... 5
ARTICLE IV. Committees of the Board of Directors....... 7
ARTICLE V. Officers................................... 10
ARTICLE VI. Indemnification............................ 13
ARTICLE VII. Miscellaneous.............................. 15
ARTICLE VIII. Alteration, Amendment or Repeal of By-Laws. 15
<PAGE>
UNICOM CORPORATION
BY-LAWS
_____
ARTICLE I.
STOCK.
SECTION 1. Each holder of fully paid stock shall be entitled to a
certificate or certificates of stock stating the number and class of shares, and
the designation of the series, if any, which such certificate represents. All
certificates of stock shall at the time of their issuance be signed either
manually or by facsimile signature by the Chairman, the President or a Vice
President and by the Secretary or an Assistant Secretary. All certificates of
stock shall be sealed with the seal of the Company or a facsimile of such seal,
shall be countersigned either manually or by facsimile signature by a Transfer
Agent and shall be authenticated by manual signature and registered by a
Registrar. The Board of Directors shall appoint one or more Transfer Agents,
none of whom shall be officers of the Company authorized to sign certificates of
stock, and one or more Registrars, each of which Registrars shall be a bank or
trust company. Certificates of stock shall not be valid until countersigned by
a Transfer Agent and authenticated and registered by a Registrar in the manner
provided by the Board of Directors.
SECTION 2. Shares of stock shall be transferable only on the books of the
Company and, except as hereinafter provided or as otherwise required by law,
shall be transferred only upon proper endorsement and surrender of the
certificates issued therefor. If an outstanding certificate of stock shall be
lost, destroyed or stolen, the holder thereof may have a new certificate upon
producing evidence satisfactory to the Board of Directors of such loss,
destruction or theft, and upon furnishing to the Company, the Transfer Agents
and the Registrars a bond of indemnity deemed sufficient by the Board of
Directors against claims under the outstanding certificate.
SECTION 3. The certificates for each class or series of stock shall be
numbered and issued in consecutive order and a record shall be kept of the name
and address of the person to whom each certificate is issued, the number of
shares represented by the certificate and the number and date of the
certificate. All certificates exchanged or returned to the Company or the
Transfer Agent for transfer shall be canceled and filed.
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<PAGE>
SECTION 4. For the purpose of determining shareholders entitled to notice
of or to vote at any meeting of shareholders, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may fix in
advance a date as the record date for any such determination of shareholders,
such date in any case to be not more than sixty days and, for a meeting of
shareholders, not less than ten days, or in the case of a merger, consolidation,
share exchange, dissolution or sale, lease or exchange of assets, not less than
twenty days, immediately preceding such meeting.
SECTION 5. If any subscription for stock in the Company or any installment
of such subscription shall be unpaid when due, as the Board of Directors shall
have determined the time for payment, and shall continue unpaid for twenty days
after demand for the amount due, made either in person or by written notice duly
mailed to the last address, as it appears on the records of the Company, of the
subscriber or other person by whom the subscription or installment shall be
payable, the stock or subscription upon which payment shall be so due shall,
upon the expiration of said twenty days, become and be forfeited to the Company
without further action, demand or notice, and such stock or subscription may be
sold at public sale, subject to payment of the amount due and unpaid, plus all
costs and expenses incurred by the Company in that connection, at a time and
place to be stated in a written notice to be mailed to the recorded address of
the delinquent subscriber or other person in default on the subscription at
least ten days prior to the time fixed for such sale; provided, that the excess
of proceeds of such sale realized over the amount due and unpaid on said stock
or subscription shall be paid to the delinquent subscriber of other person in
default on the subscription, or to his or her legal representative; and,
provided further, that no forfeiture of stock, or of any amounts paid upon a
subscription therefor, shall be declared as against the estate of any decedent
before distribution shall have been made of the estate.
The foregoing provisions for the forfeiture and sale of stock or
subscriptions shall not exclude any other remedy which may lawfully be
enforceable at any time, by forfeiture of stock or of amounts theretofore paid
or otherwise, against any person for nonpayment of a subscription or of any
installment thereof.
SECTION 6. Transfers of shares shall be made only on the books of the
Company by the registered holder thereof or by his or her legal representative,
who shall furnish proper evidence of authority to transfer, or by his or her
attorney or successor thereunto authorized by power of attorney or by documents
duly executed and filed with the Secretary or Transfer Agent of the Company, and
upon surrender for cancellation of the certificate for such shares. The person
in whose name shares stand on the
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books of the Company shall be deemed the owner thereof for all purposes as
regards the Company.
SECTION 7. The Company shall be entitled to treat the holder of record of
any share or shares of stock as the holder in fact thereof and accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of the State of Illinois.
ARTICLE II.
MEETINGS OF SHAREHOLDERS.
SECTION 1. The regular annual meeting of the shareholders of the Company
for the election of Directors and for the transaction of such other business as
may come before the meeting shall be held on such day in April or May of each
year as the Board of Directors may by resolution determine. Each such regular
annual meeting and each special meeting of the shareholders shall be held at
such place as may be fixed by the Board of Directors and at such hour as the
Board of Directors shall order.
SECTION 2. Special meetings of the shareholders may be called by the
Chairman, by the Board of Directors, by a majority of the Directors individually
or by the holders of not less than one-fifth of the total outstanding shares of
capital stock of the Company.
SECTION 3. Written notice stating the place, day and hour of the meeting
of the shareholders and, in the case of a special meeting, the purpose or
purposes for which the meeting is called shall be delivered not less than ten
nor more than sixty days before the date of the meeting, or in the case of a
merger, consolidation, share exchange, dissolution or sale, lease or exchange of
assets not less than twenty nor more than sixty days before the date of the
meeting, either personally or by mail, by or at the direction of the Chairman,
the Secretary or the persons calling the meeting, to each shareholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail addressed to the shareholder
at the shareholder's address as it appears upon the records of the Company, with
postage thereon prepaid.
SECTION 4. At all meetings of the shareholders, a majority of the
outstanding shares of stock, entitled to vote on a matter, represented in person
or by proxy, shall constitute a quorum for consideration of such matter, but the
shareholders represented at any meeting, though less than a quorum, may adjourn
the meeting to some other day or sine die. If a quorum is present, the
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<PAGE>
affirmative vote of the majority of the shares of stock represented at the
meeting and entitled to vote on a matter shall be the act of the shareholders,
unless the vote of a greater number or voting by classes is required by law or
the articles of incorporation.
SECTION 5. At every meeting of the shareholders, each outstanding share of
stock shall be entitled to one vote on each matter submitted for a vote. In all
elections for Directors, every shareholder shall have the right to vote the
number of shares owned by such shareholder for as many persons as there are
Directors to be elected, or to cumulate such votes and give one candidate as
many votes as shall equal the number of Directors to be elected multiplied by
the number of such shares or to distribute such cumulative votes in any
proportion among any number of candidates. A shareholder may vote either in
person or by proxy. A shareholder may appoint a proxy to vote or otherwise act
for him or her by signing an appointment form and delivering it to the person so
appointed.
SECTION 6. Any meeting at which a quorum of shareholders is present, in
person or by proxy, may adjourn from time to time without notice, other than
announcement at such meeting, until its business is completed. At the adjourned
meeting, the Company may transact any business which might have been transacted
at the original meeting. If the adjournment is for more than thirty days, a
notice of the adjourned meeting shall be given to each shareholder of record
entitled to vote at the meeting.
SECTION 7. The Secretary of the Company shall make or cause to be made,
within twenty days after the record date for a meeting of shareholders of the
Company or ten days before such meeting, whichever is earlier, a complete list
of the shareholders entitled to vote at such meeting, arranged in alphabetical
order, with the address of and the number of shares held by each, which list,
for at least ten days prior to such meeting, shall be kept on file at the
registered office of the Company and shall be subject to inspection by any
shareholder, and to copying at such shareholder's expense, at any time during
usual business hours. Such list shall also be produced and kept open at the
time and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting.
SECTION 8. The Chairman and the Secretary of the Company shall, when
present, act as chairman and secretary, respectively, of each meeting of the
shareholders.
SECTION 9. At any meeting of shareholders, the chairman of the meeting
may, or upon the request of any shareholder shall, appoint one or more persons
as inspectors for such meeting, unless an inspector or inspectors shall have
been previously appointed for such meeting by the Chairman. Such inspectors
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<PAGE>
shall ascertain and report the number of shares of stock represented at the
meeting, based upon their determination of the validity and effect of proxies,
count all votes and report the results and do such other acts as are proper to
conduct the election and voting with impartiality and fairness to all the
shareholders.
SECTION 10. Voting on any question or in any election may be viva voce
unless the presiding officer shall order or any shareholder shall demand that
voting be by ballot.
ARTICLE III.
BOARD OF DIRECTORS.
SECTION 1. The business and affairs of the Company shall be managed by or
under the direction of the Board of Directors. The number of Directors of the
Company shall be not less than ten nor more than fifteen. The Directors shall
be elected at each annual meeting of the shareholders, but if for any reason the
election shall not be held at an annual meeting, it may be subsequently held at
any special meeting of the shareholders called for that purpose after proper
notice. The Directors so elected shall hold office until the next annual
meeting and until their respective successors, willing to serve, shall have been
elected and qualified. Directors need not be residents of the State of Illinois
or shareholders of the Company. No person shall be eligible for nomination or
renomination as a Director by the management of the Company who, prior to the
date of election, shall have attained age seventy-two. No person who is an
employe or a former employe of the Company or of a subsidiary of the Company
shall be eligible for nomination or renomination as a Director by the management
of the Company for a term commencing after such person ceases to be such an
employe; provided, however, that any Director of the Company who was a Director
of Commonwealth Edison Company, an Illinois corporation, in office on June 15,
1989 who is or has been such an employe may be renominated as a Director unless
such person shall have attained age sixty-five on or before the date of election
of Directors.
SECTION 2. Any vacancy occurring in the Board of Directors, including a
vacancy created by an increase in the number of directors, may be filled by
election at an annual meeting or at a special meeting of shareholders called for
that purpose; provided, however, that any vacancy in the Board of Directors
arising between meetings of shareholders by reason of an increase in the number
of directors or otherwise may be filled by the vote of a majority of the
directors then in office, although less than a quorum. Any directors so elected
shall serve until the next annual meeting of shareholders.
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<PAGE>
SECTION 3. A meeting of the Board of Directors shall be held immediately,
or as soon as practicable, after the annual election of Directors in each year,
provided a quorum for such meeting can be obtained. Notice of every meeting of
the Board, stating the time and place at which such meeting will be held, shall
be given to each Director personally, by telephone or by other means of
communication at least one day, or by depositing the same in the mails properly
addressed at least two days before the day of such meeting. A meeting of the
Board of Directors may be called at any time by the Chairman or by any two
Directors and shall be held at such place as shall be specified in the notice
for such meeting.
SECTION 4. A majority of the number of Directors then in office, but not
less than six, shall constitute a quorum for the transaction of business at any
meeting of the Board, but a lesser number may adjourn the meeting from time to
time until a quorum is obtained, or may adjourn sine die. The act of the
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
SECTION 5. Each member of the Board not receiving a salary from the
Company or a subsidiary of the Company shall be paid such fees as the Board of
Directors may from time to time, by resolution adopted by the affirmative vote
of a majority of the Directors then in office, and irrespective of any personal
interest of any of its members, determine. The Directors shall be paid their
reasonable expenses, if any, of attendance at each meeting of the Board of
Directors. Members of any committee of the Board of Directors may be allowed
like fees and expenses for service on or attendance at meetings of such
committee. No such payment shall preclude any Director from serving the Company
in any other capacity and receiving compensation therefor.
SECTION 6. A Director of the Company who is present at a meeting of the
Board of Directors at which action is taken on any corporate matter shall be
conclusively presumed to have assented to the action taken unless his or her
dissent shall be entered in the minutes of the meeting or unless he shall file
his or her written dissent to such action with the person acting as Secretary of
the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Company immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
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ARTICLE IV.
COMMITTEES OF THE BOARD OF DIRECTORS
SECTION 1. There shall be an Executive Committee of the Board consisting
of five members. The Board of Directors shall, at its first meeting after the
annual meeting of the shareholders in each year, elect a chairman and the four
other members of the Executive Committee. The remaining Directors shall
constitute alternates to serve temporarily, and as far as practicable in
rotation (in such order as shall be established by the Board), in the place of
any member who may be unable to serve. The Chairman or the Directors calling a
meeting of the Executive Committee shall call upon alternates, in rotation, to
serve as herein provided. When any alternate serves, the minutes of the meeting
shall record the name of the member in whose place such alternate serves. The
Directors elected as members of the Executive Committee shall serve as such for
one year and until their respective successors, willing to serve, shall have
been elected. The Executive Committee shall, when the Board is not in session,
have and may exercise all of the authority of the Board of Directors, subject to
the limitations set forth in Section 10 of this Article IV. Vacancies in the
membership of the Executive Committee shall be filled by the Board of Directors.
The Executive Committee shall keep minutes of the proceedings at its meetings.
SECTION 2. There shall be an Audit Committee of the Board consisting of
not less than three nor more than five members who are not employes of the
Company. The Directors elected as members of the Audit Committee shall serve as
such for three years and until their respective successors, willing to serve,
shall have been elected, provided that, to the extent practicable, the members
of the Audit Committee shall be elected for staggered terms. The Board of
Directors shall, at its first meeting after the annual meeting of shareholders
in each year, elect the successors of the members whose terms shall then expire.
The Board of Directors shall designate from time to time the member who is to
serve as chairman of the Audit Committee. The Audit Committee shall meet with
the Company's independent auditors at least once each year to review the
Company's financial statements and the scope and results of such auditors'
examinations, monitor the internal accounting controls and practices of the
Company, review the annual report to shareholders and made recommendations as to
its approval to the Board and recommend, subject to shareholder approval, the
appointment of independent auditors, and shall report its findings at least once
each year to the Board. The Audit Committee shall have such powers as it shall
deem necessary for the performance of its duties. Vacancies in the membership
of the Audit Committee shall be filled by the Board of Directors. The Audit
Committee shall
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keep minutes of the proceedings at its meetings.
SECTION 3. There shall be a Compensation Committee of the Board consisting
of those Directors who are not employes or former employes of the Company. The
Board of Directors shall, at its first meeting after the annual meeting of
shareholders in each year, elect a chairman of the Compensation Committee. The
Directors serving as members of the Compensation Committee shall serve as such
for one year and until their respective successors, willing to serve, shall have
been elected. The Compensation Committee shall administer awards under the
Company's Deferred Compensation Plan. The Compensation Committee shall have
such power as it shall deem necessary for the performance of its duties.
Vacancies in the membership of the Compensation Committee shall be filled by the
Board of Directors. The Compensation Committee shall keep minutes of the
proceedings at its meetings.
SECTION 4. There shall be a Finance Committee of the Board consisting of
not less than three nor more than five members. The Board of Directors shall,
at its first meeting after the annual meeting of shareholders in each year,
elect a chairman and the other members of the Finance Committee. The Directors
elected as members of the Finance Committee shall serve as such for one year and
until their respective successors, willing to serve, shall have been elected.
The Finance Committee shall review the scope and results of the Company's
financing program and review the Company's financial statements, construction
budgets and cash budgets as they relate to the Company's financing program, and
shall report its findings at least once each year to the Board. The Finance
Committee shall have such power as it shall deem necessary for the performance
of its duties. Vacancies in the membership of the Finance Committee shall be
filled by the Board of Directors. The Finance Committee shall keep minutes of
the proceedings at its meetings.
SECTION 5. There shall be a Nominating Committee of the Board consisting
of not less than three nor more than five members, a majority of whom are not
employes of the Company. The Board of Directors shall, at its first meeting
after the annual meeting of shareholders in each year, elect a chairman and the
other members of the Nominating Committee. The Directors elected as members of
the Nominating Committee shall serve as such for one year and until their
respective successors, willing to serve, shall have been elected. The
Nominating Committee shall review the requirements for serving as Director,
review potential candidates for Director, propose nominees for Director to the
Board and recommend to the Board the successor to the Chairman when a vacancy
occurs in that position. The Nominating Committee shall have such power as it
shall deem necessary for the performance of its duties. Vacancies in the
membership of the Nominating Committee shall be filled by the Board of
Directors. The Nominating Committee shall keep minutes of the proceedings at
its
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<PAGE>
meetings.
SECTION 6. The Board of Directors may from time to time create other
committees, standing or special, appoint Directors to serve on such committees
and confer such powers upon such committees and revoke such powers and terminate
the existence of such committees, as the Board at its pleasure may determine,
subject to the limitations set forth in Section 8.40(c) of the Illinois Business
Corporation Act of 1983, as amended from time to time.
SECTION 7. Meetings of any committee of the Board may be called at any
time by the Chairman, by any two Directors or by the chairman of the committee
the meeting of which is being called and shall be held at such place as shall be
designated in the notice of such meeting. Notice of each committee meeting
stating the time and place at which such meeting will be held shall be given to
each member of the committee personally, or by telegraph, or by depositing the
same in the mails properly addressed, at least one day before the day of such
meeting. A majority of the members of a committee shall constitute a quorum
thereof but a lesser number may adjourn the meeting from time to time until a
quorum is obtained, or may adjourn sine die. A majority vote of the members of
a committee present at a meeting at which a quorum is present shall be necessary
for committee action.
SECTION 8. The Board of Directors may from time to time designate from
among the Directors alternates to serve on one or more committees as occasion
may require. Whenever a quorum cannot be secured for any meeting of any
committee from among the regular members thereof and designated alternates, the
member or members of such committee present at such meeting and not disqualified
from voting thereat, whether or not he or they 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 member.
SECTION 9. Every Director of the Company, or member of any committee
designated by the Board of Directors pursuant to authority conferred by these
By-Laws, shall, in the performance of his or her duties, be fully protected in
relying in good faith upon the records of the Company and upon such information,
opinions, reports or statements presented to the Company by any of the Company's
officers or employees, or committees of the Board of Directors, or by any other
person as to matters the Director or member reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Company.
SECTION 10. Notwithstanding any other provision of the By-Laws, no
committee of the Board of Directors shall:
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(1) authorize distributions; (2) approve or recommend to shareholders any act
required by law to be approved by shareholders; (3) fill vacancies on the Board
of Directors or on any of its committees; (4) elect or remove officers or fix
the compensation of any member of the committee; (5) adopt, amend or repeal the
By-Laws; (6) approve a plan of merger not requiring shareholder approval; (7)
authorize or approve reacquisition of stock, except according to a general
formula or method prescribed by the Board of Directors; (8) authorize or approve
the issuance or sale, or contract for sale, of stock or determine the
designation and relative rights, preferences, and limitations of a series of
stock, except that a committee may fix the specific terms of the issuance or
sale or contract for sale or the number of shares of stock to be allocated to
particular employes under an employe benefit plan; or (9) amend, alter, repeal,
or take action inconsistent with any resolution or action of the Board of
Directors when the resolution or action of the Board of Directors provides by
its terms that it shall not be amended, altered or repealed by action of a
committee.
ARTICLE V.
OFFICERS.
SECTION 1. There shall be elected by the Board of Directors, at its
first meeting after the annual election of Directors in each year if
practicable, the following principal officers of the Company, namely: a
Chairman, a President, such number of Executive Vice Presidents, Senior Vice
Presidents and Vice Presidents as the Board at the time may decide upon, a
Secretary, a Treasurer and a Comptroller; and the Board may also provide for a
Vice Chairman and such other officers, and prescribe for each of them such
duties, as in its judgment may from time to time be desirable to conduct the
affairs of the Company. No officer shall be elected for a term extending beyond
the first day of the month following the month in which such officer attains the
age of 65 years, on which date such officer shall be retired. The Chairman
shall be a Director of the Company; any other officer above named may, but need
not, be a Director of the Company. Any two or more offices may be held by the
same person. All officers shall hold their respective offices until the first
meeting of the Board of Directors after the next succeeding annual election of
Directors and until their successors, willing to serve, shall have been elected,
but any officer may be removed from office by the Board of Directors whenever in
its judgment the best interests of the Company will be served thereby. Such
removal, however, shall be without prejudice to the contract rights, if any, of
the person so removed. Election of an officer shall not of itself create
contract rights.
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<PAGE>
SECTION 2. The Chairman shall be the chief executive officer of the
Company and shall have general authority over all the affairs of the Company,
including the power to appoint and discharge any and all officers, agents and
employes of the Company not elected or appointed directly by the Board of
Directors. The Chairman shall, when present, preside at all meetings of the
shareholders and of the Board of Directors. The Chairman shall have authority
to call special meetings of the shareholders and meetings of the Board of
Directors, and of any committee of the Board of Directors and, when neither the
Board of Directors nor the Executive Committee is in session, to suspend the
authority of any other officer or officers of the Company, subject, however, to
the pleasure of the Board of Directors or of the Executive Committee at its next
meeting. The Chairman, or such other officer as the Chairman may direct, shall
be responsible for all internal audit functions, and the internal audit
personnel shall report directly to the Chairman or to such other officer.
SECTION 3. In the absence or disability of the Chairman, the powers and
duties of the Chairman shall be performed by the President or, in the
President's absence or disability, by such other principal officer as the Board
of Directors or the Executive Committee may designate.
SECTION 4. Except insofar as the Board of Directors, the Executive
Committee or the Chairman shall have devolved responsibilities on the other
principal officers, the President shall be responsible for the general
management and direction of the affairs of the Company, subject to the control
of the Board of Directors, the Executive Committee and the Chairman. The
President shall have such other powers and duties as usually devolve upon the
President of a corporation and such further powers and duties as may be
prescribed by the Board of Directors, the Executive Committee or the chairman.
The President shall report to the Chairman.
SECTION 5. The Executive Vice Presidents, the Senior Vice Presidents and
the Vice Presidents shall have such powers and duties as may be prescribed for
them, respectively, by the Board of Directors, the Executive committee or the
Chairman. Each of such officers shall report to the Chairman or such other
officer as the Chairman shall direct.
SECTION 6. The Secretary shall attend all meetings of the shareholders, of
the Board of Directors and of each committee of the Board of Directors, shall
keep a true and faithful record thereof in proper books and shall have the
custody and care of the corporate seal, records, minute books and stock books of
the Company and of such other books and papers as in the practical business
operations of the Company shall naturally belong in the office or custody of the
Secretary or as shall be placed in the
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<PAGE>
Secretary's custody by order of the Board of Directors or the Executive
Committee. The Secretary shall keep or cause to be kept a suitable record of
the addresses of shareholders and shall, except as may be otherwise required by
statute or the by-laws, sign and issue all notices required for meetings of
shareholders, of the Board of Directors and of the committees of the Board of
Directors. Whenever requested by the requisite number of shareholders or
Directors, the Secretary shall give notice, in the name of the shareholder or
shareholders or Director or Directors making the request, of a meeting of the
shareholders or of the Board of Directors or of a committee of the Board of
Directors, as the case may be. The Secretary shall sign all papers to which the
Secretary's signature may be necessary or appropriate, shall affix and attest
the seal of the Company to all instruments requiring the seal, shall have the
authority to certify the by-laws, resolutions of the shareholders and Board of
Directors and committees of the Board of Directors and other documents of the
Company as true and correct copies thereof and shall have such other powers and
duties as are commonly incidental to the office of Secretary and as may be
prescribed by the Board of Directors, the Executive Committee or the Chairman.
The Secretary shall report to the Chairman or such other officer as the Chairman
shall direct.
SECTION 7. The Treasurer shall have charge of and be responsible for the
collection, receipt, custody and disbursement of the funds of the Company. The
Treasurer shall deposit the Company's funds in its name in such banks, trust
companies or safe deposit vaults as the Board of Directors may direct. Such
funds shall be subject to withdrawal only upon checks or drafts signed or
authenticated in such manner as may be designated from time to time by
resolution of the Board of Directors or of the Executive Committee. The
Treasurer shall have the custody of such books and papers as in the practical
business operations of the Company shall naturally belong in the office or
custody of the Treasurer or as shall be placed in the Treasurer's custody by
order of the Board of Directors or the Executive Committee. The Treasurer shall
have such other powers and duties as are commonly incidental to the office of
Treasurer or as may be prescribed for the Treasurer by the Board of Directors,
the Executive Committee or the Chairman. Securities owned by the Company shall
be in the custody of the Treasurer or of such other officers, agents or
depositaries as may be designated by the Board of Directors or the Executive
Committee. The Treasurer may be required to give bond to the Company for the
faithful discharge of the duties of the Treasurer in such form and in such
amount and with such surety as shall be determined by the Board of Directors.
The Treasurer shall report to the Chairman or such other officer as the Chairman
shall direct.
SECTION 8. The Comptroller shall be responsible for the executive direction
of the accounting organization and shall have
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functional supervision over the records of all other departments pertaining to
revenues, expenses, money, securities, properties, materials and supplies. The
Comptroller shall prescribe the form of all vouchers, accounts and accounting
procedures, and reports required by the various departments. The Comptroller
shall be responsible for the preparation and interpretation of all accounting
reports and financial statements as required and for the proper review and
approval of all bills received for payment. No bill or voucher shall be so
approved unless the charges covered by the bill or voucher shall have been
previously approved through job order, requisition or otherwise by the head of
the department in which it originated, or unless the Comptroller shall otherwise
be satisfied of its propriety and correctness. The Comptroller shall have such
other powers and duties as are commonly incidental to the office of Comptroller
or as may be prescribed for the Comptroller by the Board of Directors, the
Executive Committee or the Chairman. The Comptroller may be required to give
bond to the Company for the faithful discharge of the duties of the Comptroller
in such form and in such amount and with such surety as shall be determined by
the Board of Directors. The Comptroller shall report to the Chairman or such
other officer as the Chairman shall direct.
SECTION 9. Assistant Secretaries, Assistant Treasurers and Assistant
Comptrollers, when elected or appointed, shall respectively assist the
Secretary, the Treasurer and the Comptroller in the performance of the
respective duties assigned to such principal officers, and in assisting such
principal officer, each of such assistant officers shall for such purpose have
the powers of such principal officer. In case of the absence, disability, death,
resignation or removal from office of any principal officer, such principal
officer's duties shall, except as otherwise ordered by the Board of Directors or
the Executive Committee, temporarily devolve upon such assistant officer as
shall be designated by the Chairman.
ARTICLE VI.
INDEMNIFICATION.
SECTION 1. (a) A Director of the Company shall not be personally liable to
the Company or its shareholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the Company or its shareholders, (ii) for acts or omissions
not in good faith or that involve intentional misconduct or a knowing violation
of law, (iii) under Section 8.65 of the Illinois Business Corporation Act of
1983, as amended, or (iv) for any transaction from which the Director derived an
improper personal benefit. If the Illinois Business Corporation Act of 1983 is
amended to authorize corporate action further eliminating or
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<PAGE>
limiting the personal liability of Directors, then the liability of a Director
of the Company shall be eliminated or limited to the full extent permitted by
the Illinois Business Corporation Act of 1983, as so amended. Any repeal or
modification of this Section 1(a) by the shareholders of the Company shall not
adversely affect any right or protection of a Director of the Company existing
at the time of such repeal or modification.
(b) Each person who is or was or had agreed to become a Director or officer
of the Company, and each person who is or was serving or who had agreed to serve
at the request of the Board of Directors or an officer of the Company as an
employe or agent of the Company or as a director, officer, employe, or agent,
trustee or fiduciary of another corporation, partnership, joint venture, trust
or other enterprise (including the heirs, executors, administrators or estate of
such person), shall be indemnified by the Company to the full extent permitted
by the Illinois Business Corporation Act of 1983 or any other applicable laws as
presently or hereafter in effect. Without limiting the generality of the
foregoing, the Company may enter into one or more agreements with any person
which provide for indemnification greater or different than that provided in
this Section 1(b). Any repeal or modification of this Section 1(b) shall not
adversely affect any right or protection existing hereunder immediately prior to
such repeal or modification.
SECTION 2. The provisions of this Article shall be deemed to be a contract
between the Company and each Director or officer who serves in any such capacity
at any time while this Article is in effect, and any repeal or modification of
this Article shall not affect any rights or obligations hereunder with respect
to any state of facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought or threatened based in whole or in
part upon any such state of facts.
SECTION 3. The indemnification provided or permitted by this Article shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled by law or otherwise, and shall continue as to a person who has ceased
to be a Director, officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such person.
SECTION 4. The Company may purchase and maintain insurance on behalf of any
person who is or was a Director, officer, employee or agent of the Company, or
who is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, against any liability asserted against such person
and incurred by such person in any such capacity, or arising out of his or her
status as such, whether or not the Company would have the power to indemnify
such person against such liability under the laws of the State of Illinois.
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<PAGE>
ARTICLE VII.
MISCELLANEOUS.
SECTION 1. No bills shall be paid by the Treasurer unless reviewed and
approved by the Comptroller or by some other person or committee expressly
authorized by the Board of Directors, the Executive Committee, the Chairman or
the Comptroller to review and approve bills for payment.
SECTION 2. All checks, drafts or other orders for payment of money issued
in the name of the Company shall be signed by such officers, employees or agents
of the Company as shall from time to time be designated by the Board of
Directors, the Chairman, the chief financial officer of the Company or the
Treasurer.
SECTION 3. Any and all shares of stock of any corporation owned by the
Company and any and all voting trust certificates owned by the Company calling
for or representing shares of stock of any corporation may be voted at any
meeting of the shareholders of such corporation or at any meeting of the holders
of such certificates, as the case may be, by any one of the principal officers
of the Company upon any question which may be presented at such meeting, and any
such officer may, on behalf of the Company, waive any notice required to be
given of the calling of such meeting and consent to the holding of any such
meeting without notice. Any such principal officer other than the Secretary,
acting together with the Secretary or an Assistant Secretary, shall have
authority to give to any person a written proxy, in the name of the Company and
under its corporate seal, to vote any or all shares of stock or any or all
voting trust certificates owned by the Company upon any question that may be
presented at any such meeting of shareholders or certificate holders, with full
power to waive any notice of the calling of such meeting and consent to the
holding of such meeting without notice.
SECTION 4. The fiscal year of the Company shall begin on the first day of
January and end on the last day of December in each year.
ARTICLE VIII.
ALTERATION, AMENDMENT OF REPEAL OF BY-LAWS.
These by-laws may be altered, amended or repealed by the shareholders or
the Board of Directors.
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Exhibit (3)-4
Commonwealth Edison Company
Form 10-K File No. 1-1839
COMMONWEALTH EDISON COMPANY
BY-LAWS
EFFECTIVE SEPTEMBER 2, 1988
AS AMENDED THROUGH
MARCH 9, 1995
<PAGE>
CONTENTS
PAGE
NUMBER
------
ARTICLE I. STOCK.......................................... 1
ARTICLE II. MEETINGS OF STOCKHOLDERS....................... 2
ARTICLE III. BOARD OF DIRECTORS............................. 4
ARTICLE IV. COMMITTEES OF THE BOARD OF DIRECTORS........... 5
ARTICLE V. OFFICERS....................................... 8
ARTICLE VI. MISCELLANEOUS.................................. 11
ARTICLE VII. ALTERATION, AMENDMENT OR REPEAL OF BY-LAWS..... 12
<PAGE>
COMMONWEALTH EDISON COMPANY
BY-LAWS
-------
ARTICLE I.
STOCK.
SECTION 1. Each holder of fully paid stock shall be entitled to a
certificate or certificates of stock stating the number and class of shares, and
the designation of the series, if any, which such certificate represents. All
certificates of stock shall at the time of their issuance be signed either
manually or by facsimile signature by the Chairman, the President or a Vice
President and by the Secretary or an Assistant Secretary. All certificates of
stock shall be sealed with the seal of the Company or a facsimile of such seal,
shall be countersigned either manually or by facsimile signature by a Transfer
Agent and shall be authenticated by manual signature and registered by a
Registrar. The Board of Directors shall appoint one or more Transfer Agents,
none of whom shall be officers of the Company authorized to sign certificates of
stock, and one or more Registrars, each of which Registrars shall be a bank or
trust company. Certificates of stock shall not be valid until countersigned by
a Transfer Agent and authenticated and registered by a Registrar in the manner
provided by the Board of Directors.
SECTION 2. Shares of stock shall be transferable only on the books of
the Company and, except as hereinafter provided or as otherwise required by law,
shall be transferred only upon proper endorsement and surrender of the
certificates issued therefor. If an outstanding certificate of stock shall be
lost, destroyed or stolen, the holder thereof may have a new certificate upon
producing evidence satisfactory to the Board of Directors of such loss,
destruction or theft, and upon furnishing to the Company, the Transfer Agents
and the Registrars a bond of indemnity deemed sufficient by the Board of
Directors against claims under the outstanding certificate.
SECTION 3. The certificates for each class or series of stock shall be
numbered and issued in consecutive order and a record shall be kept of the name
and address of the person to whom each certificate is issued, the number of
shares represented by the certificate and the number and date of the
certificate. All certificates exchanged or returned to the Company for transfer
shall be canceled and filed.
SECTION 4. For the purpose of determining stockholders entitled to
notice of or to vote at any meeting of stockholders, or stockholders entitled to
receive payment of any dividend, or in order to make a determination of
stockholders for any other proper purpose, the Board of Directors may fix in
advance a date as the record date for any such determination for stockholders,
such date in any case to be not more than sixty days and, for a meeting of
stockholders, not less than ten days, or in the case of a merger, consolidation,
share
<PAGE>
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exchange, dissolution or sale, lease or exchange of assets, not less than twenty
days, immediately preceding such meeting.
SECTION 5. If any subscription for stock in the Company or any
installment of such subscription shall be unpaid when due, as the Board of
Directors shall have determined the time for payment, and shall continue unpaid
for twenty days after demand for the amount due, made either in person or by
written notice duly mailed to the last address, as it appears on the records of
the Company, of the subscriber or other person by whom the subscription or
installment shall be payable, the stock or subscription upon which payment shall
be so due shall, upon the expiration of said twenty days, become and be
forfeited to the Company without further action, demand or notice, and such
stock or subscription may be sold at public sale, subject to payment of the
amount due and unpaid, plus all costs and expenses incurred by the Company in
that connection, at a time and place to be stated in a written notice to be
mailed to the recorded address of the delinquent subscriber or other person in
default on the subscription at least ten days prior to the time fixed for such
sale; provided, that the excess of proceeds of such sale realized over the
amount due and unpaid on said stock or subscription shall be paid to the
delinquent subscriber or other person in default on the subscription, or to his
or her legal representative; and, provided further, that no forfeiture of stock,
or of any amounts paid upon a subscription therefor, shall be declared as
against the estate of any decedent before distribution shall have been made of
the estate.
The foregoing provisions for the forfeiture and sale of stock or
subscriptions shall not exclude any other remedy which may lawfully be
enforceable at any time, by forfeiture of stock or of amounts theretofore paid
or otherwise, against any person for nonpayment of a subscription or of any
installment thereof.
ARTICLE II.
MEETINGS OF STOCKHOLDERS.
SECTION 1. The regular annual meeting of the stockholders of the
Company for the election of Directors and for the transaction of such other
business as may come before the meeting shall be held on such day in April or
May of each year as the Board of Directors may by resolution determine. Each
such regular annual meeting and each special meeting of the stockholders shall
be held at such place as may be fixed by the Board of Directors and at such hour
as the Board of Directors shall order.
SECTION 2. Special meetings of the stockholders may be called by the
Chairman, by the Board of Directors, by a majority of the Directors individually
or by the holders of not less than one-fifth of the total outstanding shares of
capital stock of the Company.
<PAGE>
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SECTION 3. Written notice stating the place, day and hour of the
meeting of the stockholders and, in the case of a special meeting, the purpose
or purposes for which the meeting is called shall be delivered not less than ten
nor more than sixty days before the date of the meeting, or in the case of a
merger, consolidation, share exchange, dissolution or sale, lease or exchange of
assets not less than twenty nor more than sixty days before the date of the
meeting, either personally or by mail, by or at the direction of the Chairman,
the Secretary or the persons calling the meeting, to each stockholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail addressed to the stockholder
at the stockholder's address as it appears upon the records of the Company, with
postage thereon prepaid.
SECTION 4. At all meetings of the stockholders, a majority of the
outstanding shares of stock, entitled to vote on a matter, represented in person
or by proxy, shall constitute a quorum for consideration of such matter, but the
stockholders represented at any meeting, though less than a quorum, may adjourn
the meeting to some other day or sine die. If a quorum is present, the
affirmative vote of the majority of the shares of stock represented at the
meeting and entitled to vote on a matter shall be the act of the stockholders,
unless the vote of a greater number or voting by classes is required by law or
the articles of incorporation.
SECTION 5. At every meeting of the stockholders, each outstanding
share of stock shall be entitled to one vote on each matter submitted for a
vote. In all elections for Directors, every stockholder shall have the right to
vote the number of shares owned by such stockholder for as many persons as there
are Directors to be elected, or to cumulate such votes and give one candidate as
many votes as shall equal the number of Directors to be elected multiplied by
the number of such shares or to distribute such cumulative votes in any
proportion among any number of candidates. A stockholder may vote either in
person or by proxy. A stockholder may appoint a proxy to vote or otherwise act
for him or her by signing an appointment form and delivering it to the person so
appointed.
SECTION 6. The Secretary of the Company shall make, within twenty days
after the record date for a meeting of stockholders of the Company or ten days
before such meeting, whichever is earlier, a complete list of the stockholders
entitled to vote at such meeting, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for at least ten
days prior to such meeting, shall be kept on file at the registered office of
the Company and shall be subject to inspection by any stockholder, and to
copying at such stockholder's expense, at any time during usual business hours.
Such list shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any stockholder during the
whole time of the meeting.
SECTION 7. The Chairman and the Secretary of the Company shall, when
present, act as chairman and secretary, respectively, of each meeting of the
stockholders.
<PAGE>
-4-
SECTION 8. At any meeting of stockholders, the chairman of the meeting
may, or upon the request of any stockholder shall, appoint one or more persons
as inspectors for such meeting, unless an inspector or inspectors shall have
been previously appointed for such meeting by the Chairman. Such inspectors
shall ascertain and report the number of shares of stock represented at the
meeting, based upon their determination of the validity and effect of proxies,
count all votes and report the results and do such other acts as are proper to
conduct the election and voting with impartiality and fairness to all the
stockholders.
ARTICLE III.
BOARD OF DIRECTORS.
SECTION 1. The business and affairs of the Company shall be managed by
or under the direction of the Board of Directors. The number of Directors of
the Company shall be not less than ten nor more than fifteen. The Directors
shall be elected at each annual meeting of the stockholders, but if for any
reason the election shall not be held at an annual meeting, it may be
subsequently held at any special meeting of the stockholders called for that
purpose after proper notice. The Directors so elected shall hold office until
the next annual meeting and until their respective successors, willing to serve,
shall have been elected and qualified. Directors need not be residents of the
State of Illinois or stockholders of the Company. No person shall be eligible
for nomination or renomination as a Director by the management of the Company
who, prior to the date of election, shall have attained age seventy-two.
No person who is an employe or a former employe of the Company or of a
subsidiary of the Company shall be eligible for nomination or renomination as a
Director by the management of the Company for a term commencing after such
person ceases to be such an employe; provided, however that any Director in
office on June 15, 1989 who is or has been such an employe may be renominated as
a Director unless such person shall have attained age sixty-five on or before
the date of election of Directors.
SECTION 2. A meeting of the Board of Directors shall be held
immediately, or as soon as practicable, after the annual election of Directors
in each year, provided a quorum for such meeting can be obtained. Notice of
every meeting of the Board, stating the time and place at which such meeting
will be held, shall be given to each Director personally, by telephone or by
other means of communication at least one day, or by depositing the same in the
mails properly addressed at least two days before the day of such meeting. A
meeting of the Board of Directors may be called at any time by the Chairman or
by any two Directors and shall be held at such place as shall be specified in
the notice for such meeting.
SECTION 3. A majority of the number of Directors then in office, but
not less than six, shall constitute a quorum for the transaction of business at
any meeting of the Board, but a lesser number may adjourn the meeting from time
to time until a quorum is
<PAGE>
-5-
obtained, or may adjourn sine die. The act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
SECTION 4. Each member of the Board not receiving a salary from the
Company or a subsidiary of the Company shall be paid such fees as the Board of
Directors may from time to time, by resolution adopted by the affirmative vote
of a majority of the Directors then in office, determine.
ARTICLE IV.
COMMITTEES OF THE BOARD OF DIRECTORS.
SECTION 1. There shall be an Executive Committee of the Board
consisting of five members. The Board of Directors shall, at its first meeting
after the annual meeting of the stockholders in each year, elect a chairman and
the four other members of the Executive Committee. The remaining Directors
shall constitute alternates to serve temporarily, and as far as practicable in
rotation (in such order as shall be established by the Board), in the place of
any member who may be unable to serve. The Chairman or the Directors calling a
meeting of the Executive Committee shall call upon alternates, in rotation, to
serve as herein provided. When any alternate serves, the minutes of the meeting
shall record the name of the member in whose place such alternate serves. The
Directors elected as members of the Executive Committee shall serve as such for
one year and until their respective successors, willing to serve, shall have
been elected. The Executive Committee shall, when the Board is not in session,
have and may exercise all of the authority of the Board of Directors, subject to
the limitations set forth in Section 10 of this Article IV. Vacancies in the
membership of the Executive Committee shall be filled by the Board of Directors.
The Executive Committee shall keep minutes of the proceedings at its meetings.
SECTION 2. There shall be an Audit Committee of the Board consisting
of not less than three nor more than five members who are not employes of the
Company. The Directors elected as members of the Audit Committee shall serve as
such for three years and until their respective successors, willing to serve,
shall have been elected, provided that, to the extent practicable, the members
of the Audit Committee shall be elected for staggered terms. The Board of
Directors shall, at its first meeting after the annual meeting of stockholders
in each year, elect the successors of the members whose terms shall then expire.
The Board of Directors shall designate from time to time the member who is to
serve as chairman of the Audit Committee. The Audit Committee shall meet with
the Company's independent auditors at least once each year to review the
Company's financial statements and the scope and results of such auditors'
examinations, monitor the internal accounting controls and practices of the
Company, review the annual report to stockholders and make recommendations as to
its approval to the Board and recommend, subject to stockholder approval, the
appointment of independent auditors, and shall report its findings at least once
each year to the Board. The Audit Committee shall have such
<PAGE>
-6-
powers as it shall deem necessary for the performance of its duties. Vacancies
in the membership of the Audit Committee shall be filled by the Board of
Directors. The Audit Committee shall keep minutes of the proceedings at its
meetings.
SECTION 3. There shall be a Compensation Committee of the Board
consisting of those Directors who are not employes or former employes of the
Company. The Board of Directors shall, at its first meeting after the annual
meeting of stockholders in each year, elect a chairman of the Compensation
Committee. The Directors serving as members of the Compensation Committee shall
serve as such for one year and until their respective successors, willing to
serve, shall have been elected. The Compensation Committee shall administer
awards under the Company's Deferred Compensation Plan. The Compensation
Committee shall have such power as it shall deem necessary for the performance
of its duties. Vacancies in the membership of the Compensation Committee shall
be filled by the Board of Directors. The Compensation Committee shall keep
minutes of the proceedings at its meetings.
SECTION 4. There shall be a Finance Committee of the Board consisting
of not less than three nor more than five members. The Board of Directors
shall, at its first meeting after the annual meeting of stockholders in each
year, elect a chairman and the other members of the Finance Committee. The
Directors elected as members of the Finance Committee shall serve as such for
one year and until their respective successors, willing to serve, shall have
been elected. The Finance Committee shall review the scope and results of the
Company's financing program and review the Company's financial statements,
construction budgets and cash budgets as they relate to the Company's financing
program, and shall report its findings at least once each year to the Board.
The Finance Committee shall have such power as it shall deem necessary for the
performance of its duties. Vacancies in the membership of the Finance Committee
shall be filled by the Board of Directors. The Finance Committee shall keep
minutes of the proceedings at its meetings.
SECTION 5. There shall be a Nominating Committee of the Board
consisting of not less than three nor more than five members, a majority of whom
are not employes of the Company. The Board of Directors shall, at its first
meeting after the annual meeting of stockholders in each year, elect a chairman
and the other members of the Nominating Committee. The Directors elected as
members of the Nominating Committee shall serve as such for one year and until
their respective successors, willing to serve, shall have been elected. The
Nominating Committee shall review the requirements for serving as Director,
review potential candidates for Director, propose nominees for Director to the
Board and recommend to the Board the successor to the Chairman when a vacancy
occurs in that position. The Nominating Committee shall have such power as it
shall deem necessary for the performance of its duties. Vacancies in the
membership of the Nominating Committee shall be filled by the Board of
Directors. The Nominating Committee shall keep minutes of the proceedings at
its meetings.
<PAGE>
-7-
SECTION 6. There shall be a Nuclear Operations Committee of the Board
consisting of not less than two nor more than five members. The Board of
Directors shall, at it first meeting after the annual meeting of stockholders in
each year, elect a chairman and the other members of the Nuclear Operations
Committee. The Directors elected as members of the Nuclear Operations Committee
shall serve as such for one year and until their respective successors, willing
to serve, shall have been elected. The Nuclear Operations Committee shall
review the Company's nuclear operations and the Company's strategic plans
respecting nuclear operations, and shall report its findings at least once each
year to the Board. The Nuclear Operations Committee shall have such power as it
shall deem necessary for the performance of its duties. Vacancies in the
membership of the Nuclear Operations Committee shall be filled by the Board of
Directors. The Nuclear Operations Committee shall keep minutes of the
proceedings at its meetings.
SECTION 7. There shall be a Regulatory and Environmental Affairs
Committee of the Board consisting of not less than three nor more than five
members. The Board of Directors shall, at its first meeting after the annual
meeting of stockholders in each year, elect a chairman and the other members of
the Regulatory and Environmental Affairs Committee. The Directors elected as
members of the Regulatory and Environmental Affairs Committee shall serve as
such for one year and until their respective successors, willing to serve, shall
have been elected. The Regulatory and Environmental Affairs Committee shall
review the Company's relationships with economic and environmental regulatory
agencies that exercise significant regulatory jurisdiction over the Company, and
shall review significant matters involving the Company before those agencies; it
shall review the Company's policies and strategic plans respecting regulatory
and environmental affairs; and it shall report its findings at least once each
year to the Board. The Regulatory and Environmental Affairs Committee shall
have such power as it shall deem necessary for the performance of its duties.
Vacancies in the membership of the Regulatory and Environmental Affairs
Committee shall be filled by the Board of Directors. The Regulatory and
Environmental Affairs Committee shall keep minutes of the proceedings at its
meetings.
SECTION 8. The Board of Directors may from time to time create other
committees, standing or special, appoint Directors to serve on such committees
and confer such powers upon such committees and revoke such powers and terminate
the existence of such committees, as the Board at its pleasure may determine,
subject to the limitations set forth in Section 10 of this Article IV.
SECTION 9. Meetings of any committee of the Board may be called at any
time by the Chairman, by any two Directors or by the chairman of the committee
the meeting of which is being called and shall be held at such place as shall be
designated in the notice of such meeting. Notice of each committee meeting
stating the time and place at which such meeting will be held shall be given to
each member of the committee personally, or by telegraph, or by depositing the
same in the mails properly addressed, at least one day before the day of
<PAGE>
-8-
such meeting. A majority of the members of a committee shall constitute a
quorum thereof but a lesser number may adjourn the meeting from time to time
until a quorum is obtained, or may adjourn sine die. A majority vote of the
members of a committee present at a meeting at which a quorum is present shall
be necessary for committee action.
SECTION 10. Notwithstanding any other provision of the by-laws, no
committee of the Board of Directors shall: (1) authorize distributions; (2)
approve or recommend to stockholders any act required by law to be approved by
stockholders; (3) fill vacancies on the Board of Directors or on any of its
committees; (4) elect or remove officers or fix the compensation of any member
of the committee; (5) adopt, amend or repeal the by-laws; (6) approve a plan of
merger not requiring stockholder approval; (7) authorize or approve
reacquisition of stock, except according to a general formula or method
prescribed by the Board of Directors; (8) authorize or approve the issuance or
sale, or contract for sale, of stock or determine the designation and relative
rights, preferences, and limitations of a series of stock, except that a
committee may fix the specific terms of the issuance or sale or contract for
sale or the number of shares of stock to be allocated to particular employes
under an employe benefit plan; or (9) amend, alter, repeal, or take action
inconsistent with any resolution or action of the Board of Directors when the
resolution or action of the Board of Directors provides by its terms that it
shall not be amended, altered or repealed by action of a committee.
ARTICLE V.
OFFICERS.
SECTION 1. There shall be elected by the Board of Directors, at its
first meeting after the annual election of Directors in each year if
practicable, the following principal officers of the Company, namely: a
Chairman, a President, such number of Executive Vice Presidents, Senior Vice
Presidents and Vice Presidents as the Board at the time may decide upon, a
Secretary, a Treasurer and a Comptroller; and the Board may also provide for a
Vice Chairman and such other officers, and prescribe for each of them such
duties, as in its judgment may from time to time be desirable to conduct the
affairs of the Company. No officer shall be elected for a term extending beyond
the first day of the month following the month in which such officer attains the
age of 65 years, on which date such officer shall be retired. The Chairman
shall be a Director of the Company; any other officer above named may, but need
not, be a Director of the Company. Any two or more offices may be held by the
same person, except that one person may not at the same time hold the office of
Chairman or President and the office of Secretary. All officers shall hold
their respective offices until the first meeting of the Board of Directors after
the next succeeding annual election of Directors and until their successors,
willing to serve, shall have been elected, but any officer may be removed from
office by the Board of Directors whenever in its judgment the best interests of
the Company will be served thereby.
<PAGE>
-9-
Such removal, however, shall be without prejudice to the contract rights, if
any, of the person so removed. Election of an officer shall not of itself
create contract rights.
SECTION 2. The Chairman shall be the chief executive officer of the
Company and shall have general authority over all the affairs of the Company,
including the power to appoint and discharge any and all officers, agents and
employes of the Company not elected or appointed directly by the Board of
Directors. The Chairman shall, when present, preside at all meetings of the
stockholders and of the Board of Directors. The Chairman shall have authority
to call special meetings of the stockholders and meetings of the Board of
Directors, and of any committee of the Board of Directors and, when neither the
Board of Directors nor the Executive Committee is in session, to suspend the
authority of any other officer or officers of the Company, subject, however, to
the pleasure of the Board of Directors or of the Executive Committee at its next
meeting. The Chairman, or such other officer as the Chairman may direct, shall
be responsible for all internal audit functions, and internal audit personnel
shall report directly to the Chairman or to such other officer.
SECTION 3. In the absence or disability of the Chairman, the powers
and duties of the Chairman shall be performed by the President or, in the
President's absence or disability, by such other principal officer as the Board
of Directors or the Executive Committee may designate.
SECTION 4. Except insofar as the Board of Directors, the Executive
Committee or the Chairman shall have devolved responsibilities on the other
principal officers, the President shall be responsible for the general
management and direction of the affairs of the Company, subject to the control
of the Board of Directors, the Executive Committee and the Chairman. The
President shall have such other powers and duties as usually devolve upon the
President of a corporation and such further powers and duties as may be
prescribed by the Board of Directors, the Executive Committee or the Chairman.
The President shall report to the Chairman.
SECTION 5. The Executive Vice Presidents, the Senior Vice Presidents
and the Vice Presidents shall have such powers and duties as may be prescribed
for them, respectively, by the Board of Directors, the Executive Committee or
the Chairman. Each of such officers shall report to the Chairman or such other
officer as the Chairman shall direct.
SECTION 6. The Secretary shall attend all meetings of the
stockholders, of the Board of Directors and of each committee of the Board of
Directors, shall keep a true and faithful record thereof in proper books and
shall have the custody and care of the corporate seal, records, minute books and
stock books of the Company and of such other books and papers as in the
practical business operations of the Company shall naturally belong in the
office or custody of the Secretary or as shall be placed in the Secretary's
custody by order of the Board of Directors or the Executive Committee. The
Secretary shall keep a
<PAGE>
-10-
suitable record of the addresses of stockholders and shall, except as may be
otherwise required by statute or the by-laws, sign and issue all notices
required for meetings of stockholders, of the Board of Directors and of the
committees of the Board of Directors. Whenever requested by the requisite
number of stockholders or Directors, the Secretary shall give notice, in the
name of the stockholder or stockholders or Director or Directors making the
request, of a meeting of the stockholders or of the Board of Directors or of a
committee of the Board of Directors, as the case may be. The Secretary shall
sign all papers to which the Secretary's signature may be necessary or
appropriate, shall affix and attest the seal of the Company to all instruments
requiring the seal, shall have the authority to certify the by-laws, resolutions
of the stockholders and Board of Directors and committees of the Board of
Directors and other documents of the Company as true and correct copies thereof
and shall have such other powers and duties as are commonly incidental to the
office of Secretary and as may be prescribed by the Board of Directors, the
Executive Committee or the Chairman. The Secretary shall report to the Chairman
or such other officer as the Chairman shall direct.
SECTION 7. The Treasurer shall have charge of and be responsible for
the collection, receipt, custody and disbursement of the funds of the Company.
The Treasurer shall deposit the Company's funds in its name in such banks, trust
companies or safe deposit vaults as the Board of Directors may direct. Such
funds shall be subject to withdrawal only upon checks or drafts signed or
authenticated in such manner as may be designated from time to time by
resolution of the Board of Directors or of the Executive Committee. The
Treasurer shall have the custody of such books and papers as in the practical
business operations of the Company shall naturally belong in the office or
custody of the Treasurer or as shall be placed in the Treasurer's custody by
order of the Board of Directors or the Executive Committee. The Treasurer shall
have such other powers and duties as are commonly incidental to the office of
Treasurer or as may be prescribed for the Treasurer by the Board of Directors,
the Executive Committee or the Chairman. Securities owned by the Company shall
be in the custody of the Treasurer or of such other officers, agents or
depositaries as may be designated by the Board of Directors or the Executive
Committee. The Treasurer may be required to give bond to the Company for the
faithful discharge of the duties of the Treasurer in such form and in such
amount and with such surety as shall be determined by the Board of Directors.
The Treasurer shall report to the Chairman or such other officer as the Chairman
shall direct.
SECTION 8. The Comptroller shall be responsible for the executive
direction of the accounting organization and shall have functional supervision
over the records of all other departments pertaining to revenues, expenses,
money, securities, properties, materials and supplies. The Comptroller shall
prescribe the form of all vouchers, accounts and accounting procedures, and
reports required by the various departments. The Comptroller shall be
responsible for the preparation and interpretation of all accounting reports and
financial statements as required and for the proper review and approval
<PAGE>
-11-
of all bills received for payment. No bill or voucher shall be so approved
unless the charges covered by the bill or voucher shall have been previously
approved through job order, requisition or otherwise by the head of the
department in which it originated, or unless the Comptroller shall otherwise be
satisfied of its propriety and correctness. The Comptroller shall have such
other powers and duties as are commonly incidental to the office of Comptroller
or as may be prescribed for the Comptroller by the Board of Directors, the
Executive Committee or the Chairman. The Comptroller may be required to give
bond to the Company for the faithful discharge of the duties of the Comptroller
in such form and in such amount and with such surety as shall be determined by
the Board of Directors. The Comptroller shall report to the Chairman or such
other officer as the Chairman shall direct.
SECTION 9. Assistant Secretaries, Assistant Treasurers and Assistant
Comptrollers, when elected or appointed, shall respectively assist the
Secretary, the Treasurer and the Comptroller in the performance of the
respective duties assigned to such principal officers, and in assisting such
principal officer, each of such assistant officers shall for such purpose have
the powers of such principal officer. In case of the absence, disability,
death, resignation or removal from office of any principal officer, such
principal officer's duties shall, except as otherwise ordered by the Board of
Directors or the Executive Committee, temporarily devolve upon such assistant
officer as shall be designated by the Chairman.
ARTICLE VI.
MISCELLANEOUS.
SECTION 1. No bills shall be paid by the Treasurer unless reviewed and
approved by the Comptroller or by some other person or committee expressly
authorized by the Board of Directors, the Executive Committee, the Chairman or
the Comptroller to review and approve bills for payment.
SECTION 2. Any and all shares of stock of any corporation owned by the
Company and any and all voting trust certificates owned by the Company calling
for or representing shares of stock of any corporation may be voted at any
meeting of the stockholders of such corporation or at any meeting of the holders
of such certificates, as the case may be, by any one of the principal officers
of the Company upon any question which may be presented at such meeting, and any
such officer may, on behalf of the Company, waive any notice required to be
given of the calling of such meeting and consent to the holding of any such
meeting without notice. Any such principal officer other than the Secretary,
acting together with the Secretary or an Assistant Secretary, shall have
authority to give to any person a written proxy, in the name of the Company and
under its corporate seal, to vote any or all shares of stock or any or all
voting trust certificates owned by the Company upon any question that may be
presented at any such meeting of stockholders or certificate holders, with full
power to waive any notice of the calling of such meeting and consent to the
holding of such meeting without notice.
<PAGE>
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SECTION 3. The fiscal year of the Company shall begin on the first day
of January and end on the last day of December in each year.
SECTION 4. The Company shall indemnify the Directors, officers and
employes of the Company, and shall have the power to indemnify other agents of
the Company and any person acting or serving at the request of the Company as a
director, officer, employe or agent of another corporation, partnership, joint
venture, trust or other enterprise, in accordance with and to the extent
permitted by Section 8.75 of The Business Corporation Act of 1983 of the State
of Illinois, as from time to time amended and in effect. Such indemnification
shall be available to any past, present or future Director, officer or employe
of the Company, and may be available to any past, present or future agent of the
Company and any past, present or future director, officer, employe or agent of
such other corporation, partnership, joint venture, trust or other enterprise,
and shall apply to actions, suits, proceedings or claims arising out of or based
upon events occurring prior to, on or after the date of original adoption of
this by-law.
ARTICLE VII.
ALTERATION, AMENDMENT OR REPEAL OF BY-LAWS.
These by-laws may be altered, amended or repealed by the stockholders
or the Board of Directors.
<PAGE>
Exhibit (4)-16
Commonwealth Edison Company
Form 10-K File No. 1-1839
EXECUTED IN ____ COUNTERPARTS
No. ___
================================================================================
SUPPLEMENTAL INDENTURE
__________
Dated December 1, 1994
__________
COMMONWEALTH EDISON COMPANY
TO
BANK OF AMERICA ILLINOIS
(formerly, Continental Bank,
National Association)
AND
ROBERT J. DONAHUE
Trustees under Mortgage Dated July 1, 1923, and Certain
Indentures Supplemental Thereto
__________
Providing for Issuance of
FIRST MORTGAGE 6.75% BONDS, POLLUTION CONTROL SERIES 1994D
================================================================================
THIS INSTRUMENT PREPARED BY R. R. MIGELY, P. O.
BOX 767, CHICAGO, IL 60690, ON BEHALF OF
COMMONWEALTH EDISON COMPANY
<PAGE>
THIS SUPPLEMENTAL INDENTURE, dated December 1, 1994, between
COMMONWEALTH EDISON COMPANY, a corporation organized and existing under the
laws of the State of Illinois (hereinafter called the "Company"), party of
the first part, and BANK OF AMERICA ILLINOIS (formerly, Continental Bank,
National Association), an Illinois state bank organized and existing under
the laws of the State of Illinois, and ROBERT J. DONAHUE, of Elburn,
Illinois, as Trustee and Co-Trustee, respectively, under the Mortgage of
the Company dated July 1, 1923, as amended and supplemented by Supplemental
Indentures dated, respectively, August 1, 1944, August 1, 1946, April 1,
1953, April 1, 1966, November 1, 1966, December 1, 1966, March 31, 1967,
April 1, 1967, February 1, 1968, July 1, 1968, October 1, 1968, February
28, 1969, May 29, 1970, January 1, 1971, June 1, 1971, May 31, 1972, June
1, 1973, June 15, 1973, October 15, 1973, May 31, 1974, July 1, 1974, June
13, 1975, May 28, 1976, January 15, 1977, June 1, 1977, June 3, 1977,
December 1, 1977, May 17, 1978, August 31, 1978, June 18, 1979, June 20,
1980, April 16, 1981, April 30, 1982, April 15, 1983, April 13, 1984, March
1, 1985, April 15, 1985, April 15, 1986, May 1, 1986, January 12, 1987,
June 30, 1989, February 15, 1990, June 15, 1990, June 1, 1991, October 1,
1991, October 15, 1991, February 1, 1992, May 15, 1992, July 15, 1992,
September 15, 1992, October 1, 1992, February 1, 1993, March 1, 1993, April
1, 1993, April 15, 1993, June 15, 1993, July 1, 1993, July 15, 1993 and
January 15, 1994, parties of the second part (said Trustee being
hereinafter called the "Trustee", the Trustee and said Co-Trustee being
hereinafter together called the "Trustees", and said Mortgage dated July 1,
1923, as amended and supplemented by said Supplemental Indenture dated
August 1, 1944 and subsequent supplemental indentures, being hereinafter
called the "Mortgage"),
WITNESSETH:
WHEREAS, the Mortgage provides for the issuance from time to time
thereunder, in series, of bonds of the Company for the purposes and subject to
the limitations therein specified; and
WHEREAS, the Company desires, by this Supplemental Indenture, to create
additional series of bonds to be issuable under the Mortgage, such bonds to be
designated "First Mortgage 6.75% Bonds, Pollution Control Series 1994D"
(hereinafter called the "bonds of Series 1994D"), and the terms and provisions
to be contained in the bonds of Series 1994D or to be otherwise applicable
thereto to be as set forth in this Supplemental Indenture; and
WHEREAS, the bonds of Series 1994D and the Trustee's certificate to be
endorsed thereon shall be substantially in the form of the General Form of
Registered Bond Without Coupons and the form of the General Form of Trustee's
Certificate set forth in Section 3.05 of the Supplemental Indenture dated August
1, 1944, to the Mortgage with such appropriate insertions, omissions and
variations in order to express the designation, date, maturity date, annual
interest rate, record dates for, and dates of, payment of interest,
denominations, terms of redemption and redemption prices, and other terms and
characteristics authorized or permitted by the Mortgage or not inconsistent
therewith; and
<PAGE>
WHEREAS, the Illinois Development Finance Authority (the "Authority")
proposes to issue $91,000,000 aggregate principal amount of its Pollution
Control Revenue Refunding Bonds (Commonwealth Edison Company Project) Series
1994D (the "Revenue Bonds"), pursuant to an Indenture of Trust dated as of
December 1, 1994 (the "Indenture"), under which The First National Bank of
Chicago is trustee (the "Indenture Trustee"), and to use the proceeds received
therefrom to assist the Company in refunding certain outstanding obligations
issued to finance a portion of the cost of certain air and water pollution
control and sewage and solid waste disposal facilities of the Company; and the
bonds of Series 1994D are to be pledged and delivered by the Authority to the
Indenture Trustee to secure the repayment of the Revenue Bonds, as provided in a
Loan Agreement dated as of December 1, 1994 (the "Loan Agreement"), between the
Authority and the Company; and
WHEREAS, the Company is legally empowered and has been duly authorized by
the necessary corporate action and by orders of the Illinois Commerce Commission
to make, execute and deliver this Supplemental Indenture, and to create, as
additional series of bonds of the Company, the bonds of Series 1994D, and all
acts and things whatsoever necessary to make this Supplemental Indenture, when
executed and delivered by the Company and the Trustees, a valid, binding and
legal instrument, and to make the bonds of Series 1994D, when authenticated by
the Trustee and issued as in the Mortgage and in this Supplemental Indenture
provided, the valid, binding and legal obligations of the Company, entitled in
all respects to the security of the Mortgage, as amended and supplemented, have
been done and performed;
NOW, THEREFORE, in consideration of the premises and of the sum of one
dollar duly paid by the Trustees to the Company, and for other good and valuable
considerations, the receipt of which is hereby acknowledged, the parties hereto
do hereby agree as follows:
SECTION 1. DESIGNATION AND ISSUANCE OF BONDS OF SERIES 1994D. The bonds
of Series 1994D shall, as hereinbefore recited, be designated as the Company's
"First Mortgage 6.75% Bonds, Pollution Control Series 1994D." Subject to the
provisions of the Mortgage, the bonds of Series 1994D shall be issuable without
limitation as to the aggregate principal amount thereof.
SECTION 2. FORM, DATE, MATURITY DATE, INTEREST RATE AND INTEREST PAYMENT
DATES OF BONDS OF SERIES 1994D. The definitive bonds of Series 1994D shall be
in engraved, lithographed, printed or typed form and shall be registered bonds
without coupons; and such bonds and the Trustee's certificate to be endorsed
thereon shall be substantially in the form hereinbefore recited. The bonds of
Series 1994D shall be dated as provided in Section 3.01 of the Mortgage, as
amended by Supplemental Indenture dated April 1, 1967. The bonds of Series
1994D shall mature on March 1, 2015, and shall bear interest at the rate of
6.75% per annum until the principal thereof shall be paid. Such interest shall
be payable semi-annually on March 1 and September 1 in each year, commencing
March 1, 1995. February 15 and August 15 in each year are hereby established as
record dates for the payment of interest payable on the next succeeding interest
payment dates, respectively. The interest on each bond of Series 1994D so
payable on any interest payment date shall, subject to the exceptions provided
in Section 3.01 of the Mortgage, as amended by said Supplemental Indenture dated
April 1, 1967, be paid to the
-2-
<PAGE>
person in whose name such bond is registered at the close of business on
February 15 and August 15, as the case may be, next preceding such interest
payment date.
SECTION 3. EXECUTION OF BONDS OF SERIES 1994D. The bonds of Series 1994D
shall be executed on behalf of the Company by its President or one of its Vice
Presidents, manually or by facsimile signature, and shall have its corporate
seal affixed thereto or a facsimile of such seal imprinted thereon, attested by
its Secretary or one of its Assistant Secretaries, manually or by facsimile
signature, all as may be provided by resolution of the Board of Directors of the
Company. In case any officer or officers whose signature or signatures, manual
or facsimile, shall appear upon any bond of Series 1994D shall cease to be such
officer or officers before such bond shall have been actually authenticated and
delivered, such bond nevertheless may be issued, authenticated and delivered
with the same force and effect as though the person or persons whose signature
or signatures, manual or facsimile, appear thereon had not ceased to be such
officer or officers of the Company.
SECTION 4. MEDIUM AND PLACES OF PAYMENT OF PRINCIPAL OF AND INTEREST ON
BONDS OF SERIES 1994D; TRANSFERABILITY AND EXCHANGEABILITY. Both the principal
of and interest on the bonds of Series 1994D shall be payable in any coin or
currency of the United States of America which at the time of payment is legal
tender for the payment of public and private debts, and both such principal and
interest shall be payable at the office or agency of the Company in the City of
Chicago, State of Illinois, or, at the option of the registered owner, at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, State of New York. There shall be credited against amounts due from time
to time on the bonds of Series 1994D any amounts then on deposit in the Bond
Fund created by Section 402 of the Indenture. Bonds of Series 1994D shall not
be transferable except to the Authority, the Indenture Trustee or any successor
trustee under the Indenture. Bonds of Series 1994D shall be exchangeable for
other bonds of authorized denominations, in the manner provided in Sections 3.09
and 3.10 of the Mortgage, at said office or agency. No charge shall be made by
the Company to the registered owner of any bond of Series 1994D for the transfer
of such bond or for the exchange thereof for bonds of other authorized
denominations, except, in the case of transfer, a charge sufficient to reimburse
the Company for any stamp or other tax or governmental charge required to be
paid by the Company or the Trustee.
SECTION 5. DENOMINATIONS AND NUMBERING OF BONDS OF SERIES 1994D. The
bonds of Series 1994D shall be issued in the denomination of $5,000 and in such
multiples of $5,000 as shall from time to time hereafter be determined and
authorized by the Board of Directors of the Company or by any officer or
officers of the Company authorized to make such determination, the authorization
of the denomination of any bond of Series 1994D to be conclusively evidenced by
the execution thereof on behalf of the Company. Bonds of Series 1994D shall be
numbered R-1 and consecutively upwards.
SECTION 6. TEMPORARY BONDS OF SERIES 1994D. Until definitive bonds of
Series 1994D are ready for delivery, there may be authenticated and issued in
lieu of any thereof and subject to all of the provisions, limitations and
conditions set forth in Section 3.11 of the Mortgage, temporary registered bonds
without coupons of bonds of Series 1994D.
-3-
<PAGE>
SECTION 7. OPTIONAL REDEMPTION OF BONDS OF SERIES 1994D. Upon the notice
and in the manner provided in Section 301 of the Indenture, the bonds of Series
1994D may be redeemed, at the option of the Company, on and after March 1, 2005,
in whole at any time or in part on any interest payment date, at the redemption
prices (expressed as percentages of the principal amount of each bond of Series
1994D or portion thereof to be redeemed) set forth below, plus accrued interest
to the redemption date:
Redemption Period Redemption Price
----------------- ----------------
March 1, 2005, through February 28, 2006 102%
March 1, 2006, through February 28, 2007 101
March 1, 2007, and thereafter 100
SECTION 8. EXTRAORDINARY OPTIONAL REDEMPTION OF BONDS OF SERIES 1994D.
Upon the notice and in the manner provided in Section 301 of the Indenture, the
bonds of Series 1994D may be redeemed prior to maturity at the option of the
Company, in whole but not in part, at any time at 100% of the principal amount
thereof plus accrued interest to the redemption date, within 180 days after the
occurrence of any of the following:
(a) all or substantially all of the Project (as defined in the
Indenture) shall be damaged or destroyed and the Company shall determine
that it is not practicable or desirable to rebuild, repair and restore the
Project; or
(b) all or substantially all of the Project shall be condemned or such
use or control thereof shall be taken by eminent domain so as to render the
Project unsatisfactory to the Company for continued operation; or
(c) unreasonable burdens or excessive liabilities shall be imposed
upon the Authority or the Company with respect to the Project or the
operation thereof; or
(d) as a result of any change in the Constitution of the State of
Illinois or the Constitution of the United States of America or any
legislative or administrative action (whether local, state or federal) or
any final decree, judgment or order of any court or administrative body
(whether local, state or federal) which results in the Loan Agreement or
the bonds of Series 1994D becoming void or unenforceable or impossible of
performance in accordance with the intent and purpose of the parties as
expressed in the Loan Agreement or the bonds of Series 1994D, as the case
may be.
SECTION 9. EXTRAORDINARY MANDATORY REDEMPTION OF BONDS OF SERIES 1994D.
Upon the notice and in the manner provided in Section 301 of the Indenture, the
bonds of Series 1994D shall be redeemed by the Company in whole, or as
hereinafter provided in part, at 100% of the principal amount thereof plus
accrued interest to the redemption date, in the event of a final determination
by the Internal Revenue Service or by a court of competent jurisdiction that, as
a result of a failure by the Company to observe any covenant, agreement,
representation or warranty in the Loan Agreement or the Tax Exemption
Certificate and Agreement dated
-4-
<PAGE>
December 14, 1994, between the Company and the Authority, the interest payable
on the Revenue Bonds is includible in the gross income for federal income tax
purposes of the owners thereof (other than an owner who is a "substantial user"
of the Project (as defined in the Indenture) or a "related person" within the
meaning of Section 103(b)(13) of the Internal Revenue Code of 1954, as amended
(the "Code")). Such a determination will not result from the inclusion of
interest on any Revenue Bond in the computation of minimum or indirect taxes.
Any such determination shall not be considered final for this purpose unless the
Company has been given written notice of any proceedings which might result in
such determination and has been afforded the opportunity to participate in any
such proceedings (as a party or otherwise) to the extent the Company deems
sufficient, either directly or in the name of any owner of a Revenue Bond, and
until the conclusion of any appellate review, if sought. Any such redemption
shall occur within 180 days from the date of such final determination. The
bonds of Series 1994D shall be redeemed in whole upon any such final
determination unless, in the opinion of Bond Counsel (as defined in the
Indenture), the redemption of a portion of the outstanding Revenue Bonds would
have the result that interest payable on the Revenue Bonds remaining outstanding
after such redemption would not be includible in the gross income for federal
income tax purposes of any owner of such Revenue Bonds (other than an owner who
is a "substantial user" of the Project or a "related person" within the meaning
of Section 103(b)(13) of the Code), in which event bonds of Series 1994D shall
be redeemed in an amount equal to the amount of Revenue Bonds required to be so
redeemed. If any holder of Revenue Bonds refuses to permit the Company to
participate in any such proceedings (as a party or otherwise) to the extent the
Company deems sufficient or if any holder of Revenue Bonds fails to notify the
Company of the pendency of any such proceedings, the bonds of Series 1994D shall
not, in the event of an adverse final determination, be subject to the mandatory
redemption provisions of this Section.
SECTION 10. DEFAULT MANDATORY REDEMPTION. The bonds of Series 1994D shall
be redeemed promptly, without notice, by the Company in whole at 100% of the
principal amount thereof plus accrued interest to the date of redemption
following receipt by the Trustee of written notice from the Indenture Trustee
stating that the principal of the Revenue Bonds has been declared to be
immediately due and payable as a result of an event of default under the
Indenture.
SECTION 11. MISCELLANEOUS. The terms and conditions of this Supplemental
Indenture shall be deemed to be a part of the terms and conditions of the
Mortgage for any and all purposes. The Mortgage, as supplemented by said
indentures supplemental thereto dated subsequent to August 1, 1944 and referred
to in the first paragraph of this Supplemental Indenture, and as further
supplemented by this Supplemental Indenture, is in all respects hereby ratified
and confirmed.
This Supplemental Indenture shall bind and, subject to the provisions of
Article XIV of the Mortgage, inure to the benefit of the respective successors
and assigns of the parties hereto.
Although this Supplemental Indenture is dated December 1, 1994, it shall be
effective only from and after the actual time of its execution and delivery by
the Company and the Trustees on the date indicated by their respective
acknowledgments hereto annexed.
-5-
<PAGE>
This Supplemental Indenture may be simultaneously executed in any number of
counterparts, and all such counterparts executed and delivered, each as an
original, shall constitute but one and the same instrument.
-6-
<PAGE>
IN WITNESS WHEREOF, Commonwealth Edison Company has caused this
Supplemental Indenture to be executed in its name by one of its Vice Presidents,
and its seal to be hereunto affixed and attested by its Secretary, and Bank of
America Illinois, as Trustee under the Mortgage, has caused this Supplemental
Indenture to be executed in its name by one of its Vice Presidents, and its seal
to be hereunto affixed and attested by one of its Vice Presidents, and Robert
J. Donahue, as Co-Trustee under the Mortgage, has hereunto affixed his signature
and seal, all as of the day and year first above written.
COMMONWEALTH EDISON COMPANY
By J. C. Bukovski
J. C. Bukovski
Vice President
(SEAL)
ATTEST:
David A. Scholz
David A. Scholz
Secretary
BANK OF AMERICA ILLINOIS
By Joanne M. Murphy
Joanne M. Murphy
Vice President
(SEAL)
ATTEST:
Theresa M. Jacobson
Theresa M. Jacobson
Vice President
Robert J. Donahue
ROBERT J. DONAHUE
(SEAL)
-7-
<PAGE>
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
I, JOHN R. DIETZEL, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that J. C. BUKOVSKI, a Vice President of
Commonwealth Edison Company, an Illinois corporation, one of the parties
described in and which executed the foregoing instrument, and DAVID A. SCHOLZ,
the Secretary of said corporation, who are both personally known to me to be the
same persons whose names are subscribed to the foregoing instrument as such Vice
President and Secretary, respectively, and who are both personally known to me
to be a Vice President and the Secretary, respectively, of said corporation,
appeared before me this day in person and severally acknowledged that they
signed, sealed, executed and delivered said instrument as their free and
voluntary act as such Vice President and Secretary, respectively, of said
corporation, and as the free and voluntary act of said corporation, for the uses
and purposes therein set forth.
GIVEN under my hand and notarial seal this 7th day of December, A.D. 1994.
John R. Dietzel
John R. Dietzel
Notary Public
(SEAL) (Notary Public Seal)
My Commission expires March 10, 1997.
-8-
<PAGE>
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
I, S. RHODEN, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that JOANNE M. MURPHY, a Vice President of Bank of
America Illinois, one of the parties described in and which executed the
foregoing instrument, and THERESA M. JACOBSON, a Vice President of said bank,
who are both personally known to me to be the same persons whose names are
subscribed to the foregoing instrument as such Vice Presidents and who are both
personally known to me to be Vice Presidents of said bank, appeared before me
this day in person and severally acknowledged that they signed, sealed, executed
and delivered said instrument as their free and voluntary act as such Vice
Presidents of said bank, and as the free and voluntary act of said banking
association, for the uses and purposes therein set forth.
GIVEN under my hand and notarial seal this 7th day of December, A.D. 1994.
S. Rhoden
S. Rhoden
Notary Public
(Notary Public Seal)
(SEAL)
My Commission expires June 28, 1997.
-9-
<PAGE>
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
I, S. RHODEN, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that ROBERT J. DONAHUE, one of the parties
described in and which executed the foregoing instrument, who is personally
known to me to be the same person whose name is subscribed to the foregoing
instrument, appeared before me this day in person and acknowledged that he
signed, sealed, executed and delivered said instrument as his free and voluntary
act for the uses and purposes therein set forth.
GIVEN under my hand and notarial seal this 7th day of December, A.D. 1994.
S. Rhoden
S. Rhoden
Notary Public
(Notary Public Seal)
(SEAL)
My Commission expires June 28, 1997.
COMMONWEALTH EDISON COMPANY
REAL ESTATE DEPT.
P. O. BOX 767
CHICAGO, ILLINOIS 60690
-10-
<PAGE>
Exhibit (4)-32
Commonwealth Edison Company
Form 10-K File No. 1-1839
FIRST AMENDMENT TO
COMMONWEALTH EDISON COMPANY
TERM LOAN AGREEMENT
This First Amendment (this "Amendment") is entered into as of January 9,
1995 by and among Commonwealth Edison Company (the "Company"), The First
National Bank of Chicago individually and as agent (in such capacity the
"Agent"), and the banks party hereto (the "Banks"). The parties hereto agree as
follows:
WHEREAS, the Company, the Agent, and, by operation of various assignment
agreements, the Banks have entered into that certain Term Loan Agreement dated
as of January 7, 1992 (the "Agreement"), pursuant to which the Company borrowed
a term loan in the principal amount of $100,000,000; and
WHEREAS, the parties thereto desire to amend the Agreement in certain
respects more fully described hereinafter;
NOW, THEREFORE, in consideration of the undertakings set forth herein and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used and not otherwise defined in
-------------
this Amendment shall have the meanings attributed to them in the Agreement.
2. Amendment of Agreement. The Agreement is hereby amended as follows:
----------------------
2.1. The definition of "Termination Date" in Article I (Definitions)
is deleted in its entirety and the following is inserted in lieu thereof:
"'Termination Date' means the earlier of (i) January 9, 1996 or
(ii) the date on which the Notes become immediately due and payable
pursuant to Section 7.2."
-----------
2.2. The reference to "[t]he Company's consolidated financial
statements as of September 30, 1991" in Section 4.1(d) (Representations
and Warranties/Financial Statements) is deleted in its entirety and a
reference to "[t]he Company's consolidated financial statements as of
September 30, 1994" is inserted in lieu thereof.
2.3. The references to "the Form 8-K dated December 11, 1991" in
Section 4.1(d) (Representations and Warranties/Financial Statements) and
Section 4.1(e)
<PAGE>
(Representations and Warranties/Litigation) are deleted in their entirety
and references to "the Form 10-Q dated as of September 30, 1994" are
inserted in lieu thereof.
3. Representations and Warranties. The Company hereby confirms,
------------------------------
reaffirms and restates the representations and warranties set forth in Article
IV of the Agreement (as amended hereby) as of the Effective Date (as defined in
Paragraph 4 of this Amendment) as though such representations and warranties
were fully set forth herein, except for changes in Exhibit B to the Agreement
reflecting transactions permitted by the Agreement. A Default under and as
defined in the Agreement as amended by this Amendment shall be deemed to have
occurred if any representation or warranty made pursuant to the preceding
sentence shall be materially false on the date as of which it was made.
4. Effective Date. This Amendment shall become effective as of the date
--------------
first written above (the "Effective Date") upon receipt by the Agent of:
(i) a counterpart of this Amendment duly executed by the Company and
each Bank,
(ii) replacement Notes substantially in the form of Exhibit A to the
Agreement, dated the Effective Date, payable to each Bank in the
amount of its respective portion of the Loan and substituting a
reference to "January 9, 1996" for the reference to "January 9,
1995" set forth in the first sentence thereof (the "Replacement
Notes"); and
(iii) a copy, certified by the Secretary or an Assistant Secretary of
the Company, of its Board of Directors' resolutions authorizing
the execution of this Amendment and the Replacement Notes.
Each Bank shall, promptly after receipt of its Replacement Note, return to the
Company the Note previously received by it.
5. Ratification. The Agreement, as amended hereby, shall remain in full
------------
force and effect and is hereby ratified, approved, and confirmed in all
respects.
6. Costs and Expenses. The Company agrees to pay all reasonable costs,
------------------
fees, and out-of-pocket expenses (including attorneys' fees and time charges of
attorneys for the Agent, which attorneys may be employees of the Agent) incurred
by the Agent in connection with the preparation, review, execution, delivery,
amendment, modification, and enforcement of this Amendment and the Replacement
Notes. The Company's obligations under this Paragraph 6 shall survive any
termination of the Agreement or this Amendment.
7. Miscellaneous. From and after the Effective Date, each reference in
-------------
the Agreement to "this Agreement," "hereof," "hereunder," or words of like
import, and all
Page 2
<PAGE>
references to the Agreement in any and all other agreements, instruments,
documents, notes, certificates, and other writings of every kind and nature
shall be deemed to refer to the Agreement as amended by this Amendment.
8. Counterparts. This Amendment may be executed in any number of
------------
counterparts, all of which taken together shall constitute one Amendment.
9. Governing Law. This Amendment shall be construed in accordance with
-------------
and governed by the law of the State of Illinois.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.
COMMONWEALTH EDISON COMPANY
By Dennis F. O'Brien
------------------------
Name Dennis F. O'Brien
------------------------
Title Treasurer
------------------------
UNION BANK OF SWITZERLAND
By
------------------------
Name
------------------------
Title
------------------------
THE MITSUI TRUST & BANKING CO., LTD.
By
------------------------
Name
------------------------
Title
------------------------
THE SANWA BANK, LIMITED
By
------------------------
Name
------------------------
Title
------------------------
Page 3
<PAGE>
THE BANK OF TOKYO, LTD.
By
------------------------
Name
------------------------
Title
------------------------
CIBC INC.
By
------------------------
Name
------------------------
Title
------------------------
THE TOKAI BANK, LIMITED
By
------------------------
Name
------------------------
Title
------------------------
THE SUMITOMO BANK, LIMITED
By
------------------------
Name
------------------------
Title
------------------------
THE SUMITOMO TRUST & BANKING CO., LTD.
By
------------------------
Name
------------------------
Title
------------------------
THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By
------------------------
Name
------------------------
Title
------------------------
Page 4
<PAGE>
Exhibit (4)-35
Unicom Corporation
Form 10-K File No. 1-11375
[EXECUTION COPY]
U.S. $200,000,000
CREDIT AGREEMENT
Dated as of November 22, 1994
Among
UNICOM ENTERPRISES INC.
as Borrower
THE BANKS NAMED HEREIN
as Banks
and
CITIBANK, N.A.
as Agent
<PAGE>
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section Page
------- ----
<S> <C> <C>
1.01. Certain Defined Terms................................. 1
1.02. Computation of Time Periods........................... 18
1.03. Accounting Terms...................................... 18
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
2.01. The Advances.......................................... 18
2.02. Making the Advances................................... 19
2.03. Computations of Outstandings.......................... 20
2.04. Fees.................................................. 21
2.05. Reduction of the Commitments.......................... 21
2.06. Repayment of Advances................................. 22
2.07. Interest on Advances.................................. 22
2.08. Additional Interest on Eurodollar Advances............ 23
2.09. Interest Rate Determination........................... 23
2.10. Conversion of Advances................................ 25
2.11. Optional Prepayments of Advances...................... 26
2.12. Mandatory Prepayments................................. 26
2.13. Increased Costs....................................... 27
2.14. Illegality............................................ 29
2.15. Payments and Computations............................. 29
2.16. Taxes................................................. 31
2.17. Sharing of Payments, Etc.............................. 33
2.18. Extension of Termination Date......................... 34
ARTICLE III
LETTERS OF CREDIT
3.01. LC Banks.............................................. 36
3.02. Letters of Credit..................................... 36
3.03. LC Bank Fees.......................................... 37
3.04. Reimbursement to LC Banks............................. 37
3.05. Obligations Absolute.................................. 38
3.06. Liability of LC Banks and the Lenders................. 39
ARTICLE IV
CONDITIONS OF LENDING
4.01. Conditions Precedent to Initial Extensions of Credit.. 40
4.02. Conditions Precedent to Each Extension of Credit...... 43
4.03. Condition Precedent to Certain Extensions of Credit... 43
4.04. Reliance on Certificates.............................. 44
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C> <C>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. Representations and Warranties of the Borrower........ 45
ARTICLE VI
COVENANTS OF THE BORROWER
6.01. Affirmative Covenants................................. 48
6.02. Negative Covenants.................................... 53
ARTICLE VII
EVENTS OF DEFAULT
7.01. Events of Default..................................... 56
7.02. Remedies.............................................. 60
ARTICLE VIII
THE AGENT
8.01. Authorization and Action.............................. 62
8.02. Agent's Reliance, Etc................................. 62
8.03. Citibank and Affiliates............................... 63
8.04. Lender Credit Decision................................ 63
8.05. Indemnification....................................... 63
8.06. Successor Agent....................................... 64
ARTICLE IX
MISCELLANEOUS
9.01. Amendments, Etc....................................... 65
9.02. Notices, Etc.......................................... 66
9.03. No Waiver; Remedies................................... 66
9.04. Costs, Expenses, Taxes and Indemnification............ 66
9.05. Right of Set-Off...................................... 68
9.06. Binding Effect........................................ 69
9.07. Assignments and Participations........................ 69
9.08. WAIVER OF JURY TRIAL.................................. 74
9.09. Consent............................................... 74
9.10. Governing Law......................................... 74
9.11. Relation of the Parties; No Beneficiary............... 75
9.12. Execution in Counterparts............................. 75
9.13. Severability.......................................... 75
9.14. Headings.............................................. 75
9.15. Entire Agreement...................................... 75
</TABLE>
-ii-
<PAGE>
Schedule I - List of Applicable Lending Offices
Exhibit A - Form of Note
Exhibit B-1 - Form of Notice of Borrowing
Exhibit B-2 - Form of Notice of Conversion
Exhibit C - Form of Lender Assignment
Exhibit D - Form of LC Bank Agreement
Exhibit E - Form of Guaranty
Exhibit F - Form of Opinion of Counsel for the Borrower and the Parent
Exhibit G - Form of Opinion of Special New York Counsel to the Agent
Exhibit H - Terms of Subordination
-iii-
<PAGE>
CREDIT AGREEMENT
Dated as of November 22, 1994
THIS CREDIT AGREEMENT is made by and among:
(i) Unicom Enterprises Inc., an Illinois corporation (the "BORROWER"),
(ii) the banks (the "BANKS") listed on the signature pages hereof and the
other Lenders (as hereinafter defined) from time to time party hereto,
and
(iii) Citibank, N.A. ("CITIBANK"), as agent (the "AGENT") for the Lenders
hereunder.
PRELIMINARY STATEMENT
The Borrower has requested the Banks to provide the credit facilities
hereinafter described in the amounts and on the terms and conditions set forth
herein. The Banks have so agreed on the terms and conditions set forth herein,
and the Agent has agreed to act as agent for the Lenders on such terms and
conditions.
Accordingly, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ADVANCE" means an advance by a Lender to the Borrower pursuant to Section
2.01 (or deemed made pursuant to Section 3.04(d)) as part of a Borrowing and
refers to an Alternate Base Rate Advance or a Eurodollar Rate Advance, each
of which shall be a "Type" of Advance. All Advances by a Lender of the same
Type, having the same Interest Period and made or Converted on the same day
shall be
<PAGE>
2
deemed to be a single Advance by such Lender until repaid or next Converted.
"AFFILIATE" means, with respect to any Person, any other Person directly
or indirectly controlling (including but not limited to all directors and
officers of such Person), controlled by, or under direct or indirect common
control with such Person. A Person shall be deemed to control another entity
if such Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of such entity, whether
through the ownership of voting securities, by contract, or otherwise.
"ALTERNATE BASE RATE" means a fluctuating interest rate per annum as shall
be in effect from time to time which rate per annum shall at all times be
equal to the highest of:
(a) the rate of interest announced publicly by Citibank in New York,
New York, from time to time, as Citibank's base rate;
(b) 1/2 of one percent per annum above the latest three-week moving
average of secondary market morning offering rates in the United States
for three-month certificates of deposit of major United States money
market banks, such three-week moving average being determined weekly by
the Agent on the basis of such rates reported by certificate of deposit
dealers to and published by the Federal Reserve Bank of New York or, if
such publication shall be suspended or terminated, on the basis of
quotations for such rates received by the Agent from three New York
certificate of deposit dealers of recognized standing selected by the
Agent, in either case adjusted to the nearest 1/4 of one percent or, if
there is no nearest 1/4 of one percent, to the next higher 1/4 of one
percent; and
(c) 1/2 of one percent per annum above the Federal Funds Rate.
Each change in the Alternate Base Rate shall take effect concurrently with
any change in such base rate, such moving average or the Federal Funds Rate.
"ALTERNATE BASE RATE ADVANCE" means an Advance that bears interest as
provided in Section 2.07(a).
<PAGE>
3
"APPLICABLE LAW" means, with respect to any matter or Person, any law,
rule, regulation, order, decree, or other requirement having the force of law
relating to such matter or Person and, where applicable, any interpretation
thereof by any authority having jurisdiction with respect thereto or charged
with the administration thereof.
"APPLICABLE LENDING OFFICE" means, with respect to each Lender, such
Lender's Domestic Lending Office, in the case of an Alternate Base Rate
Advance, and such Lender's Eurodollar Lending Office, in the case of a
Eurodollar Rate Advance.
"APPLICABLE MARGIN" means, on any date, as adjusted from time to time as
set forth below, for a Eurodollar Rate Advance or an Alternate Base Rate
Advance, the basis points (1 basis point equaling 0.01%) per annum set forth,
in the columns identified as Level 1, Level 2 or Level 3 below, opposite the
rate applicable to such Advance:
Level 1 Level 2 Level 3
------------ -------------- ------------
S&P A- or better BBB- or better BB+ or below
Moody's A3 or better Baa3 or better Ba1 or below
D&P A- or better BBB- or better BB+ or below
Eurodollar Rate 50.00 80.00 125.00
Alternate Base Rate 0 0 0
(Basis Points Per Annum)
The Applicable Margin shall be determined on the basis of the two highest
ratings applicable to the First Mortgage Bonds at the time of
determination; provided, however, if there shall be ratings from only two
Rating Agencies or there is a "split" rating, the Applicable Margin shall
be determined on the basis of the lower of the two ratings then
applicable; provided, further, that if no Rating Agency shall then be
rating the First Mortgage Bonds, then the Applicable Margin shall be that
corresponding to Level 3.
The Applicable Margins shall be increased or decreased in accordance with
this definition upon any change in the applicable ratings, and such
increased or decreased Applicable Margins shall be effective from the date
of announcement of such new ratings by the applicable Rating Agency. The
Borrower agrees to notify the Agent promptly upon
<PAGE>
4
each change in any rating of the First Mortgage Bonds.
In addition, each of the foregoing Applicable Margins applicable to
Eurodollar Rate Advances shall be increased by 5 basis points (0.05%) per
annum in the event that, and at all times during which, the principal
amount outstanding hereunder exceeds 50% of the aggregate amount of the
Commitments.
"APPLICABLE RATE" means:
(i) in the case of each Alternate Base Rate Advance, a rate per annum
equal at all times to the sum of the Alternate Base Rate plus the
Applicable Margin in effect from time to time; and
(ii) in the case of each Eurodollar Rate Advance comprising part of
the same Borrowing, a rate per annum during each Interest Period equal at
all times to the sum of the Eurodollar Rate for such Interest Period plus
the Applicable Margin in effect from time to time during such Interest
Period.
"AVAILABLE COMMITMENT" means, for each Lender on any day, the unused
portion of such Lender's Commitment, computed after giving effect to all
Extensions of Credit or prepayments to be made on such day and the
application of proceeds therefrom.
"AVAILABLE COMMITMENTS" means the aggregate of the Lenders' Available
Commitments hereunder.
"BANKRUPTCY CODE" means the Bankruptcy Reform Act of 1978, as amended,
as the same may be further amended, and any other applicable state or
federal law with respect to bankruptcy, liquidation, insolvency or
reorganization.
"BORROWING" means a borrowing consisting of simultaneous Advances of
the same Type, having the same Interest Period (in the case of Eurodollar
Rate Advances) and made or Converted on the same day by each of the
Lenders, ratably in accordance with their respective Percentages. Any
Borrowing consisting of Advances of a particular Type may be referred to
as being a Borrowing of such "Type".
<PAGE>
5
All Advances of the same Type, having the same Interest Period (in the
case of Eurodollar Rate Advances) and made or Converted on the same day
shall be deemed a single Borrowing hereunder until repaid or next
Converted.
"BUSINESS DAY" means a day of the year on which banks are not required
or authorized to close in New York City or Chicago, and, if the applicable
Business Day relates to any Eurodollar Rate Advance, on which dealings in
Dollar deposits are carried on in the London interbank market.
"CAPITALIZED LEASE" means, with respect to any Person, any lease which,
in accordance with GAAP, has been, or should be, recorded as a capitalized
lease in such Person's financial statements.
"CODE" means the Internal Revenue Code of 1986 or any successor
statute, and the regulations promulgated and rulings issued thereunder,
each as in effect and amended or modified from time to time. References
herein to sections of the Code shall be deemed to refer to the
corresponding sections of any successor statute.
"COMMITMENT" means, for each Lender, the obligation of such Lender to
make Advances to the Borrower and to participate in Extensions of Credit
resulting from the issuance (or extension, modification or amendment) of
any Letter of Credit in an aggregate amount no greater than the amount set
forth opposite such Lender's name on the signature pages hereof or, if
such Lender has entered into one or more Lender Assignments, set forth for
such Lender in the Register maintained by the Agent pursuant to Section
9.07(c), in each such case as such amount may be reduced from time to time
pursuant to Section 2.05. "COMMITMENTS" means the total of the Lenders'
Commitments hereunder. The Commitments shall in no event exceed
$200,000,000.
"COMMITMENT FEE" means, with respect to any Lender, a fee that shall be
payable on the average daily Available Commitment of such Lender from time
to time, at the rate per annum set forth below. As described below, the
Commitment Fee will be based upon the ratings of the First
<PAGE>
6
Mortgage Bonds as set forth in the columns identified as Level 1, Level 2
or Level 3:
Level 1 Level 2 Level 3
------------ -------------- ------------
S&P A- or better BBB- or better BB+ or below
Moody's A3 or better Baa3 or better Ba1 or below
D&P A- or better BBB- or better BB+ or below
------------ -------------- ------------
Commitment Fee 20.00 30.00 40.00
(Basis Points Per Annum)
The Commitment Fee shall be determined on the basis of the two highest
ratings applicable to the First Mortgage Bonds at the time of
determination; provided, however, if there shall be ratings from only two
Rating Agencies or there is a "split" rating, the Commitment Fee shall be
determined on the basis of the lower of the two ratings then applicable;
provided, further, that if no Rating Agency shall then be rating the First
Mortgage Bonds, then the Commitment Fee shall be that corresponding to
Level 3.
The Commitment Fee shall be increased or decreased in accordance with this
definition upon any change in the applicable ratings, and such increased
or decreased Commitment Fee shall be effective from the date of
announcement of such new ratings by the applicable Rating Agency. The
Borrower agrees to notify the Agent promptly upon each change in any
rating of the First Mortgage Bonds.
"COMMONWEALTH" means Commonwealth Edison Company, an Illinois
corporation.
"CONTINGENT OBLIGATION" means, as to any Person, the undrawn face
amount of any letters of credit issued for the account of such Person and
shall also mean any obligation of such Person guaranteeing or in effect
guaranteeing any Debt, leases, dividends, letters of credit, or other
obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not
contingent, (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the
<PAGE>
7
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (c) to purchase property, securities, or services
primarily for the purpose of assuring the obligee under any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation, or (d) otherwise to assure or hold harmless the
obligee under such primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the
primary obligation or, where such Contingent Obligation is specifically
limited to a portion of any such primary obligation, that portion to
which it is limited or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person
is required to perform thereunder) as determined by such Person in good
faith. For purposes of computing the consolidated Debt of any Person, the
amount of any primary obligation of any Subsidiary of such Person and the
amount of any Contingent Obligation of such Person corresponding to such
primary obligation shall only be counted once (i.e., without duplication).
"CONVERT", "CONVERSION" and "CONVERTED" each refers to a conversion
of Advances of one Type into Advances of another Type, or to the selection
of a new, or the renewal of the same, Interest Period for Eurodollar Rate
Advances, as the case may be, pursuant to Section 2.09 or 2.10.
"D&P" means Duff & Phelps, Inc. or any successor thereto.
"DEBT" of a Person means (without duplication) (i) indebtedness of
such Person for borrowed money, (ii) obligations of such Person evidenced
by bonds, debentures, notes, or other similar instruments, (iii)
obligations of such Person to pay the deferred purchase price of property
or services, (iv) obligations of such Person as lessee under Capitalized
Leases, (v) indebtedness of such Person consisting of unpaid reimbursement
obligations in respect of all drafts
<PAGE>
8
drawn or demands for payment made under letters of credit issued for the
account of such Person, (vi) all Contingent Obligations of such Person,
(vii) liabilities of such Person in respect of unfunded vested benefits
under Pension Plans covered by Title IV of ERISA (other than Multiemployer
Plans), and (viii) withdrawal liability of such Person incurred under
ERISA to any Multiemployer Plan (including, without limitation, with
respect to each of the foregoing clauses (i) through (vi), any such
indebtedness, obligations, or liabilities that is non-recourse to the
credit of such Person but is secured by assets of such Person, and
otherwise excluding any such indebtedness, obligations or liabilities that
is non-recourse to the credit of such Person; provided, however, that Debt
of the Borrower shall not include any Contingent Obligations of the
Borrower that are non-recourse to the credit of the Borrower and are
secured only by Liens permitted by Section 6.02(e)(ii)).
"DEFAULT RATE" means a rate per annum equal at all times to 2% per
annum above (i) in the case of a Eurodollar Rate Advance, the Applicable
Rate therefore immediately prior to such Default Rate becoming applicable,
and (ii) in all other cases, the Alternate Base Rate.
"DOLLARS" and the sign "$" each means lawful money of the United
States.
"DOMESTIC LENDING OFFICE" means, with respect to any Lender, the
office or Affiliate of such Lender specified as its "Domestic Lending
Office" opposite its name on Schedule I hereto or in the Lender Assignment
pursuant to which it became a Lender, or such other office or Affiliate of
such Lender as such Lender may from time to time specify in writing to the
Borrower and the Agent.
"EFFECTIVE DATE" means the date on which each of the conditions
precedent enumerated in Section 4.01 shall have been fulfilled to the
satisfaction of the Lenders, the Agent and the Borrower.
"ELIGIBLE ASSIGNEE" means (a) any Lender; (b) any other commercial
bank or trust company organized under the laws of the United States, or
any State thereof; (c) any other commercial bank
<PAGE>
9
organized under the laws of any other country that is a member of the
OECD, or a political subdivision of any such country, provided that such
bank is acting through a branch or agency located in the United States;
(d) the central bank of any country that is a member of the OECD; and (e)
any other commercial bank or other financial institution engaged generally
in the business of extending credit or purchasing debt instruments;
provided, however, that (i) any such Person shall also (A) have
outstanding unsecured long-term indebtedness that is rated A-, A3 or A- or
better, or unsecured short-term indebtedness that is rated A-2, P-2 or D-2
or better, by any two of S&P, Moody's or D&P, respectively, and (B) have
combined capital and surplus (as established in its most recent report of
condition to its primary regulator) of not less than $250,000,000 (or its
equivalent in foreign currency), (ii) any Person described in clause (c),
(d), or (e), above, shall, on the date on which it is to become a Lender
hereunder, (A) be entitled to receive payments hereunder without deduction
or withholding of any United States Federal income taxes (as contemplated
by Section 2.16) and (B) not be incurring any losses, costs or expenses of
the type for which such Person could demand payment under Section 2.13,
and (iii) any Person described in clause (b), (c), (d), or (e), above,
shall, in addition, be reasonably acceptable to the Agent and each LC Bank
based upon its then-existing credit criteria.
"ENVIRONMENTAL LAWS" means any federal, state or local laws,
ordinances or codes, rules, orders, or regulations relating to pollution
or protection of the environment, including, without limitation, laws
relating to Hazardous Substances, laws relating to reclamation of land and
waterways and laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes into the environment (including,
without limitation, ambient air, surface water, ground water, land surface
or subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollution, contaminants,
<PAGE>
10
chemicals, industrial or toxic wastes or other Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.
"ERISA AFFILIATE" of any Person means any trade or business (whether
or not incorporated) that is a member of a group of which such Person is a
member and that is under common control with such Person within the
meaning of Section 414 of the Code.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as
in effect from time to time.
"EURODOLLAR LENDING OFFICE" means, with respect to any Lender, the
office or Affiliate of such Lender specified as its "Eurodollar Lending
Office" opposite its name on Schedule I hereto or in the Lender Assignment
pursuant to which it became a Lender (or, if no such office is specified,
its Domestic Lending Office), or such other office or Affiliate of such
Lender as such Lender may from time to time specify in writing to the
Borrower and the Agent.
"EURODOLLAR RATE" means, for each Interest Period for each Eurodollar
Rate Advance made as part of the same Borrowing, an interest rate per
annum equal to the average (rounded upward to the nearest whole multiple
of 1/16 of 1% per annum, if such average is not such a multiple) of the
rate per annum at which deposits in Dollars are offered by the principal
office of each of the Reference Banks in London, England to prime banks in
the London interbank market at 11:00 A.M. (London time) two Business Days
before the first day of such Interest Period in an amount substantially
equal to such Reference Bank's Eurodollar Rate Advance made as part of
such Borrowing and for a period equal to such Interest Period. The
Eurodollar Rate for the Interest Period for each Eurodollar Rate Advance
made as part of the same
<PAGE>
11
Borrowing shall be determined by the Agent on the basis of applicable
rates furnished to and received by the Agent from the Reference Banks two
Business Days before the first day of such Interest Period, subject,
however, to the provisions of Section 2.09.
"EURODOLLAR RATE ADVANCE" means an Advance that bears interest as
provided in Section 2.07(b).
"EURODOLLAR RESERVE PERCENTAGE" of any Lender for each Interest
Period for each Eurodollar Rate Advance means the reserve percentage
applicable to such Lender during such Interest Period (or if more than one
such percentage shall be so applicable, the daily average of such
percentages for those days in such Interest Period during which any such
percentage shall be so applicable) under Regulation D or other regulations
issued from time to time by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other
marginal reserve requirement) then applicable to such Lender with respect
to liabilities or assets consisting of or including Eurocurrency
Liabilities having a term equal to such Interest Period.
"EVENT OF DEFAULT" has the meaning assigned to that term in Section
7.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, and the
regulations promulgated thereunder, in each case as amended from time to
time.
"EXTENSION OF CREDIT" means (i) the making of a Borrowing (including,
without limitation, any Conversion), (ii) the issuance of a Letter of
Credit, or (iii) the amendment of any Letter of Credit having the effect
of extending the stated termination date thereof, increasing the LC
Outstandings thereunder, or otherwise altering any of the material terms
or conditions thereof.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted
<PAGE>
12
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the
next preceding Business Day) by the Federal Reserve Bank of New York, or,
if such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by
the Agent from three Federal funds brokers of recognized standing selected
by it.
"FEE LETTER" means that certain letter agreement, dated October 11,
1994, from Citibank to, and accepted by, the Borrower.
"FIRST MORTGAGE BONDS" means the bonds issued by Commonwealth
pursuant to the Indenture.
"GAAP" means generally accepted accounting principles in the United
States in effect from time to time.
"GOVERNMENTAL APPROVAL" means any authorization, consent, approval,
license, franchise, lease, ruling, tariff, rate, permit, certificate,
exemption of, or filing or registration with, any governmental authority
or other legal or regulatory body required in connection with the
execution, delivery or performance of any Loan Document.
"GUARANTY" means the Guaranty, dated as of the date hereof, by the
Parent in favor of the Agent and the Lenders, in substantially the form of
Exhibit E hereto.
"HAZARDOUS SUBSTANCE" means any waste, substance, or material
identified as hazardous, dangerous or toxic by any office, agency,
department, commission, board, bureau, or instrumentality of the United
States or of the State or locality in which the same is located having or
exercising jurisdiction over such waste, substance or material.
"INDENTURE" means that certain Mortgage of Commonwealth to Bank of
America NT & SA (successor by merger to Continental Bank, National
Association), and M.J. Kruger, as trustees, dated
<PAGE>
13
as of July 1, 1923, as the same has been and may from time to time be
amended or supplemented and in effect.
"INTEREST PERIOD" means, for each Eurodollar Rate Advance made as
part of the same Borrowing, the period commencing on the date of such
Eurodollar Rate Advance or the date of the Conversion of any Advance into
such Eurodollar Rate Advance and ending on the last day of the period
selected by the Borrower pursuant to the provisions below and, thereafter,
each subsequent period commencing on the last day of the immediately
preceding Interest Period and ending on the last day of the period
selected by the Borrower pursuant to the provisions below. The duration
of each such Interest Period shall be 1, 2, 3 or 6 months, in each case as
the Borrower may select, upon notice received by the Agent not later than
11:00 A.M. on the third Business Day prior to the first day of such
Interest Period; provided, however, that:
(i) the Borrower may not select any Interest Period that ends
after the Termination Date;
(ii) Interest Periods commencing on the same date for Eurodollar
Rate Advances made as part of the same Borrowing shall be of the same
duration;
(iii) if any Interest Period begins on a day for which there
is no corresponding day in the calendar month during which such
Interest Period is to end, such Interest Period shall end on the last
Business Day of such month; and
(iv) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next
succeeding Business Day, provided that if such extension would cause
the last day of such Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day.
<PAGE>
14
"LC BANK" means a Lender designated by the Borrower, and acceptable
to the Agent, in accordance with Section 3.01 as the issuer of a Letter of
Credit pursuant to an LC Bank Agreement.
"LC BANK AGREEMENT" means an agreement between an LC Bank and the
Borrower providing for the issuance of one or more Letters of Credit, in
substantially the form of Exhibit D hereto.
"LC OUTSTANDINGS" means, for any Letter of Credit on any date of
determination, the maximum amount available to be drawn under such Letter
of Credit (assuming the satisfaction of all conditions for drawing
enumerated therein).
"LC PAYMENT NOTICE" has the meaning assigned to that term in Section
3.04(b).
"LENDER ASSIGNMENT" means an assignment and acceptance agreement
entered into by a Lender and an Eligible Assignee, and accepted by the
Agent, in substantially the form of Exhibit C hereto.
"LENDERS" means the Banks listed on the signature pages hereof, each
Eligible Assignee that shall become a party hereto pursuant to Section
9.07 and, if and to the extent so provided in Section 3.04(c), each LC
Bank.
"LETTER OF CREDIT" means a letter of credit issued by an LC Bank
pursuant to Section 3.02, as such letter of credit may from time to time
be amended, modified or extended in accordance with the terms of this
Agreement and the LC Bank Agreement to which it relates.
"LIEN" has the meaning assigned to that term in Section 6.02(e).
"LOAN DOCUMENTS" means this Agreement, the Notes, the Guaranty, each
LC Bank Agreement and all other agreements, instruments and documents now
or hereafter executed and delivered pursuant hereto or thereto.
"MAJORITY LENDERS" means, on any date of determination, Lenders that,
collectively, on such date have in the aggregate at least 66-2/3% of the
Commitments (without giving effect to any
<PAGE>
15
termination in whole of the Commitments pursuant to Section 7.02). Any
determination of those Lenders constituting the Majority Lenders shall be
made by the Agent and shall be conclusive and binding on all parties,
absent manifest error.
"MATERIAL ADVERSE EFFECT" means, relative to any occurrence of
whatever nature (including, without limitation, any adverse determination
in any litigation, arbitration, or governmental investigation or
proceeding), a material adverse effect on:
(a) the consolidated business, assets, revenues, financial
condition, results of operations, operations, or prospects of the
Borrower and its Subsidiaries; or
(b) the ability of the Borrower to make any payment when due
under this Agreement or to perform any of its other obligations under
the Loan Documents.
"MOODY'S" means Moody's Investors Service, Inc. or any successor
thereto.
"MULTIEMPLOYER PLAN" means a "multiemployer plan", as such term is
defined in Section 4001(a)(3) of ERISA, that is maintained for employees
of the Borrower or any ERISA Affiliate of the Borrower.
"NORTHWIND" means Unicom Thermal Technologies Inc., an Illinois
corporation, all of whose common stock is on the date hereof owned by the
Borrower.
"NOTE" means a promissory note of the Borrower payable to the order
of a Lender, in substantially the form of Exhibit A hereto, evidencing the
aggregate indebtedness of the Borrower to such Lender resulting from the
Advances made by such Lender.
"NOTICE OF BORROWING" has the meaning assigned to that term in
Section 2.02(a).
"NOTICE OF CONVERSION" has the meaning assigned to that term in
Section 2.10(a).
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16
"OECD" means the Organization for Economic Cooperation and
Development.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor entity) established under ERISA.
"PARENT" means Unicom Corporation, an Illinois corporation.
"PENSION PLAN" means a "pension plan", as such term is defined in
Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
Multiemployer Plan), and to which the Borrower or any ERISA Affiliate of
the Borrower may have any liability, including any liability by reason of
having been a substantial employer within the meaning of Section 4063 of
ERISA at any time during the preceding five years, or by reason of being
deemed to be a contributing sponsor under Section 4069 of ERISA.
"PERCENTAGE" means, for any Lender on any date of determination, the
percentage obtained by dividing such Lender's Commitment on such date by
the total of the Commitments on such date (in each case, without giving
effect to any termination of the Commitments pursuant to Section 7.02),
and multiplying the quotient so obtained by 100%.
"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture or other entity, or a government or any political
subdivision or agency thereof.
"RATING AGENCY" means D&P, Moody's or S&P.
"REFERENCE BANKS" means Citibank, Morgan Guaranty Trust Company of
New York and Toronto Dominion (Texas), Inc., or any additional or
substitute Lenders as may be selected from time to time to act as
Reference Banks hereunder by the Agent, the Majority Lenders and the
Borrower.
"REGISTER" has the meaning assigned to that term in Section 9.07(c).
"REQUEST FOR ISSUANCE" has the meaning assigned to that term in
Section 3.02(a).
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17
"S&P" means Standard & Poor's Ratings Group or any successor thereto.
"SEC" means the Securities and Exchange Commission and any entity
succeeding to its functions under the Securities Act of 1933, as amended,
or the Exchange Act.
"SIGNIFICANT SUBSIDIARY" means Northwind and any other Subsidiary of
the Borrower that, on a consolidated basis with any of its Subsidiaries as
of any date of determination, accounts for more than 10% of the
consolidated assets (valued at book value) of the Borrower and its
Subsidiaries.
"SUBSIDIARY" means, with respect to any Person, any corporation or
unincorporated entity of which more than 50% of the outstanding capital
stock (or comparable interest) having ordinary voting power (irrespective
of whether at the time capital stock (or comparable interest) of any other
class or classes of such corporation or entity shall or might have voting
power upon the occurrence of any contingency) is at the time directly or
indirectly owned by said Person (whether directly or through one of more
other Subsidiaries). In the case of an unincorporated entity, a Person
shall be deemed to have more than 50% of interests having ordinary voting
power only if such Person's vote in respect of such interests comprises
more than 50% of the total voting power of all such interests in the
unincorporated entity.
"TERMINATION DATE" means, as to any Lender, the earlier to occur of
(i) November 22, 1997 or, as to each Lender that has consented to the same
pursuant to Section 2.18, such later date to which the Termination Date
for such Lender is extended in accordance with Section 2.18, and (ii) the
date of termination or reduction in whole of the Commitments pursuant to
Section 2.05 or 7.02.
"TYPE" has the meaning assigned to that term (i) in the definition of
"ADVANCE" when used in such context and (ii) in the definition of
"BORROWING" when used in such context.
<PAGE>
18
"UNMATURED DEFAULT" means an event that, with the giving of notice or
lapse of time, or both, would constitute an Event of Default.
"WELFARE PLAN" means a "welfare plan", as such term is defined in
Section 3(1) of ERISA.
SECTION 1.02. COMPUTATION OF TIME PERIODS. Unless otherwise indicated,
each reference in this Agreement to a specific time of day is a reference to New
York City time. In the computation of periods of time under this Agreement, any
period of a specified number of days or months shall be computed by including
the first day or month occurring during such period and excluding the last such
day or month. In the case of a period of time "FROM" a specified date "TO" or
"UNTIL" a later specified date, the word "FROM" means "FROM AND INCLUDING" and
the words "TO" and "UNTIL" each means "TO BUT EXCLUDING".
SECTION 1.03. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. THE ADVANCES. (a) Each Lender severally agrees, on the
terms and conditions hereinafter set forth, to make Advances to the Borrower and
to participate in the issuance of Letters of Credit (and the LC Outstandings
thereunder) from time to time on any Business Day during the period from the
Effective Date until the Termination Date in an aggregate outstanding amount not
to exceed on any day such Lender's Available Commitment (after giving effect to
all Extensions of Credit to be made on such day and the application of the
proceeds thereof). Each Borrowing (other than a Borrowing deemed made under
Section 3.04(d)) shall be in an aggregate amount not less than $5,000,000, or an
integral multiple of $1,000,000 in excess thereof (or such lesser amount as
shall be equal to the total amount of the Available Commitments on such date,
after giving effect to all other Extensions of Credit to be made on such date),
and shall consist of Advances of the same Type, having the same Interest Period
(in the case of Eurodollar Rate Advances) and made or Converted on the same day
by the Lenders ratably according to their
<PAGE>
19
respective Percentages. Within the limits of each Lender's Commitment and
subject to the conditions hereinafter set forth, the Borrower may request
Extensions of Credit hereunder, prepay Advances, or reduce or cancel Letters of
Credit, and use the resulting increase in the Available Commitments for further
Extensions of Credit in accordance with the terms hereof.
(b) In no event shall the Borrower be entitled to request or receive any
Extensions of Credit that would cause the principal amount outstanding hereunder
to exceed the Commitments.
SECTION 2.02. MAKING THE ADVANCES. (a) Each Borrowing shall be made on
notice, given not later than 10:30 A.M., in the case of Alternate Base Rate
Advances, or 11:30 A.M., in the case of Eurodollar Rate Advances, (i) on the
third Business Day prior to the date of the proposed Borrowing, in the case of a
Borrowing comprised of Eurodollar Rate Advances, and (ii) on the date of the
proposed Borrowing, in the case of a Borrowing comprised of Alternate Base Rate
Advances, in each case by the Borrower to the Agent, which shall give to each
Lender prompt notice thereof by telecopier, telex, or cable. Each such notice
of a Borrowing (a "NOTICE OF BORROWING") shall be by telecopier, telex or cable,
in substantially the form of Exhibit B-1 hereto, specifying therein the
requested (A) date of such Borrowing, (B) Type of Advances comprising such
Borrowing, (C) aggregate amount of such Borrowing, and (D) in the case of a
Borrowing comprised of Eurodollar Rate Advances, the Interest Period for each
such Advance. Each Lender shall, before 12:00 noon on the date of such
Borrowing, make available for the account of its Applicable Lending Office to
the Agent at its address referred to in Section 9.02, in same day funds, such
Lender's ratable portion of such Borrowing. After the Agent's receipt of such
funds and upon fulfillment of the applicable conditions set forth in Article IV,
the Agent will make such funds available to the Borrower at the Agent's
aforesaid address.
(b) Each Notice of Borrowing shall be irrevocable and binding on the
Borrower. In the case of any Borrowing which the related Notice of Borrowing
specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall
indemnify each Lender against any loss, cost or expense incurred by such Lender
as a result of any failure to fulfill, on or before the date specified in such
Notice of Borrowing for such Borrowing, the applicable conditions set forth in
Article IV, including,
<PAGE>
20
without limitation, any loss, cost, or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to fund the Advance to be made by such Lender as part of such Borrowing when
such Advance, as a result of such failure, is not made on such date.
(c) Unless the Agent shall have received notice from a Lender prior to the
date of any Borrowing that such Lender will not make available to the Agent such
Lender's Advance as part of such Borrowing, the Agent may assume that such
Lender has made such Advance available to the Agent on the date of such
Borrowing in accordance with subsection (a) of this Section 2.02 and the Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that such Lender shall not
have so made such Advance available to the Agent, such Lender and the Borrower
severally agree to repay to the Agent forthwith on demand such corresponding
amount, together with interest thereon for each day from the date such amount is
made available to the Borrower until the date such amount is repaid to the
Agent, at (i) in the case of the Borrower, the interest rate applicable at the
time to Advances comprising such Borrowing and (ii) in the case of such Lender,
the Federal Funds Rate. If such Lender shall repay to the Agent such
corresponding amount, such amount so repaid shall constitute such Lender's
Advance as part of such Borrowing for purposes of this Agreement.
(d) The failure of any Lender to make the Advance to be made by it as part
of any Borrowing shall not relieve any other Lender of its obligation, if any,
hereunder to make its Advance on the date of such Borrowing, but no Lender shall
be responsible for the failure of any other Lender to make the Advance to be
made by such other Lender on the date of any Borrowing.
(e) Notwithstanding anything contained herein to the contrary, (i) not
more than two Borrowings may be made on the same Business Day and (ii) not more
than seven Borrowings may be outstanding at any one time.
SECTION 2.03. COMPUTATIONS OF OUTSTANDINGS. Whenever reference is made
in this Agreement to the principal amount outstanding on any date under this
Agreement, such reference shall refer to the sum of (i) the aggregate principal
amount of all Advances outstanding on such date plus (ii) the aggregate LC
Outstandings of all Letters of Credit outstanding on such
<PAGE>
21
date, in each case after giving effect to all Extensions of Credit to be made on
such date and the application of the proceeds thereof. References to the unused
portion of the Commitments shall refer to the excess, if any, of the Commitments
over the principal amount outstanding hereunder; and references to the unused
portion of any Lender's Commitment shall refer to such Lender's Percentage of
the unused Commitments.
SECTION 2.04. FEES. (a) The Borrower agrees to pay to the Agent for the
account of each Lender the Commitment Fee from the date hereof, in the case of
each Bank, and from the effective date specified in the Lender Assignment
pursuant to which it became a Lender, in the case of each other Lender, until
the Termination Date, payable quarterly in arrears on the last day of each
March, June, September and December during the term of such Lender's Commitment,
commencing on the first such date to occur following the date hereof, and on the
Termination Date.
(b) The Borrower agrees to pay to the Agent for the account of each Bank a
participation fee equal to (i) 0.125% of such Bank's Commitment, if the amount
of such Bank's initial commitment was equal to or in excess of $15,000,000 and
less than $25,000,000, or (ii) 0.175% of such Bank's Commitment, if the amount
of such Bank's initial commitment was equal to or in excess of $25,000,000, such
fee to be payable on the Effective Date.
(c) The Borrower agrees to pay to the Agent for the account of each Lender
a commission on such Lender's Percentage of the average daily aggregate amount
of the LC Outstandings from the date hereof until the Termination Date at a rate
per annum equal to the Applicable Margin with respect to Eurodollar Rate
Advances from time to time, payable quarterly in arrears on the last day of each
March, June, September and December, commencing on the first such date to occur
following the date hereof, and on the Termination Date.
(d) In addition to the fees provided for in subsections (a), (b) and (c),
above, the Borrower shall pay to the Agent, for the account of the Agent, such
other fees as are provided for in the Fee Letter, at the times and in the manner
set forth therein.
SECTION 2.05. REDUCTION OF THE COMMITMENTS. The Borrower shall have the
right, upon at least three
<PAGE>
22
Business Days' notice to the Agent, to terminate in whole or reduce ratably in
part the unused portions of the respective Commitments of the Lenders; provided
that the aggregate amount of the Commitments of the Lenders shall not be reduced
to an amount that is less than the aggregate principal amount then outstanding
hereunder; and provided, further, that each partial reduction shall be in an
aggregate amount equal to $5,000,000 and an integral multiple of $1,000,000 in
excess thereof.
SECTION 2.06. REPAYMENT OF ADVANCES. The Borrower shall repay the
principal amount of each Advance made by each Lender in accordance with the Note
to the order of such Lender; provided, however, that the aggregate principal
amount outstanding of all Advances made by a Lender shall be due and payable in
full on the Termination Date applicable to such Lender.
SECTION 2.07. INTEREST ON ADVANCES. The Borrower shall pay interest on
the unpaid principal amount of each Advance owing to each Lender from the date
of such Advance until such principal amount shall be paid in full, at the
Applicable Rate for such Advance (except as otherwise provided in this Section
2.07), payable as follows:
(a) ALTERNATE BASE RATE ADVANCES. If such Advance is an Alternate
Base Rate Advance, interest thereon shall be payable quarterly in arrears
on the last day of each March, June, September and December, on the date
of any Conversion of such Alternate Base Rate Advance and on the date such
Alternate Base Rate Advance shall become due and payable or shall
otherwise be paid in full; provided that any amount of principal that is
not paid when due (whether at stated maturity, by acceleration, or
otherwise) shall bear interest, from the date on which such amount is due
until such amount is paid in full, payable on demand, at a rate per annum
equal at all times to the Default Rate.
(b) EURODOLLAR RATE ADVANCES. Subject to Section 2.08, if such
Advance is a Eurodollar Rate Advance, interest thereon shall be payable on
the last day of each Interest Period and, if the Interest Period for such
Advance has a duration of six months, on the numerically corresponding day
that occurs during such Interest Period three months from the first day of
such Interest Period
<PAGE>
23
(or, if any such month does not have a numerically corresponding day, then
on the last day of such month) and on the date such Eurodollar Rate
Advance shall be Converted, shall become due and payable or shall
otherwise be paid in full; provided that any amount of principal that is
not paid when due (whether at stated maturity, by acceleration, or
otherwise) shall bear interest, from the date on which such amount is due
until such amount is paid in full, payable on demand, at a rate per annum
equal at all times to the Default Rate.
SECTION 2.08. ADDITIONAL INTEREST ON EURODOLLAR ADVANCES. The Borrower
shall pay to Agent for the account of each Lender any costs actually incurred by
such Lender which are attributable to such Lender's compliance with regulations
of the Board of Governors of the Federal Reserve System requiring the
maintenance of reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities. Such costs shall be paid to the Agent for
the account of such Lender in the form of additional interest on the unpaid
principal amount of each Eurodollar Rate Advance of such Lender, from the date
of such Advance until such principal amount is paid in full, at an interest rate
per annum equal at all times to the remainder obtained by subtracting (i) the
Eurodollar Rate for the Interest Period for such Advance from (ii) the rate
obtained by dividing such Eurodollar Rate by a percentage equal to 100% minus
the Eurodollar Reserve Percentage of such Lender for such Interest Period,
payable on each date on which interest is payable on such Advance. Such
additional interest shall be determined by such Lender and notified to the
Borrower through the Agent. A certificate as to the amount of such additional
interest, submitted to the Borrower and the Agent by such Lender, shall be
conclusive and binding for all purposes, absent manifest error.
SECTION 2.09. INTEREST RATE DETERMINATION. (a) Each Reference Bank
agrees to furnish to the Agent timely information for the purpose of determining
each Eurodollar Rate. If any one or more of the Reference Banks shall not
furnish such timely information to the Agent for the purpose of determining any
such interest rate, the Agent shall determine such interest rate on the basis of
timely information furnished by the remaining Reference Banks.
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24
(b) The Agent shall give prompt notice to the Borrower and the Lenders of
the applicable interest rate determined by the Agent for purposes of Section
2.07(a) or (b) and the applicable rate, if any, furnished by each Reference Bank
for the purpose of determining the applicable interest rate under Section
2.07(b).
(c) If fewer than two Reference Banks furnish timely information to the
Agent for determining the Eurodollar Rate for any Eurodollar Rate Advances, due
to the unavailability of funds to such Reference Banks in the relevant financial
markets:
(i) the Agent shall forthwith notify the Borrower and the
Lenders that the interest rate cannot be determined for such Eurodollar
Rate Advances;
(ii) each such Advance will automatically, on the last day of
the then existing Interest Period therefor, Convert into an Alternate Base
Rate Advance (or if such Advance is then an Alternate Base Rate Advance,
will continue as an Alternate Base Rate Advance); and
(iii) the obligation of the Lenders to make, or to Convert
Advances into, Eurodollar Rate Advances, shall be suspended until the
Agent shall notify the Borrower and the Lenders that the circumstances
causing such suspension no longer exist.
(d) If, with respect to any Eurodollar Rate Advances, the Majority Lenders
notify the Agent that the Eurodollar Rate for any Interest Period for such
Advances will not adequately reflect the cost to such Majority Lenders of
making, funding, or maintaining their respective Eurodollar Rate Advances for
such Interest Period, the Agent shall forthwith so notify the Borrower and the
Lenders, whereupon:
(i) each Eurodollar Rate Advance will automatically, on the last
day of the then existing Interest Period therefor, Convert into an
Alternate Base Rate Advance; and
(ii) the obligation of the Lenders to make, or to Convert
Advances into, Eurodollar Rate Advances shall be suspended until the Agent
shall notify the Borrower and the Lenders that the
<PAGE>
25
circumstances causing such suspension no longer exist.
(e) If the Borrower shall fail to select the duration of any Interest
Period for any Eurodollar Rate Advances in accordance with the provisions
contained in the definition of "INTEREST PERIOD" in Section 1.01, the Agent will
forthwith so notify the Borrower and the Lenders and such Advances will
automatically, on the last day of the then existing Interest Period therefor,
Convert into Alternate Base Rate Advances.
(f) On the date on which the aggregate unpaid principal amount of Advances
comprising all Borrowings shall be reduced, by payment or prepayment or
otherwise, to less than $5,000,000, such Advances shall, if they are Eurodollar
Rate Advances, automatically Convert into Alternate Base Rate Advances, and on
and after such date the right of the Borrower to Convert such Advances into
Eurodollar Rate Advances shall be suspended until such time that the aggregate
unpaid principal amount of Advances comprising all Borrowings shall equal or
exceed $5,000,000.
SECTION 2.10. CONVERSION OF ADVANCES. So long as no Event of Default or
Unmatured Default shall have occurred and be continuing, the Borrower may on any
Business Day, by delivering a notice of Conversion (a "NOTICE OF CONVERSION") to
the Agent not later than 12:00 noon (i) on the third Business Day prior to the
date of the proposed Conversion, in the case of a Conversion to Eurodollar Rate
Advances and (ii) on the date of the proposed Conversion, in the case of a
Conversion to Alternate Base Rate Advances, and subject to the provisions of
Sections 2.09 and 2.13, Convert all Advances of one Type comprising the same
Borrowing into Advances of another Type; provided, however, that, in the case of
any Conversion of any Eurodollar Rate Advances into Advances of another Type on
a day other than the last day of an Interest Period for such Eurodollar Rate
Advances, the Borrower shall be obligated to reimburse the Lenders in respect
thereof pursuant to Section 9.04(b). Each such Notice of Conversion shall be in
substantially the form of Exhibit B-2 hereto and shall, within the restrictions
specified above, specify (A) the date of such Conversion, (B) the Advances to be
Converted, (C) if such Conversion is into Eurodollar Rate Advances, the duration
of the Interest Period for each such Advance, and (D) the aggregate amount of
Advances proposed to be Converted.
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26
SECTION 2.11. OPTIONAL PREPAYMENTS OF ADVANCES. The Borrower may, upon
at least three Business Days' notice to the Agent stating the proposed date and
aggregate principal amount of the prepayment, and if such notice is given the
Borrower shall, prepay the outstanding principal amounts of the Advances
comprising part of the same Borrowing in whole or ratably in part, together with
accrued interest to the date of such prepayment on the principal amount prepaid;
provided, however, that (i) each partial prepayment shall be in an aggregate
principal amount not less than $5,000,000 or an integral multiple of $1,000,000
in excess thereof and (ii) in the case of any such prepayment of Eurodollar Rate
Advances, the Borrower shall be obligated to reimburse the Lenders in respect
thereof pursuant to Section 9.04(b) on the date of such prepayment. Except as
provided in this Section 2.11, the Borrower shall have no right to prepay any
principal amount of any Advances.
SECTION 2.12. MANDATORY PREPAYMENTS. (a) If and to the extent that the
aggregate principal amount outstanding on any date hereunder shall exceed the
aggregate amount of the Commitments hereunder on such date, the Borrower shall
pay or prepay for the ratable accounts of the Lenders so much of the principal
amount outstanding under this Agreement as shall be necessary in order that the
principal amount outstanding (after giving effect to such prepayment) will not
exceed the amount of Commitments on such date, together with (i) accrued
interest to the date of such prepayment on the principal amount repaid or
prepaid and (ii) in the case of prepayments of Eurodollar Rate Advances, any
amount payable to the Lenders pursuant to Section 9.04(b).
(b) All prepayments required to be made pursuant to subsection (a), above,
shall be applied by the Agent:
(i) first, to the prepayment in whole or ratably in part of the
principal amount of all outstanding Alternate Base Rate Advances (without
reference to minimum dollar requirements);
(ii) second, to the prepayment in whole or ratably in part of the
principal amount of all outstanding Eurodollar Rate Advances (without
reference to minimum dollar requirements); and
(iii) third, to the cash collateralization of LC Outstandings by
depositing such amounts in a special interest-bearing escrow
<PAGE>
27
account maintained by the Agent at the Agent's office and pledged to the
Agent for the benefit of the Lenders pursuant to documentation reasonably
satisfactory to the Borrower and the Agent.
(c) In lieu of prepaying any Eurodollar Rate Advances under any provision
(other than Sections 2.14 and 7.02) of this Agreement, the Borrower may, upon
notice to the Agent, deliver such funds to the Agent, to be held as additional
cash collateral securing the obligations hereunder and under the Notes. The
Agent shall deposit all amounts delivered to it in a non-interest-bearing
special purpose cash collateral account, to be governed by a cash collateral
agreement in form and substance satisfactory to the Borrower and the Agent, and
shall apply all such amounts in such account against such Advances, and such
Advances shall be deemed prepaid, on the last day of the Interest Period
therefor. The Agent shall promptly notify the Lenders of any election by the
Borrower to deliver funds to the Agent under this subsection (c).
(d) In addition, in the event that any Lender shall not have consented to
a request made by the Borrower under Section 2.18 to extend the Termination
Date, then, on the date of any termination or reduction of the Commitment of
such Lender pursuant to Section 2.18, the Borrower shall pay or prepay to such
Lender the aggregate outstanding principal amount of all Advances of such
Lender, together with accrued interest to the date of such prepayment on the
principal amount prepaid. In the case of any such prepayment of a Eurodollar
Rate Advance, the Borrower shall be obligated to reimburse each such Lender in
respect thereof pursuant to Section 9.04(b).
SECTION 2.13. INCREASED COSTS. (a) If, due to either (i) the
introduction of or any change (other than any change by way of imposition or
increase of reserve requirements, in the case of Eurodollar Rate Advances,
included in the Eurodollar Reserve Percentage) in or in the interpretation of
any law or regulation or (ii) the compliance with any guideline or request from
any central bank or other governmental authority (whether or not having the
force of law), there shall be any increase in (A) the cost to any Lender of
agreeing to make or making, funding or maintaining Eurodollar Rate Advances, or
of participating in the issuance, maintenance or funding of any Letter of
Credit, or (B) the cost to any LC Bank of issuing, maintaining or funding any
Letter of Credit,
<PAGE>
28
then the Borrower shall from time to time, upon demand by such Lender or any LC
Bank, as the case may be (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender or LC Bank, as the case may be, additional
amounts sufficient to compensate such Lender or LC Bank, as the case may be, for
such increased cost. A certificate as to the amount of such increased cost,
submitted to the Borrower and the Agent by such Lender or LC Bank, shall be
conclusive and binding for all purposes, absent manifest error.
(b) If any Lender or LC Bank determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by such
Lender or LC Bank or any corporation controlling such Lender or LC Bank and that
the amount of such capital is increased by or based upon (1) the existence of
such Lender's or LC Bank's commitment to lend or issue or participate in any
Letter of Credit hereunder or (2) the participation in or issuance or
maintenance of any Letter of Credit or Advance and (3) other similar such
commitments, then, upon demand by such Lender or LC Bank (with a copy of such
demand to the Agent), the Borrower shall immediately pay to the Agent for the
account of such Lender or LC Bank from time to time as specified by such Lender
or LC Bank additional amounts sufficient to compensate such Lender or LC Bank or
such corporation in the light of such circumstances, to the extent that such
Lender or LC Bank reasonably determines such increase in capital to be allocable
to the transactions contemplated hereby. A certificate as to such amounts
submitted to the Borrower and the Agent by such Lender or LC Bank, describing in
reasonable detail the manner in which such amounts have been calculated, shall
be conclusive and binding for all purposes, absent manifest error.
(c) Notwithstanding the provisions of subsection (a) or (b), above, to the
contrary, no Lender or LC Bank shall be entitled to demand compensation or be
compensated thereunder to the extent that such compensation relates to any
period of time more than 180 days prior to the date upon which such Lender or LC
Bank first notified the Borrower of the occurrence of the event entitling such
Lender to such compensation (unless, and to the extent, that any such
compensation so demanded shall relate to the retroactive application of any
event so notified to the Borrower).
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29
SECTION 2.14. ILLEGALITY. Notwithstanding any other provision of this
Agreement to the contrary, if any Lender (the "AFFECTED LENDER") shall notify
the Agent and the Borrower that the introduction of or any change in or in the
interpretation of any law or regulation makes it unlawful, or any central bank
or other governmental authority asserts that it is unlawful, for the Affected
Lender or its Eurodollar Lending Office to perform its obligations hereunder to
make Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances
hereunder, (i) all Eurodollar Rate Advances of the Affected Lender shall, on the
fifth Business Day following such notice from the Affected Lender (or sooner if
required by such law, regulation, central bank or other governmental authority),
automatically be Converted into a like number of Alternate Base Rate Advances,
each in the amount of the corresponding Eurodollar Rate Advance of the Affected
Lender being so Converted (each such Advance, as so Converted, being an
"AFFECTED LENDER ADVANCE"), and the obligation of the Affected Lender to make,
maintain, or Convert Advances into Eurodollar Rate Advances shall thereupon be
suspended until the Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist, or the Affected Lender
has been replaced pursuant to Section 9.07(g), and (ii) in the event that, on
the last day of each of the then-current Interest Periods for each Eurodollar
Rate Advance (each such Advance being an "UNAFFECTED LENDER ADVANCE") of each of
the other Lenders (each such Lender being an "UNAFFECTED LENDER"), the Agent
shall have yet to notify the Borrower and the Lenders that the circumstances
causing such suspension of the Affected Lender's obligations as aforesaid no
longer exist, or the Affected Lender has not yet been replaced pursuant to
Section 9.07(g), such Unaffected Lender Advances shall be Converted into
Alternate Base Rate Advances, and the obligation of each such Unaffected Lender
to make, maintain, or Convert Advances into Eurodollar Rate Advances shall be
suspended until the Agent shall so notify the Borrower and the Lenders, or the
Affected Lender shall be so replaced. For purposes of any prepayment under this
Agreement, each Affected Lender Advance shall be deemed to continue to be part
of the same Borrowing as the Unaffected Lender Advances to which it corresponded
at the time of the Conversion of such Affected Lender Advance pursuant to clause
(i), above.
SECTION 2.15. PAYMENTS AND COMPUTATIONS. (a) The Borrower shall make
each payment hereunder and under the Notes not later than 1:00 P.M. on the day
when due in
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30
Dollars to the Agent at its address referred to in Section 9.02 in same day
funds. Any payment that is received by the Agent after 1:00 P.M. on any
Business Day shall be deemed received on the immediately succeeding Business
Day. The Agent will promptly thereafter cause to be distributed like funds
relating to the payment of principal or interest or fees ratably (other than
amounts payable pursuant to Section 2.02(c), 2.04(b), 2.04(d), 2.08, 2.12(d),
2.13, 2.16, 9.04(b) or 9.04(c)) (in accordance with their respective
Percentages) to the Lenders for the account of their respective Applicable
Lending Offices, and like funds relating to the payment of any other amount
payable to any Lender to such Lender for the account of its Applicable Lending
Office, in each case to be applied in accordance with the terms of this
Agreement. Upon its acceptance of a Lender Assignment and recording of the
information contained therein in the Register pursuant to Section 9.07(d), from
and after the effective date specified in such Lender Assignment, the Agent
shall make all payments hereunder and under the Notes in respect of the interest
assigned thereby to the Lender assignee thereunder, and the parties to such
Lender Assignment shall make all appropriate adjustments in such payments for
periods prior to such effective date directly between themselves.
(b) The Borrower hereby authorizes each Lender and LC Bank, if and to the
extent payment owed to such Lender or LC Bank is not made when due hereunder or
under any Note held by such Lender, to charge from time to time against any or
all of the Borrower's accounts with such Lender or LC Bank, as the case may be,
any amount so due.
(c) All computations of interest based on the Alternate Base Rate and of
fees shall be made by the Agent on the basis of a year of 365 or 366 days, as
the case may be, and all computations of interest based on the Eurodollar Rate
and the Federal Funds Rate shall be made by the Agent, and all computations of
interest pursuant to Section 2.08 shall be made by a Lender, on the basis of a
year of 360 days, in each case for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest or fees are payable. Each determination by the Agent (or, in the case
of Section 2.08, by a Lender) of an interest rate hereunder shall be conclusive
and binding for all purposes, absent manifest error.
(d) Whenever any payment hereunder, under the Notes, under an LC Bank
Agreement or under any other Loan
<PAGE>
31
Document shall be stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of payment of interest or
fees, as the case may be; provided, however, that if such extension would cause
payment of interest on or principal of Eurodollar Rate Advances to be made in
the next following calendar month, such payment shall be made on the next
preceding Business Day, and such reduction of time shall in such case be taken
into account in the computation of interest or fees, as the case may be.
(e) Unless the Agent shall have received notice from the Borrower prior to
the date on which any payment is due to the Lenders hereunder that the Borrower
will not make such payment in full, the Agent may assume that the Borrower has
made such payment in full to the Agent on such date and the Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent that the Borrower shall not have so made such payment in full to the
Agent, each Lender shall repay to the Agent forthwith on demand such amount
distributed to such Lender together with interest thereon, for each day from the
date such amount is distributed to such Lender until the date such Lender repays
such amount to the Agent, at the Federal Funds Rate.
(f) Notwithstanding anything to the contrary contained herein, any amount
payable by the Borrower hereunder or under any Note that is not paid when due
(whether at stated maturity, by acceleration or otherwise) shall (to the fullest
extent permitted by law) bear interest from the date when due until paid in full
at a rate per annum equal at all times to the Default Rate, payable upon demand.
SECTION 2.16. TAXES. (a) Any and all payments by the Borrower hereunder
and under the other Loan Documents shall be made, in accordance with Section
2.15, free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges, or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender, each LC
Bank and the Agent, taxes imposed on its overall net income and franchise taxes
imposed on it by the jurisdiction under the laws of which such Lender, LC Bank
or the Agent (as the case may be) is organized or any
<PAGE>
32
political subdivision thereof and, in the case of each Lender, taxes imposed on
its overall net income and franchise taxes imposed on it by the jurisdiction of
such Lender's Applicable Lending Office or any political subdivision thereof
(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "TAXES"). If the Borrower
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder or under any other Loan Document to any Lender, any LC Bank or
the Agent, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.16) such Lender, such LC Bank or
the Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law.
(b) In addition, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges, or similar
levies which arise from any payment made hereunder or under any other Loan
Document or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement or any other Loan Document (hereinafter referred to
as "OTHER TAXES").
(c) The Borrower will indemnify each Lender, each LC Bank and the Agent
for the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.16) paid by such Lender, such LC Bank or the Agent (as the case may
be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. This indemnification shall be made within 30
days from the date such Lender, such LC Bank or the Agent (as the case may be)
makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
will furnish to the Agent, at its address referred to in Section 9.02, the
original or a certified copy of a receipt evidencing payment thereof.
(e) Each Lender which is organized under the laws of a jurisdiction
outside of the United States agrees
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33
that, on or prior to the date upon which it shall become a party hereto, and
upon the reasonable request from time to time of the Borrower or the Agent, such
Lender will deliver to the Borrower and the Agent duly completed copies of such
form or forms as may from time to time be prescribed by the United States
Internal Revenue Service indicating that such Lender is entitled to receive
payments without deduction or withholding of any United States Federal income
taxes, as permitted by the Code. Each Lender that delivers to the Borrower and
the Agent the form or forms referred to in the preceding sentence further
undertakes to deliver to the Borrower and the Agent further copies of such form
or forms, or successor applicable form or forms, as the case may be, as and when
any previous form filed by it hereunder shall expire or shall become incomplete
or inaccurate in any respect, unless such Lender is no longer permitted under
United States law to deliver such form or forms. Each such Lender represents
and warrants that each such form supplied by it to the Agent and the Borrower
pursuant to this subsection (e), and not superseded by another form supplied by
it, is or will be, as the case may be, complete and accurate.
(f) Any Lender claiming any additional amounts payable pursuant to this
Section 2.16 shall use its best efforts (consistent with its internal policy and
legal and regulatory restrictions) to change the jurisdiction of its Applicable
Lending Office if the making of such a change would avoid the need for, or
reduce the amount of, any such additional amounts which may thereafter accrue
and would not, in the reasonable judgment of such Lender, be otherwise
disadvantageous to such Lender.
(g) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.16 shall survive the payment in full of principal and interest
hereunder and under the Notes.
SECTION 2.17. SHARING OF PAYMENTS, ETC. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Advances made by it (other than
pursuant to Section 2.02(c), 2.08, 2.12(d), 2.16, 9.04(b) or 9.07) in excess of
its ratable share of payments on account of the Advances obtained by all the
Lenders, such Lender shall forthwith purchase from the other Lenders such
participations in the Advances made by them as shall be necessary to cause such
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34
purchasing Lender to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and such Lender shall repay to the purchasing Lender the
purchase price to the extent of such recovery, together with an amount equal to
such Lender's ratable share (according to the proportion of (i) the amount of
such Lender's required repayment to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 2.17 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.
SECTION 2.18. EXTENSION OF TERMINATION DATE. (a) At least 60 but not
more than 90 days before each of the first two anniversaries of the Effective
Date, the Borrower may, by delivering a written request to the Agent (each such
request being irrevocable), request that each Lender extend for one year the
Termination Date with respect to such Lender's Commitment. The Agent shall,
upon its receipt of such a request, promptly notify each Lender thereof, and
request that each Lender promptly advise the Agent of its approval or rejection
of such request.
(b) Upon receipt of such notification from the Agent, each Lender may (but
shall not be required to), in its sole and absolute discretion, agree to extend
the Termination Date with respect to its Commitment for a period of one year,
and shall (should it determine to do so), no later than 30 days following its
receipt of such notification, notify the Agent of its approval concerning such
request. If any Lender shall not so notify the Agent, such Lender shall be
deemed not to have consented to such request. The Agent shall thereupon notify
the Borrower as to the Lenders, if any, that have consented to such request.
(c) The Commitment of each Lender that consents to such request shall be
extended for a period of one year, commencing on the then-scheduled Termination
Date. Subject to subsection (d), below, the Commitment of any Lender electing
not to extend (or failing to notify the
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35
Agent of its consent to extend) the Termination Date shall automatically
terminate on the then-scheduled Termination Date.
(d) In the event that any Lender (a "NONCONSENTING LENDER") shall not
consent (or shall be deemed not to have consented) to the Borrower's extension
request made prior to the first anniversary of the Effective Date pursuant to
subsection (a), above, the Borrower may, by delivering a written request to the
Agent (such request being irrevocable) at least 60 but no more than 90 days
prior to the second anniversary of the Effective Date, request that each
Nonconsenting Lender extend for two years the Termination Date with respect to
such Lender's Commitment. The Agent shall, upon its receipt of such a request,
promptly notify such Nonconsenting Lender thereof, and request that each
Nonconsenting Lender promptly advise the Agent of its approval or rejection of
such request. Upon receipt of such notification from the Agent, each
Nonconsenting Lender may (but shall not be required to), in its sole and
absolute discretion, agree to extend the Termination Date with respect to its
Commitment for a period of two years, and shall (should it determine to do so),
no later than 30 days following its receipt of such notification, notify the
Agent of its approval concerning such request. If any Nonconsenting Lender
shall not so notify the Agent, such Nonconsenting Lender shall be deemed not to
have consented to such request. The Agent shall thereupon notify the Borrower
as to the Nonconsenting Lenders, if any, that have consented to such request.
The Commitment of each Nonconsenting Lender that consents to such request shall
be extended for a period of two years, commencing on the then-scheduled
Termination Date for such Nonconsenting Lender. The Commitment of any
Nonconsenting Lender electing not to extend (or failing to notify the Agent of
its consent to extend) the Termination Date shall automatically terminate on the
then-scheduled Termination Date for such Nonconsenting Lender.
(e) On each then-scheduled Termination Date, the aggregate Commitments
shall be automatically reduced by an amount equal to the product of (i) the sum
of the Percentages of those Lenders (including Nonconsenting Lenders) that have
elected not to extend (or failed to notify the Agent of their consent to extend)
their Commitment pursuant to subsection (b) or (d), above, as applicable, and
(ii) the Commitments on such Termination Date immediately prior to such
calculation.
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ARTICLE III
LETTERS OF CREDIT
SECTION 3.01 LC BANKS. (a) Subject to the terms and conditions hereof,
the Borrower may from time to time arrange for one or more Lenders to act as an
LC Bank hereunder. Any such designation by the Borrower shall be notified to
the Agent at least five Business Days prior to the first date upon which the
Borrower proposes that such LC Bank issue its first Letter of Credit, so as to
provide adequate time for such proposed Letter of Credit to be approved by the
Agent hereunder; provided, that nothing contained herein shall be deemed to
require any Lender to agree to act as an LC Bank, if it does not so desire.
Within two Business Days following the receipt of any such designation of a
proposed LC Bank together with the proposed form of such Letter of Credit, the
Agent shall notify the Borrower as to whether such Letter of Credit complies
with the requirements specified therefor in this Agreement.
(b) The aggregate amount of all LC Outstandings in respect of all Letters
of Credit outstanding on any date of determination shall not exceed
$100,000,000.
SECTION 3.02 LETTERS OF CREDIT. (a) Each Letter of Credit shall be
issued (or the stated maturity thereof extended or terms thereof modified or
amended) on not less than three Business Days' prior written notice thereof to
the Agent (which shall promptly distribute copies thereof to the Lenders) and
the relevant LC Bank. Each such notice (a "REQUEST FOR ISSUANCE") shall specify
(i) the date (which shall be a Business Day) of issuance of such Letter of
Credit (or the date of effectiveness of such extension, modification or
amendment) and the stated expiry date thereof (which shall be no later than the
latest then-scheduled Termination Date on which the amount of the Commitments
(without giving effect to any scheduled reductions in the Commitments on such
date) will equal or exceed the aggregate stated amount of such Letter of Credit
and all other Letters of Credit that are then scheduled to expire thereafter),
(ii) the proposed stated amount of such Letter of Credit (which shall not be
less than $1,000,000) and (iii) such other information as shall demonstrate
compliance by such Letter of Credit with the requirements specified therefor in
this Agreement and the relevant LC Bank Agreement. Each Request for Issuance
shall be irrevocable unless modified
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37
or rescinded by the Borrower not less than two days prior to the proposed date
of issuance (or effectiveness) specified therein. Not later than 12:00 noon on
the proposed date of issuance (or effectiveness) specified in such Request for
Issuance, and upon fulfillment of the applicable conditions precedent and the
other requirements set forth herein and in the relevant LC Bank Agreement, such
LC Bank shall issue (or extend, amend or modify) such Letter of Credit and
provide notice and a copy thereof to the Agent, which shall promptly furnish
copies thereof to the Lenders.
(b) Each Lender severally agrees with such LC Bank to participate in the
Extension of Credit resulting from the issuance (or extension, modification or
amendment) of such Letter of Credit, in the manner and the amount provided in
Section 3.04(b), and the issuance of such Letter of Credit shall be deemed to be
a confirmation by such LC Bank and each Lender of such participation in such
amount.
SECTION 3.03 LC BANK FEES. The Borrower shall pay directly to each LC
Bank the letter of credit fees, if any, specified to be paid pursuant to the
terms of the LC Bank Agreement to which such LC Bank is a party at the times and
in the manner specified in such LC Bank Agreement.
SECTION 3.04 REIMBURSEMENT TO LC BANKS. (a) The Borrower hereby agrees
to pay to the Agent for the account of each LC Bank, on demand made by such LC
Bank to the Borrower and the Agent, on and after each date on which such LC Bank
shall pay any amount under the Letter of Credit issued by such LC Bank, a sum
equal to the amount so paid plus interest on such amount from the date so paid
by such LC Bank until repayment to such LC Bank in full at a fluctuating
interest rate per annum equal at all times to the interest rate hereunder for
Alternate Base Rate Advances.
(b) If any LC Bank shall not have been reimbursed in full for any payment
made by such LC Bank under the Letter of Credit issued by such LC Bank on the
date of such payment, such LC Bank shall give the Agent and each Lender notice
thereof (an "LC PAYMENT NOTICE") no later than 12:00 noon on the Business Day
immediately succeeding the date of such payment by such LC Bank. Each Lender
severally agrees to purchase a participation in the reimbursement obligation of
the Borrower to such LC Bank under subsection (a), above, by paying to the
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38
Agent for the account of such LC Bank an amount equal to such Lender's
Percentage of such unreimbursed amount paid by such LC Bank, plus interest on
such amount at a rate per annum equal to the Federal Funds Rate from the date of
such payment by such LC Bank to the date of payment to such LC Bank by such
Lender. Each such payment by a Lender shall be made not later than 3:00 P.M. on
the later to occur of (i) the Business Day immediately following the date of
such payment by such LC Bank and (ii) the Business Day on which such Lender
shall have received an LC Payment Notice from such LC Bank. Each Lender's
obligation to make each such payment to the Agent for the account of such LC
Bank shall be several and shall not be affected by the occurrence or continuance
of an Unmatured Default or Event of Default or the failure of any other Lender
to make any payment under this Section 3.04. Each Lender further agrees that
each such payment shall be made without any offset, abatement, withholding or
reduction whatsoever.
(c) The failure of any Lender to make any payment to the Agent for the
account of an LC Bank in accordance with subsection (b), above, shall not
relieve any other Lender of its obligation to make payment, but no Lender shall
be responsible for the failure of any other Lender. If any Lender shall fail to
make any payment to the Agent for the account of an LC Bank in accordance with
subsection (b), above, within five Business Days after the LC Payment Notice
relating thereto, then, for so long as such failure shall continue, such LC Bank
shall be deemed, for purposes of Section 2.17 and Article VII hereof, to be a
Lender hereunder owed an Advance in an amount equal to the outstanding principal
amount due and payable by such Lender to the Agent for the account of such LC
Bank pursuant to subsection (b), above.
(d) Each participation purchased by a Lender under subsection (b), above,
shall constitute an Alternate Base Rate Advance deemed made by such Lender to
the Borrower on the date of such payment by the relevant LC Bank under the
Letter of Credit issued by such LC Bank (irrespective of the Borrower's
noncompliance, if any, with the conditions precedent for Advances hereunder);
and all such payments by the Lenders in respect of any one such payment by such
LC Bank shall constitute a single Borrowing hereunder.
SECTION 3.05 OBLIGATIONS ABSOLUTE. The payment obligations of each
Lender under Section 3.04(b) and of the Borrower under this Agreement in respect
of any
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payment under any Letter of Credit and any Advance made under Section 3.04(d)
shall be unconditional and irrevocable, and shall be paid strictly in accordance
with the terms of this Agreement under all circumstances, including, without
limitation, the following circumstances:
(i) any lack of validity or enforceability of any Loan Document or
any other agreement or instrument relating thereto or to such Letter of
Credit;
(ii) any amendment or waiver of, or any consent to departure from,
all or any of the Loan Documents;
(iii) the existence of any claim, set-off, defense or other right
that the Borrower may have at any time against any beneficiary, or any
transferee, of such Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), any LC Bank, or any
other Person, whether in connection with this Agreement, the transactions
contemplated herein or by such Letter of Credit, or any unrelated
transaction;
(iv) any statement or any other document presented under such Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect;
(v) payment in good faith by any LC Bank under the Letter of Credit
issued by such LC Bank against presentation of a draft or certificate
which does not comply with the terms of such Letter of Credit; or
(vi) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
SECTION 3.06 LIABILITY OF LC BANKS AND THE LENDERS. The Borrower assumes
all risks of the acts and omissions of any beneficiary or transferee of any
Letter of Credit. Neither the LC Bank that has issued such Letter of Credit,
the Lenders nor any of their respective officers, directors, employees, agents
or Affiliates shall be liable or responsible for (i) the use that may
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40
be made of such Letter of Credit or any acts or omissions of any beneficiary or
transferee thereof in connection therewith; (ii) the validity, sufficiency or
genuineness of documents, or of any endorsement thereon, even if such documents
should prove to be in any or all respects invalid, insufficient, fraudulent or
forged; (iii) payment by such LC Bank against presentation of documents that do
not comply with the terms of such Letter of Credit, including failure of any
documents to bear any reference or adequate reference to such Letter of Credit;
or (iv) any other circumstances whatsoever in making or failing to make payment
under such Letter of Credit, except that the Borrower and each Lender shall have
the right to bring suit against such LC Bank, and such LC Bank shall be liable
to the Borrower and any Lender, to the extent of any direct, as opposed to
consequential, damages suffered by the Borrower or such Lender which the
Borrower or such Lender proves were caused by such LC Bank's wilful misconduct
or gross negligence, including such LC Bank's wilful failure to make timely
payment under such Letter of Credit following the presentation to it by the
beneficiary thereof of a draft and accompanying certificate(s) that strictly
comply with the terms and conditions of such Letter of Credit. In furtherance
and not in limitation of the foregoing, any LC Bank may accept sight drafts and
accompanying certificates presented under a Letter of Credit issued by such LC
Bank that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary.
Notwithstanding the foregoing, no Lender (in its capacity as Lender) shall be
obligated to indemnify the Borrower for damages caused by any LC Bank's wilful
misconduct or gross negligence, and the obligation of the Borrower to reimburse
the Lenders hereunder shall be absolute and unconditional, notwithstanding the
gross negligence or wilful misconduct of any LC Bank.
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.01. CONDITIONS PRECEDENT TO INITIAL EXTENSION OF CREDIT. The
obligation of each Lender to make its initial Extension of Credit is subject to
the satisfaction, prior to or concurrently with the making of such initial
Extension of Credit, of each of the following conditions precedent:
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41
(a) DOCUMENTS AND OTHER AGREEMENTS. The Agent shall have received the
following, each dated the same date (unless otherwise specified below), in form
and substance satisfactory to the Agent and each Lender and (except for the
Notes) in sufficient copies for each Lender:
(i) The Notes payable to the order of each of the Lenders,
respectively, duly executed by the Borrower;
(ii) A copy of the Guaranty, duly executed by the Parent;
(iii) Certified copies of the resolutions of the Board of Directors
of the Borrower approving this Agreement, the Notes, the other Loan
Documents to which it is a party and the transactions contemplated hereby
and thereby and any other documents to be delivered by the Borrower
hereunder, and of all documents evidencing other necessary corporate
action and all Governmental Approvals, if any, with respect to this
Agreement, the Notes and the other Loan Documents;
(iv) Certified copies of the resolutions of the Board of Directors of
the Parent approving the Guaranty and any other documents to be delivered
by the Parent hereunder or thereunder, and of all documents evidencing
other necessary corporate action and all Governmental Approvals, if any,
with respect to the Guaranty;
(v) A certificate of the Secretary or an Assistant Secretary of the
Borrower certifying (A) the names and true signatures of the officers of
the Borrower authorized to sign this Agreement, the Notes and the other
documents to be delivered hereunder and (B) that attached thereto are true
and correct copies of the Certificate of Incorporation (or comparable
charter document) and the By-laws of the Borrower, in each case as in
effect on such date;
(vi) A certificate of the Secretary or an Assistant Secretary of the
Parent certifying (A) the names and true signatures of the officers of the
Parent authorized to sign the Guaranty and any other documents to be
delivered by the Parent
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42
hereunder or thereunder and (B) that attached thereto are true and correct
copies of the Certificate of Incorporation (or comparable charter
document) and By-laws of the Parent, in each case as in effect on such
date;
(vii) A good standing certificate issued by the Secretary of State
of its incorporation for each of the Borrower and the Parent, each dated
as of a date not more than five days prior to such date;
(viii) A certificate of the chief financial officer of the Borrower,
or such other officer of the Borrower acceptable to the Agent, stating
that (A) the representations and warranties contained in Section 5.01 of
this Agreement are true and correct on and as of the date of such
certificate as though made on and as of such date and (B) no Event of
Default and no Unmatured Default has occurred and is continuing;
(ix) A certificate of the chief financial officer of the Parent, or
such other officer of the Parent acceptable to the Agent, stating that the
representations and warranties contained in Section 6 of the Guaranty are
true and correct on and as of the date of such certificate as though made
on such date;
(x) A favorable opinion of Sidley & Austin, counsel for the Borrower
and the Parent, substantially in the form of Exhibit F hereto and as to
such other matters as the Majority Lenders through the Agent may
reasonably request;
(xi) A favorable opinion of King & Spalding, special counsel for the
Agent, substantially in the form of Exhibit G hereto; and
(xii) Such other approvals, opinions and documents as the Majority
Lenders, through the Agent, may reasonably request.
(b) PAYMENT OF FEES. The Agent and the Banks shall have received all fees
required to be paid by the Borrower on or prior to the date hereof pursuant to
Section 2.04(b) and (d) and all costs and expenses of the Agent (including
counsel fees and disbursements) incurred
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through (and for which statements have been provided prior to) the date hereof.
SECTION 4.02. CONDITIONS PRECEDENT TO EACH EXTENSION OF CREDIT. The
obligation of each Lender or LC Bank, as the case may be, to make an Extension
of Credit (including the initial Extension of Credit) shall be subject to the
further conditions precedent that, on the date of such Extension of Credit and
after giving effect thereto:
(a) The following statements shall be true (and each of the giving of the
applicable notice or request with respect thereto and the making of such
Extension of Credit shall constitute a representation and warranty by the
Borrower that, on the date of such Extension of Credit, such statements are
true):
(i) the representations and warranties contained in Section 5.01 of
this Agreement (other than those contained in subsections (e) and (f)
thereof) and in Section 6 of the Guaranty (other than those contained in
subsections (f) and (g) thereof) are true and correct on and as of the
date of such Extension of Credit, before and after giving effect to such
Extension of Credit and to the application of the proceeds thereof, as
though made on and as of such date; and
(ii) no Event of Default has occurred and is continuing, or would
result from such Extension of Credit or the application of the proceeds
thereof.
(b) The Agent shall have received such other approvals, opinions and
documents as the Majority Lenders or any LC Bank, through the Agent, may
reasonably request as to the legality, validity, binding effect or
enforceability of the Loan Documents or the financial condition, results of
operations, operations, business, properties or prospects of the Borrower or of
the Parent and its Subsidiaries.
SECTION 4.03. CONDITIONS PRECEDENT TO CERTAIN EXTENSIONS OF CREDIT. The
obligation of each Lender or LC Bank, as the case may be, to make an Extension
of Credit (including the initial Extension of Credit) that would (after giving
effect to all Extensions of Credit on such date and the application of proceeds
thereof) increase the principal amount outstanding hereunder, or to make an
Extension of Credit of the type described in
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44
clause (ii) or (iii) of the definition thereof, shall be subject to the further
conditions precedent that, on the date of such Extension of Credit and after
giving effect thereto:
(a) the following statements shall be true (and each of the giving of the
applicable notice or request with respect thereto and the making of such
Extension of Credit shall constitute a representation and warranty by the
Borrower that, on the date of such Extension of Credit, such statements are
true):
(i) the representations and warranties contained in subsections (e)
and (f) of Section 5.01 of this Agreement and in subsections (f) and (g)
of Section 6 of the Guaranty are true and correct on and as of the date of
such Extension of Credit, before and after giving effect to such Extension
of Credit and to the application of the proceeds thereof, as though made
on and as of such date; and
(ii) no Unmatured Default has occurred and is continuing, or would
result from such Extension of Credit or the application of the proceeds
thereof.
(b) The Agent shall have received such other approvals, opinions and
documents as the Majority Lenders or any LC Bank, through the Agent, may
reasonably request.
SECTION 4.04. RELIANCE ON CERTIFICATES. The Lenders, the LC Banks and
the Agent shall be entitled to rely conclusively upon the certificates delivered
from time to time by officers of the Borrower and the Parent as to the names,
incumbency, authority and signatures of the respective persons named therein
until such time as the Agent may receive a replacement certificate, in form
acceptable to the Agent, from an officer of such Person identified to the Agent
as having authority to deliver such certificate, setting forth the names and
true signatures of the officers and other representatives of such Person
thereafter authorized to act on behalf of such Person.
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45
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Illinois, and is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of the business conducted or the property
owned, operated or leased by it requires such qualification and where the
failure to so qualify might have a Material Adverse Effect, and has full power
and authority to own and hold under lease its property and to conduct its
business substantially as presently conducted by it.
(b) The execution, delivery and performance by the Borrower of this
Agreement, the Notes and the other Loan Documents to which it is a party are
within the Borrower's corporate powers, have been duly authorized by all
necessary corporate action and do not, and will not, (i) contravene the
Borrower's Certificate of Incorporation (or other comparable charter document)
or By-laws, law or any contractual or legal restriction binding on or affecting
the Borrower or its properties, (ii) result in a breach of, or constitute a
default under, any indenture or loan or credit agreement or any other agreement,
lease or instrument to which the Borrower is a party or by which it or its
properties may be bound or affected, or (iii) result in or require the creation
of any Lien upon or with respect to any of its properties.
(c) No Governmental Approval is required for the due execution, delivery
and performance by the Borrower of this Agreement, the Notes or any other Loan
Document to which it is a party.
(d) This Agreement has been duly executed and delivered by the Borrower
and is, and the Notes and the other Loan Documents to which the Borrower is a
party when delivered hereunder will be, legal, valid and binding obligations of
the Borrower enforceable against the Borrower in accordance with their
respective terms.
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46
(e) The balance sheets of the Borrower and its Subsidiaries as at
September 30, 1994, and the related statements of income, cash flows and
retained earnings of the Borrower and its Subsidiaries for the ten-month period
(December 1, 1993 to September 30, 1994) then ended, copies of each of which
have been furnished to each Lender, fairly present (subject to year-end
adjustments) the financial condition of the Borrower and its Subsidiaries as at
such dates and the results of the operations of the Borrower and its
Subsidiaries for the periods ended on such dates, all in accordance with GAAP
(except for the absence of notes thereto), and since September 30, 1994, there
has been no material adverse change in the financial condition, results of
operations, operations, business, properties or prospects of the Borrower and
its Subsidiaries, taken as a whole (other than operating losses resulting from
start-up operations of Subsidiaries of the Borrower), or in the Borrower's
ability to perform any of its obligations under this Agreement, the Notes and
the other Loan Documents to which it is a party.
(f) There is no pending or threatened action or proceeding affecting the
Borrower, the Parent or any of their respective Subsidiaries before any court,
governmental agency or arbitrator that may result in a Material Adverse Effect,
or that relates to this Agreement or the other Loan Documents or any transaction
contemplated hereby or thereby.
(g) No proceeds of any Advance will be used to acquire any equity security
of a class which is registered pursuant to Section 12 of the Exchange Act or in
any transaction subject to the requirements of Section 13 or 14 of the Exchange
Act.
(h) The Borrower is not engaged in the business of extending credit for
the purpose of buying or carrying margin stock (within the meaning of Regulation
U issued by the Board of Governors of the Federal Reserve System), and no
proceeds of any Advance and no Letter of Credit will be used to buy or carry any
margin stock or to extend credit to others for the purpose of buying or carrying
any margin stock.
(i) Neither the Borrower nor any Subsidiary of the Borrower is in
violation of any law or governmental regulation or court decree or order which
may result in a Material Adverse Effect.
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(j) Each of the Borrower and its Subsidiaries has filed all tax returns
and reports required by law to have been filed by it and has paid all taxes and
governmental charges thereby shown to be owing, except any such taxes or charges
which are being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books. No tax Liens have been filed with respect to the Borrower or any of its
Subsidiaries and, to the knowledge of the Borrower, no claims with respect to
any such taxes or charges are being asserted which, individually or in the
aggregate, could result in a Material Adverse Effect.
(k) During the preceding twelve-consecutive-month period, no steps have
been taken to terminate any Pension Plan, and no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien
under Section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Pension Plan which could result in the incurrence
by the Borrower of any material liability, fine, or penalty. The Borrower has
no contingent liability with respect to any post-retirement benefit under a
Welfare Plan, other than liability for continuation coverage described in Part 6
of Title I of ERISA.
(l) All factual information heretofore or contemporaneously furnished by
or on behalf of the Borrower in writing to any Lender or the Agent for purposes
of or in connection with this Agreement, any other Loan Document or any
transaction contemplated hereby is, and all other such factual information
hereafter furnished by or on behalf of the Borrower or Parent to the Agent or
any Lender will be, true and accurate in every material respect on the date as
of which such information is dated or certified, and not incomplete by omitting
to state any material fact necessary to make such information not misleading.
(m) The Borrower is not (i) a "public utility holding company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended, or (ii)
an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, or an
"investment advisor" within the meaning of the Investment Advisors Act of 1940,
as amended.
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ARTICLE VI
COVENANTS OF THE BORROWER
SECTION 6.01. AFFIRMATIVE COVENANTS. So long as any Note or any amount
payable by the Borrower hereunder shall remain unpaid, any Letter of Credit
shall remain outstanding or any Lender shall have any Commitment hereunder, the
Borrower will, unless the Majority Lenders shall otherwise consent in writing:
(a) REPORTING REQUIREMENTS. Furnish to each Lender:
(i) as soon as available and in any event within 60 days after the
end of each of the first three quarters of each fiscal year of the
Borrower, a consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such quarter and consolidated statements of
income, retained earnings and cash flows of the Borrower and its
Subsidiaries for the period commencing at the end of the previous fiscal
year and ending with the end of such quarter, all in reasonable detail and
duly certified (subject to year-end audit adjustments) by the chief
financial officer or the Treasurer of the Borrower as having been prepared
in accordance with GAAP consistently applied, except for (A) the absence
of notes thereto and (B) changes in accounting principles required by
GAAP;
(ii) as soon as available and in any event within 90 days after the
end of each fiscal year of the Borrower and its Subsidiaries, a
consolidated balance sheet of the Borrower and its Subsidiaries as at the
end of such fiscal year and consolidated statements of income, retained
earnings and cash flows of the Borrower and its Subsidiaries for such
fiscal year, certified in a manner acceptable to the Agent by Arthur
Anderson & Co. or another nationally-recognized independent public
accounting firm selected by the Borrower and acceptable to the Agent;
(iii) concurrently with the financial statements for each quarterly
accounting period and for each fiscal year of the Borrower furnished
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pursuant to paragraphs (i) and (ii), above, (A) a certificate of the chief
financial officer, any vice president responsible for financial or
accounting matters, or the Treasurer of the Borrower stating that (1) the
Borrower has performed and observed all of, and the Borrower is not in
default in the performance or observance of any of, the terms, covenants,
agreements and conditions of this Agreement or any Loan Document or, if
the Borrower shall be in default, specifying all such defaults and the
nature thereof, of which the signer of such certificate may have
knowledge, and (2) the signer has obtained no knowledge of any Unmatured
Default or Event of Default except as specified in such certificate, and
(B) an analysis prepared and certified by the chief financial officer, any
vice president responsible for financial or accounting matters, or the
Treasurer of the Borrower of the covenant contained in Section 6.02(b)
containing all information necessary for determining compliance by the
Borrower with such covenant;
(iv) as soon as available and in any event within 90 days after the
end of each fiscal year of the Borrower and concurrently with the
financial statements furnished pursuant to paragraph (ii), above, a
written statement of the independent public accountants that certified
such financial statements stating that, in making the examination
necessary for their certification of such financial statements, they have
obtained no knowledge of any Unmatured Default or Event of Default by the
Borrower in the observance of any of the covenants contained in Section
6.02 or, if such accountants shall have obtained knowledge of any such
Unmatured Default or Event of Default, specifying all such Unmatured
Defaults and Events of Defaults and the nature thereof, it being
understood that they shall not be liable directly or indirectly for any
failure to obtain knowledge of any Unmatured Default or Event of Default;
(v) as soon as possible and in any event within ten days after the
commencement of litigation against the Borrower or any of its Subsidiaries
that may result in a Material Adverse Effect or that questions the
validity or enforceability of any Loan Document against the Borrower or
the Parent, notice of such litigation
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describing in reasonable detail the facts and circumstances concerning
such litigation and the Borrower's, or such Subsidiary's, as the case may
be, proposed actions in connection therewith;
(vi) if the Borrower has any class of securities registered under the
Exchange Act, then promptly after the sending or filing thereof, copies of
all reports which the Borrower sends to any of its security holders, and
copies of all reports and registration statements which the Borrower or
any of its Subsidiaries files with the Securities and Exchange Commission
or any national securities exchange;
(vii) promptly after the occurrence of the institution of any steps
by the Borrower or any other Person to terminate any Pension Plan, or the
failure to make a required contribution to any Pension Plan if such
failure is sufficient to give rise to a Lien under Section 302(f) of
ERISA, or the taking of any action with respect to a Pension Plan which
could result in the requirement that the Borrower or any of its
Subsidiaries furnish a bond or other security to the PBGC or such Pension
Plan, or the occurrence of any event with respect to any Pension Plan
which could result in the incurrence by the Borrower or any of its
Subsidiaries of any material liability, fine, or penalty, or any material
increase in the contingent liability of the Borrower or any of its
Subsidiaries with respect to any post-retirement Welfare Plan benefit,
notice of such event and the action the Borrower proposes to take with
respect thereto;
(viii) as soon as possible and in any event within ten days after
the Borrower knows or should have reason to know of the occurrence of each
Unmatured Default or Event of Default continuing on the date of such
statement, a statement of the chief financial officer, any vice president
responsible for financial or accounting matters, or the Treasurer of the
Borrower setting forth details of such Unmatured Default or Event of
Default and the action that the Borrower has taken and proposes to take
with respect thereto; and
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(ix) such other information respecting the business, assets,
revenues, financial condition, results of operations, operations,
business, properties or prospects of the Borrower or any of its
Subsidiaries as the Agent or any Lender, through the Agent, may from time
to time reasonably request.
(b) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain, and
cause each of its Subsidiaries to preserve and maintain, its legal existence in
the jurisdiction of its organization and qualify and remain qualified as a
foreign organization in each jurisdiction in which such qualification is
reasonably necessary in view of its business and operations or the ownership of
its properties, and preserve, renew and keep in full force and effect the
rights, privileges and franchises necessary or desirable in the normal conduct
of its business, except to the extent that the Borrower's chief financial
officer certifies to the Lenders that the loss of any such right, privilege or
franchise, both individually and together with all other rights, privileges and
franchises lost since the Effective Date, would not have a Material Adverse
Effect.
(c) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of its Subsidiaries
to comply, in all material respects with all Applicable Laws, such compliance to
include compliance with ERISA and Environmental Laws.
(d) MAINTENANCE OF INSURANCE, ETC. Maintain, and cause each of its
Subsidiaries to maintain, such insurance as may be required by law and such
other insurance, to the extent and against such hazards and liabilities, as is
customarily maintained by companies similarly situated.
(e) INSPECTION RIGHTS. At any reasonable time and from time to time as
the Agent or any Lender may reasonably request, permit the Agent, each Lender or
any agents or representatives thereof to examine and make copies of and
abstracts from the records and books of account of, and visit the properties of,
the Borrower and any of its Subsidiaries, and to discuss the affairs, finances
and accounts of the Borrower and any of its Subsidiaries with any of their
respective officers or directors.
(f) MAINTAINING OF BOOKS. Maintain, and cause each of its Subsidiaries to
maintain, complete and
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accurate books of record and account in which entries shall be made of all
financial transactions and the assets and business of the Borrower and each of
its Subsidiaries in accordance with GAAP.
(g) MAINTENANCE OF PROPERTIES. Cause all properties used or useful in the
conduct of the business of the Borrower or any of its Subsidiaries to be
maintained and kept in reasonable condition, repair and working order, and cause
to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Borrower may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that neither the
Borrower nor any such Subsidiary shall be prevented from discontinuing the
operation and maintenance of any such properties if the chief financial officer
of the Borrower certifies that such discontinuance is desirable in the conduct
of the Borrower's or such Subsidiary's business and such discontinuance,
individually or with all such other discontinuances since the Effective Date,
would not have a Material Adverse Effect.
(h) TAXES AND LIABILITIES. Pay, and cause each of its Subsidiaries to
pay, when due all taxes, assessments, governmental charges and other liabilities
imposed upon it or its property, except to the extent contested in good faith
and by appropriate proceedings and in respect of which adequate reserves for the
payment thereof have been set aside by the Borrower or such Subsidiary, as the
case may be, in accordance with GAAP.
(i) USE OF PROCEEDS. Use the proceeds of each Extension of Credit
hereunder exclusively to finance investments in nonregulated energy generation
and energy-service-related businesses and projects, and for other general
corporate purposes, including, without limitation, intercompany advances to the
Parent in an aggregate amount not to exceed $25,000,000 at any one time
outstanding.
(j) CONDUCT OF BUSINESS. Carry out and conduct, and cause each of its
Subsidiaries to carry out and conduct, its business in substantially the same
manner and in substantially the same fields (including, without limitation,
nonregulated energy generation and energy-service-related businesses and
projects) as such business is now carried on and conducted.
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53
(k) ERISA. Maintain, and cause each of its Subsidiaries to maintain, each
of its defined benefit plans in substantial compliance with all applicable
requirements of ERISA and of the Code and with all applicable rulings and
regulations issued under the provisions of ERISA and the Code.
SECTION 6.02. NEGATIVE COVENANTS. So long as any Note or any amount
payable by the Borrower hereunder shall remain unpaid, any Letter of Credit
shall remain outstanding or any Lender shall have any Commitment hereunder, the
Borrower will not, unless the Majority Lenders shall otherwise consent in
writing:
(a) BORROWER STOCK. Permit any of its Subsidiaries to purchase, redeem,
retire, or otherwise acquire for value any shares of capital stock of the
Borrower, or any warrants, rights, or options to acquire any such shares, now or
hereafter outstanding.
(b) DEBT. Create, incur, assume or suffer to exist any Debt, other than
(i) Debt hereunder and under the Notes and the other Loan Documents, (ii)
unsecured Contingent Obligations (other than in respect of Letters of Credit
issued pursuant to Article III hereof) in an aggregate amount at any one time
outstanding not to exceed the excess of (A) $300,000,000 over (B) the amount of
Contingent Obligations incurred by the Parent pursuant to Section 8(c)(ii) of
the Guaranty, and (iii) unsecured intercompany advances from the Parent
subordinated in all respects to any and all Debt hereunder and under the Notes
upon the terms set forth in Exhibit H hereto; provided, however, that,
notwithstanding the foregoing, the aggregate amount of Debt of the Borrower and
its Subsidiaries and of the Parent at any one time outstanding shall not exceed
$500,000,000.
(c) INVESTMENTS IN OTHER PERSONS. Make, or permit any of its Subsidiaries
to make, any loan or advance to any Person or purchase or otherwise acquire any
capital stock, obligations or other securities of, make any capital contribution
to, or otherwise invest in, any Person, except that (i) so long as no Unmatured
Default or Event of Default has occurred and is continuing, (A) the Borrower may
make capital contributions and intercompany advances to any of its Subsidiaries,
and (B) the Borrower or any of its Subsidiaries may make investments in single-
purpose entities engaged in, or that will engage in, nonregulated energy
generation and energy-service-related businesses
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54
and projects to the extent that foreclosure of any such investment would not
have a Material Adverse Effect and (ii) the Borrower may make intercompany
advances to the Parent in an aggregate amount not to exceed $25,000,000 at any
one time outstanding.
(d) DISTRIBUTIONS. Upon the occurrence and during the continuance of an
Event of Default, declare or pay, directly or indirectly, any dividend, payment
or other distribution of assets, properties, cash, rights, obligations or
securities on account of any share of any class of capital stock of the
Borrower, or purchase, redeem, retire, or otherwise acquire for value any shares
of any class of capital stock of the Borrower or any warrants, rights, or
options to acquire any such shares, now or hereafter outstanding, or make any
distribution of assets to any of its shareholders.
(e) LIENS, ETC. Create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any lien, security interest, or other
charge or encumbrance, or any other type of preferential arrangement, upon or
with respect to any of its properties (including, without limitation, the
capital stock of any of its Subsidiaries), whether now owned or hereafter
acquired, or assign, or permit any of its Subsidiaries to assign, any right to
receive income, in each case to secure or provide for the payment of any Debt of
any Person (any of the foregoing being referred to herein as a "LIEN"), other
than (i) Liens imposed by law, such as carriers', warehousemen's and mechanics'
Liens and other similar Liens arising in the ordinary course of business and
(ii) Liens on the capital stock of any of the Borrower's single-purpose
Subsidiaries or any such Subsidiary's assets to secure the repayment of
nonrecourse project financing for such Subsidiary.
(f) MAINTENANCE OF OWNERSHIP OF SUBSIDIARIES. Sell, assign, transfer,
pledge, hypothecate, or otherwise dispose of any shares of capital stock of any
of its Significant Subsidiaries or any warrants, rights or options to acquire
such capital stock, or permit any of its Significant Subsidiaries to issue,
sell, or otherwise dispose of any shares of its capital stock or the capital
stock of any other of its Significant Subsidiaries or any warrants, rights, or
options to acquire such capital stock, except (and only to the extent) as may be
necessary to give effect to a transaction permitted by subsection (e)(ii), above
(including, without limitation, any disposition pursuant to a foreclosure of any
Lien
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55
permitted by subsection (e)(ii), above, provided that such disposition would not
have a Material Adverse Effect), subsection (g), below, or Section 8(g) of the
Guaranty and except that any Significant Subsidiary may issue and sell shares of
its capital stock, and warrants, rights, or options to acquire the same, to the
Borrower or such Significant Subsidiary's parent corporation (if not the
Borrower); provided, however, that the Borrower may sell or otherwise dispose of
up to 49% of the capital stock of any of its Subsidiaries (other than a
Significant Subsidiary) to any Person.
(g) MERGERS; SALE OF ASSETS; ETC. (i) Merge or consolidate, or permit any
of its Subsidiaries to merge or consolidate, with or into any Person, or (ii)
convey, transfer, lease or otherwise dispose of, or permit any of its
Subsidiaries to convey, transfer, lease or otherwise dispose of, whether in one
transaction or in a series of transactions, and whether in a sale/leaseback
transaction or otherwise, more than 10% of its assets (whether now owned or
hereafter acquired, unless, in the case of a merger, immediately after giving
effect thereto, (i) no event shall occur and be continuing that constitutes an
Unmatured Default or an Event of Default, (ii) in the case of any merger
involving the Borrower, the Borrower is the surviving corporation, (iii) in the
case of any merger between any Subsidiary of the Borrower and any other Person
(other than the Borrower and the Parent), such Subsidiary is the surviving
corporation, and (iv) the Borrower and such Subsidiary shall not be liable with
respect to any Debt or allow its property to be subject to any Lien which it
could not become liable with respect to or allow its property to become subject
to under this Agreement on the date of such transaction; provided, however, that
any Subsidiary of the Borrower may transfer any turnkey project constructed by
such Subsidiary for any other Person to the extent that such Subsidiary receives
adequate consideration (in the judgment of its board of directors) therefor.
(h) OTHER AGREEMENTS. Enter into, or permit any of its Subsidiaries to
enter into, any agreement containing any provision that would be violated or
breached by the performance of its obligations hereunder or under any instrument
or document delivered or to be delivered by the Borrower hereunder or in
connection herewith.
(i) REGULATION U. Use or permit any Letter of Credit or any proceeds of
any Advance to be used, whether
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directly or indirectly, for the purpose, whether immediate, incidental, or
ultimate, of "buying or carrying any margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System.
(j) TRANSACTIONS WITH AFFILIATES. Enter into, or permit any of its
Subsidiaries to enter into, any transaction with an Affiliate of the Borrower,
unless such transaction is on terms no less favorable to the Borrower or such
Subsidiary, as the case may be, than if the transaction had been negotiated in
good faith on an arm's length basis with a Person that was not an Affiliate of
the Borrower; provided, however, that the foregoing restrictions shall not apply
to any transaction between the Borrower and any of its Subsidiaries or between
Commonwealth and the Borrower or any of the Borrower's Subsidiaries.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01. EVENTS OF DEFAULT. If any of the following events (each an
"EVENT OF DEFAULT") shall occur and be continuing after the applicable grace
period and notice requirement (if any), the Agent and the Lenders shall be
entitled to exercise the remedies set forth in Section 7.02:
(a) the Borrower shall fail to pay any principal of any Note, or any
reimbursement obligation in respect of any drawing under any Letter of Credit,
when the same becomes due and payable; or
(b) the Borrower shall fail to pay any interest on any Note, any fees or
any other amount due under this Agreement for two Business Days after the same
becomes due and payable; or
(c) any representation or warranty made or deemed made by the Borrower
herein or in any of the other Loan Documents or by the Borrower (or any of its
officers) in connection with this Agreement or any of the Loan Documents, or any
representation or warranty made or deemed made by the Parent in the Guaranty or
by the Parent (or any of its officers) in connection with the Guaranty, shall
prove to have been incorrect in any material respect when made or deemed made;
or
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(d) (i) the Borrower shall fail to perform or observe any term, covenant,
or agreement contained in Section 6.01(i) or Section 6.02; (ii) the Parent shall
fail to perform or observe any term, covenant or agreement contained in Section
7(i), Section 7(j), Section 7(l) or Section 8 of the Guaranty; (iii) the
Borrower shall fail to perform or observe any other term, covenant, or agreement
contained in this Agreement or in any other Loan Document on its part to be
performed or observed (and not constituting an Event of Default under any of the
other provisions of this Section 7.01) if such failure shall remain unremedied
for 30 days; or (iv) the Parent shall fail to perform or observe any other term,
covenant, or agreement contained in the Guaranty on its part to be performed or
observed (and not constituting an Event of Default under any of the other
provisions of this Section 7.01) if such failure shall remain unremedied for 30
days; or
(e) Commonwealth shall fail to pay any principal of or premium or interest
on any of its Debt which is outstanding in a principal amount of at least
$25,000,000 in the aggregate, when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand, or otherwise),
and such failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Debt; or any other
event shall occur or condition shall exist under any agreement or instrument
relating to any such Debt and shall continue after the applicable grace period,
if any, specified in such agreement or instrument, if the effect of such event
or condition is to accelerate, or to permit the acceleration of, the maturity of
such Debt; or any such Debt shall be declared to be due and payable, or required
to be prepaid (other than by a regularly scheduled required prepayment), prior
to the stated maturity thereof; or
(f) the Parent shall fail to pay any principal of or premium or interest
on any of its Debt which is outstanding in a principal amount of at least
$5,000,000 in the aggregate, when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand, or otherwise),
and such failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Debt; or any other
event shall occur or condition shall exist under any agreement or instrument
relating to any such Debt and shall continue after the applicable grace period,
if any, specified in such agreement or
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instrument, if the effect of such event or condition is to accelerate, or to
permit the acceleration of, the maturity of such Debt; or any such Debt shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated maturity thereof;
or
(g) the Borrower or any of its Subsidiaries shall fail to pay any
principal of or premium or interest on any of its Debt (excluding Debt evidenced
by the Notes and any Debt secured by a Lien of the type referred to in Section
6.02(e)(ii)) which is outstanding in a principal amount of at least $5,000,000
in the aggregate, when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise), and such
failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Debt; or any other event shall
occur or condition shall exist under any agreement or instrument relating to any
such Debt and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the maturity of
such Debt; or any such Debt shall be declared to be due and payable, or required
to be prepaid (other than by a regularly scheduled required prepayment), prior
to the stated maturity thereof; or
(h) either (i) the Parent, Commonwealth, the Borrower or any Significant
Subsidiary shall generally fail to pay, or admit in writing its inability to
pay, its debts as they become due, or shall voluntarily commence any proceeding
or file any petition under any bankruptcy, insolvency, or similar law seeking
dissolution, liquidation, or reorganization or the appointment of a receiver,
trustee, custodian, or liquidator for itself or a substantial portion of its
property, assets, or business, or to effect a plan or other arrangement with its
creditors, or shall file any answer admitting the jurisdiction of the court and
the material allegations of any involuntary petition filed against it in any
bankruptcy, insolvency, or similar proceeding, or shall be adjudicated bankrupt,
or shall make a general assignment for the benefit of creditors, or shall
consent to, or acquiesce in the appointment of, a receiver, trustee, custodian,
or liquidator for itself or a substantial portion of its property, assets, or
business, or (ii) corporate action shall be taken by the Parent, Commonwealth,
the Borrower or any Significant
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Subsidiary for the purpose of effectuating any of the foregoing; or
(i) involuntary proceedings or an involuntary petition shall be commenced
or filed against the Parent, Commonwealth, the Borrower or any Significant
Subsidiary under any bankruptcy, insolvency, or similar law or seeking the
dissolution, liquidation, or reorganization of the Parent, Commonwealth, the
Borrower or such Significant Subsidiary (as the case may be) or the appointment
of a receiver, trustee, custodian, or liquidator for the Parent, Commonwealth,
the Borrower or such Significant Subsidiary (as the case may be) or of a
substantial part of the property, assets, or business of the Parent,
Commonwealth, the Borrower or such Significant Subsidiary (as the case may be),
or any writ, judgment, warrant of attachment, execution, or similar process
shall be issued or levied against a substantial part of the property, assets, or
business of the Parent, Commonwealth, the Borrower or any Significant
Subsidiary, and such proceedings or petition shall not be dismissed, or such
writ, judgment, warrant of attachment, execution, or similar process shall not
be released, vacated, or fully bonded, within 45 days after commencement,
filing, or levy, as the case may be; or
(j) any judgment or order for the payment of money in excess of (i)
$5,000,000 shall be rendered against the Parent or the Borrower or any
Subsidiary of the Borrower or any of their respective properties, or (ii)
$20,000,000 shall be rendered against Commonwealth or any of its properties, and
either (A) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order, or (B) there shall be any period during which a
stay of enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(k) (i) the institution of any steps by the Borrower or any sponsor of a
Pension Plan to terminate a Pension Plan, if as a result of such termination the
Borrower or any of its Subsidiaries could be required to make a contribution to
such Pension Plan, or could incur a liability or obligation to such Pension
Plan, in excess of $5,000,000, or (ii) a contribution failure occurs with
respect to any Pension Plan sufficient to give rise to a Lien under Section
302(f) of ERISA; or
(l) the Borrower or any of its Subsidiaries shall default in the payment
when due, or in the performance or
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observance of, any Debt described in clause (iii), (vii), or (viii) of the
definition of "Debt" or any material obligation of, or material condition agreed
to by the Borrower or such Subsidiary, with respect to any material purchase or
lease of goods or services (subject to any applicable grace period and except as
waived or to the extent that the existence of any such default is being
contested in good faith by appropriate proceedings and reserves therefor are
being maintained in accordance with GAAP); or
(m) the Parent shall fail to own directly 100% of the issued and
outstanding shares of capital stock of the Borrower or 80% of the issued and
outstanding shares of voting capital stock of Commonwealth; or
(n) any provision of the Guaranty or any of the subordination provisions
of any Debt incurred by the Borrower pursuant to Section 6.02(b)(iii) shall for
any reason (except pursuant to the terms thereof) cease to be valid and binding
on the Parent or the Parent shall so assert in writing; or
(o) any provision of any Loan Document to which the Borrower is a party
shall for any reason (except pursuant to the terms thereof) cease to be valid
and binding on the Borrower or the Borrower shall so assert in writing; or
(p) at any time any LC Bank shall have been served with or otherwise
subjected to a court order, injunction, or other process or decree issued or
granted at the instance of the Borrower restraining or seeking to restrain such
LC Bank from paying any amount under any Letter of Credit issued by it and
either (i) there has been a drawing under such Letter of Credit which such LC
Bank would otherwise be obligated to pay or (ii) the stated expiration date or
any reduction of the stated amount of such Letter of Credit has occurred but the
right of the beneficiary to draw thereunder has been extended in connection with
the pendency of the related court action or proceeding; or
(q) the Parent shall receive cash dividends from its Subsidiaries in any
two consecutive fiscal quarters of the Parent in an aggregate amount less than
$150,000,000.
SECTION 7.02. REMEDIES. If any Event of Default has occurred and is
continuing, then the Agent shall at
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the request, or may with the consent, of the Majority Lenders, upon notice to
the Borrower (i) declare the Commitments and the obligation of each Lender to
make Advances (other than Advances under Section 3.04 hereof) and of any LC Bank
to issue a Letter of Credit to be terminated, whereupon the same shall forthwith
terminate, (ii) declare the Notes, all interest thereon and all other amounts
payable under this Agreement and the other Loan Documents to be forthwith due
and payable, whereupon the Notes, all such interest and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower, and (iii) make demand upon the Borrower to, and forthwith upon such
demand the Borrower shall, deposit with the Agent in same day funds in a special
interest-bearing cash escrow account maintained by the Agent at the Agent's
office and pledged to the Agent for the benefit of the Lenders pursuant to
documentation satisfactory to the Agent, an amount equal to the aggregate LC
Outstandings, such cash escrow to be held for the benefit of the LC Banks and
the Lenders as security for the payment obligations of the Borrower under this
Agreement, the Notes and the other Loan Documents; provided, however, that in
the event of an actual or deemed entry of an order for relief with respect to
the Borrower under the Bankruptcy Code, (A) the Commitments and the obligation
of each Lender to make Advances and of any LC Bank to issue any Letter of Credit
shall automatically be terminated and (B) the Notes, all such interest and all
such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower. Notwithstanding anything to the contrary
contained herein, no notice given or declaration made by the Agent pursuant to
this Section 7.02 shall affect (i) the obligation of any LC Bank to make any
payment under any Letter of Credit issued by such LC Bank in accordance with the
terms of such Letter of Credit or (ii) the participatory interest of each Lender
in each such payment thereunder.
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ARTICLE VIII
THE AGENT
SECTION 8.01. AUTHORIZATION AND ACTION. Each Lender and LC Bank hereby
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the other Loan Documents as are
delegated to the Agent by the terms hereof and thereof, together with such
powers as are reasonably incidental thereto. As to any matters not expressly
provided for by this Agreement or any other Loan Document (including, without
limitation, enforcement or collection of the Notes), the Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Majority Lenders, and such
instructions shall be binding upon all Lenders and all holders of Notes;
provided, however, that the Agent shall not be required to take any action which
exposes the Agent to personal liability or which is contrary to this Agreement
or applicable law. The Agent agrees to give to each Lender prompt notice of each
notice given to it by the Borrower pursuant to the terms of this Agreement.
SECTION 8.02. AGENT'S RELIANCE, ETC. Neither the Agent nor any of its
directors, officers, agents, or employees shall be liable to any Lender, any LC
Bank or the Borrower for any action taken or omitted to be taken by it or them
under or in connection with this Agreement or any other Loan Document, except
for its or their own gross negligence or wilful misconduct. Without limitation
of the generality of the foregoing, the Agent: (a) may treat the payee of any
Note as the holder thereof until the Agent receives and accepts a Lender
Assignment entered into by the Lender which is the payee of such Note, as
assignor, and an Eligible Assignee, as assignee, as provided in Section 9.07;
(b) may consult with legal counsel (including counsel for the Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (c) makes no
warranty or representation to any Lender or LC Bank and shall not be responsible
to any Lender or LC Bank for any statements, warranties, or representations
(whether written or oral) made in or in connection with this
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Agreement or any other Loan Document; (d) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms, covenants
or conditions of this Agreement or any other Loan Document on the part of the
Borrower or the Parent or to inspect the property (including the books and
records) of the Borrower or the Parent; (e) shall not be responsible to any
Lender or LC Bank for the due execution, legality, validity, enforceability,
genuineness, sufficiency, or value of this Agreement, any other Loan Document,
or any other instrument or document furnished pursuant hereto or thereto; and
(f) shall incur no liability under or in respect of this Agreement or any other
Loan Document by acting upon any notice, consent, certificate, or other
instrument or writing (which may be by telecopier, telegram, cable, or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 8.03. CITIBANK AND AFFILIATES. With respect to its Commitment,
the Advances made by it and the Notes issued to it, Citibank shall have the same
rights and powers under this Agreement as any other Lender and may exercise the
same as though it were not the Agent; and the term "Bank" or "Banks" and
"Lender" or "Lenders" shall, unless otherwise expressly indicated, include
Citibank in its individual capacity. Citibank and its Affiliates may accept
deposits from, lend money to, act as trustee under indentures of, and generally
engage in any kind of business with, the Borrower, any of its Subsidiaries and
any Person who may do business with or own securities of the Borrower or any
such Subsidiary, all as if Citibank were not the Agent and without any duty to
account therefor to the Lenders.
SECTION 8.04. LENDER CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon the Agent or any other Lender and
based on the financial statements referred to in Section 5.01(e) and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION 8.05. INDEMNIFICATION. The Lenders agree to indemnify the Agent
(to the extent not reimbursed by
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the Borrower), ratably according to the respective principal amounts of the
Notes then held by each of them (or if no Notes are at the time outstanding or
if any Notes are held by Persons which are not Lenders, ratably according to the
respective Percentages of the Lenders), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses, or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against the Agent in any way relating to or
arising out of this Agreement or any action taken or omitted by the Agent under
this Agreement, provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses, or disbursements resulting from the Agent's gross negligence or
wilful misconduct. Without limitation of the foregoing, each Lender agrees to
reimburse the Agent promptly upon demand for its ratable share of any out-of-
pocket expenses (including counsel fees) incurred by the Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment, or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement, to the extent that the Agent is not reimbursed for such expenses
by the Borrower.
SECTION 8.06. SUCCESSOR AGENT. The Agent may resign at any time by
giving written notice thereof to the Lenders and the Borrower and may be removed
at any time with or without cause by the Majority Lenders, with any such
resignation or removal to become effective only upon the appointment of a
successor Agent pursuant to this Section 8.06. Upon any such resignation or
removal, the Majority Lenders shall have the right to appoint a successor Agent,
which shall be another commercial bank or trust company reasonably acceptable to
the Borrower organized under the laws of the United States or of any State
thereof. If no successor Agent shall have been so appointed by the Majority
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Agent's giving of notice of resignation or the Majority Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be another commercial bank or
trust company organized under the laws of the United States of any State thereof
reasonably acceptable to the Borrower. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor
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Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article VIII shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement. Notwithstanding the
foregoing, the Borrower shall not have any approval rights with respect to any
successor Agent if, at the time of appointment of such successor Agent, an
Unmatured Default or an Event of Default shall have occurred and be continuing.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. AMENDMENTS, ETC. No amendment or waiver of any provision
of any Loan Document, nor consent to any departure by the Borrower therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Majority Lenders and, in the case of any amendment, the Borrower, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that no amendment,
waiver or consent shall, unless in writing and signed by all the Lenders, do any
of the following: (a) waive, modify or eliminate any of the conditions specified
in Article IV, (b) increase the Commitments of any of the Lenders or subject any
of the Lenders to any additional obligations, (c) except as otherwise provided
in Section 2.18, extend the term of the Commitments of any of the Lenders, (d)
reduce the principal of, or interest on, the Notes, any Applicable Margin or any
fees or other amounts payable hereunder, (e) postpone any date fixed for any
payment of principal of, or interest on, the Notes or any fees or other amounts
payable hereunder, (f) change the Percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or the number of Lenders, which
shall be required for the Lenders or any of them to take any action hereunder,
(g) amend any Loan Document in a manner intended to prefer one or more Lenders,
(h) release the Parent from its guaranty obligations under the Guaranty or (i)
amend this Section 9.01; and provided, further, that no amendment, waiver or
consent shall, unless in writing and signed by the Agent in addition to the
Lenders required above to take such
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action, affect the rights or duties of the Agent under this Agreement or any
other Loan Document.
SECTION 9.02. NOTICES, ETC. All notices and other communications
provided for hereunder and under the other Loan Documents shall be in writing
(including telecopier, telegraphic, telex or cable communication) and mailed,
telecopied, telegraphed, telexed, cabled, or delivered, if to the Borrower, at
its address at P.O. Box A-3005, 10 South Dearborn Street, 38th Floor, Chicago,
Illinois 60690-3005, Attention: Treasurer (Telephone: 312.394.3153 or
312.394.8203; and Telecopier 312.394.4082); if to any Bank, at its Domestic
Lending Office specified opposite its name on Schedule I hereto; if to any other
Lender, at its Domestic Lending Office specified in the Lender Assignment
pursuant to which it became a Lender; and if to the Agent, at its address at 399
Park Avenue, New York, New York 10043, Attention: Utilities Department, North
American Finance Group (Telephone: 312.559.1500; Telecopier 212.793.6130); or,
as to each party, at such other address as shall be designated by such party in
a written notice to the other parties. All such notices and communications
shall, when mailed, telecopied, telegraphed, telexed or cabled, be effective
five days after being deposited in the mails, or when delivered to the telegraph
company, telecopied, confirmed by telex answerback or delivered to the cable
company, respectively, except that notices and communications to the Agent
pursuant to Article II or VIII shall not be effective until received by the
Agent.
SECTION 9.03. NO WAIVER; REMEDIES. No failure on the part of any Lender,
any LC Bank or the Agent to exercise, and no delay in exercising, any right
hereunder or under any other Loan Document shall operate as a waiver thereof;
nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 9.04. COSTS, EXPENSES, TAXES AND INDEMNIFICATION. (a) The
Borrower agrees to pay on demand all costs and expenses of the Agent in
connection with the preparation (including, without limitation, printing costs),
negotiation, execution, delivery, administration, modification and amendment of
this Agreement and the other Loan Documents, and the other documents and
instruments to be delivered hereunder and thereunder, including, without
limitation, the reasonable
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fees and out-of-pocket expenses of counsel for the Agent with respect thereto
and with respect to advising the Agent as to its rights and responsibilities
under this Agreement and the other Loan Documents. The Borrower further agrees
to pay on demand all costs and expenses, if any (including, without limitation,
reasonable counsel fees and expenses of outside counsel and internal counsel),
of the Agent, the Lenders and the LC Banks in connection with the enforcement
(whether through negotiations, legal proceedings, or otherwise) of this
Agreement and the other Loan Documents and the other documents and instruments
to be delivered hereunder and thereunder, including, without limitation,
reasonable counsel fees and expenses in connection with the enforcement of
rights under this Section 9.04(a). In addition, the Borrower shall pay any and
all stamp and other taxes payable or determined to be payable in connection with
the execution and delivery of this Agreement and the other Loan Documents, and
the other documents and instruments to be delivered hereunder and thereunder,
and agrees to save the Agent and each Lender harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes.
(b) If any payment of principal of, or Conversion of any Eurodollar Rate
Advance is made other than on the last day of the Interest Period for such
Advance or as a result of a payment or Conversion pursuant to Section 2.09(f),
2.10, 2.11, 2.12 or 2.14 or acceleration of the maturity of the Notes pursuant
to Section 7.02 or for any other reason, the Borrower shall, upon demand by any
Lender (with a copy of such demand to the Agent), pay to the Agent for the
account of such Lender any amounts required to compensate such Lender for any
additional losses, costs, or expenses which it may reasonably incur as a result
of such payment or Conversion, including, without limitation, any loss, cost, or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by any Lender to fund or maintain such Advance.
(c) The Borrower hereby agrees to indemnify and hold harmless each Lender,
each LC Bank, the Agent, counsel to the Agent and their respective officers,
directors, partners, employees and Affiliates (each, an "INDEMNIFIED PERSON")
from and against any and all claims, damages, losses, liabilities, costs, or
expenses (including reasonable attorney's fees and expenses, whether or not such
Indemnified Person is named as a
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party to any proceeding or is otherwise subjected to judicial or legal process
arising from any such proceeding) which any of them may incur or which may be
claimed against any of them by any Person:
(i) by reason of or in connection with the execution, delivery,
or performance of any of the Loan Documents or any transaction
contemplated thereby, or the use by the Borrower of the proceeds of any
Extension of Credit; and
(ii) in connection with or resulting from the utilization,
storage, disposal, treatment, generation, transportation, release, or
ownership of any Hazardous Substance (i) at, upon, or under any property
of the Borrower or any of its Affiliates or (ii) by or on behalf of the
Borrower or any of its Affiliates at any time and in any place.
(d) The Borrower's obligations under this Section 9.04 shall survive the
repayment of all amounts owing to the Lenders, the LC Banks and the Agent under
the Loan Documents and the termination of the Commitments. If and to the extent
that the obligations of the Borrower under this Section 9.04 are unenforceable
for any reason, the Borrower agrees to make the maximum contribution to the
payment and satisfaction thereof which is permissible under applicable law.
SECTION 9.05. RIGHT OF SET-OFF. (a) Upon (i) the occurrence and during
the continuance of any Event of Default and (ii) the making of the request or
the granting of the consent specified by Section 7.02 to authorize the Agent to
declare the Notes due and payable pursuant to the provisions of Section 7.02,
each Lender and LC Bank is hereby authorized at any time and from time to time,
to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional, or final) at any time
held and other indebtedness at any time owing by such Lender or LC Bank to or
for the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under any Loan Document
and any Note held by such Lender, irrespective of whether or not such Lender or
LC Bank shall have made any demand under such Loan Document or such Note and
although such obligations may be unmatured. Each Lender and LC Bank agrees
promptly to notify the Borrower after any such set-off and application made by
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such Lender or LC Bank, provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of each Lender
and LC Bank under this Section 9.05 are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which such Lender or LC
Bank may have.
(b) The Borrower agrees that it shall have no right of set-off, deduction,
or counterclaim in respect of its obligations hereunder, and that the
obligations of the Lenders hereunder are several and not joint. Nothing
contained herein shall constitute a relinquishment or waiver of the Borrower's
rights to any independent claim that the Borrower may have against the Agent,
any Lender or any LC Bank for the Agent's, such Lender's or such LC Bank's, as
the case may be, gross negligence or wilful misconduct, but no Lender or LC Bank
shall be liable for the conduct of the Agent, any other Lender or any other LC
Bank, and the Agent shall not be liable for the conduct of any Lender or LC
Bank.
SECTION 9.06. BINDING EFFECT. This Agreement shall become effective on
the Effective Date and thereafter shall be binding upon and inure to the benefit
of the Borrower, the Agent, each LC Bank and each Lender and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights or obligations hereunder or any interest herein without the
prior written consent of the Lenders.
SECTION 9.07. ASSIGNMENTS AND PARTICIPATIONS. (a) Each Lender may, with
the consent of the Borrower (such consent not to be unreasonably withheld or
delayed), assign to one or more banks or other entities all or a portion of its
rights and obligations under this Agreement and the other Loan Documents
(including, without limitation, all or a portion of its Commitment, the Advances
owing to it and the Note or Notes held by it); provided, however, that (i) each
such assignment shall be of a constant, and not a varying, percentage of all of
the assigning Lender's rights and obligations under this Agreement, (ii) after
giving effect to any partial assignment, the amount of the Commitment of each of
the assigning and the assignee Lender shall in no event be less than
$10,000,000, (iii) each such assignment shall be to an Eligible Assignee, and
(iv) the parties to each such assignment shall execute and deliver to the Agent
a duly completed Lender Assignment, together with any Note or Notes subject to
such assignment and a processing and recordation fee of $2,500; and provided,
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further, however, that the consent of the Borrower shall not be required for any
assignments (A) by a Lender to any of its Affiliates or (B) made during the
continuance of an Event of Default. Promptly following its receipt of such
Lender Assignment, Note or Notes and fee, the Agent shall accept and record such
Lender Assignment in the Register. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Lender
Assignment, which effective date shall be at least five Business Days after the
execution thereof, (x) the assignee thereunder shall be a party hereto and, to
the extent that rights and obligations hereunder have been assigned to it
pursuant to such Lender Assignment, have the rights and obligations of a Lender
hereunder and (y) the Lender assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it to an Eligible
Assignee pursuant to such Lender Assignment, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of a Lender
Assignment covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto); provided, however, that the limitation set forth in clause (ii), above,
shall not apply if an Event of Default shall have occurred and be continuing and
the Agent shall have declared all Advances to be immediately due and payable
hereunder. In addition to, and notwithstanding, the foregoing, any Lender may at
any time pledge or assign for security purposes its rights to receive payments
hereunder (or any part thereof) to any Federal Reserve Bank; provided, however,
that no such pledge or assignment shall relieve the pledging or assigning Lender
from its obligations hereunder or grant to such Federal Reserve Bank any right
to direct such Lender with respect to any action which such Lender would be
entitled to take or omit to take hereunder but for the existence of such pledge
or assignment.
(b) By executing and delivering a Lender Assignment, the Lender assignor
thereunder and the assignee thereunder confirm to and agree with each other and
the other parties hereto as follows: (i) other than as provided in such Lender
Assignment, such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with any Loan Document or any other
instrument or document furnished pursuant thereto or the execution, legality,
validity, enforceability, genuineness, sufficiency, or value of any
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Loan Document or any other instrument or document furnished pursuant thereto;
(ii) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
Parent or the performance or observance by the Borrower or the Parent of any of
their obligations under any Loan Document or any other instrument or document
furnished pursuant thereto; (iii) such assignee confirms that it has received a
copy of each Loan Document, together with such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into such Lender Assignment; (iv) such assignee will, independently and
without reliance upon the Agent, such assigning Lender or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Documents; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under the Loan
Documents as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; and (vii) such assignee agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of the Loan Documents are required to be performed by it as a Lender.
(c) The Agent shall maintain at its address referred to in Section 9.02 a
copy of each Lender Assignment delivered to and accepted by it and a register
for the recordation of the names and addresses of the Lenders and the Commitment
of, and principal amount of the Advances owing to, each Lender from time to time
(the "REGISTER"). The entries in the Register shall be conclusive and binding
for all purposes, absent manifest error, and the Borrower, the Agent and the
Lenders may treat each Person whose name is recorded in the Register as a Lender
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by the Borrower or any Lender at any reasonable time and from
time to time upon reasonable prior notice.
(d) Upon its receipt of a Lender Assignment executed by an assigning
Lender and an assignee representing that it is an Eligible Assignee, together
with any Note or Notes subject to such assignment, the Agent shall, if such
Lender Assignment has been completed and is in substantially the form of Exhibit
C hereto, (i)
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accept such Lender Assignment, (ii) record the information contained therein in
the Register and (iii) give prompt notice thereof to the Borrower. Within 15
Business Days after its receipt of such notice, the Borrower shall execute and
deliver to the Agent in exchange for the surrendered Note or Notes a new Note to
such Eligible Assignee in an amount equal to the Commitment assumed by it
pursuant to such Lender Assignment and, if the assigning Lender has retained a
Commitment hereunder, a new Note to the assigning Lender in an amount equal to
the Commitment retained by it hereunder. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Note or Notes and shall be dated the effective date of such Lender
Assignment and shall otherwise be in substantially the form of Exhibit A hereto.
(e) Each Lender may sell participations to one or more banks, financial
institutions, or other entities in all or a portion of its rights and
obligations under the Loan Documents (including, without limitation, all or a
portion of its Commitment, the Advances owing to it and the Note or Notes held
by it); provided, however, that (i) such Lender's obligations under this
Agreement (including, without limitation, its Commitment to the Borrower
hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any such Note for all purposes of
this Agreement, (iv) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement, (v) such Lender shall not
agree with any such participant (other than an Affiliate of such Lender) that
such Lender shall take directions from such participant with respect to any
action which such Lender shall be entitled to take or omit to take hereunder or
under or in respect of the other Loan Documents, other than, in the case of a
participant in an Advance or a Commitment, actions under Section 2.18 and
Section 9.01(a), (b), (c), (d), or (g), and (vi) such participant shall be
entitled to the cost protection provisions contained in Sections 2.08 and 2.13
only if the Lender from which such participant acquired its participation would
have been entitled to such cost protection provisions had such Lender not sold
such participation hereunder.
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(f) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 9.07, disclose to
the assignee or participant or proposed assignee or participant, any information
relating to the Borrower furnished to such Lender by or on behalf of the
Borrower; provided, that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any confidential information received by it from such Lender.
(g) If any Lender (or any bank, financial institution, or other entity to
which such Lender has sold a participation) shall (i) make any demand for
payment under Section 2.08 or 2.13, (ii) give notice to the Agent pursuant to
Section 2.14, (iii) either (A) not have outstanding unsecured long-term
indebtedness rated at or above "investment grade" by at least two of Moody's,
S&P and D&P, or (B) not have outstanding short-term unsecured indebtedness rated
at or above A-2, P-2, or D-2 by at least two of Moody's, S&P and D&P, or (iv)
determine not to extend the Termination Date in response to any request by the
Borrower pursuant to Section 2.18, then (1) in the case of any demand made under
clause (i) or the occurrence of the event described in clause (ii), within 30
days after any such demand (if, but only if, in the case of any demanded payment
described in clause (i), such demanded payment has been made by the Borrower),
(2) in the case of the occurrence of any event described in clause (iii), at any
time thereafter, and (3) in the case of the occurrence of any event described in
clause (iv), at any time prior to the then-scheduled Termination Date for such
Lender, the Borrower may, with the approval of the Agent (which approval shall
not be unreasonably withheld), and provided that no Event of Default or
Unmatured Default shall then have occurred and be continuing, demand that such
Lender assign in accordance with this Section 9.07 to one or more Eligible
Assignees designated by the Borrower all (but not less than all) of such
Lender's Commitment and the Advances owing to it within the period ending on the
later to occur of the last day in the period described in clause (1), (2), or
(3), above, as applicable, and the last day of the longest of the then current
Interest Periods for such Advances. If any such Eligible Assignee designated by
the Borrower shall fail to consummate such assignment on terms acceptable to
such Lender, or if the Borrower shall fail to designate any such Eligible
Assignees for all or part of such Lender's Commitment or Advances, then such
<PAGE>
74
demand by the Borrower shall become ineffective; it being understood for
purposes of this subsection (g) that such assignment shall be conclusively
deemed to be on terms acceptable to such Lender, and such Lender shall be
compelled to consummate such assignment to an Eligible Assignee designated by
the Borrower, if such Eligible Assignee (x) shall agree to such assignment by
entering into a Lender Assignment with such Lender, (y) shall offer compensation
to such Lender in an amount equal to all amounts then owing by the Borrower to
such Lender hereunder and under the Note made by the Borrower to such Lender,
whether for principal, interest, fees, costs or expenses (other than the
demanded payment referred to above and payable by the Borrower as a condition to
the Borrower's right to demand such assignment), or otherwise, and (z) shall pay
to the Agent the $2,500 processing and recordation fee referred to in Section
9.07(a)(iii).
SECTION 9.08. WAIVER OF JURY TRIAL. THE AGENT, THE LENDERS, THE LC BANKS
AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE AGENT, SUCH LENDERS, SUCH LC
BANKS OR THE BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT,
THE LC BANKS AND THE LENDERS ENTERING INTO THIS AGREEMENT.
SECTION 9.09. CONSENT. Unless otherwise specified as being within the
sole discretion of the Agent, the Lenders, the LC Banks, the Majority Lenders or
the Borrower, whenever the consent or approval of the Agent, the Lenders, the
Majority Lenders, or the Borrower, respectively, is required herein, such
consent or approval shall not be unreasonably withheld or delayed.
SECTION 9.10. GOVERNING LAW. This Agreement and the other Loan Documents
shall be governed by, and construed in accordance with, the laws of the State of
New York. Each of the Borrower, the Lenders, the LC Banks and the Agent (i)
irrevocably submits to the non-exclusive jurisdiction of any New York State
Court or Federal court sitting in New York City in any action arising out of any
Loan Document, (ii) agrees that all claims in such action may be decided in such
court, (iii) waives, to the fullest extent it may effectively do so,
<PAGE>
75
the defense of an inconvenient forum and any objection to venue and (iv)
consents to the service of process by mail. A final judgment in any such action
shall be conclusive and may be enforced in other jurisdictions. Nothing herein
shall affect the right of any party to serve legal process in any manner
permitted by law or affect its right to bring any action in any other court.
SECTION 9.11. RELATION OF THE PARTIES; NO BENEFICIARY. No term,
provision or requirement, whether express or implied, of any Loan Document, or
actions taken or to be taken by any party thereunder, shall be construed to
create a partnership, association, or joint venture between such parties or any
of them. No term or provision of the Loan Documents shall be construed to
confer a benefit upon, or grant a right or privilege to, any Person other than
the parties thereto.
SECTION 9.12. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
SECTION 9.13. SEVERABILITY. Any provision of this Agreement or any other
Loan Document that is prohibited, unenforceable or invalid in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition, unenforceability or invalidity without invalidating the remaining
provisions hereof or thereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction.
SECTION 9.14. HEADINGS. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION 9.15. ENTIRE AGREEMENT. This Agreement, the Exhibits and
Schedules hereto and the other Loan Documents constitute the entire agreement
and understanding among the parties hereto and thereto relative to the subject
matter hereof and thereof. Any previous agreement among the parties with
respect to the subject matter hereof and thereof is superseded by this
Agreement, the Exhibits and Schedules hereto and the
<PAGE>
76
other Loan Documents. Nothing in this Agreement or in the other Loan Documents,
expressed or implied, is intended to confer upon any party other than the
parties hereto and thereto any rights, remedies, obligations, or liabilities
under or by reason of this Agreement or the other Loan Documents.
<PAGE>
RCA S-1
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
UNICOM ENTERPRISES INC.
By Dennis F. O'Brien
-----------------------------------
Name: Dennis F. O'Brien
Title: Treasurer
CITIBANK, N.A., as Agent
By
-----------------------------------
Name: Emily J. Eisenlohr
Title: Attorney-In-Fact
SIGNATURE PAGE TO THE UNICOM REVOLVING CREDIT AGREEMENT
<PAGE>
RCA S-1
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
UNICOM ENTERPRISES INC.
By
-----------------------------------
Name: Dennis F. O'Brien
Title: Treasurer
CITIBANK, N.A., as Agent
By Emily J. Eisenlohr
------------------------------------
Name: Emily J. Eisenlohr
Title: Attorney-In-Fact
SIGNATURE PAGE TO THE UNICOM REVOLVING CREDIT AGREEMENT
<PAGE>
RCA S-2
COMMITMENT BANK
---------- ----
$21,000,000 CITIBANK, N.A.
By Emily J. Eisenlohr
------------------------------------
Name: Emily J. Eisenlohr
SIGNATURE PAGE TO THE UNICOM REVOLVING CREDIT AGREEMENT
<PAGE>
RCA S-3
COMMITMENT BANK
---------- ----
$21,000,000 THE FIRST NATIONAL BANK OF
CHICAGO
By Susan Verback
-----------------------------------
Name: Susan Verback
Title: Assistant Vice-President
SIGNATURE PAGE TO THE UNICOM REVOLVING CREDIT AGREEMENT
<PAGE>
RCA S-4
COMMITMENT BANK
---------- ----
$21,000,000 MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By Robert M. Osieski
----------------------------------
Name: Robert M. Osieski
Title: Vice President
SIGNATURE PAGE TO THE UNICOM REVOLVING CREDIT AGREEMENT
<PAGE>
RCA S-5
COMMITMENT BANK
---------- ----
$21,000,000 TORONTO DOMINION (TEXAS), INC.
By Frederic B. Hawley
-----------------------------------
Name: Frederic Hawley
Title: Vice President
SIGNATURE PAGE TO THE UNICOM REVOLVING CREDIT AGREEMENT
<PAGE>
RCA S-6
COMMITMENT BANK
---------- ----
$17,000,000 BANK OF AMERICA ILLINOIS
By Ronald E. McKaig
------------------------------------
Name: Ronald E. McKaig
Title: Vice President
SIGNATURE PAGE TO THE UNICOM REVOLVING CREDIT AGREEMENT
<PAGE>
RCA S-7
COMMITMENT BANK
---------- ----
$17,000,000 ROYAL BANK OF CANADA
By Gordon MacArthur
------------------------------------
Name: Gordon MacArthur
Title: Manager
SIGNATURE PAGE TO THE UNICOM REVOLVING CREDIT AGREEMENT
<PAGE>
RCA S-8
COMMITMENT BANK
---------- ----
$17,000,000 THE BANK OF NEW YORK
By Nathan S. Howard
-----------------------------------
Name: Nathan S. Howard
Title: Vice President
SIGNATURE PAGE TO THE UNICOM REVOLVING CREDIT AGREEMENT
<PAGE>
RCA S-9
COMMITMENT BANK
---------- ----
$13,000,000 BANK OF MONTREAL
By J. Michael Linton
-------------------------------
Name: J. Michael Linton
Title: Director
SIGNATURE PAGE TO THE UNICOM REVOLVING CREDIT AGREEMENT
<PAGE>
RCA S-10
COMMITMENT BANK
---------- ----
$13,000,000 CHEMICAL BANK
By Beth Herman
-----------------------------------
Name: Beth F. Herman
Title: Vice President
SIGNATURE PAGE TO THE UNICOM REVOLVING CREDIT AGREEMENT
<PAGE>
RCA S-11
COMMITMENT BANK
---------- ----
$13,000,000 CIBC INC.
By P. Saggan
----------------------------------
Name: Peter Saggan
Title: Vice President
SIGNATURE PAGE TO THE UNICOM REVOLVING CREDIT AGREEMENT
<PAGE>
RCA S-12
COMMITMENT BANK
---------- ----
$13,000,000 MELLON BANK N.A.
By A. K. Marsh
----------------------------------
Name: A. K. Marsh
Title: Vice President
SIGNATURE PAGE TO THE UNICOM REVOLVING CREDIT AGREEMENT
<PAGE>
RCA S-13
COMMITMENT BANK
---------- ----
$13,000,000 THE SUMITOMO BANK, LTD.
By K. Iwasawa
-----------------------------------
Name: Katsuyasu Iwasawa
Title: Joint General Manager
SIGNATURE PAGE TO THE UNICOM REVOLVING CREDIT AGREEMENT
<PAGE>
SCHEDULE I
UNICOM ENTERPRISES INC.
$200,000,000 Credit Agreement, dated as of November 22, 1994, among
Unicom Enterprises Inc., the Banks named therein and Citibank, N.A., as Agent
<TABLE>
<CAPTION>
NAME OF BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
-------------------------- ----------------------------------- ------------------------ -------------------------
<S> <C> <C> <C>
Bank of America Illinois 231 South Lasalle Street-1036 Same as Domestic Lending Same as Domestic Lending
Chicago, Illinois 60697-1036 Office Office
Telephone: 312.828.6720
Telecopier: 312.987.5614
Attention: Mr. Robert I. Ingersoll
The Bank of New York Public Utilities Division Same as Domestic Lending Same as Domestic Lending
One Wall Street, 19th Floor Office Office
New York, New York 10286
Telephone: 212.635.7916
Telecopier: 212.635.7923/24
Attention: Mr. Nathan S. Howard
Bank of Montreal 115 South LaSalle, 12th Floor Same as Domestic Lending Same as Domestic Lending
Chicago, Illinois 60603 Office Office
Telephone: 312.750.3876
Telecopier: 312.750.4314
Attention: Mr. Howard Turner
Chemical Bank Utilities and Communications Same as Domestic Lending Same as Domestic Lending
270 Park Avenue, 8th Floor Office Office
New York, New York 10017
Telephone: 212.270.6993
Telecopier: 212.270.3841
Attention: Ms. Beth Herman
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME OF BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
-------------------------- ----------------------------------- ------------------------ -------------------------
<S> <C> <C> <C>
CIBC Inc. Two Paces West Same as Domestic Lending Same as Domestic Lending
2727 Paces Ferry Road, Suite 1200 Office Office
Atlanta, Georgia 30339
Telephone: 404.319.4836
Telecopier: 404.319.4950
Attention: Ms. Clare Coyne
Citibank, N.A. 399 Park Avenue, Same as Domestic Lending Same as Domestic Lending
4th Floor, zone 22 Office Office
New York, New York 10043
Telephone: 212.559.6986
Telecopier: 212.793.6130
Attention: Ms. Emily J. Eisenlohr
The First National Bank of One First National Plaza, Same as Domestic Lending Same as Domestic Lending
Chicago Suite 0363 Office Office
Chicago, Illinois 60670-0363
Telephone: 312.732.9780
Telecopier: 312.732.3055
Attention: Mr. Robert G. Bussa
Mellon Bank, N.A. Three Mellon Bank Center Same as Domestic Lending Same as Domestic Lending
Suite 2305 Office Office
Pittsburgh, Pennsylvania 15259
Telephone: 412.234.9448
Telecopier: 412.234.5409
412.236.2028
Attention: Ms. Judy Laughrey
Morgan Guaranty Trust 60 Wall Street Same as Domestic Lending Same as Domestic Lending
Company of New York New York, New York 10260 Office Office
Telephone: 212.648.7420
Telecopier: 212.648.5014
Attention: Ms. Sheila J. O'Connell
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
NAME OF BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
-------------------------- ----------------------------------- ------------------------ -------------------------
<S> <C> <C> <C>
Royal Bank of Canada Grand Cayman (North America No. 1) Same as Domestic Lending Same as Domestic Lending
Branch Office Office
Royal Bank of Canada
c/o New York Branch
Financial Square, 23rd Floor
New York, New York 10005-3531
Telephone: 212.428.2372
Telecopier: 212.428.6324
Attention: Manager, Credit
Administration
with a copy to:
Royal Bank of Canada
One North Franklin, Suite 700
Chicago, Illinois 60606
Telephone: 312.551.1613
Telecopier: 312.551.0805
Attention: Mr. Gordon MacArthur
The Sumitomo Bank, Ltd. 233 South Wacker Drive Same as Domestic Lending Same as Domestic Lending
Suite 4800 Office Office
Chicago, Illinois 60606
Telephone: 312.876.6435
Telecopier: 312.876.6436
Attention: Mr. John E. Buchfink
Toronto Dominion (Texas), Houston Agency Same as Domestic Lending Same as Domestic Lending
Inc. Suite 1700 Office Office
909 Fannin
Houston, Texas 77010
Telephone: 713.653.8281
Telecopier: 713.951.9921
Attention: Mr. Fred Harley
</TABLE>
-3-
<PAGE>
EXHIBIT A
FORM OF NOTE
U.S.$______________ Dated: _________, 19__
FOR VALUE RECEIVED, the undersigned, UNICOM ENTERPRISES INC., an Illinois
corporation (the "BORROWER"), HEREBY PROMISES TO PAY to the order of
___________________________ (the "LENDER") for the account of its Applicable
Lending Office (such term and other capitalized terms herein being used as
defined in the Credit Agreement referred to below) the principal sum of
U.S.$[amount of the Lender's Commitment in figures] or, if less, the aggregate
principal amount of the Advances made by the Lender to the Borrower pursuant to
the Credit Agreement outstanding on the Termination Date applicable to the
Lender.
The Borrower promises to pay interest on the unpaid principal amount of
each Advance from the date of such Advance until such principal amount is paid
in full, at such interest rates, and payable at such times, as are specified in
the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to Citibank, N.A., as Agent, at 399 Park Avenue, New York, New
York 10043, in same day funds. Each Advance made by the Lender to the Borrower
pursuant to the Credit Agreement, and all payments made on account of principal
thereof, shall be recorded by the Lender and, prior to any transfer hereof,
endorsed on the grid attached hereto which is part of this Promissory Note,
provided that the failure to so record any Advance or any payment on account
thereof shall not affect the payment obligations of the Borrower hereunder or
under the Credit Agreement.
This Promissory Note is one of the Notes referred to in, and is entitled
to the benefits of, the Credit Agreement, dated as of November 22, 1994 (as
amended, modified or supplemented from time to time, the "CREDIT AGREEMENT"),
among the Borrower, the Lender and certain other banks parties thereto, and
Citibank, N.A., as Agent for the Lender and such other banks. The Credit
Agreement, among other things, (i) provides for the making of Advances by the
Lender to the Borrower from time to time in an aggregate amount not to exceed at
any time outstanding the U.S. dollar amount first above
<PAGE>
2
mentioned, the indebtedness of the Borrower resulting from each such Advance
being evidenced by this Promissory Note, and (ii) contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
and also for prepayments on account of principal hereof prior to the maturity
hereof upon the terms and conditions therein specified.
The Borrower hereby waives presentment, demand, protest and notice of any
kind. No failure to exercise, and no delay in exercising, any rights hereunder
on the part of the holder hereof shall operate as a waiver of such rights.
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
UNICOM ENTERPRISES INC.
By___________________________
Name:
Title:
<PAGE>
ADVANCES, INTEREST PERIODS AND PAYMENTS OF PRINCIPAL
--------------------------------------------------------------------------------
Interest Amount of
Period (if Principal Unpaid
Amount of any) of Paid or Principal Notation
Date Advance Advance Prepaid Balance Made By
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
EXHIBIT B-1
FORM OF NOTICE OF BORROWING
Citibank, N.A., as Agent for the
Lenders parties to the Credit
Agreement referred to below
399 Park Avenue
New York, New York 10043
[Date]
Attention: Utilities Department
North American Finance Group
Ladies and Gentlemen:
The undersigned, Unicom Enterprises Inc., refers to the Credit Agreement,
dated as of November 22, 1994 (as amended, modified or supplemented from time to
time, the "CREDIT AGREEMENT", the terms defined therein being used herein as
therein defined), among the undersigned, certain Lenders parties thereto and
Citibank, N.A., as Agent for said Lenders, and hereby gives you notice,
irrevocably, pursuant to Section 2.02 of the Credit Agreement that the
undersigned hereby requests a Borrowing under the Credit Agreement, and in that
connection sets forth below the information relating to such Borrowing (the
"PROPOSED BORROWING") as required by Section 2.02(a) of the Credit Agreement:
(i) The Business Day of the Proposed Borrowing is ________________,
19__.
(ii) The Type of Advances to be made in connection with the Proposed
Borrowing is [Alternate Base Rate Advances] [Eurodollar Rate Advances].
(iii) The aggregate principal amount of the Proposed Borrowing is
$___________.
<PAGE>
2
[(iv) The Interest Period for each Advance made as part of the
Proposed Borrowing is ____ month[s].]*
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the Proposed Borrowing:
(A) the representations and warranties contained in Section 5.01 of
the Credit Agreement are true and correct, before and after giving effect
to the Proposed Borrowing and to the application of the proceeds thereof,
as though made on and as of such date; and
(B) no event has occurred and is continuing, or would result from
such Proposed Borrowing or from the application of the proceeds thereof,
that constitutes an Event of Default or Unmatured Default.
Very truly yours,
UNICOM ENTERPRISES INC.
By _____________________________
Name:
Title:
----------------
* For Eurodollar Rate Advances only.
<PAGE>
EXHIBIT B-2
FORM OF NOTICE OF CONVERSION
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
399 Park Avenue
New York, New York 10043
[Date]
Attention: Utilities Department
North American Finance Group
Ladies and Gentlemen:
The undersigned, Unicom Enterprises Inc., refers to the Credit Agreement,
dated as of November 22, 1994 (as amended, modified or supplemented from time to
time, the "CREDIT AGREEMENT", the terms defined therein and not otherwise
defined herein being used herein as therein defined), among the Borrower, the
Lenders named therein and the Agent, and hereby gives you notice, irrevocably,
pursuant to Section 2.10 of the Credit Agreement that the undersigned hereby
requests a Conversion under the Credit Agreement, and in that connection sets
forth below the information relating to such Conversion (the "PROPOSED
CONVERSION") as required by Section 2.10 of the Credit Agreement:
(i) The Business Day of the Proposed Conversion is
____________________, _______.
(ii) The Type of Advances to be subject to the Proposed Conversion is
[Alternate Base Rate Advances] [Eurodollar Rate Advances].
(iii) The aggregate principal amount of the Advances to be subject
to the Proposed Conversion is $_________________.
(iv) The Type of Advances to which such Advances are proposed to be
Converted is [Alternate Base Rate Advances] [Eurodollar Rate Advances].
<PAGE>
2
[(v) The Interest Period for each Advance made as part of the
Proposed Conversion is ____ month(s).]/1/
The undersigned hereby certifies that the Borrower's request for the
Proposed Conversion is made in compliance with Sections 2.01, 2.09 and 2.10 of
the Credit Agreement.
The undersigned hereby further certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed
Conversion:
(i) The representations and warranties contained in Section 5.01 of
the Credit Agreement (other than those contained in subsections (e) and
(f) thereof) and in Section 6 of the Guaranty (other than those contained
in subsections (f) and (g) thereof) are true and correct, before and after
giving effect to the Proposed Conversion, as though made on and as of such
date; and
(ii) No Unmatured Default or Event of Default has occurred and is
continuing, or would result from the Proposed Conversion.
Very truly yours,
UNICOM ENTERPRISES INC.
By___________________________
Title:
----------------
/1/ Delete for Base Rate Advances
<PAGE>
EXHIBIT C
[FORM OF LENDER ASSIGNMENT]
ASSIGNMENT AND ACCEPTANCE
Dated ___________, 19__
Reference is made to the Credit Agreement, dated as of November 22, 1994
(as amended, modified or supplemented from time to time, the "CREDIT
AGREEMENT"), among Unicom Enterprises Inc., an Illinois corporation (the
"BORROWER"), the Lenders named therein and from time to time parties thereto and
Citibank, N.A., as Agent for the Lenders (the "AGENT"). Terms defined in the
Credit Agreement and not otherwise defined herein are used herein with the same
meaning.
_____________ (the "ASSIGNOR") and ____________ (the "ASSIGNEE") agree as
follows:
1. The Assignor hereby sells and assigns without recourse to the
Assignee, and the Assignee hereby purchases and assumes from the Assignor, that
interest in and to all of the Assignor's rights and obligations under the Credit
Agreement as of the date hereof which represents the percentage interest
specified on Schedule 1 of all outstanding rights and obligations under the
Credit Agreement, including, without limitation, such interest in the Assignor's
Commitment, the Advances owing to the Assignor, the Assignor's participation in
Letters of Credit, and the Note[s] held by the Assignor. After giving effect to
such sale and assignment, the Assignee's Commitment and the amount of the
Advances owing to the Assignee will be as set forth in Section 2 of Schedule 1.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with any Loan Document or
any other instrument or document furnished pursuant thereto or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of any
Loan Document or any other instrument or document furnished pursuant thereto;
(iii) makes no representation
<PAGE>
2
or warranty and assumes no responsibility with respect to the financial
condition of the Borrower or the performance or observance by the Borrower of
any of its obligations under the Credit Agreement or any other instrument or
document furnished pursuant thereto; and (iv) attaches the Note[s] referred to
in paragraph 1 above and requests that the Agent exchange such Note[s] for a new
Note payable to the order of the Assignee in an amount equal to the Commitment
assumed by the Assignee pursuant hereto or new Notes payable to the order of the
Assignee in an amount equal to the Commitment assumed by the Assignee pursuant
hereto and the Assignor in an amount equal to the Commitment retained by the
Assignor under the Credit Agreement, respectively, as specified on Schedule 1
hereto.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 5.01(e) thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under the Credit Agreement as are delegated to the Agent
by the terms thereof, together with such powers as are reasonably incidental
thereto; (v) agrees that it will perform in accordance with their terms all of
the obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender; [and] (vi) specifies as its Domestic Lending Office
(and address for notices) and Eurodollar Lending Office the offices set forth
beneath its name on the signature pages hereof [and (vi) attaches the forms
prescribed by the Internal Revenue Service of the United States certifying that
it is exempt from United States withholding taxes with respect to all payments
to be made to the Assignee under the Credit Agreement and the Notes]./1/
4. Following the execution of this Assignment and Acceptance by the
Assignor, the Assignee and, if
----------------
/1/ If the Assignee is organized under the laws of a jurisdiction outside the
United States.
<PAGE>
3
required pursuant to Section 9.07(a) of the Credit Agreement, the Borrower, it
will be delivered to the Agent for acceptance and recording by the Agent. The
effective date of this Assignment and Acceptance shall be the date of acceptance
thereof by the Agent, unless otherwise specified on Schedule 1 hereto (the
"EFFECTIVE ASSIGNMENT DATE").
5. Upon such acceptance and recording by the Agent, as of the Effective
Assignment Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and after the
Effective Assignment Date, the Agent shall make all payments under the Credit
Agreement and the Notes in respect of the interest assigned hereby (including,
without limitation, all payments of principal, interest and fees with respect
thereto) to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement and the Notes for periods
prior to the Effective Assignment Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed by their respective officers thereunto duly
authorized, as of the date first above written, such execution being made on
Schedule 1 hereto.
<PAGE>
Schedule 1
to
Assignment and Acceptance
Dated __________, 19__
Section 1.
----------
Percentage Interest: ____%
Section 2.
----------
Assignee's Commitment: $____
Aggregate Outstanding Principal
Amount of Advances owing to the Assignee: $____
A Note payable to the order of the Assignee
Dated: _________, 19__
Principal amount: $____
A Note payable to the order of the Assignor
Dated: _________, 19__
Principal amount: $____
Section 3.
----------
Effective Assignment Date/1/: _________, 19__
[NAME OF ASSIGNOR]
By_____________________________
Name:
Title:
[NAME OF ASSIGNEE]
----------------
/1/ This date should be no earlier than the date of acceptance by the Agent.
<PAGE>
2
By_____________________________
Name:
Title:
Domestic Lending Office (and
address for notices):
[Address]
Eurodollar Lending Office:
[Address]
Consented to as of the
date first above written:
UNICOM ENTERPRISES INC.
By________________________________
Name:
Title:
Accepted this ____ day
of ____________, 19__
CITIBANK, N.A.
By________________________________
Name:
Title:
<PAGE>
EXHIBIT D
FORM OF LC BANK AGREEMENT
LETTER OF CREDIT BANK AGREEMENT (the "AGREEMENT"), dated as of __________,
19___, between UNICOM ENTERPRISES INC., an Illinois corporation (the
"BORROWER"), and _____________________ (the "LC BANK").
PRELIMINARY STATEMENTS
(1) The Borrower has entered into a Credit Agreement, dated as of November
22, 1994 (said agreement, as amended, modified or supplemented from time to
time, being the "CREDIT AGREEMENT"), with certain lenders named therein and from
time to time parties thereto (the "LENDERS") and Citibank, N.A., as Agent.
Unless otherwise defined herein, capitalized terms used herein shall have the
meanings assigned to such terms in the Credit Agreement.
(2) Pursuant to Section 3.01 of the Credit Agreement, the Borrower may from
time to time identify and arrange for one or more Lenders to act as an LC Bank
thereunder and issue one or more Letters of Credit (as defined below) in an
aggregate stated amount not exceeding $100,000,000. The Borrower desires to
designate ________________ as an LC Bank under the Credit Agreement. Subject to
the terms and conditions hereof and of the Credit Agreement, ______________ has
agreed to act as an LC Bank and to issue an irrevocable letter of credit in
favor of ________________________ (the "BENEFICIARY") in the amount of
$__________ (the "LC COMMITMENT") for the account of the Borrower.
(3) [PURPOSE OF THE LETTER OF CREDIT TO BE ISSUED HEREUNDER.]
NOW, THEREFORE, in consideration of the premises and in order to induce the
LC Bank to issue the Letter of Credit, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
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2
applicable to both the singular and plural forms of the terms defined):
"BENEFICIARY" has the meaning assigned to that term in Preliminary
Statement (2).
"ISSUANCE TERMINATION DATE" has the meaning assigned to that term in
Section 3.01 hereof.
"LC COMMITMENT" has the meaning assigned to that term in Preliminary
Statement (2).
"LETTER OF CREDIT" means the letter of credit issued by the LC Bank
pursuant to Section 3.02 hereof, as such letter of credit may from time to
time be amended, modified or extended in accordance with the terms of the
Credit Agreement and this Agreement, in form and substance satisfactory to
the LC Bank, the Borrower and the Agent.
"STATED TERMINATION DATE" means ___________________________; provided,
however, that the Stated Termination Date of the Letter of Credit upon its
date of issuance shall be no later than the latest then-scheduled
Termination Date; and provided further, however, that if the aggregate
amount of the Commitments on any scheduled Termination Date (after giving
effect to any scheduled reductions in the Commitments on such date) will be
less than the LC Commitment, the Stated Termination Date of the Letter of
Credit shall be no later than such Termination Date.
SECTION 1.02. COMPUTATION OF TIME PERIODS. Computation of a period of
time from a specified date to a later specified date shall be made in accordance
with the Credit Agreement.
SECTION 1.03. ACCOUNTING TERMS. All accounting terms not specifically
defined herein or in the Credit Agreement shall be construed in accordance with
generally accepted United States accounting principles as in effect as of the
date hereof consistently applied, except as otherwise stated herein.
ARTICLE II
THE CREDIT AGREEMENT
SECTION 2.01. CREDIT AGREEMENT. (a) The parties hereto acknowledge and
agree that this Agreement is an
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3
"LC Bank Agreement" under the Credit Agreement, and that the parties hereto
shall be entitled to the rights and remedies, and bound by the obligations,
accorded to the parties in interest to an "LC Bank Agreement" as so provided in
the Credit Agreement. The parties hereto hereby further acknowledge and agree
that the Agent, the Lenders and the Beneficiary, as the case may be, are
intended third-party beneficiaries hereof and are entitled (acting through the
Agent, in the case of the Lenders) to the rights and benefits accorded
hereunder.
(b) The LC Bank hereby acknowledges and agrees that it is an "LC Bank"
under the Credit Agreement, that, by its execution and delivery hereof, it is
deemed a party to the Credit Agreement as if it were a signatory thereof in such
capacity and that it assumes all obligations, and acquires all rights and
remedies, of an "LC Bank" under the Credit Agreement.
(c) In the event of any conflict between the terms of this Agreement and
the Credit Agreement (unless such conflict arises solely as a result of an
amendment to the Credit Agreement made after the date hereof without the written
consent of the LC Bank thereto), the terms of the Credit Agreement shall control
and such conflicting terms hereunder shall be of no force or effect.
ARTICLE III
AMOUNT AND TERMS OF THE LETTER
OF CREDIT
SECTION 3.01. THE LETTER OF CREDIT. The LC Bank agrees, on the terms and
conditions hereinafter set forth, and subject, at all times, to Sections 3.01(b)
and 2.12(a) of the Credit Agreement, to issue the Letter of Credit to the
Beneficiary on any Business Day during the period from the date hereof to and
including ________________, 19__ (the "ISSUANCE TERMINATION DATE") in an amount
not to exceed the LC Commitment and expiring on or before the Stated Termination
Date.
SECTION 3.02. ISSUING THE LETTER OF CREDIT. The Letter of Credit shall be
issued (or the stated maturity thereof extended or terms thereof modified or
amended) on not less than three Business Days' prior written notice thereof to
the Agent and the LC Bank pursuant to, and in accordance with, Section 3.02 of
the Credit Agreement.
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4
SECTION 3.03. FEES.
(a) The Borrower hereby agrees to pay to the LC Bank, upon the
issuance of the Letter of Credit hereunder, an issuance fee in an amount equal
to [___% of the initial stated amount thereof] [$________].
(b) The Borrower hereby agrees to pay to the LC Bank, upon each
drawing made by the Beneficiary under the Letter of Credit, a drawing fee in an
amount equal to $______.
(c) The Borrower hereby agrees to pay to the LC Bank, upon each
amendment to the Letter of Credit, an amendment fee in an amount equal to
$______.
[(d) The Borrower hereby agrees to pay to the LC Bank a fronting fee
equal to ___% of the average daily amount of the stated amount of the Letter of
Credit from the date of issuance of the Letter of Credit until the date of
expiry of the Letter of Credit, payable on the last day of each __________,
__________, __________ and __________ during such period and on such date of
expiry.]
SECTION 3.04. PAYMENTS AND COMPUTATIONS. The Borrower shall make
each payment hereunder not later than 12:00 noon (New York City time) on any day
when due in U.S. Dollars. Any such payment shall be made to the Agent for the
account of the LC Bank at the Agent's office set forth in Section 9.02 of the
Credit Agreement. The Borrower hereby authorizes the LC Bank, if and to the
extent payment is not made when due hereunder, to charge from time to time
against any or all of the Borrower's accounts with the LC Bank any amount so
due. Computations of the fees hereunder shall be made by the LC Bank on the
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) elapsed.
SECTION 3.05. EXTENSION OF THE STATED TERMINATION DATE. At least 30
but not more than 60 days before the Stated Termination Date of the Letter of
Credit, the Borrower may request the LC Bank in writing (with a copy of each
such request to the Agent) to extend the Stated Termination Date of the Letter
of Credit for purposes of this Agreement and the Letter of Credit to any date
not later than the latest then-scheduled Termination Date (provided, however,
that if the aggregate amount of the Commitments on any scheduled Termination
Date (after giving effect to any scheduled reductions in the Commitments on such
date) will be less than the LC
<PAGE>
5
Commitment, the extended Stated Termination Date of the Letter of Credit shall
be no later than such Termination Date). If the Borrower shall make such a
request, the LC Bank shall, on or before the 15th Business Day after its receipt
of such request, notify the Borrower in writing whether or not the LC Bank
consents to such request and, if the LC Bank does so consent, the conditions of
such consent (including conditions relating to legal documentation and the
consent of the Beneficiary thereof). If the LC Bank shall not so notify the
Borrower, the LC Bank shall be deemed not to have consented to such request.
Any such extension shall be effective only if and when made in accordance with
Articles III and IV of the Credit Agreement.
ARTICLE IV
CONDITIONS OF ISSUANCE
SECTION 4.01. CONDITIONS PRECEDENT TO ISSUANCE OF THE LETTER OF
CREDIT. The obligation of the LC Bank to issue the Letter of Credit is subject
to the satisfaction of the applicable conditions precedent set forth in Article
IV of the Credit Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower hereby represents and warrants for the benefit of the LC Bank that the
representations and warranties of the Borrower set forth in Article V of the
Credit Agreement are true and correct on the date hereof, on each date of
issuance of the Letter of Credit and on each date on which the term thereof is
extended in accordance with Section 3.05 hereof, as if made on and as of such
date.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing,
signed by the LC Bank and the Borrower and consented to by the Agent on behalf
of the Majority Lenders, and then
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6
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
SECTION 6.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall be made in accordance with Section 9.02 of the
Credit Agreement and sent, if to the LC Bank, at its address set forth on the
signature page hereof.
SECTION 6.03. NO WAIVER; REMEDIES. No failure on the part of the
Borrower or LC Bank to exercise, and no delay in exercising, any right hereunder
or under the Credit Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder or thereunder preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein and therein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 6.04. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay
on demand all costs and expenses incurred by the LC Bank, including, without
limitation, the reasonable counsel fees and expenses of counsel to the LC Bank,
in connection with the preparation, execution, delivery and administration of
this Agreement and any other documents that may be delivered in connection with
this Agreement and any proposed modification, amendment or consent relating to
this Agreement, including, without limitation, fees and out-of-pocket expenses
of counsel for the LC Bank with respect thereto and with respect to advising the
LC Bank as to its rights and responsibilities under this Agreement. The
Borrower further agrees to pay on demand all costs and expenses, if any
(including, without limitation, counsel fees and expenses of outside counsel and
of internal counsel), incurred by the LC Bank in connection with (i) the
enforcement (whether through negotiations, legal proceedings or otherwise) of
this Agreement and such other documents that may be delivered in connection with
this Agreement and (ii) any action or proceeding relating to a court order,
injunction, or other process or decree restraining or seeking to restrain the LC
Bank from paying any amount under the Letter of Credit. In addition, the
Borrower shall pay any and all stamp and other taxes and fees payable or
determined to be payable in connection with the execution and delivery of this
Agreement or the Letter of Credit or any such other documents, and agrees to
save the LC Bank harmless from and against any and all liabilities with respect
to or resulting from any delay in paying or omission to pay such taxes and fees.
<PAGE>
7
SECTION 6.05. BINDING EFFECT. This Agreement shall become effective
when it shall have been executed by the Borrower and the LC Bank and consented
to in writing by the Agent (for itself as the Agent and on behalf of the
Lenders); and thereafter shall be binding upon and inure to the benefit of the
Borrower, the LC Bank, the Agent, the Lenders and their respective successors
and assigns, except that the Borrower shall not have the right to assign its
rights hereunder or any interest herein without the prior written consent of the
Lenders and the LC Bank shall not have the right to assign its rights hereunder
or any interest herein without the prior written consent of the Lenders.
SECTION 6.06. SEVERABILITY. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
SECTION 6.07. WAIVER OF JURY TRIAL. EACH OF THE LC BANK AND THE
BORROWER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
LETTER OF CREDIT, OR ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED HEREUNDER OR
THEREUNDER.
SECTION 6.08. GOVERNING LAW; SUBMISSION TO JURISDICTION. This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York. Each of the Borrower and the LC Bank (i) irrevocably
submits to the jurisdiction of any New York State court or Federal court sitting
in New York City in any action arising out of this Agreement or the Letter of
Credit, (ii) agrees that all claims in such action may be decided in such court,
(iii) waives, to the fullest extent it may effectively do so, the defense of an
inconvenient forum and any objections to venue and (iv) consents to the service
of process by mail. A final judgment in any such action shall be conclusive and
may be enforced in other jurisdictions. Nothing herein shall affect the right
of any party to serve legal process in any manner permitted by law or affect its
right to bring any action in any other court.
SECTION 6.09. HEADINGS. Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
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8
SECTION 6.10. EXECUTION IN COUNTERPARTS. This Agreement may be
executed and consented to in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed or consented to
shall be deemed to be an original and all of which taken together shall
constitute one and the same instrument.
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9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
UNICOM ENTERPRISES INC.
By__________________________________
Name:
Title:
[INSERT LC BANK], as LC Bank
By__________________________________
Name:
Title:
Consented to as of the date
first above written:
CITIBANK, N.A., as Agent on
behalf of the Lenders
By____________________________________
Name:
Title:
<PAGE>
EXHIBIT E
FORM OF GUARANTY
GUARANTY, dated as of November ___, 1994, made by UNICOM CORPORATION, a
corporation organized and existing under the laws of the State of Illinois (the
"GUARANTOR"), in favor of the Lenders (the "LENDERS") and the LC Banks parties
to the Credit Agreement (as defined below) and Citibank, N.A., as agent (in such
capacity, the "AGENT") for the Lenders.
PRELIMINARY STATEMENTS
(1) The Lenders and the Agent have entered into a Credit Agreement, dated
as of the date hereof (said Agreement, as it may hereafter be amended or
otherwise modified from time to time, being the "CREDIT AGREEMENT", the terms
defined therein and not otherwise defined herein being used herein as therein
defined), with Unicom Enterprises Inc., a corporation organized and existing
under the laws of the State of Illinois (the "BORROWER"). The Guarantor will
derive substantial direct and indirect benefit from the transactions
contemplated by the Credit Agreement, the Notes and the other Loan Documents.
(2) The Borrower is a wholly-owned Subsidiary of the Guarantor.
(3) It is a condition precedent to the making of Advances by the Lenders
under the Credit Agreement and the issuance of Letters of Credit by the LC Banks
pursuant to the Credit Agreement that the Guarantor shall have executed and
delivered this Guaranty.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Lenders to make Advances and each LC Bank to issue Letters of Credit under
the Credit Agreement, the Guarantor hereby agrees as follows:
SECTION 1. CERTAIN DEFINED TERMS. As used in this Guaranty, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"CONSOLIDATED CAPITALIZATION" means, at any date of determination,
the sum of (i) common
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2
equity of the Guarantor and its Consolidated Subsidiaries, (ii) preferred
and preference stock of the Guarantor and its Consolidated Subsidiaries
and (iii) Consolidated Debt of the Guarantor and its Consolidated
Subsidiaries.
"CONSOLIDATED DEBT" means, at any date of determination, the sum of
Debt of the Guarantor and its Consolidated Subsidiaries and Contingent
Obligations of the Guarantor and its Consolidated Subsidiaries.
"CONSOLIDATED SUBSIDIARY" means, as to any Person, any Subsidiary of
such Person whose accounts are or are required to be consolidated with the
accounts of such Person in accordance with GAAP.
"CONTINGENT OBLIGATION" means, as to any Person, the undrawn face
amount of any letters of credit issued for the account of such Person and
shall also mean any obligation of such Person guaranteeing or in effect
guaranteeing any Debt, leases, dividends, letters of credit, or other
obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not
contingent, (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (c) to purchase property, securities, or services
primarily for the purpose of assuring the obligee under any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation, or (d) otherwise to assure or hold harmless the
obligee under such primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the
primary obligation or, where such
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3
Contingent Obligation is specifically limited to a portion of any such
primary obligation, that portion to which it is limited or, if not stated
or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as
determined by such Person in good faith. For purposes of computing the
consolidated Debt of any Person, the amount of any primary obligation of
any Subsidiary of such Person and the amount of any Contingent Obligation
of such Person corresponding to such primary obligation shall only be
counted once (i.e., without duplication).
"TANGIBLE NET WORTH" means, at any time of determination, with
respect to any Person, the excess of such Person's total assets over its
total liabilities, with total assets and total liabilities each to be
determined in accordance with GAAP consistently applied, excluding,
however, from the determination of total assets (i) goodwill,
organizational expenses, research and development expenses, trademarks,
trade names, copyrights, patents, patent applications, licenses and rights
in any thereof, and other similar intangibles, (ii) all prepaid expenses,
deferred charges or unamortized debt discount and expense, (iii) all
reserves carried and not deducted from assets, (iv) securities that are
not readily marketable, (v) cash held in a sinking or other analogous fund
established for the purpose of redemption, retirement or prepayment of
capital stock or Debt, (vi) any write-up in the book value of any asset
resulting from a revaluation thereof subsequent to September 30, 1994, and
(vii) any items not included in clauses (i) through (vi), above, that are
treated as intangibles in conformity with GAAP.
SECTION 2. GUARANTY. The Guarantor hereby absolutely, unconditionally and
irrevocably guaranties the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all obligations of the Borrower now
or hereafter existing under the Credit Agreement, the Notes and any other Loan
Documents, whether for principal, reimbursement obligations, interest, fees,
expenses or otherwise (all such obligations being the "OBLIGATIONS"), and agrees
to pay any and all expenses (including counsel fees and expenses) incurred by
the Agent, the LC Banks or the
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4
Lenders in enforcing any rights under this Guaranty. Without limiting the
generality of the foregoing, the Guarantor's liability shall extend to all
amounts that constitute part of the Obligations and would be owed by the
Borrower to the Agent, the LC Banks or the Lenders under the Credit Agreement,
the Notes and the other Loan Documents but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Borrower.
SECTION 3. GUARANTY ABSOLUTE. The Guarantor guarantees that the
Obligations will be paid strictly in accordance with the terms of the Credit
Agreement, the Notes and the other Loan Documents, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of the Agent, the LC Banks or the Lenders with
respect thereto. The obligations of the Guarantor under this Guaranty are
independent of the Obligations, and a separate action or actions may be brought
and prosecuted against the Guarantor to enforce this Guaranty, irrespective of
whether any action is brought against the Borrower or whether the Borrower is
joined in any such action or actions. The liability of the Guarantor under this
Guaranty shall be absolute, unconditional and irrevocable irrespective of:
(i) any lack of validity or enforceability of the Credit Agreement,
the Notes, any other Loan Document, any Advance, or any other agreement or
instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of, or any consent to departure from, the Credit Agreement or the
Notes, including, without limitation, any increase in the Obligations
resulting from the extension of additional credit to the Borrower or
otherwise and any extension of the Termination Date;
(iii) any manner of application of collateral, or proceeds thereof,
to all or any of the Obligations, or any manner of sale or other
disposition of, any release of or any failure to perfect any lien on or
security interest in any collateral for all or any of the Obligations or
any other assets of the Borrower or any of its
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5
Subsidiaries, or any release or discharge of any Person liable for any or
all of the Obligations;
(iv) any change, restructuring or termination of the corporate
structure or existence of the Borrower or any of its Subsidiaries or any
bankruptcy, insolvency, liquidation or similar proceeding instituted by or
against the Borrower or any of its Subsidiaries; or
(v) any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Borrower or a guarantor.
As against the Guarantor, this Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Obligations is rescinded or must otherwise be returned by the Agent, any LC Bank
or any Lender upon the insolvency, bankruptcy or reorganization of the Borrower
or otherwise, all as though such payment had not been made.
SECTION 4. WAIVER. The Guarantor hereby waives promptness, diligence,
presentment, protest, notice of protest, notice of dishonor, notice of
acceptance and any other notice with respect to any of the Obligations and this
Guaranty and any requirement that the Agent, any LC Bank or any Lender protect,
secure, perfect or insure any security interest or lien on any property subject
thereto or exhaust any right or take any action against the Borrower or any
other person or entity or any collateral.
SECTION 5. WAIVER OF RIGHTS OF SUBROGATION. The Guarantor hereby
expressly and irrevocably waives with respect to the Borrower and its successors
and assigns and any other Person, any and all rights at law or in equity, by
agreement or otherwise, to subrogation, reimbursement, exoneration,
contribution, setoff, share in any collateral or any other rights that could
accrue to a surety against a principal, to a guarantor against a maker or
obligor, to an accommodation party against the party accommodated, or to a
holder or transferee against a maker, and that the Guarantor may have or
hereafter acquire against the Borrower, any of its Affiliates, or any other
Person in connection with or as a result of the Guarantor's execution, delivery
or performance hereunder. In furtherance of the foregoing, the Guarantor agrees
that any payment by the Guarantor to the Agent, the LC Banks or the Lenders
pursuant to this Guaranty shall be deemed a contribution to the capital of the
Borrower, and
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6
no such payment shall constitute the Guarantor a creditor of the Borrower. The
Guarantor hereby acknowledges and agrees that the foregoing waivers are intended
to benefit the Borrower, the Agent, the LC Banks and the Lenders and shall not
limit or otherwise affect the Guarantor's liability hereunder or the
enforceability hereof. If, notwithstanding the foregoing, any amount shall be
paid to the Guarantor on account of such subrogation rights at any time when all
of the Obligations shall not have been paid in full, such amount shall be held
by the Guarantor in trust for the Agent, the LC Banks and the Lenders,
segregated from other funds of the Guarantor, and shall, forthwith upon receipt
by the Guarantor, be turned over to the Agent in the exact form received by the
Guarantor (duly endorsed by the Guarantor to the Agent), to be applied against
the Obligations, whether matured or unmatured, in such order as the Agent may
determine.
SECTION 6. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby
represents and warrants as follows:
(a) CORPORATE EXISTENCE AND POWER. It is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Illinois,
is duly qualified to do business as a foreign corporation in, and is in good
standing under the laws of, each state in which the ownership of its properties
or the conduct of its business makes such qualification necessary, except where
the failure to be so qualified would not have a material adverse effect on its
business, assets, revenues, financial condition, results of operations,
operations or prospects or its ability to perform its obligations under this
Guaranty, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to own or lease its property and
to carry on its business as now conducted.
(b) CORPORATE AUTHORIZATION. The execution, delivery and performance by it
of this Guaranty have been duly authorized by all necessary corporate action on
its part and do not, and will not, require the consent or approval of its
shareholders, or any trustee or holder of any Debt or other obligation of the
Guarantor.
(c) NO VIOLATION, ETC. The execution and delivery by the Guarantor of this
Guaranty, and the performance by the Guarantor of its obligations hereunder, (i)
are within the Guarantor's corporate powers, (ii) have been duly authorized by
all necessary corporate action and (iii) do not and will not (A)
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7
violate any provision of the charter or by-laws of the Guarantor or of law, (B)
violate any legal restriction binding on or affecting the Guarantor, (C) result
in a breach of, or constitute a default under, any indenture or loan or credit
agreement or any other agreement, lease or instrument to which the Guarantor is
a party or by which it or its properties may be bound or affected, or (D) result
in or require the creation of any lien or security interest upon or with respect
to any of its properties.
(d) GOVERNMENTAL ACTIONS. No authorization or approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body is required for the due execution, delivery and performance by the
Guarantor of this Guaranty.
(e) EXECUTION AND DELIVERY. This Guaranty has been duly executed and
delivered by the Guarantor, and is the legal, valid and binding obligation of
the Guarantor enforceable against it in accordance with its terms, subject,
however, to the application by a court of general principles of equity and to
the effect of any applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally.
(f) LITIGATION. There is no pending or threatened action or proceeding
(including, without limitation, any proceeding relating to, or arising out of,
any Environmental Laws) affecting it or any of its Subsidiaries before any
court, governmental agency or arbitrator, that may have a material adverse
effect on the business, assets, revenues, financial condition, results of
operations, operations or prospects of the Guarantor or the Guarantor and its
Subsidiaries, taken as a whole, or on the Guarantor's ability to perform its
obligations under this Guaranty, or that questions the validity or
enforceability of this Guaranty or any other Loan Document against the Guarantor
or the Borrower.
(g) FINANCIAL STATEMENTS; MATERIAL ADVERSE CHANGE. The consolidated
balance sheet of the Guarantor and its Consolidated Subsidiaries as at December
31, 1993, and the consolidated balance sheet of the Guarantor and its
Consolidated Subsidiaries as at September 30, 1994 and the related consolidated
statements of income, retained earnings and cash flows for the nine-month period
then ended, together with the report thereon of Arthur Andersen LLP included in
the Guarantor's Quarterly
<PAGE>
8
Report on Form 10-Q for the quarterly period ended September 30, 1994, copies of
each of which have been furnished to each Lender, fairly present (subject, in
the case of such balance sheet and statements of income, retained earnings and
cash flows for the nine months ended September 30, 1994, to year-end
adjustments) the financial condition of the Guarantor and its Consolidated
Subsidiaries as at such dates and the results of operations of the Guarantor and
its Consolidated Subsidiaries for the periods ended on such dates, all in
accordance with GAAP consistently applied (except for such changes in accounting
methods described in such report of Arthur Andersen LLP). Since September 30,
1994, there has been no material adverse change in the business, assets,
revenues, financial condition, results of operations, operations or prospects of
the Guarantor and its Subsidiaries, taken as a whole, or the Borrower and its
Subsidiaries, taken as a whole (other than operating losses resulting from
start-up operations of Subsidiaries of the Borrower), or in the Guarantor's
ability to perform any of its obligations hereunder.
(h) ERISA. During the preceding twelve-consecutive-month period, no steps
have been taken to terminate any Pension Plan, and no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien
under Section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Pension Plan which could result in the incurrence
by the Guarantor or any of its Subsidiaries of any material liability, fine, or
penalty. The Guarantor has no contingent liability with respect to any post-
retirement benefit under a Welfare Plan, other than liability for continuation
coverage described in Part 6 of Title I of ERISA.
(i) TAXES. The Guarantor and each of its Subsidiaries have filed all tax
returns (federal, state and local) required to be filed and paid all taxes shown
thereon to be due, including interest and penalties, or provided adequate
reserves for payment thereof other than such taxes that the Guarantor or such
Subsidiary is contesting in good faith by appropriate legal proceedings and in
respect of which the Guarantor or such Subsidiary, as the case may be, has
established adequate reserves in conformity with GAAP.
(j) VIOLATION OF LAW. Neither the Guarantor nor any of its Subsidiaries is
in violation of any law or governmental regulation or court decree or order
which
<PAGE>
9
may result in a material adverse effect on the business, assets, revenues,
financial condition, results of operations, operations or prospects of the
Guarantor and its Subsidiaries, taken as a whole, or the Borrower and its
Subsidiaries, taken as a whole, or on the Guarantor's ability to perform any of
its obligations hereunder.
(k) INVESTMENT COMPANY. The Guarantor is not an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or an "investment advisor" within
the meaning of the Investment Advisers Act of 1940, as amended.
(l) HOLDING COMPANY. The Guarantor is a "holding company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended, but the
Guarantor and its Subsidiaries are exempt from the provisions of that Act,
except Section 9(a)(2) thereof, by virtue of an order issued by the Securities
and Exchange Commission on July 22, 1994. Such exemption is in full force and
effect and the Guarantor is not aware of any existing or proposed proceedings
contemplating the revocation or modification of such exemption.
(m) INFORMATION. All factual information heretofore or contemporaneously
furnished by or on behalf of the Guarantor in writing to the Agent or any Lender
for purposes of or in connection with this Guaranty or any transaction
contemplated hereby is, and all other such factual information hereafter
furnished by or on behalf of the Guarantor to the Agent, any LC Bank or any
Lender will be, true and accurate in every material respect on the date as of
which such information is dated or certified, and not incomplete by omitting to
state any material fact necessary to make such information not misleading.
(n) NO CONDITIONS PRECEDENT. There are no conditions precedent to the
effectiveness of this Guaranty that have not been satisfied or waived.
(o) RELIANCE. The Guarantor has, independently and without reliance upon
the Borrower and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Guaranty.
SECTION 7. AFFIRMATIVE COVENANTS. The Guarantor covenants and agrees
that, so long as any part of the
<PAGE>
10
Obligations shall remain unpaid or any Lender shall have any Commitment, the
Guarantor will:
(a) REPORTING REQUIREMENTS. Furnish to each Lender:
(i) as soon as available and in any event within 60 days after the
end of each of the first three quarters of each fiscal year of the
Guarantor, a consolidated balance sheet of the Guarantor and its
Consolidated Subsidiaries as of the end of such quarter and consolidated
statements of income, retained earnings and cash flows of the Guarantor
and its Consolidated Subsidiaries for the period commencing at the end of
the previous fiscal year and ending with the end of such quarter, all in
reasonable detail and duly certified (subject to year-end audit
adjustments) by the chief financial officer or the Treasurer of the
Guarantor as having been prepared in accordance with GAAP consistently
applied, except for (A) the absence of notes thereto and (B) changes in
accounting principles required by GAAP;
(ii) as soon as available and in any event within 90 days after the
end of each fiscal year of the Guarantor and its Consolidated
Subsidiaries, a copy of the annual report for such year for the Guarantor
and its Consolidated Subsidiaries, containing a consolidated balance sheet
of the Guarantor and its Consolidated Subsidiaries as at the end of such
fiscal year and consolidated statements of income, retained earnings and
cash flows of the Guarantor and its Consolidated Subsidiaries for such
fiscal year, certified in a manner acceptable to the Agent by Arthur
Anderson & Co. or another nationally-recognized independent public
accounting firm selected by the Guarantor and acceptable to the Agent;
(iii) concurrently with the financial statements for each quarterly
accounting period and for each fiscal year of the Guarantor furnished
pursuant to paragraphs (i) and (ii), above, (A) a certificate of the chief
financial officer, any vice president responsible for financial or
accounting matters, or the treasurer of the Guarantor stating that (1) the
Guarantor
<PAGE>
11
has performed and observed all of, and the Guarantor is not in default in
the performance or observance of any of, the terms, covenants, agreements
and conditions of this Guaranty or, if the Guarantor shall be in default,
specifying all such defaults and the nature thereof, of which the signer
of such certificate may have knowledge, and (2) the signer has obtained no
knowledge of any Unmatured Default or Event of Default except as specified
in such certificate, and (B) an analysis prepared and certified by the
chief financial officer, any vice president responsible for financial or
accounting matters, or the Treasurer of the Guarantor of the covenants
contained in Sections 7(i) and (j), containing all information necessary
for determining compliance by the Guarantor with such covenants;
(iv) as soon as available and in any event within 90 days after the
end of each fiscal year of the Guarantor and concurrently with the
financial statements furnished pursuant to paragraph (ii), above, a
written statement of the independent public accountants that certified
such financial statements stating that, in making the examination
necessary for their certification of such financial statements, they have
obtained no knowledge of any default by the Guarantor in the observance of
any of the covenants contained in Section 7(i) or (j) or, if such
accountants shall have obtained knowledge of any such default, specifying
all such defaults and the nature thereof, it being understood that they
shall not be liable directly or indirectly for any failure to obtain
knowledge of any default;
(v) as soon as possible and in any event within ten days after the
commencement of litigation against the Guarantor, the Borrower, or any of
their respective Subsidiaries that could reasonably be expected to have a
material adverse effect on the business, assets, revenues, financial
condition, results of operations, operations or prospects of the Guarantor
and its Subsidiaries, taken as a whole, or that questions the validity or
enforceability of any of the Loan Documents against the Guarantor or the
Borrower, notice of such litigation describing in reasonable detail the
facts and circumstances concerning such litigation and the Guarantor's,
the Borrower's or
<PAGE>
12
such Subsidiary's, as the case may be, proposed actions in connection
therewith;
(vi) promptly after the sending or filing thereof, copies of all
reports which the Guarantor sends to any of its security holders, and
copies of all reports and registration statements (other than registration
statements relating to (A) the offering of debt or preferred/preference
stock equity securities and (B) employee benefit plans) which the
Guarantor or any of its Subsidiaries files with the Securities and
Exchange Commission or any national securities exchange;
(vii) promptly after the occurrence of the institution of any steps
by the Guarantor or any other Person to terminate any Pension Plan, or the
failure to make a required contribution to any Pension Plan if such
failure is sufficient to give rise to a Lien under Section 302(f) of
ERISA, or the taking of any action with respect to a Pension Plan which
could result in the requirement that the Guarantor or any of its
Subsidiaries furnish a bond or other security to the PBGC or such Pension
Plan, or the occurrence of any event with respect to any Pension Plan
which could result in the incurrence by the Guarantor or any of its
Subsidiaries of any material liability, fine, or penalty, or any material
increase in the contingent liability of the Guarantor or any of its
Subsidiaries with respect to any post-retirement Welfare Plan benefit,
notice of such event and the action the Guarantor proposes to take with
respect thereto;
(viii) as soon as possible and in any event within ten days after
the Guarantor knows or should have reason to know of the occurrence of
each Unmatured Default or Event of Default continuing on the date of such
statement, a statement of the chief financial officer, any vice president
responsible for financial or accounting matters, or the Treasurer of the
Guarantor setting forth details of such Unmatured Default or Event of
Default and the action that the Guarantor or the Borrower has taken and
proposes to take with respect thereto; and
<PAGE>
13
(ix) such other information (other than proprietary customer
information) respecting the business, assets, revenues, financial
condition, results of operations, operations or prospects of the
Guarantor, the Borrower, or any of their respective Subsidiaries as the
Agent or any Lender may from time to time reasonably request.
(b) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain, and
cause each of its Subsidiaries to preserve and maintain, its legal existence in
the jurisdiction of its organization and qualify and remain qualified as a
foreign organization in each jurisdiction in which such qualification is
reasonably necessary in view of its business and operations or the ownership of
its properties, and preserve, renew and keep in full force and effect the
rights, privileges and franchises necessary or desirable in the normal conduct
of its business, except to the extent that the Guarantor's chief financial
officer certifies to the Lenders that the loss of any such right, privilege or
franchise, both individually and together with all other rights, privileges and
franchises lost since the Effective Date, would not have a Material Adverse
Effect.
(c) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of its
Subsidiaries to comply, in all material respects with all Applicable Laws, such
compliance to include compliance with ERISA and Environmental Laws.
(d) MAINTENANCE OF INSURANCE, ETC. Maintain, and cause each of its
Subsidiaries to maintain, such insurance as may be required by law and such
other insurance, to the extent and against such hazards and liabilities, as is
customarily maintained by companies similarly situated.
(e) INSPECTION RIGHTS. At any reasonable time and from time to time as
the Agent or any Lender may reasonably request, permit the Agent, each Lender or
any agents or representatives thereof to examine and make copies of and
abstracts from the records and books of account of, and visit the properties of,
the Guarantor and any of its Subsidiaries (except in the case of Commonwealth,
as may be restricted by law), and to discuss the affairs, finances and accounts
of the Guarantor and any of its Subsidiaries with any of their respective
officers or directors.
<PAGE>
14
(f) MAINTAINING OF BOOKS. Maintain, and cause each of its Subsidiaries to
maintain, complete and accurate books of record and account in which entries
shall be made of all financial transactions and the assets and business of the
Guarantor and each of its Subsidiaries in accordance with GAAP.
(g) MAINTENANCE OF PROPERTIES. Cause all properties used or useful in the
conduct of the business of the Guarantor or any of its Subsidiaries to be
maintained and kept in reasonable condition, repair and working order, and cause
to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Guarantor may be necessary
so that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that neither the
Guarantor nor any such Subsidiary shall be prevented from discontinuing the
operation and maintenance of any such properties if the chief financial officer
of the Guarantor certifies that such discontinuance is desirable in the conduct
of the Guarantor's or such Subsidiary's business and such discontinuance,
individually or with all such other discontinuances since the date hereof, would
not have a material adverse effect on the business, assets, revenues, financial
condition, results of operations, operations or prospects of the Guarantor and
its Subsidiaries, taken as a whole.
(h) TAXES AND LIABILITIES. Pay, and cause each of its Subsidiaries to
pay, when due all taxes, assessments, governmental charges and other liabilities
imposed upon it or its property, except to the extent contested in good faith
and by appropriate proceedings and in respect of which adequate reserves for the
payment thereof have been set aside by the Guarantor or such Subsidiary, as the
case may be, in accordance with GAAP.
(i) MAINTENANCE OF MINIMUM TANGIBLE NET WORTH. Maintain at all times an
excess of (i) the Tangible Net Worth of the Guarantor and its Consolidated
Subsidiaries over (ii) the Tangible Net Worth of Commonwealth and its
Consolidated Subsidiaries, of at least $10,000,000.
(j) CONSOLIDATED LEVERAGE RATIO. Maintain, on the last day of each fiscal
quarter, a ratio of (i) Consolidated Debt to (ii) Consolidated Capitalization of
not greater than 0.65 to 1.
<PAGE>
15
(k) ERISA. Maintain, and cause each of its Consolidated Subsidiaries to
maintain, each of its defined benefit plans in substantial compliance with all
applicable requirements of ERISA and of the Code and with all applicable rulings
and regulations issued under the provisions of ERISA and the Code.
(l) OWNERSHIP OF SUBSIDIARIES. Maintain direct ownership of 100% of the
capital stock of the Borrower and at least 80% of the voting capital stock of
Commonwealth.
SECTION 8. NEGATIVE COVENANTS. The Guarantor covenants and agrees that,
so long as any part of the Obligations shall remain unpaid or any Lender shall
have any Commitment, the Guarantor will not:
(a) LIENS, ETC. Create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any lien, security interest, or other
charge or encumbrance, or any other type of preferential arrangement, upon or
with respect to any of its properties (including, without limitation, the
capital stock of any of its Subsidiaries), whether now owned or hereafter
acquired, or assign, or permit any of its Subsidiaries to assign, any right to
receive income, in each case to secure or provide for the payment of any Debt of
any Person (any of the foregoing being referred to herein as a "LIEN"), other
than (i) Liens imposed by law, such as carriers', warehousemen's and mechanics'
Liens and other similar Liens arising in the ordinary course of business; (ii)
Liens arising under the Indenture; (iii) "permitted liens", as such term is
defined in the Indenture; and (iv) Liens permitted by Section 6.02(e)(ii) of the
Credit Agreement; provided, however, that, notwithstanding the foregoing, if
both before and after giving effect thereto no Unmatured Default or Event of
Default shall have occurred and be continuing, Commonwealth may sell, pledge or
otherwise dispose of its accounts receivable.
(b) MERGERS, ETC. Merge or consolidate with or into any Person, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions, and whether in a sale/leaseback transaction or
otherwise) more than 10% of its assets (whether now owned or hereafter
acquired), unless, in the case of a merger, immediately after giving effect
thereto, (i) no event shall occur and be continuing that constitutes an
Unmatured Default or an Event of Default, (ii) the
<PAGE>
16
Guarantor is the surviving corporation, (iii) the Guarantor's Tangible Net Worth
shall be equal to or greater than its Tangible Net Worth immediately prior to
such merger and (iv) the Guarantor shall not be liable with respect to any Debt
or allow its property to be subject to any Lien which it could not become liable
with respect to or allow its property to become subject to under this Guaranty
on the date of such transaction.
(c) DEBT. Create, incur, assume or suffer to exist any Debt, other than
(i) Debt to the Borrower in an amount not to exceed $25,000,000 in the aggregate
at any one time outstanding, (ii) Debt hereunder, (iii) unsecured Contingent
Obligations (other than in respect of this Guaranty) in an aggregate amount at
any one time outstanding not to exceed the excess of (A) $300,000,000 over (B)
the amount of Contingent Obligations incurred by the Borrower and its
Subsidiaries pursuant to Section 6.02(b)(ii) of the Credit Agreement, and (iv)
other unsecured Debt; provided, however, that, notwithstanding the foregoing,
the aggregate amount of Debt of the Guarantor, the Borrower and Subsidiaries of
the Borrower at any one time outstanding shall not exceed $500,000,000.
(d) GUARANTOR AND SUBSIDIARIES' STOCK. Permit any of its Subsidiaries to
purchase or otherwise acquire any shares of capital stock of the Guarantor; or
take any action, or permit any such Subsidiary to take any action, that would
result in a material decrease in the percentage of the outstanding shares of
capital stock of any "Significant Subsidiary" of the Guarantor (within the
meaning of Rule 1-02 of the Regulation S-X of the Securities and Exchange
Commission) owned by the Guarantor and its other Subsidiaries; provided,
however, that the Guarantor or Commonwealth may take any such action with
respect to the capital stock of Commonwealth, provided that, after giving effect
to any such action, the Guarantor is in compliance with Section 7(l) hereof.
(e) OTHER AGREEMENTS. Enter into any agreement containing any provision
that would be violated or breached by the performance of its obligations
hereunder or under any instrument or document delivered or to be delivered by
the Guarantor hereunder or in connection herewith.
(f) TRANSACTIONS WITH AFFILIATES. Enter into, or permit any of its
Subsidiaries to enter into, any transaction with an Affiliate of the Guarantor,
unless
<PAGE>
17
such transaction is on terms no less favorable to the Guarantor or such
Subsidiary, as the case may be, than if the transaction had been negotiated in
good faith on an arm's length basis with a Person that was not an Affiliate of
the Guarantor; provided, however, that the foregoing restrictions shall not
apply to any transaction between the Guarantor and any of its Subsidiaries,
between the Guarantor and Commonwealth, or between Commonwealth and any of the
Guarantor's other Subsidiaries.
(g) MAINTENANCE OF OWNERSHIP OF SUBSIDIARIES. Sell, assign, transfer,
pledge, hypothecate, or otherwise dispose of any shares of capital stock of any
of its Subsidiaries or any warrants, rights or options to acquire such capital
stock, or permit any of its Subsidiaries to issue, sell, or otherwise dispose of
any shares of its capital stock or the capital stock of any other of its
Subsidiaries or any warrants, rights, or options to acquire such capital stock,
except (and only to the extent) as may be necessary to give effect to a
transaction permitted by subsections (b) and (d), above, or subsections (e)(ii),
(f) or (g) of Section 6.02 of the Credit Agreement (including, without
limitation, any disposition pursuant to a foreclosure of any Lien permitted by
Section 6.02(e)(ii) of the Credit Agreement, provided that such disposition
would not have a Material Adverse Effect) and except that, subject to Section
6.02(f) of the Credit Agreement, any Subsidiary of the Guarantor may issue and
sell shares of its capital stock, and warrants, rights, or options to acquire
the same, to the Guarantor or such Subsidiary's parent corporation (if not the
Guarantor); provided, however, that Commonwealth may issue shares of its common
stock upon any exercise of its common stock purchase warrants and any conversion
of its $1.425 convertible preferred stock, in each case only with respect to
such warrants and shares of preferred stock outstanding on the date hereof.
(h) DISTRIBUTIONS. Upon the occurrence and during the continuance of an
Event of Default, declare or pay, directly or indirectly, any dividend, payment
or other distribution of assets, properties, cash, rights, obligations or
securities on account of any share of any class of capital stock of the
Guarantor, or purchase, redeem, retire, or otherwise acquire for value, or
permit any of its Subsidiaries to purchase, redeem, retire, or otherwise acquire
for value, any shares of any class of capital stock of the Guarantor or any
warrants, rights, or options to acquire any such shares, now or hereafter
<PAGE>
18
outstanding, or make any distribution of assets to any of its shareholders;
provided, however, that, notwithstanding the foregoing, the Guarantor may, to
the extent that it is legally required to do so, pay any such dividend, payment
or other distribution after the Guarantor has declared such dividend, payment or
other distribution.
SECTION 9. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Guaranty, and no consent to any departure by the Guarantor herefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Agent and the Majority Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given, provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by all of the Lenders, (i) limit the liability of, or
release, the Guarantor hereunder, (ii) postpone any date fixed for payment
hereunder, or (iii) change the number of Lenders required to take any action
hereunder.
SECTION 10. ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic or
cable communication) and mailed, telecopied, telegraphed, cabled or delivered to
it, (i) if to the Guarantor, at its address at P.O. Box A-3005, 10 South
Dearborn Street, 38th Floor, Chicago, Illinois 60690-3005, Attention: Treasurer,
Telecopy: (312) 394-4082, and (ii) if to the Agent, any LC Bank or any Lender,
at its address specified in the Credit Agreement or, as to any party, at such
other address as shall be designated by such party in a written notice to each
other party. All such notices and other communications shall, when mailed,
telecopied, telegraphed or cabled, be effective when deposited in the mails,
telecopied, delivered to the telegraph company or delivered to the cable
company, respectively.
SECTION 11. NO WAIVER; REMEDIES. No failure on the part of the Agent,
any LC Bank or any Lender to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law,
<PAGE>
19
SECTION 12. RIGHT OF SET-OFF. Upon the occurrence and during the
continuance of any Event of Default, each Lender and LC Bank is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits of the Guarantor (general or
special, time or demand, provisional or final). Each Lender and LC Bank agrees
promptly to notify the Agent and the Guarantor after any such set-off and
application made by such Lender, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of
each Lender and LC Bank under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) that such
Lender or LC Bank may have.
SECTION 13. CONTINUING GUARANTY; ASSIGNMENTS UNDER CREDIT AGREEMENT.
This Guaranty is a continuing guaranty and shall (i) subject to the last
sentence of Section 3, remain in full force and effect until the later to occur
of (A) the payment in full of the Obligations and all other amounts payable
under this Guaranty and (B) the expiration or termination of the Commitments,
(ii) be binding upon the Guarantor, its successors and assigns (provided, that
the Guarantor may not assign any of its rights or obligations hereunder without
the prior written consent of the Lenders), and (iii) inure to the benefit of,
and be enforceable by, the Agent, the LC Banks, the Lenders and their respective
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (iii), any Lender may assign or otherwise transfer all or any
portion of its rights and obligations under the Credit Agreement (including,
without limitation, all or any portion of its Commitment, the Advances owing to
it and any Note held by it) to any other person or entity pursuant to Section
9.07 thereof, and such other person or entity shall thereupon become vested with
all the benefits in respect thereof granted to such Lender herein or otherwise,
subject, however, to the provisions of Article VIII (concerning the Agent) of
the Credit Agreement.
SECTION 14. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 15. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. (a) The
Guarantor hereby irrevocably (i) submits to the non-exclusive jurisdiction of
any New York State or Federal court sitting in New York City and
<PAGE>
20
any appellate court from any thereof in any action or proceeding arising out of
or relating to this Guaranty or any other Loan Document and (ii) agrees that all
claims in respect of such action or proceeding may be heard and determined in
such New York State court or in such Federal court. The Guarantor hereby
irrevocably waives the defense of an inconvenient forum to the maintenance of
such action or proceeding and any objection to venue in connection therewith.
The Guarantor also irrevocably consents to the service of any and all process in
any such action or proceeding by the mailing by certified mail of copies of such
process to the Guarantor at its address specified in Section 10. The Guarantor
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
(B) THE GUARANTOR HEREBY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY, ANY
OTHER LOAN DOCUMENT, OR ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED HEREUNDER OR
THEREUNDER.
SECTION 16. EXECUTION IN COUNTERPARTS. This Guaranty may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which counterparts when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same
agreement.
SECTION 17. SEVERABILITY. Any provision of this Guaranty or any other
Loan Document that is prohibited, unenforceable or invalid in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition, unenforceability or invalidity without invalidating the remaining
provisions hereof or thereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction.
SECTION 18. HEADINGS. Article and Section headings used herein are for
convenience of reference only, are not part of this Guaranty and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Guaranty.
SECTION 19. ENTIRE AGREEMENT. This Guaranty constitutes the entire
agreement and understanding among the Guarantor, the Lenders, the LC Banks and
the Agent relative to the subject matter hereof. Any previous
<PAGE>
21
agreement by or among such parties with respect to the subject matter hereof is
superseded by this Guaranty. Nothing in this Guaranty, expressed or implied, is
intended to confer upon any party other than the Lenders, the LC Banks and the
Agent any rights, remedies, obligations, or liabilities under or by reason of
this Guaranty.
<PAGE>
22
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
UNICOM CORPORATION
By___________________________
Name:
Title:
SIGNATURE PAGE TO THE GUARANTY
<PAGE>
EXHIBIT F
FORM OF OPINION OF COUNSEL
FOR THE BORROWER AND THE PARENT
November 22, 1994
To each of the Lenders party to the Credit
Agreement hereinafter referred to and to
Citibank, N.A., as Agent
RE: UNICOM ENTERPRISES INC.
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 4.01(a)(x) of the
Credit Agreement, dated as of November 22, 1994 (the "CREDIT AGREEMENT"), among
Unicom Enterprises Inc., an Illinois corporation (the "BORROWER"), the Lenders
named therein and from time to time party thereto (the "LENDERS") and Citibank,
N.A., as Agent for said Lenders (the "AGENT"). Unless otherwise defined herein,
capitalized terms defined in the Credit Agreement are used herein as therein
defined.
We have acted as counsel to the Borrower and to Unicom Corporation, an
Illinois corporation (the "PARENT"; together with the Borrower, the "LOAN
PARTIES"), in connection with the preparation, execution and delivery of the
Credit Agreement and the other Loan Documents to be delivered thereunder.
In that capacity, we have examined:
(1) the Credit Agreement;
(2) the Notes executed and delivered on the date hereof;
(3) the Guaranty;
(4) the form of the LC Bank Agreement attached as Exhibit D to the
Credit Agreement;
<PAGE>
To each of the Lenders party to the Credit
Agreement hereinafter referred to and to
Citibank, N.A., as Agent
November 22, 1994
Page 2
(5) the other documents furnished by the Borrower and the Parent
pursuant to Section 4.01 of the Credit Agreement;
(6) the Articles of Incorporation of the Borrower and all amendments
thereto (the "BORROWER CHARTER");
(7) the by-laws of the Borrower and all amendments thereto (the
"BORROWER BY-LAWS");
(8) a certificate of the Secretary of State of the State of Illinois,
dated November 18, 1994, attesting to the continued corporate existence
and good standing of the Borrower in that State;
(9) the Articles of Incorporation of the Parent and all amendments
thereto (the "PARENT CHARTER");
(10) the by-laws of the Parent and all amendments thereto (the
"PARENT BY-LAWS"); and
(11) a certificate of the Secretary of State of the State of
Illinois, dated November 18, 1994, attesting to the continued corporate
existence and good standing of the Parent in that State.
We are familiar with the corporate proceedings taken by the Borrower
and the Parent in connection with the foregoing agreements and documents and the
transactions contemplated thereby. We have relied, as to various questions of
fact material to the opinions expressed below, upon the representations made by
the Borrower in the Credit Agreement and by the Parent in the Guaranty and upon
certificates delivered by or on behalf of each of them on the date hereof. We
have also examined originals, or copies of originals certified to our
satisfaction, of such agreements, documents, certificates and other statements
of government officials and other instruments, have examined such questions of
law and have satisfied ourselves as to such matters of fact as we have
considered relevant and necessary as a basis for the opinions hereinafter
expressed. We have assumed the authenticity of all documents submitted to us
<PAGE>
To each of the Lenders party to the Credit
Agreement hereinafter referred to and to
Citibank, N.A., as Agent
November 22, 1994
Page 3
as originals, the genuineness of all signatures, the legal capacity of all
natural persons and the conformity with the original documents of any copies
thereof submitted to us for our examination.
Based upon, and subject to, the foregoing, it is our opinion that:
1. Each of the Loan Parties is a corporation duly organized,
validly existing and in good standing under the laws of the State of Illinois.
Each of the Loan Parties has full corporate power and authority to own and to
hold under lease its property and to conduct its business substantially as
currently being conducted by it. The Borrower has full corporate power and
authority (a) to execute, deliver and perform its obligations under the Credit
Agreement and the Notes and (b) to obtain Extensions of Credit as contemplated
by the Credit Agreement. The Parent has full corporate power and authority to
execute, deliver and perform its obligations under the Guaranty.
2. The execution, delivery and performance by the Borrower of the
Credit Agreement, the Notes and the other Loan Documents to which it is, or is
to become, a party have been duly authorized by all necessary corporate action,
and do not and will not (A) breach, constitute a default under or otherwise
violate (i) the Borrower Charter or the Borrower By-laws, (ii) any law, rule or
regulation binding on the Borrower, (iii) to our knowledge, any order, decree,
writ or judgment to which the Borrower is a party or (iv) to our knowledge, any
indenture, any loan or credit agreement or any other agreement, lease or
instrument to which the Borrower is a party or by which it or its properties are
bound or (B) to our knowledge, result in or create any lien or security interest
on or in any of the Borrower's properties.
3. The execution, delivery and performance by the Parent of the
Guaranty have been duly authorized by all necessary corporate action, and do not
and will not (A) breach, constitute a default under or otherwise violate (i) the
Parent Charter or the Parent By-laws, (ii) any law, rule or regulation binding
on the Parent,
<PAGE>
To each of the Lenders party to the Credit
Agreement hereinafter referred to and to
Citibank, N.A., as Agent
November 22, 1994
Page 4
(iii) to our knowledge, any order, decree, writ or judgment to which the Parent
is a party or (iv) to our knowledge, any indenture, any loan or credit agreement
or any other agreement, lease or instrument to which the Parent is a party or by
which it or its properties are bound or (B) to our knowledge, result in or
create any lien or security interest on or in any of the Parent's properties.
4. To our knowledge, neither the Parent nor any of its Subsidiaries
is in default in the payment of (or in the performance of any material
obligation applicable to) any Debt or Contingent Obligation exceeding
$5,000,000, in the case of the Parent, the Borrower or Northwind, or any Debt or
Contingent Obligation exceeding $20,000,000, in the case of Commonwealth Edison
Company or any of its Subsidiaries, or in violation of any court decree or order
which could reasonably be expected to result in a material adverse effect on the
business or financial condition of the Borrower.
5. The Credit Agreement and the Notes have been duly executed and
delivered by the Borrower. Each of the Credit Agreement and the Notes
constitutes, and each LC Bank Agreement, when duly completed, executed and
delivered by an authorized officer of the Borrower, will constitute, the legal,
valid and binding obligation of the Borrower, enforceable against the Borrower
in accordance with its respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws of
general applicability relating to or affecting the enforceability of creditors'
rights generally, and except as the enforceability thereof may be limited by
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity).
6. The Guaranty has been duly executed and delivered by the Parent
and constitutes the legal, valid and binding obligation of the Parent,
enforceable against the Parent in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other similar laws of general
<PAGE>
To each of the Lenders party to the Credit
Agreement hereinafter referred to and to
Citibank, N.A., as Agent
November 22, 1994
Page 5
applicability relating to or affecting the enforceability of creditors' rights
generally, and except as the enforceability thereof may be limited by general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
7. To our knowledge, except as disclosed in writing by the Parent or
the Borrower to the Lenders on or prior to the date hereof, there is no pending
or overtly threatened action or proceeding to which the Parent or any of its
Subsidiaries is a party before any court, governmental agency or arbitrator
which relates to the Credit Agreement, the Notes or the Guaranty which could
reasonably be expected to materially and adversely affect the Parent's
performance of its obligations under the Guaranty or the Borrower's performance
of its obligations under the Credit Agreement or the Notes.
8. No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is or will be
required to be made or obtained by the Parent or any of its Subsidiaries in
connection with the execution, delivery and performance by the Borrower or the
Parent of any Loan Document to which it is, or is to become, a party.
9. Neither the Borrower nor the Parent is an "investment company" or
a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or an "investment advisor" within
the meaning of the Investment Advisors Act of 1940, as amended.
10. The Borrower is not a "public utility holding company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended (the
"ACT"). The Parent is a "public utility holding company" within the meaning of
the Act, but the Parent and its Subsidiaries are exempt from the provisions of
the Act, except Section 9(a)(2) thereof, by virtue of an order dated July 22,
1994 issued by the Securities and Exchange Commission. Such order is in full
force and effect and, to our knowledge, there are no pending or overtly
threatened
<PAGE>
To each of the Lenders party to the Credit
Agreement hereinafter referred to and to
Citibank, N.A., as Agent
November 22, 1994
Page 6
proceedings contemplating the revocation or modification of such order.
In rendering the opinions set forth in paragraph 5 above with respect
to the Credit Agreement and any LC Bank Agreement, we have assumed, with your
approval: the due authorization, execution and delivery of such agreements on
behalf of all parties thereto other than the Borrower; the legality, validity,
binding effect and enforceability of such agreements with respect to all such
other parties, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws of general applicability relating to or affecting the enforceability of
creditors' rights generally, and except as the enforceability thereof may be
limited by general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity); and such authorization,
execution and delivery and the performance of the Credit Agreement and any LC
Bank Agreement by the Agent and the Lenders will not violate any law, rule,
regulation, permit or court order applicable thereto or violate any agreement,
document or instrument binding upon the Agent or the Lenders.
We express no opinion as to (i) the enforceability of the last
sentence of Section 2.13(a) and the last sentence of Section 2.13(b) of the
Credit Agreement to the extent that such sentences state that non-manifest
errors contained in the certificates referred to therein are conclusive and
binding, (ii) the enforceability of the provisions contained in Section 9.10 of
the Credit Agreement, Section 15(a) of the Guaranty or Section 6.08 of the LC
Bank Agreement with respect to the submission to the jurisdiction of the United
States District Court for the Southern District of New York, (iii) the
enforceability of the provisions contained in Section 9.08 of the Credit
Agreement, Section 15(b) of the Guaranty or Section 6.07 of the LC Bank
Agreement with respect to the waiver of jury trial or (iv) Sections 3.05(i),
(iv) and (vi) of the Credit Agreement and Sections 3(i) and (v) of the Guaranty
to the extent that such provisions constitute a waiver of illegality as a
defense to performance of contractual obligations or any other defense which
cannot, as a
<PAGE>
To each of the Lenders party to the Credit
Agreement hereinafter referred to and to
Citibank, N.A., as Agent
November 22, 1994
Page 7
matter of law, be effectively waived or a waiver of rights to seek protection
under the Federal Bankruptcy Code or other similar law.
Any opinion or statement herein which is expressed to be "to our
knowledge" or is otherwise qualified by words of like import means that the
lawyers in this firm who have had an involvement in negotiating the Loan
Documents and, in connection with the opinion set forth in paragraph 7 above,
such lawyers and the lawyers in this firm who currently supervise litigation and
regulatory matters handled by this Firm for Commonwealth Edison Company, have no
current conscious awareness of any facts or information contrary to such opinion
or statement. This opinion is limited to the federal laws of the United States
of America and the laws of the States of Illinois and New York.
This opinion is being delivered solely for the benefit of the persons
to whom it is addressed; accordingly, it may not be relied upon by any other
person or otherwise circulated or utilized for any purpose without our prior
written consent. It may not be quoted or filed with any governmental authority
or other regulatory agency (except to the extent required by law).
Very truly yours,
<PAGE>
EXHIBIT G
FORM OF OPINION OF SPECIAL NEW YORK COUNSEL TO THE AGENT
[Date of Initial Extension of Credit]
To each of the Lenders parties to the
Credit Agreement referred to below,
and to Citibank, N.A., as Agent
Re: Unicom Enterprises Inc.
-----------------------
Ladies and Gentlemen:
We have acted as special New York counsel to Citibank, N.A., individually
and as Agent, in connection with the execution and delivery of the Credit
Agreement, dated as of November 22, 1994 (the "CREDIT AGREEMENT"), among Unicom
Enterprises Inc., the Banks parties thereto and the other Lenders from time to
time parties thereto, and Citibank, N.A., as Agent. Terms defined in the Credit
Agreement are used herein as therein defined.
In this connection, we have examined an executed counterpart of the Credit
Agreement, together with the other documents listed on Schedule A hereto.
In our examination of the documents referred to above, we have assumed the
authenticity of all such documents submitted to us as originals, the genuineness
of all signatures, the due authority of the parties executing such documents and
the conformity to the originals of all such documents submitted to us as copies.
We have further assumed that you have evaluated, and are satisfied with, the
creditworthiness of the Borrower and the Parent and the business and financial
terms evidenced by the Loan Documents. We have relied, as to factual matters,
on the documents we have examined.
Our opinions expressed below are limited to the law of the State of New
York and the Federal law of the United States, and we do not express any
opinions concerning any other law.
Based upon and subject to the foregoing and upon such investigation as we
have deemed necessary, and while we have not independently considered the
matters covered by the opinion listed on Schedule A hereto to the extent
necessary to enable us to express the conclusions stated therein, we are of the
opinion that (a) the Credit Agreement, the Notes and the Guaranty are in
<PAGE>
substantially acceptable legal form, and (b) the opinion of counsel to the
Borrower and the Parent and the other documents listed on Schedule A hereto are
substantially responsive to the requirements of the corresponding subsections of
Section 4.01(a) of the Credit Agreement pursuant to which the same have been
delivered.
Very truly yours,
<PAGE>
SCHEDULE A
List of Documents Examined
--------------------------
All documents are dated on or as
of November 22, 1994. Terms
defined in the Credit Agreement
are used herein as therein defined.
Unless otherwise indicated, all
section references are to those
contained in the Credit Agreement.
1. The Notes payable to the order of the Lenders, delivered pursuant to
Section 4.01(a)(i).
2. The Guaranty, delivered pursuant to Section 4.01(a)(ii).
3. Certificate of David A. Scholz, Secretary of the Borrower, as to (i) the
Articles of Incorporation of the Borrower, (ii) the By-laws of the
Borrower, (iii) the resolutions of the Board of Directors of the Borrower
and (iv) the name and true signature of the Treasurer of the Borrower,
delivered pursuant to Sections 4.01(a)(iii) and (v).
4. Certificate of David A. Scholz, Secretary of the Parent, as to (i) the
Articles of Incorporation of the Parent, (ii) the By-laws of the Parent,
(iii) the resolutions of the Board of Directors of the Parent and (iv) the
name and true signature of the Treasurer of the Parent, delivered pursuant
to Sections 4.01(a)(iv) and (vi).
5. Certificate of Good Standing for each of the Borrower and the Parent,
issued by the Secretary of State of the State of Illinois on November 18,
1994, delivered pursuant to Section 4.01(a)(vii).
6. Certificate of Dennis F. O'Brien, Treasurer of the Borrower, certifying
that the representations and warranties set forth in Section 5.01 are true
and correct and that no Event of Default and no Unmatured Default has
occurred and is continuing, delivered pursuant to Section 4.01(a)(viii).
7. Certificate of Dennis F. O'Brien, Treasurer of the Parent, certifying that
the representations and warranties set forth in Section 6 of the Guaranty
are true and correct, delivered pursuant to Section 4.01(a)(ix).
8. Opinion of Sidley & Austin, counsel for the Borrower and the Parent,
delivered pursuant to Section 4.01(a)(x).
<PAGE>
EXHIBIT H
TERMS OF SUBORDINATION
[The following provisions are to be included
in each instrument or document evidencing
loans from the Parent to the Borrower pursuant
to Section 6.02(b)(iii) of the Credit Agreement]
1. Reference is made to the Credit Agreement, dated as of November 22,
1994 (such agreement, as it may hereafter be amended, modified or supplemented
from time to time, being the "Credit Agreement"; the terms defined therein and
not otherwise defined herein being used herein as therein defined), among Unicom
Enterprises Inc., the Lenders named therein and Citibank, N.A., as Agent for the
Lenders. The Parent hereby agrees for the benefit of the Agent and the Lenders
that all obligations of the Borrower to the Parent hereunder (the "Subordinated
Debt") are and shall be subordinate, to the extent and in the manner set forth
hereinafter, in right of payment to the prior payment in full of all obligations
of the Borrower under the Credit Agreement and the other Loan Documents, whether
for principal, interest (including interest, as provided in the Loan Documents,
after the filing of a petition initiating any proceeding referred to in
paragraph 3, below), fees, expenses or otherwise (all such obligations being the
"Senior Debt").
2. Upon the occurrence and during the continuance of an Event of Default
or an Unmatured Default, the Parent shall not ask, demand, sue for, take or
receive from the Borrower, directly or indirectly, in cash or other property or
by set-off or in any other manner (including, without limitation, from or by way
of collateral), payment of all or any of the Subordinated Debt.
3. Upon any distribution of all or any of the assets of the Borrower to
creditors of the Borrower upon the dissolution, winding up, liquidation,
arrangement, reorganization or composition of the Borrower, whether in any
bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceedings or upon an assignment for the benefit of creditors or any other
marshalling of the assets and liabilities of the Borrower or otherwise, any
payment or distribution of any kind (whether in cash, property or securities)
which otherwise would be payable or deliverable upon or with respect to the
Subordinated Debt shall be paid or delivered directly to the Agent for the
benefit of the Agent and the Lenders for application (in the case of cash) to or
as collateral (in the case of non-cash property or securities) for the payment
or prepayment
<PAGE>
2
of the Senior Debt until the Senior Debt shall have been paid in full. For the
purposes of these provisions, the Senior Debt shall not be deemed to have been
paid in full until the Agent and the Lenders shall have indefeasibly received
payment in full of the Senior Debt in cash.
4. Until such time as the Senior Debt shall have been paid in full, if
any proceeding referred to in paragraph 3, above, is commenced by or against the
Borrower, the Agent is hereby irrevocably authorized and empowered (in its own
name, on behalf of the Lenders, in the name of the Parent, or otherwise), but
shall have no obligation, to demand, sue for, collect and receive every payment
or distribution referred to in paragraph 3, above, and give acquittance therefor
and to file claims and proofs of claim and take such other action (including,
without limitation, voting the Subordinated Debt or enforcing any Lien securing
payment of the Subordinated Debt) as it may deem necessary or advisable for the
exercise or enforcement of any of the rights or interests of the Lenders
hereunder.
5. All payments or distributions upon or with respect to the
Subordinated Debt which are received by the Parent contrary to the provisions
hereof shall be received in trust for the benefit of the Agent and the Lenders,
shall be segregated from other funds and property held by the Parent and shall
be forthwith paid over to the Agent for the benefit of the Agent and the Lenders
in the same form as so received (with any necessary endorsement) to be applied
(in the case of cash) to or held as collateral (in the case of non-cash property
or securities) for the payment or prepayment of the Senior Debt in accordance
with the terms of the Loan Documents.
6. The Agent is hereby authorized to demand specific performance of
these terms of subordination, whether or not the Borrower shall have complied
with any of the provisions hereof applicable to it, at any time when the Parent
shall have failed to comply with any of such provisions applicable to it. The
Parent hereby irrevocably waives any defense based on the adequacy of a remedy
at law which might be asserted as a bar to such remedy of specific performance.
7. So long as any of the Senior Debt shall remain unpaid, the Parent
shall not (i) commence, or join with any creditor other than the Agent and the
Lenders in commencing, any involuntary proceeding referred to in paragraph 3,
above, or (ii) declare any default in payment due hereunder or sue for breach of
the terms hereof, if and so long as payment hereunder would not be permissible
pursuant to paragraph 2 above.
<PAGE>
3
8. No payment or distribution to the Agent and the Lenders pursuant to
the above provisions shall entitle the Parent to exercise any rights of
subrogation in respect thereof until the Senior Debt shall have been paid in
full.
9. The holders of the Senior Debt may, at any time and from time to
time, without any consent of or notice to the Parent or any other holder of the
Subordinated Debt and without impairing or releasing the obligations of the
Parent under these terms of subordination: (i) change the manner, place or
terms of payment or change or extend the time of payment of, or increase the
amount of, renew or alter, the Senior Debt (including any change in the interest
rate under which any of the Senior Debt is outstanding); (ii) sell, exchange,
release, not perfect and otherwise deal with any property at any time pledged,
assigned or mortgaged to secure the Senior Debt; (iii) release anyone liable in
any manner under or in respect of the Senior Debt; (iv) exercise or refrain from
exercising any rights against the Borrower and others; and (v) apply any sums
from time to time received to the Senior Debt.
10. The foregoing provisions regarding subordination are for the benefit
of the holders of the Senior Debt and shall be enforceable by them directly
against the holders of any Subordinated Debt, and no holder of the Senior Debt
shall be prejudiced in its right to enforce subordination of any of the
Subordinated Debt by any act or failure to act by the Borrower or anyone in
custody of its assets or property. No such provisions may be amended or
modified without the prior written consent of the Agent and the Lenders.
<PAGE>
Exhibit (4)-36
Unicom Corporation
Form 10-K File No. 1-11375
[EXECUTION COPY]
GUARANTY
GUARANTY, dated as of November 22, 1994, made by UNICOM CORPORATION, a
corporation organized and existing under the laws of the State of Illinois (the
"GUARANTOR"), in favor of the Lenders (the "LENDERS") and the LC Banks parties
to the Credit Agreement (as defined below) and Citibank, N.A., as agent (in such
capacity, the "AGENT") for the Lenders.
PRELIMINARY STATEMENTS
(1) The Lenders and the Agent have entered into a Credit Agreement, dated
as of the date hereof (said Agreement, as it may hereafter be amended or
otherwise modified from time to time, being the "CREDIT AGREEMENT", the terms
defined therein and not otherwise defined herein being used herein as therein
defined), with Unicom Enterprises Inc., a corporation organized and existing
under the laws of the State of Illinois (the "BORROWER"). The Guarantor will
derive substantial direct and indirect benefit from the transactions
contemplated by the Credit Agreement, the Notes and the other Loan Documents.
(2) The Borrower is a wholly-owned Subsidiary of the Guarantor.
(3) It is a condition precedent to the making of Advances by the Lenders
under the Credit Agreement and the issuance of Letters of Credit by the LC Banks
pursuant to the Credit Agreement that the Guarantor shall have executed and
delivered this Guaranty.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Lenders to make Advances and each LC Bank to issue Letters of Credit under
the Credit Agreement, the Guarantor hereby agrees as follows:
SECTION 1. CERTAIN DEFINED TERMS. As used in this Guaranty, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"CONSOLIDATED CAPITALIZATION" means, at any date of determination,
the sum of (i) common
<PAGE>
2
equity of the Guarantor and its Consolidated Subsidiaries, (ii) preferred
and preference stock of the Guarantor and its Consolidated Subsidiaries
and (iii) Consolidated Debt of the Guarantor and its Consolidated
Subsidiaries.
"CONSOLIDATED DEBT" means, at any date of determination, the sum of
Debt of the Guarantor and its Consolidated Subsidiaries and Contingent
Obligations of the Guarantor and its Consolidated Subsidiaries.
"CONSOLIDATED SUBSIDIARY" means, as to any Person, any Subsidiary of
such Person whose accounts are or are required to be consolidated with the
accounts of such Person in accordance with GAAP.
"CONTINGENT OBLIGATION" means, as to any Person, the undrawn face
amount of any letters of credit issued for the account of such Person and
shall also mean any obligation of such Person guaranteeing or in effect
guaranteeing any Debt, leases, dividends, letters of credit, or other
obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not
contingent, (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (c) to purchase property, securities, or services
primarily for the purpose of assuring the obligee under any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation, or (d) otherwise to assure or hold harmless the
obligee under such primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the
primary obligation or, where such
<PAGE>
3
Contingent Obligation is specifically limited to a portion of any such
primary obligation, that portion to which it is limited or, if not stated
or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as
determined by such Person in good faith. For purposes of computing the
consolidated Debt of any Person, the amount of any primary obligation of
any Subsidiary of such Person and the amount of any Contingent Obligation
of such Person corresponding to such primary obligation shall only be
counted once (i.e., without duplication).
"TANGIBLE NET WORTH" means, at any time of determination, with
respect to any Person, the excess of such Person's total assets over its
total liabilities, with total assets and total liabilities each to be
determined in accordance with GAAP consistently applied, excluding,
however, from the determination of total assets (i) goodwill,
organizational expenses, research and development expenses, trademarks,
trade names, copyrights, patents, patent applications, licenses and rights
in any thereof, and other similar intangibles, (ii) all prepaid expenses,
deferred charges or unamortized debt discount and expense, (iii) all
reserves carried and not deducted from assets, (iv) securities that are
not readily marketable, (v) cash held in a sinking or other analogous fund
established for the purpose of redemption, retirement or prepayment of
capital stock or Debt, (vi) any write-up in the book value of any asset
resulting from a revaluation thereof subsequent to September 30, 1994, and
(vii) any items not included in clauses (i) through (vi), above, that are
treated as intangibles in conformity with GAAP.
SECTION 2. GUARANTY. The Guarantor hereby absolutely, unconditionally
and irrevocably guaranties the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all obligations of the Borrower now
or hereafter existing under the Credit Agreement, the Notes and any other Loan
Documents, whether for principal, reimbursement obligations, interest, fees,
expenses or otherwise (all such obligations being the "OBLIGATIONS"), and agrees
to pay any and all expenses (including counsel fees and expenses) incurred by
the Agent, the LC Banks or the
<PAGE>
4
Lenders in enforcing any rights under this Guaranty. Without limiting the
generality of the foregoing, the Guarantor's liability shall extend to all
amounts that constitute part of the Obligations and would be owed by the
Borrower to the Agent, the LC Banks or the Lenders under the Credit Agreement,
the Notes and the other Loan Documents but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Borrower.
SECTION 3. GUARANTY ABSOLUTE. The Guarantor guarantees that the
Obligations will be paid strictly in accordance with the terms of the Credit
Agreement, the Notes and the other Loan Documents, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of the Agent, the LC Banks or the Lenders with
respect thereto. The obligations of the Guarantor under this Guaranty are
independent of the Obligations, and a separate action or actions may be brought
and prosecuted against the Guarantor to enforce this Guaranty, irrespective of
whether any action is brought against the Borrower or whether the Borrower is
joined in any such action or actions. The liability of the Guarantor under this
Guaranty shall be absolute, unconditional and irrevocable irrespective of:
(i) any lack of validity or enforceability of the Credit Agreement,
the Notes, any other Loan Document, any Advance, or any other agreement or
instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of, or any consent to departure from, the Credit Agreement or the
Notes, including, without limitation, any increase in the Obligations
resulting from the extension of additional credit to the Borrower or
otherwise and any extension of the Termination Date;
(iii) any manner of application of collateral, or proceeds thereof,
to all or any of the Obligations, or any manner of sale or other
disposition of, any release of or any failure to perfect any lien on or
security interest in any collateral for all or any of the Obligations or
any other assets of the Borrower or any of its
<PAGE>
5
Subsidiaries, or any release or discharge of any Person liable for any or
all of the Obligations;
(iv) any change, restructuring or termination of the corporate
structure or existence of the Borrower or any of its Subsidiaries or any
bankruptcy, insolvency, liquidation or similar proceeding instituted by or
against the Borrower or any of its Subsidiaries; or
(v) any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Borrower or a guarantor.
As against the Guarantor, this Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Obligations is rescinded or must otherwise be returned by the Agent, any LC Bank
or any Lender upon the insolvency, bankruptcy or reorganization of the Borrower
or otherwise, all as though such payment had not been made.
SECTION 4. WAIVER. The Guarantor hereby waives promptness, diligence,
presentment, protest, notice of protest, notice of dishonor, notice of
acceptance and any other notice with respect to any of the Obligations and this
Guaranty and any requirement that the Agent, any LC Bank or any Lender protect,
secure, perfect or insure any security interest or lien on any property subject
thereto or exhaust any right or take any action against the Borrower or any
other person or entity or any collateral.
SECTION 5. WAIVER OF RIGHTS OF SUBROGATION. The Guarantor hereby
expressly and irrevocably waives with respect to the Borrower and its successors
and assigns and any other Person, any and all rights at law or in equity, by
agreement or otherwise, to subrogation, reimbursement, exoneration,
contribution, setoff, share in any collateral or any other rights that could
accrue to a surety against a principal, to a guarantor against a maker or
obligor, to an accommodation party against the party accommodated, or to a
holder or transferee against a maker, and that the Guarantor may have or
hereafter acquire against the Borrower, any of its Affiliates, or any other
Person in connection with or as a result of the Guarantor's execution, delivery
or performance hereunder. In furtherance of the foregoing, the Guarantor agrees
that any payment by the Guarantor to the Agent, the LC Banks or the Lenders
pursuant to this Guaranty shall be deemed a contribution to the capital of the
Borrower, and
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6
no such payment shall constitute the Guarantor a creditor of the Borrower. The
Guarantor hereby acknowledges and agrees that the foregoing waivers are intended
to benefit the Borrower, the Agent, the LC Banks and the Lenders and shall not
limit or otherwise affect the Guarantor's liability hereunder or the
enforceability hereof. If, notwithstanding the foregoing, any amount shall be
paid to the Guarantor on account of such subrogation rights at any time when all
of the Obligations shall not have been paid in full, such amount shall be held
by the Guarantor in trust for the Agent, the LC Banks and the Lenders,
segregated from other funds of the Guarantor, and shall, forthwith upon receipt
by the Guarantor, be turned over to the Agent in the exact form received by the
Guarantor (duly endorsed by the Guarantor to the Agent), to be applied against
the Obligations, whether matured or unmatured, in such order as the Agent may
determine.
SECTION 6. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby
represents and warrants as follows:
(a) CORPORATE EXISTENCE AND POWER. It is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Illinois,
is duly qualified to do business as a foreign corporation in, and is in good
standing under the laws of, each state in which the ownership of its properties
or the conduct of its business makes such qualification necessary, except where
the failure to be so qualified would not have a material adverse effect on its
business, assets, revenues, financial condition, results of operations,
operations or prospects or its ability to perform its obligations under this
Guaranty, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to own or lease its property and
to carry on its business as now conducted.
(b) CORPORATE AUTHORIZATION. The execution, delivery and performance by
it of this Guaranty have been duly authorized by all necessary corporate action
on its part and do not, and will not, require the consent or approval of its
shareholders, or any trustee or holder of any Debt or other obligation of the
Guarantor.
(c) NO VIOLATION, ETC. The execution and delivery by the Guarantor of
this Guaranty, and the performance by the Guarantor of its obligations
hereunder, (i) are within the Guarantor's corporate powers, (ii) have been duly
authorized by all necessary corporate action and (iii) do not and will not (A)
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7
violate any provision of the charter or by-laws of the Guarantor or of law, (B)
violate any legal restriction binding on or affecting the Guarantor, (C) result
in a breach of, or constitute a default under, any indenture or loan or credit
agreement or any other agreement, lease or instrument to which the Guarantor is
a party or by which it or its properties may be bound or affected, or (D) result
in or require the creation of any lien or security interest upon or with respect
to any of its properties.
(d) GOVERNMENTAL ACTIONS. No authorization or approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body is required for the due execution, delivery and performance by the
Guarantor of this Guaranty.
(e) EXECUTION AND DELIVERY. This Guaranty has been duly executed and
delivered by the Guarantor, and is the legal, valid and binding obligation of
the Guarantor enforceable against it in accordance with its terms, subject,
however, to the application by a court of general principles of equity and to
the effect of any applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally.
(f) LITIGATION. There is no pending or threatened action or proceeding
(including, without limitation, any proceeding relating to, or arising out of,
any Environmental Laws) affecting it or any of its Subsidiaries before any
court, governmental agency or arbitrator, that may have a material adverse
effect on the business, assets, revenues, financial condition, results of
operations, operations or prospects of the Guarantor or the Guarantor and its
Subsidiaries, taken as a whole, or on the Guarantor's ability to perform its
obligations under this Guaranty, or that questions the validity or
enforceability of this Guaranty or any other Loan Document against the Guarantor
or the Borrower.
(g) FINANCIAL STATEMENTS; MATERIAL ADVERSE CHANGE. The consolidated
balance sheet of the Guarantor and its Consolidated Subsidiaries as at December
31, 1993, and the consolidated balance sheet of the Guarantor and its
Consolidated Subsidiaries as at September 30, 1994 and the related consolidated
statements of income, retained earnings and cash flows for the nine-month period
then ended, together with the report thereon of Arthur Andersen LLP included in
the Guarantor's Quarterly
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8
Report on Form 10-Q for the quarterly period ended September 30, 1994, copies of
each of which have been furnished to each Lender, fairly present (subject, in
the case of such balance sheet and statements of income, retained earnings and
cash flows for the nine months ended September 30, 1994, to year-end
adjustments) the financial condition of the Guarantor and its Consolidated
Subsidiaries as at such dates and the results of operations of the Guarantor and
its Consolidated Subsidiaries for the periods ended on such dates, all in
accordance with GAAP consistently applied (except for such changes in accounting
methods described in such report of Arthur Andersen LLP). Since September 30,
1994, there has been no material adverse change in the business, assets,
revenues, financial condition, results of operations, operations or prospects of
the Guarantor and its Subsidiaries, taken as a whole, or the Borrower and its
Subsidiaries, taken as a whole (other than operating losses resulting from
start-up operations of Subsidiaries of the Borrower), or in the Guarantor's
ability to perform any of its obligations hereunder.
(h) ERISA. During the preceding twelve-consecutive-month period, no steps
have been taken to terminate any Pension Plan, and no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien
under Section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Pension Plan which could result in the incurrence
by the Guarantor or any of its Subsidiaries of any material liability, fine, or
penalty. The Guarantor has no contingent liability with respect to any post-
retirement benefit under a Welfare Plan, other than liability for continuation
coverage described in Part 6 of Title I of ERISA.
(i) TAXES. The Guarantor and each of its Subsidiaries have filed all tax
returns (federal, state and local) required to be filed and paid all taxes shown
thereon to be due, including interest and penalties, or provided adequate
reserves for payment thereof other than such taxes that the Guarantor or such
Subsidiary is contesting in good faith by appropriate legal proceedings and in
respect of which the Guarantor or such Subsidiary, as the case may be, has
established adequate reserves in conformity with GAAP.
(j) VIOLATION OF LAW. Neither the Guarantor nor any of its Subsidiaries
is in violation of any law or governmental regulation or court decree or order
which
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9
may result in a material adverse effect on the business, assets, revenues,
financial condition, results of operations, operations or prospects of the
Guarantor and its Subsidiaries, taken as a whole, or the Borrower and its
Subsidiaries, taken as a whole, or on the Guarantor's ability to perform any of
its obligations hereunder.
(k) INVESTMENT COMPANY. The Guarantor is not an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or an "investment advisor" within
the meaning of the Investment Advisers Act of 1940, as amended.
(l) HOLDING COMPANY. The Guarantor is a "holding company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended, but the
Guarantor and its Subsidiaries are exempt from the provisions of that Act,
except Section 9(a)(2) thereof, by virtue of an order issued by the Securities
and Exchange Commission on July 22, 1994. Such exemption is in full force and
effect and the Guarantor is not aware of any existing or proposed proceedings
contemplating the revocation or modification of such exemption.
(m) INFORMATION. All factual information heretofore or contemporaneously
furnished by or on behalf of the Guarantor in writing to the Agent or any Lender
for purposes of or in connection with this Guaranty or any transaction
contemplated hereby is, and all other such factual information hereafter
furnished by or on behalf of the Guarantor to the Agent, any LC Bank or any
Lender will be, true and accurate in every material respect on the date as of
which such information is dated or certified, and not incomplete by omitting to
state any material fact necessary to make such information not misleading.
(n) NO CONDITIONS PRECEDENT. There are no conditions precedent to the
effectiveness of this Guaranty that have not been satisfied or waived.
(o) RELIANCE. The Guarantor has, independently and without reliance upon
the Borrower and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Guaranty.
SECTION 7. AFFIRMATIVE COVENANTS. The Guarantor covenants and agrees
that, so long as any part of the
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10
Obligations shall remain unpaid or any Lender shall have any Commitment, the
Guarantor will:
(a) REPORTING REQUIREMENTS. Furnish to each Lender:
(i) as soon as available and in any event within 60 days after the
end of each of the first three quarters of each fiscal year of the
Guarantor, a consolidated balance sheet of the Guarantor and its
Consolidated Subsidiaries as of the end of such quarter and consolidated
statements of income, retained earnings and cash flows of the Guarantor
and its Consolidated Subsidiaries for the period commencing at the end of
the previous fiscal year and ending with the end of such quarter, all in
reasonable detail and duly certified (subject to year-end audit
adjustments) by the chief financial officer or the Treasurer of the
Guarantor as having been prepared in accordance with GAAP consistently
applied, except for (A) the absence of notes thereto and (B) changes in
accounting principles required by GAAP;
(ii) as soon as available and in any event within 90 days after the
end of each fiscal year of the Guarantor and its Consolidated
Subsidiaries, a copy of the annual report for such year for the Guarantor
and its Consolidated Subsidiaries, containing a consolidated balance sheet
of the Guarantor and its Consolidated Subsidiaries as at the end of such
fiscal year and consolidated statements of income, retained earnings and
cash flows of the Guarantor and its Consolidated Subsidiaries for such
fiscal year, certified in a manner acceptable to the Agent by Arthur
Anderson & Co. or another nationally-recognized independent public
accounting firm selected by the Guarantor and acceptable to the Agent;
(iii) concurrently with the financial statements for each quarterly
accounting period and for each fiscal year of the Guarantor furnished
pursuant to paragraphs (i) and (ii), above, (A) a certificate of the chief
financial officer, any vice president responsible for financial or
accounting matters, or the treasurer of the Guarantor stating that (1) the
Guarantor
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11
has performed and observed all of, and the Guarantor is not in default in
the performance or observance of any of, the terms, covenants, agreements
and conditions of this Guaranty or, if the Guarantor shall be in default,
specifying all such defaults and the nature thereof, of which the signer
of such certificate may have knowledge, and (2) the signer has obtained no
knowledge of any Unmatured Default or Event of Default except as specified
in such certificate, and (B) an analysis prepared and certified by the
chief financial officer, any vice president responsible for financial or
accounting matters, or the Treasurer of the Guarantor of the covenants
contained in Sections 7(i) and (j), containing all information necessary
for determining compliance by the Guarantor with such covenants;
(iv) as soon as available and in any event within 90 days after the
end of each fiscal year of the Guarantor and concurrently with the
financial statements furnished pursuant to paragraph (ii), above, a
written statement of the independent public accountants that certified
such financial statements stating that, in making the examination
necessary for their certification of such financial statements, they have
obtained no knowledge of any default by the Guarantor in the observance of
any of the covenants contained in Section 7(i) or (j) or, if such
accountants shall have obtained knowledge of any such default, specifying
all such defaults and the nature thereof, it being understood that they
shall not be liable directly or indirectly for any failure to obtain
knowledge of any default;
(v) as soon as possible and in any event within ten days after the
commencement of litigation against the Guarantor, the Borrower, or any of
their respective Subsidiaries that could reasonably be expected to have a
material adverse effect on the business, assets, revenues, financial
condition, results of operations, operations or prospects of the Guarantor
and its Subsidiaries, taken as a whole, or that questions the validity or
enforceability of any of the Loan Documents against the Guarantor or the
Borrower, notice of such litigation describing in reasonable detail the
facts and circumstances concerning such litigation and the Guarantor's,
the Borrower's or
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12
such Subsidiary's, as the case may be, proposed actions in connection
therewith;
(vi) promptly after the sending or filing thereof, copies of all
reports which the Guarantor sends to any of its security holders, and
copies of all reports and registration statements (other than registration
statements relating to (A) the offering of debt or preferred/preference
stock equity securities and (B) employee benefit plans) which the
Guarantor or any of its Subsidiaries files with the Securities and
Exchange Commission or any national securities exchange;
(vii) promptly after the occurrence of the institution of any steps
by the Guarantor or any other Person to terminate any Pension Plan, or the
failure to make a required contribution to any Pension Plan if such
failure is sufficient to give rise to a Lien under Section 302(f) of
ERISA, or the taking of any action with respect to a Pension Plan which
could result in the requirement that the Guarantor or any of its
Subsidiaries furnish a bond or other security to the PBGC or such Pension
Plan, or the occurrence of any event with respect to any Pension Plan
which could result in the incurrence by the Guarantor or any of its
Subsidiaries of any material liability, fine, or penalty, or any material
increase in the contingent liability of the Guarantor or any of its
Subsidiaries with respect to any post-retirement Welfare Plan benefit,
notice of such event and the action the Guarantor proposes to take with
respect thereto;
(viii) as soon as possible and in any event within ten days after
the Guarantor knows or should have reason to know of the occurrence of
each Unmatured Default or Event of Default continuing on the date of such
statement, a statement of the chief financial officer, any vice president
responsible for financial or accounting matters, or the Treasurer of the
Guarantor setting forth details of such Unmatured Default or Event of
Default and the action that the Guarantor or the Borrower has taken and
proposes to take with respect thereto; and
<PAGE>
13
(ix) such other information (other than proprietary customer
information) respecting the business, assets, revenues, financial
condition, results of operations, operations or prospects of the
Guarantor, the Borrower, or any of their respective Subsidiaries as the
Agent or any Lender may from time to time reasonably request.
(b) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain, and
cause each of its Subsidiaries to preserve and maintain, its legal existence in
the jurisdiction of its organization and qualify and remain qualified as a
foreign organization in each jurisdiction in which such qualification is
reasonably necessary in view of its business and operations or the ownership of
its properties, and preserve, renew and keep in full force and effect the
rights, privileges and franchises necessary or desirable in the normal conduct
of its business, except to the extent that the Guarantor's chief financial
officer certifies to the Lenders that the loss of any such right, privilege or
franchise, both individually and together with all other rights, privileges and
franchises lost since the Effective Date, would not have a Material Adverse
Effect.
(c) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of its Subsidiaries
to comply, in all material respects with all Applicable Laws, such compliance to
include compliance with ERISA and Environmental Laws.
(d) MAINTENANCE OF INSURANCE, ETC. Maintain, and cause each of its
Subsidiaries to maintain, such insurance as may be required by law and such
other insurance, to the extent and against such hazards and liabilities, as is
customarily maintained by companies similarly situated.
(e) INSPECTION RIGHTS. At any reasonable time and from time to time as
the Agent or any Lender may reasonably request, permit the Agent, each Lender or
any agents or representatives thereof to examine and make copies of and
abstracts from the records and books of account of, and visit the properties of,
the Guarantor and any of its Subsidiaries (except in the case of Commonwealth,
as may be restricted by law), and to discuss the affairs, finances and accounts
of the Guarantor and any of its Subsidiaries with any of their respective
officers or directors.
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14
(f) MAINTAINING OF BOOKS. Maintain, and cause each of its Subsidiaries to
maintain, complete and accurate books of record and account in which entries
shall be made of all financial transactions and the assets and business of the
Guarantor and each of its Subsidiaries in accordance with GAAP.
(g) MAINTENANCE OF PROPERTIES. Cause all properties used or useful in the
conduct of the business of the Guarantor or any of its Subsidiaries to be
maintained and kept in reasonable condition, repair and working order, and cause
to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Guarantor may be necessary
so that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that neither the
Guarantor nor any such Subsidiary shall be prevented from discontinuing the
operation and maintenance of any such properties if the chief financial officer
of the Guarantor certifies that such discontinuance is desirable in the conduct
of the Guarantor's or such Subsidiary's business and such discontinuance,
individually or with all such other discontinuances since the date hereof, would
not have a material adverse effect on the business, assets, revenues, financial
condition, results of operations, operations or prospects of the Guarantor and
its Subsidiaries, taken as a whole.
(h) TAXES AND LIABILITIES. Pay, and cause each of its Subsidiaries to
pay, when due all taxes, assessments, governmental charges and other liabilities
imposed upon it or its property, except to the extent contested in good faith
and by appropriate proceedings and in respect of which adequate reserves for the
payment thereof have been set aside by the Guarantor or such Subsidiary, as the
case may be, in accordance with GAAP.
(i) MAINTENANCE OF MINIMUM TANGIBLE NET WORTH. Maintain at all times an
excess of (i) the Tangible Net Worth of the Guarantor and its Consolidated
Subsidiaries over (ii) the Tangible Net Worth of Commonwealth and its
Consolidated Subsidiaries, of at least $10,000,000.
(j) CONSOLIDATED LEVERAGE RATIO. Maintain, on the last day of each fiscal
quarter, a ratio of (i) Consolidated Debt to (ii) Consolidated Capitalization of
not greater than 0.65 to 1.
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15
(k) ERISA. Maintain, and cause each of its Consolidated Subsidiaries to
maintain, each of its defined benefit plans in substantial compliance with all
applicable requirements of ERISA and of the Code and with all applicable rulings
and regulations issued under the provisions of ERISA and the Code.
(l) OWNERSHIP OF SUBSIDIARIES. Maintain direct ownership of 100% of the
capital stock of the Borrower and at least 80% of the voting capital stock of
Commonwealth.
SECTION 8. NEGATIVE COVENANTS. The Guarantor covenants and agrees that,
so long as any part of the Obligations shall remain unpaid or any Lender shall
have any Commitment, the Guarantor will not:
(a) LIENS, ETC. Create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any lien, security interest, or other
charge or encumbrance, or any other type of preferential arrangement, upon or
with respect to any of its properties (including, without limitation, the
capital stock of any of its Subsidiaries), whether now owned or hereafter
acquired, or assign, or permit any of its Subsidiaries to assign, any right to
receive income, in each case to secure or provide for the payment of any Debt of
any Person (any of the foregoing being referred to herein as a "LIEN"), other
than (i) Liens imposed by law, such as carriers', warehousemen's and mechanics'
Liens and other similar Liens arising in the ordinary course of business; (ii)
Liens arising under the Indenture; (iii) "permitted liens", as such term is
defined in the Indenture; and (iv) Liens permitted by Section 6.02(e)(ii) of the
Credit Agreement; provided, however, that, notwithstanding the foregoing, if
both before and after giving effect thereto no Unmatured Default or Event of
Default shall have occurred and be continuing, Commonwealth may sell, pledge or
otherwise dispose of its accounts receivable.
(b) MERGERS, ETC. Merge or consolidate with or into any Person, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions, and whether in a sale/leaseback transaction or
otherwise) more than 10% of its assets (whether now owned or hereafter
acquired), unless, in the case of a merger, immediately after giving effect
thereto, (i) no event shall occur and be continuing that constitutes an
Unmatured Default or an Event of Default, (ii) the
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16
Guarantor is the surviving corporation, (iii) the Guarantor's Tangible Net Worth
shall be equal to or greater than its Tangible Net Worth immediately prior to
such merger and (iv) the Guarantor shall not be liable with respect to any Debt
or allow its property to be subject to any Lien which it could not become liable
with respect to or allow its property to become subject to under this Guaranty
on the date of such transaction.
(c) DEBT. Create, incur, assume or suffer to exist any Debt, other than
(i) Debt to the Borrower in an amount not to exceed $25,000,000 in the aggregate
at any one time outstanding, (ii) Debt hereunder, (iii) unsecured Contingent
Obligations (other than in respect of this Guaranty) in an aggregate amount at
any one time outstanding not to exceed the excess of (A) $300,000,000 over (B)
the amount of Contingent Obligations incurred by the Borrower and its
Subsidiaries pursuant to Section 6.02(b)(ii) of the Credit Agreement, and (iv)
other unsecured Debt; provided, however, that, notwithstanding the foregoing,
the aggregate amount of Debt of the Guarantor, the Borrower and Subsidiaries of
the Borrower at any one time outstanding shall not exceed $500,000,000.
(d) GUARANTOR AND SUBSIDIARIES' STOCK. Permit any of its Subsidiaries to
purchase or otherwise acquire any shares of capital stock of the Guarantor; or
take any action, or permit any such Subsidiary to take any action, that would
result in a material decrease in the percentage of the outstanding shares of
capital stock of any "Significant Subsidiary" of the Guarantor (within the
meaning of Rule 1-02 of the Regulation S-X of the Securities and Exchange
Commission) owned by the Guarantor and its other Subsidiaries; provided,
however, that the Guarantor or Commonwealth may take any such action with
respect to the capital stock of Commonwealth, provided that, after giving effect
to any such action, the Guarantor is in compliance with Section 7(l) hereof.
(e) OTHER AGREEMENTS. Enter into any agreement containing any provision
that would be violated or breached by the performance of its obligations
hereunder or under any instrument or document delivered or to be delivered by
the Guarantor hereunder or in connection herewith.
(f) TRANSACTIONS WITH AFFILIATES. Enter into, or permit any of its
Subsidiaries to enter into, any transaction with an Affiliate of the Guarantor,
unless
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17
such transaction is on terms no less favorable to the Guarantor or such
Subsidiary, as the case may be, than if the transaction had been negotiated in
good faith on an arm's length basis with a Person that was not an Affiliate of
the Guarantor; provided, however, that the foregoing restrictions shall not
apply to any transaction between the Guarantor and any of its Subsidiaries,
between the Guarantor and Commonwealth, or between Commonwealth and any of the
Guarantor's other Subsidiaries.
(g) MAINTENANCE OF OWNERSHIP OF SUBSIDIARIES. Sell, assign, transfer,
pledge, hypothecate, or otherwise dispose of any shares of capital stock of any
of its Subsidiaries or any warrants, rights or options to acquire such capital
stock, or permit any of its Subsidiaries to issue, sell, or otherwise dispose of
any shares of its capital stock or the capital stock of any other of its
Subsidiaries or any warrants, rights, or options to acquire such capital stock,
except (and only to the extent) as may be necessary to give effect to a
transaction permitted by subsections (b) and (d), above, or subsections (e)(ii),
(f) or (g) of Section 6.02 of the Credit Agreement (including, without
limitation, any disposition pursuant to a foreclosure of any Lien permitted by
Section 6.02(e)(ii) of the Credit Agreement, provided that such disposition
would not have a Material Adverse Effect) and except that, subject to Section
6.02(f) of the Credit Agreement, any Subsidiary of the Guarantor may issue and
sell shares of its capital stock, and warrants, rights, or options to acquire
the same, to the Guarantor or such Subsidiary's parent corporation (if not the
Guarantor); provided, however, that Commonwealth may issue shares of its common
stock upon any exercise of its common stock purchase warrants and any conversion
of its $1.425 convertible preferred stock, in each case only with respect to
such warrants and shares of preferred stock outstanding on the date hereof.
(h) DISTRIBUTIONS. Upon the occurrence and during the continuance of an
Event of Default, declare or pay, directly or indirectly, any dividend, payment
or other distribution of assets, properties, cash, rights, obligations or
securities on account of any share of any class of capital stock of the
Guarantor, or purchase, redeem, retire, or otherwise acquire for value, or
permit any of its Subsidiaries to purchase, redeem, retire, or otherwise acquire
for value, any shares of any class of capital stock of the Guarantor or any
warrants, rights, or options to acquire any such shares, now or hereafter
<PAGE>
18
outstanding, or make any distribution of assets to any of its shareholders;
provided, however, that, notwithstanding the foregoing, the Guarantor may, to
the extent that it is legally required to do so, pay any such dividend, payment
or other distribution after the Guarantor has declared such dividend, payment or
other distribution.
SECTION 9. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Guaranty, and no consent to any departure by the Guarantor herefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Agent and the Majority Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given, provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by all of the Lenders, (i) limit the liability of, or
release, the Guarantor hereunder, (ii) postpone any date fixed for payment
hereunder, or (iii) change the number of Lenders required to take any action
hereunder.
SECTION 10. ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic or
cable communication) and mailed, telecopied, telegraphed, cabled or delivered to
it, (i) if to the Guarantor, at its address at P.O. Box A-3005, 10 South
Dearborn Street, 38th Floor, Chicago, Illinois 60690-3005, Attention: Treasurer,
Telecopy: (312) 394-4082, and (ii) if to the Agent, any LC Bank or any Lender,
at its address specified in the Credit Agreement or, as to any party, at such
other address as shall be designated by such party in a written notice to each
other party. All such notices and other communications shall, when mailed,
telecopied, telegraphed or cabled, be effective when deposited in the mails,
telecopied, delivered to the telegraph company or delivered to the cable
company, respectively.
SECTION 11. NO WAIVER; REMEDIES. No failure on the part of the Agent,
any LC Bank or any Lender to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law,
<PAGE>
19
SECTION 12. RIGHT OF SET-OFF. Upon the occurrence and during the
continuance of any Event of Default, each Lender and LC Bank is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits of the Guarantor (general or
special, time or demand, provisional or final). Each Lender and LC Bank agrees
promptly to notify the Agent and the Guarantor after any such set-off and
application made by such Lender, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of
each Lender and LC Bank under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) that such
Lender or LC Bank may have.
SECTION 13. CONTINUING GUARANTY; ASSIGNMENTS UNDER CREDIT AGREEMENT.
This Guaranty is a continuing guaranty and shall (i) subject to the last
sentence of Section 3, remain in full force and effect until the later to occur
of (A) the payment in full of the Obligations and all other amounts payable
under this Guaranty and (B) the expiration or termination of the Commitments,
(ii) be binding upon the Guarantor, its successors and assigns (provided, that
the Guarantor may not assign any of its rights or obligations hereunder without
the prior written consent of the Lenders), and (iii) inure to the benefit of,
and be enforceable by, the Agent, the LC Banks, the Lenders and their respective
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (iii), any Lender may assign or otherwise transfer all or any
portion of its rights and obligations under the Credit Agreement (including,
without limitation, all or any portion of its Commitment, the Advances owing to
it and any Note held by it) to any other person or entity pursuant to Section
9.07 thereof, and such other person or entity shall thereupon become vested with
all the benefits in respect thereof granted to such Lender herein or otherwise,
subject, however, to the provisions of Article VIII (concerning the Agent) of
the Credit Agreement.
SECTION 14. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 15. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. (a) The
Guarantor hereby irrevocably (i) submits to the non-exclusive jurisdiction of
any New York State or Federal court sitting in New York City and
<PAGE>
20
any appellate court from any thereof in any action or proceeding arising out of
or relating to this Guaranty or any other Loan Document and (ii) agrees that all
claims in respect of such action or proceeding may be heard and determined in
such New York State court or in such Federal court. The Guarantor hereby
irrevocably waives the defense of an inconvenient forum to the maintenance of
such action or proceeding and any objection to venue in connection therewith.
The Guarantor also irrevocably consents to the service of any and all process in
any such action or proceeding by the mailing by certified mail of copies of such
process to the Guarantor at its address specified in Section 10. The Guarantor
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
(B) THE GUARANTOR HEREBY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY, ANY
OTHER LOAN DOCUMENT, OR ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED HEREUNDER OR
THEREUNDER.
SECTION 16. EXECUTION IN COUNTERPARTS. This Guaranty may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which counterparts when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same
agreement.
SECTION 17. SEVERABILITY. Any provision of this Guaranty or any other
Loan Document that is prohibited, unenforceable or invalid in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition, unenforceability or invalidity without invalidating the remaining
provisions hereof or thereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction.
SECTION 18. HEADINGS. Article and Section headings used herein are for
convenience of reference only, are not part of this Guaranty and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Guaranty.
SECTION 19. ENTIRE AGREEMENT. This Guaranty constitutes the entire
agreement and understanding among the Guarantor, the Lenders, the LC Banks and
the Agent relative to the subject matter hereof. Any previous
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21
agreement by or among such parties with respect to the subject matter hereof is
superseded by this Guaranty. Nothing in this Guaranty, expressed or implied, is
intended to confer upon any party other than the Lenders, the LC Banks and the
Agent any rights, remedies, obligations, or liabilities under or by reason of
this Guaranty.
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22
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
UNICOM CORPORATION
By Dennis F. O'Brien
---------------------------
Name: Dennis F. O'Brien
Title: Treasurer
<PAGE>
Exhibit (4)-37
Unicom Corporation
Form 10-K File No. 1-11375
[EXECUTION COPY]
LC GUARANTY
GUARANTY, dated as of November 22, 1994, made by UNICOM CORPORATION, a
corporation organized and existing under the laws of the State of Illinois (the
"GUARANTOR"), in favor of Citibank, N.A. ("CITIBANK").
PRELIMINARY STATEMENTS
(1) On December 10, 1993, Commonwealth Edison Company, an Illinois
corporation ("COMMONWEALTH"), and Northwind, Inc., an Illinois corporation, as
account parties, entered into two Agreements for Clean Irrevocable Letter of
Credit (the "LC AGREEMENTS") with Citibank, pursuant to which Citibank issued
Irrevocable Standby Letter of Credit No. NY-00389-30014375 and Irrevocable
Standby Letter of Credit No. NY-00389-30014376, respectively, each dated
December 13, 1993 (the "LETTERS OF CREDIT"). Commonwealth is no longer an
account party under the LC Agreements. The Guarantor has derived, and continues
to derive, substantial direct and indirect benefit from the transactions
contemplated by the LC Agreements and the issuance of the Letters of Credit.
(2) Citibank has entered into a Credit Agreement, dated as of the date
hereof (said Agreement, as it may hereafter be amended or otherwise modified
from time to time, being the "CREDIT AGREEMENT"), the terms defined therein and
not otherwise defined herein being used herein as therein defined), with Unicom
Enterprises Inc., a corporation organized and existing under the laws of the
State of Illinois (the "BORROWER"), the other Lenders and the Agent. The
Guarantor will derive substantial direct and indirect benefit from the
transactions contemplated by the Credit Agreement and the Notes.
(3) Northwind is a wholly-owned Subsidiary of the Guarantor.
(4) It is a condition precedent to Citibank entering into the Credit
Agreement with the Borrower that the Guarantor shall have executed and delivered
this Guaranty.
<PAGE>
2
NOW, THEREFORE, in consideration of the premises and in order to induce
Citibank to enter into, and make Advances under, the Credit Agreement, the
Guarantor hereby agrees as follows:
SECTION 1. CERTAIN DEFINED TERMS. As used in this Guaranty, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"CONSOLIDATED CAPITALIZATION" means, at any date of determination, the
sum of (i) common equity of the Guarantor and its Consolidated
Subsidiaries, (ii) preferred and preference stock of the Guarantor and its
Consolidated Subsidiaries and (iii) Consolidated Debt of the Guarantor and
its Consolidated Subsidiaries.
"CONSOLIDATED DEBT" means, at any date of determination, the sum of
Debt of the Guarantor and its Consolidated Subsidiaries and Contingent
Obligations of the Guarantor and its Consolidated Subsidiaries.
"CONSOLIDATED SUBSIDIARY" means, as to any Person, any Subsidiary of
such Person whose accounts are or are required to be consolidated with the
accounts of such Person in accordance with GAAP.
"CONTINGENT OBLIGATION" means, as to any Person, the undrawn face
amount of any letters of credit issued for the account of such Person and
shall also mean any obligation of such Person guaranteeing or in effect
guaranteeing any Debt, leases, dividends, letters of credit, or other
obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (a)
to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (c) to purchase
property, securities, or services primarily for the purpose of assuring the
obligee under any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation, or (d)
<PAGE>
3
otherwise to assure or hold harmless the obligee under such primary
obligation against loss in respect thereof; provided, however, that the
term Contingent Obligation shall not include endorsements of instruments
for deposit or collection in the ordinary course of business. The amount
of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation or, where such
Contingent Obligation is specifically limited to a portion of any such
primary obligation, that portion to which it is limited or, if not stated
or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as
determined by such Person in good faith. For purposes of computing the
consolidated Debt of any Person, the amount of any primary obligation of
any Subsidiary of such Person and the amount of any Contingent Obligation
of such Person corresponding to such primary obligation shall only be
counted once (i.e., without duplication).
"TANGIBLE NET WORTH" means, at any time of determination, with respect
to any Person, the excess of such Person's total assets over its total
liabilities, with total assets and total liabilities each to be determined
in accordance with GAAP consistently applied, excluding, however, from the
determination of total assets (i) goodwill, organizational expenses,
research and development expenses, trademarks, trade names, copyrights,
patents, patent applications, licenses and rights in any thereof, and other
similar intangibles, (ii) all prepaid expenses, deferred charges or
unamortized debt discount and expense, (iii) all reserves carried and not
deducted from assets, (iv) securities that are not readily marketable, (v)
cash held in a sinking or other analogous fund established for the purpose
of redemption, retirement or prepayment of capital stock or Debt, (vi) any
write-up in the book value of any asset resulting from a revaluation
thereof subsequent to September 30, 1994, and (vii) any items not included
in clauses (i) through (vi), above, that are treated as intangibles in
conformity with GAAP.
SECTION 2. GUARANTY. The Guarantor hereby absolutely, unconditionally and
irrevocably guaranties the punctual payment when due of all unreimbursed
drawings under the Letters of Credit and all other
<PAGE>
4
obligations of Northwind now or hereafter existing under the LC Agreements,
whether for principal, interest, fees, expenses or otherwise (all such
obligations being the "OBLIGATIONS"), and agrees to pay any and all expenses
(including counsel fees and expenses) incurred by Citibank in enforcing any
rights under this Guaranty. Without limiting the generality of the foregoing,
the Guarantor's liability shall extend to all amounts that constitute part of
the Obligations and would be owed by Northwind to Citibank under the LC
Agreements but for the fact that they are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
Northwind.
SECTION 3. GUARANTY ABSOLUTE. The Guarantor guarantees that the
Obligations will be paid strictly in accordance with the terms of the LC
Agreements, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of Citibank
with respect thereto. The obligations of the Guarantor under this Guaranty are
independent of the Obligations, and a separate action or actions may be brought
and prosecuted against the Guarantor to enforce this Guaranty, irrespective of
whether any action is brought against Northwind or whether Northwind is joined
in any such action or actions. The liability of the Guarantor under this
Guaranty shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the Credit Agreement, the
Notes, any other Loan Document, any Advance, the LC Agreements, the
Letters of Credit, or any other agreement or instrument relating
thereto;
(ii) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Obligations, or any other amendment or
waiver of, or any consent to departure from, the LC Agreements,
including, without limitation, any increase in the Obligations
resulting from the extension of additional credit to Northwind or
otherwise and any extension of the expiration date of the Letters of
Credit;
(iii) any manner of application of collateral, or proceeds thereof, to all
or any of the Obligations, or any manner of sale or other disposition
of, any release of or any failure to perfect any lien on or security
interest in
<PAGE>
5
any collateral for all or any of the Obligations or any other assets
of Northwind or any of its Subsidiaries, or any release or discharge
of any Person liable for any or all of the Obligations;
(iv) any change, restructuring or termination of the corporate structure or
existence of Northwind or any of its Subsidiaries or any bankruptcy,
insolvency, liquidation or similar proceeding instituted by or against
Northwind or any of its Subsidiaries; or
(v) any other circumstance that might otherwise constitute a defense
available to, or a discharge of, Northwind or a guarantor.
As against the Guarantor, this Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Obligations is rescinded or must otherwise be returned by Citibank upon the
insolvency, bankruptcy or reorganization of Northwind or otherwise, all as
though such payment had not been made.
SECTION 4. WAIVER. The Guarantor hereby waives promptness, diligence,
presentment, protest, notice of protest, notice of dishonor, notice of
acceptance and any other notice with respect to any of the Obligations and this
Guaranty and any requirement that Citibank protect, secure, perfect or insure
any security interest or lien or any property subject thereto or exhaust any
right or take any action against Northwind or any other person or entity or any
collateral.
SECTION 5. WAIVER OF RIGHTS OF SUBROGATION. The Guarantor hereby
expressly and irrevocably waives with respect to Northwind and its successors
and assigns and any other Person, any and all rights at law or in equity, by
agreement or otherwise, to subrogation, reimbursement, exoneration,
contribution, setoff, share in any collateral or any other rights that could
accrue to a surety against a principal, to a guarantor against a maker or
obligor, to an accommodation party against the party accommodated, or to a
holder or transferee against a maker, and that the Guarantor may have or
hereafter acquire against Northwind, any of its Affiliates, or any other Person
in connection with or as a result of the Guarantor's execution, delivery or
performance hereunder. In furtherance of the foregoing, the Guarantor agrees
that any payment by the Guarantor to Citibank pursuant to this Guaranty shall be
deemed a contribution to the
<PAGE>
6
capital of Northwind, and no such payment shall constitute the Guarantor a
creditor of Northwind. The Guarantor hereby acknowledges and agrees that the
foregoing waivers are intended to benefit Northwind and Citibank and shall not
limit or otherwise affect the Guarantor's liability hereunder or the
enforceability hereof. If, notwithstanding the foregoing, any amount shall be
paid to the Guarantor on account of such subrogation rights at any time when all
of the Obligations shall not have been paid in full, such amount shall be held
by the Guarantor in trust for Citibank, segregated from other funds of the
Guarantor, and shall, forthwith upon receipt by the Guarantor, be turned over to
Citibank in the exact form received by the Guarantor (duly endorsed by the
Guarantor to Citibank) to be applied against the Obligations, whether matured or
unmatured, in such order as Citibank may determine.
SECTION 6. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby
represents and warrants as follows:
(a) CORPORATE EXISTENCE AND POWER. It is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Illinois,
is duly qualified to do business as a foreign corporation in, and is in good
standing under the laws of, each state in which the ownership of its properties
or the conduct of its business makes such qualification necessary, except where
the failure to be so qualified would not have a material adverse effect on its
business, assets, revenues, financial condition, results of operations,
operations or prospects or its ability to perform its obligations under this
Guaranty, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to own or lease its property and
to carry on its business as now conducted.
(b) CORPORATE AUTHORIZATION. The execution, delivery and performance by it
of this Guaranty have been duly authorized by all necessary corporate action on
its part and do not, and will not, require the consent or approval of its
shareholders, or any trustee or holder of any Debt or other obligation of the
Guarantor.
(c) NO VIOLATION, ETC. The execution and delivery by the Guarantor of this
Guaranty, and the performance by the Guarantor of its obligations hereunder, (i)
are within the Guarantor's corporate powers, (ii) have been duly authorized by
all necessary corporate action and (iii) do not and will not (A) violate any
provision of the charter or by-laws of the Guarantor or of law, (B)
<PAGE>
7
violate any legal restriction binding on or affecting the Guarantor, (C) result
in a breach of, or constitute a default under, any indenture or loan or credit
agreement or any other agreement, lease or instrument to which the Guarantor is
a party or by which it or its properties may be bound or affected, or (D) result
in or require the creation of any lien or security interest upon or with respect
to any of its properties.
(d) GOVERNMENTAL ACTIONS. No authorization or approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by the Guarantor of
this Guaranty.
(e) EXECUTION AND DELIVERY. This Guaranty has been duly executed and
delivered by the Guarantor, and is the legal, valid and binding obligation of
the Guarantor enforceable against it in accordance with its terms, subject,
however, to the application by a court of general principles of equity and to
the effect of any applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally.
(f) LITIGATION. There is no pending or threatened action or proceeding
(including, without limitation, any proceeding relating to, or arising out of
any Environmental Laws) affecting it or any of its Subsidiaries before any
court, governmental agency or arbitrator, that may have a material adverse
effect on the business, assets, revenues, financial condition, results of
operations, operations or prospects of the Guarantor or the Guarantor and its
Subsidiaries, taken as a whole, or on the Guarantor's ability to perform its
obligations under this Guaranty, or that questions the validity or
enforceability of this Guaranty or any LC Agreement against the Guarantor or
Northwind.
(g) FINANCIAL STATEMENTS; MATERIAL ADVERSE CHANGE. The consolidated
balance sheet of the Guarantor and its Consolidated Subsidiaries as at December
31, 1993, and the consolidated balance sheet of the Guarantor and its
Consolidated Subsidiaries as at September 30, 1994 and the related consolidated
statements of income, retained earnings and cash flows for the nine-month period
then ended, together with the report thereon of Arthur Andersen LLP included in
the Guarantor's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1994, copies of each of which have been furnished to each Lender,
fairly present (subject, in the case of such balance sheet and statements of
income, retained earnings
<PAGE>
8
and cash flows for the nine months ended September 30, 1994, to year-end
adjustments) the financial condition of the Guarantor and its Consolidated
Subsidiaries as at such dates and the results of operations of the Guarantor and
its Consolidated Subsidiaries for the periods ended on such dates, all in
accordance with GAAP consistently applied (except for such changes in accounting
methods described in such report of Arthur Andersen LLP). Since September 30,
1994, there has been no material adverse change in the business, assets,
revenues, financial condition, results of operations, operations or prospects of
the Guarantor and its Subsidiaries, taken as a whole, or of Northwind and its
Subsidiaries, taken as a whole (other than operating losses resulting from
start-up operations of Northwind), or in the Guarantor's ability to perform any
of its obligations hereunder.
(h) ERISA. During the preceding twelve-consecutive-month period, no steps
have been taken to terminate any Pension Plan, and no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien
under Section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Pension Plan which could result in the incurrence
by the Guarantor or any of its Subsidiaries of any material liability, fine, or
penalty. The Guarantor has no contingent liability with respect to any post-
retirement benefit under a Welfare Plan, other than liability for continuation
coverage described in Part 6 of Title I of ERISA.
(i) TAXES. The Guarantor and each of its Subsidiaries have filed all tax
returns (federal, state and local) required to be filed and paid all taxes shown
thereon to be due, including interest and penalties, or provided adequate
reserves for payment thereof other than such taxes that the Guarantor or such
Subsidiary is contesting in good faith by appropriate legal proceedings and in
respect of which the Guarantor or such Subsidiary, as the case may be, has
established adequate reserves in conformity with GAAP.
(j) VIOLATION OF LAW. Neither the Guarantor nor any of its Subsidiaries is
in violation of any law or governmental regulation or court decree or order
which may result in a material adverse effect on the business, assets, revenues,
financial condition, results of operations, operations or prospects of the
Guarantor and its Subsidiaries, taken as a whole, or of Northwind and its
Subsidiaries, taken as a whole, or on the Guarantor's ability to perform any of
its obligations hereunder.
<PAGE>
9
(k) INVESTMENT COMPANY. The Guarantor is not an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or an "investment advisor" within
the meaning of the Investment Advisers Act of 1940, as amended.
(l) HOLDING COMPANY. The Guarantor is a "holding company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended, but the
Guarantor and its Subsidiaries are exempt from the provisions of that Act,
except Section 9(a)(2) thereof, by virtue of an order issued by the Securities
and Exchange Commission on July 22, 1994. Such exemption is in full force and
effect and the Guarantor is not aware of any existing or proposed proceedings
contemplating the revocation or modification of such exemption.
(m) INFORMATION. All factual information heretofore or contemporaneously
furnished by or on behalf of the Guarantor in writing to Citibank for purposes
of or in connection with this Guaranty or any transaction contemplated hereby
is, and all other such factual information hereafter furnished by or on behalf
of the Guarantor to Citibank will be, true and accurate in every material
respect on the date as of which such information is dated or certified, and not
incomplete by omitting to state any material fact necessary to make such
information not misleading.
(n) NO CONDITIONS PRECEDENT. There are no conditions precedent to the
effectiveness of this Guaranty that have not been satisfied or waived.
(o) RELIANCE. The Guarantor has, independently and without reliance upon
Northwind and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Guaranty.
SECTION 7. AFFIRMATIVE COVENANTS. The Guarantor covenants and agrees
that, so long as any part of the Obligations shall remain unpaid or the Letters
of Credit shall not have expired or terminated, the Guarantor will:
(a) REPORTING REQUIREMENTS. Furnish to Citibank:
(i) as soon as available and in any event within 60 days after the end
of each of the first three quarters of each fiscal year of the Guarantor, a
consolidated balance sheet of the Guarantor and its Consolidated
Subsidiaries as of
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10
the end of such quarter and consolidated statements of income, retained
earnings and cash flows of the Guarantor and its Consolidated Subsidiaries
for the period commencing at the end of the previous fiscal year and ending
with the end of such quarter, all in reasonable detail and duly certified
(subject to year-end audit adjustments) by the chief financial officer or
the Treasurer of the Guarantor as having been prepared in accordance with
GAAP consistently applied, except for (A) the absence of notes thereto and
(B) changes in accounting principles required by GAAP;
(ii) as soon as available and in any event within 90 days after the
end of each fiscal year of the Guarantor and its Consolidated Subsidiaries,
a copy of the annual report for such year for the Guarantor and its
Consolidated Subsidiaries, containing a consolidated balance sheet of the
Guarantor and its Consolidated Subsidiaries as at the end of such fiscal
year and consolidated statements of income, retained earnings and cash
flows of the Guarantor and its Consolidated Subsidiaries for such fiscal
year, certified in a manner acceptable to Citibank by Arthur Anderson & Co.
or another nationally-recognized independent public accounting firm
selected by the Guarantor and acceptable to Citibank;
(iii) concurrently with the financial statements for each quarterly
accounting period and for each fiscal year of the Guarantor furnished
pursuant to paragraphs (i) and (ii), above, (A) a certificate of the chief
financial officer, any vice president responsible for financial or
accounting matters, or the treasurer of the Guarantor stating that the
Guarantor has performed and observed all of, and the Guarantor is not in
default in the performance or observance of any of, the terms, covenants,
agreements and conditions of this Guaranty or, if the Guarantor shall be in
default, specifying all such defaults and the nature thereof, of which the
signer of such certificate may have knowledge, and (B) an analysis prepared
and certified by the chief financial officer, any vice president
responsible for financial or accounting matters, or the Treasurer of the
Guarantor of the covenants contained in Sections 7(i) and (j), containing
all information necessary for determining compliance by the Guarantor with
such covenants;
<PAGE>
11
(iv) as soon as available and in any event within 90 days after the
end of each fiscal year of the Guarantor and concurrently with the
financial statements furnished pursuant to paragraph (ii), above, a written
statement of the independent public accountants that certified such
financial statements stating that, in making the examination necessary for
their certification of such financial statements, they have obtained no
knowledge of any default by the Guarantor in the observance of any of the
covenants contained in Section 7(i) or (j) or, if such accountants shall
have obtained knowledge of any such default, specifying all such defaults
and the nature thereof, it being understood that they shall not be liable
directly or indirectly for any failure to obtain knowledge of any default;
(v) as soon as possible and in any event within ten days after the
commencement of litigation against the Guarantor, the Borrower, Northwind
or any of their respective Subsidiaries that could reasonably be expected
to have a material adverse effect on the business, assets, revenues,
financial condition, results of operations, operations or prospects of the
Guarantor and its Subsidiaries, taken as a whole, or that questions the
validity or enforceability of any of this Guarantor or any LC Agreement
against the Guarantor or Northwind, notice of such litigation describing in
reasonable detail the facts and circumstances concerning such litigation
and the Guarantor's, the Borrower's, Northwind's or such Subsidiary's, as
the case may be, proposed actions in connection therewith;
(vi) promptly after the sending or filing thereof, copies of all
reports which the Guarantor sends to any of its security holders, and
copies of all reports and registration statements (other than registration
statements relating to (A) the offering of debt or preferred/preference
stock equity securities and (B) employee benefit plans) which the Guarantor
or any of its Subsidiaries files with the Securities and Exchange
Commission or any national securities exchange;
(vii) promptly after the occurrence of the institution of any steps
by the Guarantor or any other Person to terminate any Pension Plan, or the
failure to make a required contribution to any Pension Plan if such failure
is sufficient to give
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12
rise to a Lien under Section 302(f) of ERISA, or the taking of any action
with respect to a Pension Plan which could result in the requirement that
the Guarantor or any of its Subsidiaries furnish a bond or other security
to the PBGC or such Pension Plan, or the occurrence of any event with
respect to any Pension Plan which could result in the incurrence by the
Guarantor or any of its Subsidiaries of any material liability, fine, or
penalty, or any material increase in the contingent liability of the
Guarantor or any of its Subsidiaries with respect to any post-retirement
Welfare Plan benefit, notice of such event and the action the Guarantor
proposes to take with respect thereto;
(viii) as soon as possible and in any event within ten days after the
Guarantor knows or should have reason to know of the occurrence of each
Unmatured Default, Event of Default or default under the LC Agreements
continuing on the date of such statement, a statement of the chief
financial officer, any vice president responsible for financial or
accounting matters, or the Treasurer of the Guarantor setting forth details
of such Unmatured Default, Event of Default or default and the action that
the Guarantor or Northwind has taken and proposes to take with respect
thereto; and
(ix) such other information (other than proprietary customer
information) respecting the business, assets, revenues, financial
condition, results of operations, operations or prospects of the Guarantor,
the Borrower, Northwind or any of their respective Subsidiaries as Citibank
may from time to time reasonably request.
(b) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain, and
cause each of its Subsidiaries to preserve and maintain, its legal existence in
the jurisdiction of its organization and qualify and remain qualified as a
foreign organization in each jurisdiction in which such qualification is
reasonably necessary in view of its business and operations or the ownership of
its properties, and preserve, renew and keep in full force and effect the
rights, privileges and franchises necessary or desirable in the normal conduct
of its business, except to the extent that the Guarantor's chief financial
officer certifies to Citibank that the loss of any such right, privilege or
franchise, both individually and together with all other rights, privileges and
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13
franchises lost since the Effective Date, would not have a Material Adverse
Effect.
(c) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of its Subsidiaries
to comply, in all material respects with all Applicable Laws, such compliance to
include compliance with ERISA and Environmental Laws.
(d) MAINTENANCE OF INSURANCE, ETC. Maintain, and cause each of its
Subsidiaries to maintain, such insurance as may be required by law and such
other insurance, to the extent and against such hazards and liabilities, as is
customarily maintained by companies similarly situated.
(e) INSPECTION RIGHTS. At any reasonable time and from time to time as
Citibank may reasonably request, permit Citibank or any agents or
representatives thereof to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, the Guarantor and
any of its Subsidiaries (except in the case of Commonwealth, as may be
restricted by law), and to discuss the affairs, finances and accounts of the
Guarantor and any of its Subsidiaries with any of their respective officers or
directors.
(f) MAINTAINING OF BOOKS. Maintain, and cause each of its Subsidiaries to
maintain, complete and accurate books of record and account in which entries
shall be made of all financial transactions and the assets and business of the
Guarantor and each of its Subsidiaries in accordance with GAAP.
(g) MAINTENANCE OF PROPERTIES. Cause all properties used or useful in the
conduct of the business of the Guarantor or any of its Subsidiaries to be
maintained and kept in reasonable condition, repair and working order, and cause
to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Guarantor may be necessary
so that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that neither the
Guarantor nor any such Subsidiary shall be prevented from discontinuing the
operation and maintenance of any such properties if the chief financial officer
of the Guarantor certifies that such discontinuance is desirable in the conduct
of the Guarantor's or such Subsidiary's business and such discontinuance,
individually or with all such other discontinuances since the date hereof, would
not have a material adverse effect on the business, assets,
<PAGE>
14
revenues, financial condition, results of operations, operations or prospects of
the Guarantor and its Subsidiaries, taken as a whole.
(h) TAXES AND LIABILITIES. Pay, and cause each of its Subsidiaries to pay,
when due all taxes, assessments, governmental charges and other liabilities
imposed upon it or its property, except to the extent contested in good faith
and by appropriate proceedings and in respect of which adequate reserves for the
payment thereof have been set aside by the Guarantor or such Subsidiary, as the
case may be, in accordance with GAAP.
(i) MAINTENANCE OF MINIMUM TANGIBLE NET WORTH. Maintain at all times an
excess of (i) the Tangible Net Worth of the Guarantor and its Consolidated
Subsidiaries over (ii) the Tangible Net Worth of Commonwealth and its
Consolidated Subsidiaries, of at least $10,000,000.
(j) CONSOLIDATED LEVERAGE RATIO. Maintain, on the last day of each fiscal
quarter, a ratio of (i) Consolidated Debt to (ii) Consolidated Capitalization of
not greater than 0.65 to 1.
(k) ERISA. Maintain, and cause each of its Consolidated Subsidiaries to
maintain, each of its defined benefit plans in substantial compliance with all
applicable requirements of ERISA and of the Code and with all applicable rulings
and regulations issued under the provisions of ERISA and the Code.
(l) OWNERSHIP OF SUBSIDIARIES. Maintain direct ownership of 100% of the
capital stock of the Borrower and at least 80% of the voting capital stock of
Commonwealth, and cause the Borrower to maintain direct ownership of 100% of the
capital stock of Northwind.
SECTION 8. NEGATIVE COVENANTS. The Guarantor covenants and agrees that,
so long as any part of the Obligations shall remain unpaid or the Letters of
Credit shall not have expired or terminated, the Guarantor will not:
(a) LIENS, ETC. Create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any lien, security interest, or other
charge or encumbrance, or any other type of preferential arrangement, upon or
with respect to any of its properties (including, without limitation, the
capital stock of any of its Subsidiaries), whether now owned or hereafter
acquired, or assign, or permit any of its Subsidiaries to assign, any right to
receive income, in
<PAGE>
15
each case to secure or provide for the payment of any Debt of any Person (any of
the foregoing being referred to herein as a "LIEN"), other than (i) Liens
imposed by law, such as carriers', warehousemen's and mechanics' Liens and other
similar Liens arising in the ordinary course of business; (ii) Liens arising
under the Indenture; (iii) "permitted liens", as such term is defined in the
Indenture; and (iv) Liens permitted by Section 6.02(e)(ii) of the Credit
Agreement; provided, however, that, notwithstanding the foregoing, if both
before and after giving effect thereto no Unmatured Default or Event of Default
shall have occurred and be continuing, Commonwealth may sell, pledge or
otherwise dispose of its accounts receivable.
(b) MERGERS, ETC. Merge or consolidate with or into any Person, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions, and whether in a sale/leaseback transaction or
otherwise) more than 10% of its assets (whether now owned or hereafter
acquired), unless, in the case of a merger, immediately after giving effect
thereto, (i) no event shall occur and be continuing that constitutes an
Unmatured Default, an Event of Default, or a default under the LC Agreements,
(ii) the Guarantor is the surviving corporation, (iii) the Guarantor's Tangible
Net Worth shall be equal to or greater than its Tangible Net Worth immediately
prior to such merger and (iv) the Guarantor shall not be liable with respect to
any Debt or allow its property to be subject to any Lien which it could not
become liable with respect to or allow its property to become subject to under
this Guaranty on the date of such transaction.
(c) DEBT. Create, incur, assume or suffer to exist any Debt, other than
(i) Debt to the Borrower in an amount not to exceed $25,000,000 in the aggregate
at any one time outstanding, (ii) Debt hereunder, (iii) unsecured Contingent
Obligations (other than in respect of this Guaranty) in an aggregate amount at
any one time outstanding not to exceed the excess of (A) $300,000,000 over (B)
the amount of Contingent Obligations incurred by the Borrower and its
Subsidiaries pursuant to Section 6.02(b)(ii) of the Credit Agreement, and (iv)
other unsecured Debt; provided, however, that, notwithstanding the foregoing,
the aggregate amount of Debt of the Guarantor, the Borrower and Subsidiaries of
the Borrower at any one time outstanding shall not exceed $500,000,000.
(d) GUARANTOR AND SUBSIDIARIES' STOCK. Permit any of its Subsidiaries to
purchase or otherwise acquire any
<PAGE>
16
shares of capital stock of the Guarantor; or take any action, or permit any such
Subsidiary to take any action, that would result in a material decrease in the
percentage of the outstanding shares of capital stock of any "Significant
Subsidiary" of the Guarantor (within the meaning of Rule 1-02 of the Regulation
S-X of the Securities and Exchange Commission) owned by the Guarantor and its
other Subsidiaries; provided, however, that the Guarantor or Commonwealth may
take any such action with respect to the capital stock of Commonwealth, provided
that, after giving effect to any such action, the Guarantor is in compliance
with Section 7(l) hereof.
(e) OTHER AGREEMENTS. Enter into any agreement containing any provision
that would be violated or breached by the performance of its obligations
hereunder or under any instrument or document delivered or to be delivered by
the Guarantor hereunder or in connection herewith.
(f) TRANSACTIONS WITH AFFILIATES. Enter into, or permit any of its
Subsidiaries to enter into, any transaction with an Affiliate of the Guarantor,
unless such transaction is on terms no less favorable to the Guarantor or such
Subsidiary, as the case may be, than if the transaction had been negotiated in
good faith on an arm's length basis with a Person that was not an Affiliate of
the Guarantor; provided, however, that the foregoing restrictions shall not
apply to any transaction between the Guarantor and any of its Subsidiaries,
between the Guarantor and Commonwealth, or between Commonwealth and any of the
Guarantor's other Subsidiaries.
(g) MAINTENANCE OF OWNERSHIP OF SUBSIDIARIES. Sell, assign, transfer,
pledge, hypothecate, or otherwise dispose of any shares of capital stock of any
of its Subsidiaries or any warrants, rights or options to acquire such capital
stock, or permit any of its Subsidiaries to issue, sell, or otherwise dispose of
any shares of its capital stock or the capital stock of any other of its
Subsidiaries or any warrants, rights, or options to acquire such capital stock,
except (and only to the extent) as may be necessary to give effect to a
transaction permitted by subsections (b) and (d), above, or subsections (e)(ii),
(f) or (g) of Section 6.02 of the Credit Agreement (including, without
limitation, any disposition pursuant to a foreclosure of any Lien permitted by
Section 6.02(e)(ii) of the Credit Agreement, provided that such disposition
would not have a Material Adverse Effect) and except that, subject to Section
6.02(f) of the Credit Agreement, any Subsidiary of the
<PAGE>
17
Guarantor may issue and sell shares of its capital stock, and warrants, rights,
or options to acquire the same, to the Guarantor or such Subsidiary's parent
corporation (if not the Guarantor); provided, however, that Commonwealth may
issue shares of its common stock upon any exercise of its common stock purchase
warrants and any conversion of its $1.425 convertible preferred stock, in each
case only with respect to such warrants and shares of preferred stock
outstanding on the date hereof.
(h) DISTRIBUTIONS. Upon the occurrence and during the continuance of an
Event of Default or default under the LC Agreements, declare or pay, directly or
indirectly, any dividend, payment or other distribution of assets, properties,
cash, rights, obligations or securities on account of any share of any class of
capital stock of the Guarantor, or purchase, redeem, retire, or otherwise
acquire for value, or permit any of its Subsidiaries to purchase, redeem,
retire, or otherwise acquire for value, any shares of any class of capital stock
of the Guarantor or any warrants, rights, or options to acquire any such shares,
now or hereafter outstanding, or make any distribution of assets to any of its
shareholders; provided, however, that, notwithstanding the foregoing, the
Guarantor may, to the extent that it is legally required to do so, pay any such
dividend, payment or other distribution after the Guarantor has declared such
dividend, payment or other distribution.
SECTION 9. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Guaranty, and no consent to any departure by the Guarantor herefrom, shall
in any event be effective unless the same shall be in writing and signed by
Citibank and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 10. ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic or
cable communication) and mailed, telecopied, telegraphed, cabled or delivered to
it, (i) if to the Guarantor, at its address at P.O. Box A-3005, 10 South
Dearborn Street, 38th Floor, Chicago, Illinois 60690-3005, Attention: Treasurer,
Telecopy: (312) 394-4082 and (ii) if to Citibank, at its address specified in
the LC Agreements or, as to any party, at such other address as shall be
designated by such party in a written notice to each other party. All such
notices and other communications shall, when mailed, telecopied, telegraphed or
cabled, be effective when deposited in the mails, telecopied,
<PAGE>
18
delivered to the telegraph company or delivered to the cable company,
respectively.
SECTION 11. NO WAIVER; REMEDIES. No failure on the part of Citibank to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law,
SECTION 12. RIGHT OF SET-OFF. Upon the occurrence and during the
continuance of any default under the LC Agreements, Citibank is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits of the Guarantor (general or
special, time or demand, provisional or final). Citibank agrees promptly to
notify the Guarantor after any such set-off and application made by Citibank;
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of Citibank under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) that Citibank may have.
SECTION 13. CONTINUING GUARANTY; ASSIGNMENTS UNDER CREDIT AGREEMENT. This
Guaranty is a continuing guaranty and shall (i) subject to the last sentence of
Section 3, remain in full force and effect until the later to occur of (A) the
payment in full of the Obligations and all other amounts payable under this
Guaranty and (B) the expiration or termination of the Letters of Credit, (ii) be
binding upon the Guarantor, its successors and assigns (provided, that the
Guarantor may not assign any of its rights or obligations hereunder without the
prior written consent of Citibank), and (iii) inure to the benefit of, and be
enforceable by Citibank and its successors, transferees and assigns.
SECTION 14. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 15. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. (a) The
Guarantor hereby irrevocably (i) submits to the non-exclusive jurisdiction of
any New York State or Federal court sitting in New York City and any appellate
court from any thereof in any action or proceeding arising out of or relating to
this Guaranty, the LC Agreements or the Letters of Credit and
<PAGE>
19
(ii) agrees that all claims in respect of such action or proceeding may be heard
and determined in such New York State court or in such Federal court. The
Guarantor hereby irrevocably waives the defense of an inconvenient forum to the
maintenance of such action or proceeding and any objection to venue in
connection therewith. The Guarantor also irrevocably consents to the service of
any and all process in any such action or proceeding by the mailing by certified
mail of copies of such process to the Guarantor at its address specified in
Section 10. The Guarantor agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
(B) THE GUARANTOR HEREBY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY, ANY LC
AGREEMENT, ANY LETTER OF CREDIT OR ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED
HEREUNDER OR THEREUNDER.
SECTION 16. EXECUTION IN COUNTERPARTS. This Guaranty may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which counterparts when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same
agreement.
SECTION 17. SEVERABILITY. Any provision of this Guaranty or any LC
Agreement that is prohibited, unenforceable or invalid in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition, unenforceability or invalidity without invalidating the remaining
provisions hereof or thereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction.
SECTION 18. HEADINGS. Article and Section headings used herein are for
convenience of reference only, are not part of this Guaranty and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Guaranty.
SECTION 19. ENTIRE AGREEMENT. This Guaranty constitutes the entire
agreement and understanding among the Guarantor and Citibank relative to the
subject matter hereof. Any previous agreement by or among such parties with
respect to the subject matter hereof is superseded by this Guaranty. Nothing in
this Guaranty, expressed or implied, is intended to confer upon any party other
than Citibank any rights, remedies, obligations, or liabilities under or by
reason of this Guaranty.
<PAGE>
20
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
UNICOM CORPORATION
By Dennis F. O'Brien
---------------------------
Name: Dennis F. O'Brien
Title: Treasurer
<PAGE>
Exhibit (10)-6
Unicom Corporation
Form 10-K File 1-11375
Commonwealth Edison Company
Form 10-K File No. 1-1839
As Amended on March 9, 1995
UNICOM CORPORATION
1995 LONG-TERM PERFORMANCE UNIT AWARD
FOR EXECUTIVE AND GROUP LEVEL EMPLOYEES
PAYABLE IN 1998
UNDER THE
UNICOM CORPORATION LONG-TERM INCENTIVE PLAN
Unicom Corporation, an Illinois corporation (the "Company"), hereby
grants to each employee described in Section 1 hereof as of January 1, 1995 (the
"Grant Date"), in accordance with the provisions of the Unicom Corporation Long-
Term Incentive Plan (the "Plan"), a performance unit award (each, an "Award")
expressed as a number (the "Base Unit") of performance units, in the amount and
upon and subject to the restrictions, terms and conditions set forth below.
Capitalized terms not defined herein shall have the meanings specified in the
Plan.
1. Recipients of Awards. Recipients of Awards hereunder shall consist
of the following employees (each, an "Existing Employee") of Commonwealth Edison
Company ("ComEd") and of Commonwealth Edison Company of Indiana, Inc.: (i) each
Group Level employee on the Grant Date, (ii) each Executive on the Grant Date
and (iii) each Officer on the Grant Date, including, without limitation, the
Chairman of ComEd, the President of ComEd and each Senior Vice President of
ComEd; provided, however, that individuals who become Group Level employees,
Executives or Officers after the Grant Date and during the Performance Period
(as hereinafter defined) (each, a "New Employee") shall be eligible to receive
an Award hereunder. The term "Employee" shall mean either an Existing Employee
or a New Employee.
2. Base Unit. The Base Unit for each Award shall be a number (rounded
to the nearest whole number) equal to (a) the product of multiplying (i) the
Salary (as defined herein) of the Employee receiving such Award by (ii) the
applicable percentage
<PAGE>
set forth below, divided by (b) the closing price of a share of Common Stock as
reported in The Wall Street Journal as New York Stock Exchange Composite
Transactions on December 30, 1994:
Chairman: 100%
President: 50%
Senior Vice Presidents: 40%
Officers, other than as listed above: 30%
Executives, other than as listed above: 20%
Group Level employees, other than as listed above: 20%
For the purposes of calculating the Base Unit, an Existing Employee's Salary
shall be such Existing Employee's monthly scheduled rate of pay as of the Grant
Date multiplied by 12 together with the income from such Existing Employee's
Deferred Compensation Units (whether such Units were granted by the Company or
by ComEd), and a New Employee's Salary shall be such New Employee's monthly
scheduled rate of pay as of the date such New Employee becomes a New Employee
(the "Start Date") multiplied by 12 together with the income from such New
Employee's Deferred Compensation Units (whether such Units were granted by the
Company or by ComEd).
3. Performance Period. The Performance Period shall commence on
January 1, 1995 and end on December 31, 1997.
4. Payment Amount/Stockholder Protection. The amount payable in
connection with an Award (a "Payment Amount") shall be a dollar amount based on
the Base Unit and on the Company's percentile rank, with the percentile rank
corresponding to the highest performance in the performance group being 100 and
the percentile rank corresponding to the lowest performance in the performance
group being 1 (the "Company Rank"), in the Ranking (as hereinafter defined) for
the Performance Period, and calculated as follows:
Below Threshold Level. If the Company Rank is lower than the 25th
percentile in the Ranking, then the Payment Amount shall be zero.
Between Threshold Level and Target Level. If the Company Rank is no
lower than the 25th percentile in the Ranking and no higher than the 49th
percentile in the Ranking, then the Payment Amount shall be the Base Value
multiplied by a fraction the numerator of which is the Company Rank
multiplied by 2 and the denominator of which is 100.
Between Target Level and Maximum Level. If the Company Rank is no
lower than the 50th percentile in the Ranking and no higher than the 90th
percentile in the Ranking, then the Payment Amount shall be the Base Value
-2-
<PAGE>
multiplied by a fraction the numerator of which is the Company Rank
multiplied by 2.5 minus 25 and the denominator of which is 100.
Above Maximum Level. If the Company Rank is above the 90th percentile
in the Ranking, then the Payment Amount shall be the Base Value multiplied
by 2.
Notwithstanding the foregoing, if the Company fails to maintain
regular quarterly cash dividends of at least $.40 per share of Common Stock
during the Performance Period (adjusted for any stock-split, stock dividend or
other similar event), then the Payment Amount shall be zero.
For purposes of the foregoing, the term "Ranking" shall mean a ranking
determined based upon the Cumulative Total Shareholder Return (as hereinafter
defined) for such Performance Period on the Company's Common Stock as compared
to the Cumulative Total Shareholder Return for such Performance Period on the
common stock of each corporation comprising the Dow Jones Utility Index (or any
successor index); the term "Cumulative Total Shareholder Return" for a period
shall mean the result obtained by dividing (i) the sum of (a) the cumulative
amount of dividends on the common stock in question for such period, assuming
reinvestment of said dividends in said common stock, and (b) the difference
between the price per share of said common stock at the end and the beginning of
such period, by (ii) the price per share of said common stock at the beginning
of such period; and the term "Base Value" shall mean the result obtained by
multiplying the Base Unit by the value of a share of Common Stock (as determined
under Section 5 hereof).
5. Settlement of Awards. The Payment Amount shall become payable
upon the completion of the Performance Period and shall be paid by the Company
within 90 days after the completion of the Performance Period. The Payment
Amount shall be paid 50% in cash and 50% in shares of Common Stock; provided,
however, that shares that may become payable hereunder shall not be issued if
the aggregate number of shares payable to an Employee does not exceed five (and,
in such cases, cash shall be paid in an amount equal to the value of the shares
that would have been issued but for this proviso). Fractional shares of Common
Stock that may become payable hereunder shall be issued if the shares paid an
Employee exceed five and are held in non-certificated, book-entry or electronic
form; otherwise, any such fractional shares shall be paid in cash. For the
purposes of determining the number of shares of Common Stock payable pursuant to
this Section, a share of Common Stock shall be valued at the average of the
closing prices of a share of Common Stock as reported in The Wall Street Journal
as New York Stock Exchange Composite Transactions during the calendar quarter
ending on the last day of the Performance Period (appropriately adjusted for any
stock-split, stock dividend or other similar event).
-3-
<PAGE>
6. Employment as an "Employee" for Less Than Full Performance Period.
6.1. Termination of Employment. If an Employee's employment with the
Company is terminated prior to the completion of the Performance Period for any
reason other than as provided in the immediately following sentence, then no
amount shall be payable hereunder. If an Employee's employment with the Company
is terminated prior to the completion of the Performance Period due to such
Employee's (i) retirement under the pension plan of any of the Employers or (ii)
death, then such Employee shall be entitled to an amount equal to the Payment
Amount calculated in accordance with Section 4 hereof multiplied by a fraction
the numerator of which is the number of days in the Performance Period that have
elapsed between the commencement of the Performance Period (in the case of an
Existing Employee), or the Start Date (in the case of a New Employee), and the
date of such retirement or death (as the case may be) and the denominator of
which is the number of days in the Performance Period. The Payment Amount for
any New Employee whose employment is not terminated prior to the completion of
the Performance Period shall be calculated in accordance with Section 4 hereof
and be reduced by multiplying it by a fraction the numerator of which is the
number of days in the Performance Period that have elapsed between such New
Employee's Start Date and the end of the Performance Period and the denominator
of which is the number of days in the Performance Period. Any Payment Amount
calculated in accordance with either of the two immediately preceding sentences
shall be paid as provided in Section 5 hereof within 90 days after the
completion of the Performance Period.
6.2. Promotions; Demotions. If an Employee is promoted or demoted
during the Performance Period to a level that is included within the definition
of Employee, then such person shall be entitled to an amount equal to a Payment
Amount calculated in accordance with Section 4 hereof, but based upon the sum of
the products of (i) the Base Unit applicable to each level held by such person
during the Performance Period, multiplied by (ii) a fraction the numerator of
which is the number of days such level was held and the denominator of which is
the number of days in the Performance Period. If an Employee is demoted during
the Performance Period to a level below that included within the definition of
Employee, then such person shall be entitled to an amount equal to the Payment
Amount calculated in accordance with Section 4 hereof multiplied by a fraction
the numerator of which is the number of days in the Performance Period that such
person was at a level included within the definition of Employee and the
denominator of which is the number of days in the Performance Period.
6.3. Employment. As used in this Section 6, employment by the
Company shall include employment by a corporation which is a "subsidiary
corporation" of the Company, as such term is defined in section 424 (and any
successor section) of the Internal Revenue Code of 1986, as amended, or any
successor internal revenue law.
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<PAGE>
7. Rights as a Stockholder. No Employee shall have any rights as a
stockholder of the Company with respect to any shares of Common Stock that may
be payable hereunder unless and until such shares have been issued to such
Employee or otherwise credited to an account for the benefit of such Employee.
8. Additional Terms and Conditions of Award.
8.1. Nontransferability of Award. In accordance with Section 13.5 of
the Plan, no Award or other related benefit may, except as otherwise
specifically provided by the Plan or by law, be transferable in any manner
other than by will or the laws of descent and distribution, and any attempt to
transfer any such Award or other benefit shall be void; provided, however, that
the foregoing shall not restrict the ability of any Employee to transfer any
cash or Common Stock received as part of the Payment Amount. In accordance with
Section 13.5 of the Plan, Awards or other benefits payable under Awards shall
not in any manner be subject to the debts, contracts, liabilities, engagements
or torts of any person who shall be entitled to such Award or benefits, nor
shall they be subject to attachment or legal process for or against such person.
8.2. Withholding Taxes. As a condition precedent to the delivery to
the Employee of cash or Common Stock hereunder and in accordance with Section
13.4 of the Plan, the Company may deduct from any amount (including any Payment
Amount) payable then or thereafter payable by the Company or any of its
subsidiaries to the Employee, or may request the Employee to pay to the Company
in cash, such amount as the Company or any of its subsidiaries may be required,
under all applicable federal, state, local or other laws or regulations, to
withhold and pay over with respect to the Award.
8.3. Compliance with Applicable Law. Each Award is subject to the
condition that if the listing, registration or qualification of the shares of
Common Stock subject to the Award upon any securities exchange or under any law,
or the consent or approval of any governmental body, or the taking of any other
action is necessary or desirable as a condition of, or in connection with, the
vesting or delivery of such shares hereunder, such shares may not be delivered,
in whole or in part, unless such listing, registration, qualification, consent
or approval shall have been effected or obtained.
8.4. Award Subject to the Plan. This Award is subject to the
provisions of the Plan, and shall be interpreted in accordance therewith.
-5-
<PAGE>
Exhibit (10)-7
Unicom Corporation
Form 10-K File No. 1-11375
Commonwealth Edison Company
Form 10-K File No. 1-1839
As Amended on March 9, 1995
UNICOM CORPORATION
1995 VARIABLE COMPENSATION AWARD FOR MANAGEMENT EMPLOYEES
UNDER THE UNICOM CORPORATION LONG-TERM INCENTIVE PLAN
Unicom Corporation, an Illinois corporation (the "Company"), hereby
grants to each employee described in Section 1 hereof (each, an "Employee"), as
of January 1, 1995 (the "Grant Date"), in accordance with the provisions of the
Unicom Corporation Long-Term Incentive Plan (the "Plan"), a performance unit
award (each, an "Award"), expressed as a number of performance units, in the
amount and upon and subject to the restrictions, terms and conditions set forth
below and in Appendices A and B attached hereto. Capitalized terms not defined
herein shall have the meanings specified in the Plan.
1. Recipients of Awards. Subject in all respects to the provisions
hereof, recipients of Awards hereunder shall consist of each employee of
Commonwealth Edison Company ("ComEd") (other than (i) the Chairman and the
President and (ii) temporary employees) and of Commonwealth Edison Company of
Indiana, Inc. (collectively, the "Employers") who is on the management or
executive payroll during calendar year 1995.
2. Base Unit. The Base Unit for each Award shall be the number which
is equal to the number of dollars determined by multiplying the Base Pay (as
defined herein) of the Employee receiving the Award by the conversion factor of
1.25% and rounding up to the nearest whole dollar. For purposes of calculating
the Base Unit, "Base Pay" shall mean the sum of (i) the product of an Employee's
monthly scheduled rate of pay, determined as of the close of the final pay
period for calendar year 1995, multiplied by 12, plus (ii) the income from such
Employee's Deferred Compensation Units (whether such Units were granted by the
Company or by ComEd) if such Employee is Grade 12 or above.
3. Payment Amount. The total amount payable in connection with an
Award (the "Payment Amount") may consist solely of a cash payment (the "Cash
Payment Amount") or may consist of a Cash Payment Amount and a payment of Common
Stock (the "Stock Payment Amount"), as determined below. Interpolation shall be
used in determining the number of performance units earned for goal achievement
between the "Threshold" level and the "Distinguished" level.
<PAGE>
a. Cash Payment Amount. The Cash Payment Amount shall be the dollar
amount computed by multiplying the Employee's Base Unit by the applicable
performance unit set forth (i) in the cases of the "Rated" and "Group"
categories of Employees, below under the column titled "Cash" that
corresponds to such Employee's category of employment and the level of
performance goals achieved as set forth in Appendix A attached hereto that
are applicable to such Employee or (ii) in the case of the "Executive"
category of Employees, in Appendix B under the column titled "Cash" that
corresponds to such Employee's name and level of performance goals achieved
as set forth in Appendix A attached hereto that are applicable to such
Employee.
b. Stock Payment Amount. The Stock Payment Amount shall be the
dollar amount computed by multiplying the Employee's Base Unit by the
applicable performance unit set forth (i) in the cases of the "Rated" and
"Group" categories of Employees, below under the column titled "Stock" that
corresponds to such Employee's category of employment and the level of
performance goals achieved as set forth in Appendix A attached hereto that
are applicable to such Employee, or (ii) in the case of the "Executive"
category of Employees, in Appendix B under the column titled "Stock" that
corresponds to such Employee's name and level of performance goals achieved
as set forth in Appendix A attached hereto and that are applicable to such
Employee.
PERFORMANCE UNITS
-----------------
THRESHOLD TARGET DISTINGUISHED
--------- ------ -------------
CATEGORY CASH STOCK CASH STOCK CASH STOCK
RATED 4 0 6 0 7.876 0.924
GROUP 4 0 8 4 8 8
4. Reduction of Payment Amount in Certain Instances. In the event
that an Employee (i) is first placed on the management or executive payroll
after January 1, 1995, (ii) is on a leave of absence during 1995, (iii) retires
under the pension plan of any one of the Employers during 1995, or (iv) dies
during 1995, each of the Cash Payment Amount and the Stock Payment Amount will
be a reduced amount equal to each of the amounts determined in Section 3 above
multiplied by a fraction, the numerator of which is the number of days the
Employee worked during 1995 and the denominator of which is 365. In addition,
in the event that an Employee is or becomes a participant in, or is eligible or
becomes eligible to participate in, The ComEd Pension Fund Management Incentive
Pay Plan or The ComEd Bulk Power Marketing Incentive Plan (such incentive plans
are collectively referred to herein as the "Other Incentive Plans") during 1995,
then each of the Cash Payment Amount and the Stock Payment Amount will be a
reduced amount equal to each of the amounts determined in Section 3 above
(subject to any
-2-
<PAGE>
adjustment required by the first sentence of this Section 4) multiplied by a
fraction, the numerator of which is the number of days the Employee was not a
participant in, or eligible to participate in, the Other Incentive Plans and the
denominator of which is the number of days the Employee worked during 1995. For
purposes of the preceding sentences, the number of days an Employee worked in
1995 shall include, solely in the cases of an Employee who retires under the
pension plan of any one of the Employers or who dies, the full month in which
the Employee retires or dies. For an Employee who is a part-time Employee
described in clause (i), (ii), (iii) or (iv) of the first sentence of this
Section, the reduction provided in this Section shall be made after the
reduction set forth in Section 5 is made.
5. Reduction of Payment Amount for Part-Time Employees. For an
Employee who is a part-time Employee, each of the Cash Payment Amount and the
Stock Payment Amount will be a reduced amount equal to the amount determined
above multiplied by a fraction, the numerator of which is the number of hours
the Employee was scheduled to work during 1995 and the denominator of which is
2080 hours.
6. Transfer of Employee from One Business Unit to Another Business
Unit. In the event that an Employee is transferred from one Business Unit (as
hereinafter defined) to another Business Unit during 1995, each of the Cash
Payment Amount and the Stock Payment Amount will be determined on a prorated
basis from each Business Unit. For purposes of this Section, "Business Unit"
means the following corporate functions of the Employers: (a) commercial, (b)
financial, (c) human resources, (d) corporate relations, (e) corporate
resources, (f) legal, (g) fuel, (h) fuel/ethics, (i) fossil energy production,
(j) nuclear energy production and (k) quality improvement programs.
7. Stockholder Protection. Notwithstanding anything herein to the
contrary, no amount shall be paid hereunder unless the following three
conditions are satisfied:
a. The Company maintains regular quarterly cash dividends of at least
$.40 per share of Common Stock during calendar year 1995 (adjusted for any
stock-split, stock dividend or other similar event).
b. The aggregate amount actually incurred by the Employers for
operations and maintenance expenditures for calendar year 1995 is less than
or equal to $2,031 million; provided, however, that, in determining whether
the foregoing condition has been met, there shall be excluded from the
computation of operations and maintenance expenditures (i) charges
associated with any early retirement program adopted by the Employers or
any severance payments made by the Employers, (ii) any charges associated
with awards made or paid under the Plan, (iii) any write-off (as opposed to
depreciation charges) included in operation and maintenance expenditures
that relates to any plant, property or equipment of the
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<PAGE>
Employers, (iv) any accounting effects resulting from any subsequent
Illinois Commerce Commission ("ICC") or judicial proceeding relating to any
order entered by the ICC in Docket No. 94-0065 and (v) any charges
associated with necessary increases in pension provisions for the Service
Annuity Systems of the Employers which are determined after January 1,
1995.
c. The aggregate amount actually incurred by the Employers for
capital expenditures for calendar year 1995 is less than $920 million.
8. Failure to Achieve "Meeting All Expectations" Rating. An Employee
who fails to receive at least a "meeting all expectations" rating under the
Performance Evaluation, Career Development and/or Succession Planning (or the
equivalent thereof) with respect to performance in 1995 shall not receive any
amount hereunder.
9. Settlement of Awards. The Payment Amount, if any, will be paid to
an Employee as soon as practicable after the Company's audited financial results
are available for calendar year 1995. The number of shares of Common Stock
payable to an Employee with respect to an Award shall be computed by dividing
the Stock Payment Amount by the value of one share of Common Stock; provided,
however, that shares that may become payable hereunder shall not be issued if
the aggregate number of shares payable to an Employee does not exceed five (and,
in such case, cash shall be paid in an amount equal to the value of the shares
that would have been issued but for this proviso). Fractional shares of Common
Stock that may become payable hereunder shall be awarded if the shares awarded
such Employee exceed five and are held in non-certificated, book-entry or
electronic form; otherwise, any such fractional shares shall be paid in cash.
For purposes of this Section, the value of a share of Common Stock shall be the
average of the closing prices of a share of Common Stock as reported in The Wall
Street Journal as New York Stock Exchange Composite Transactions during the last
calendar quarter of 1995 (appropriately adjusted for any stock-split, stock
dividend or other similar event).
10. Termination of Employment. An Employee whose employment with the
Employers is terminated prior to December 31, 1995 for any reason other than
death or retirement under the pension plan of any one of the Employers shall not
be entitled to any payment under the Plan.
11. Rights as a Stockholder. No Employee shall have any rights as a
stockholder of the Company with respect to any shares of Common Stock that may
be payable hereunder unless and until such shares shall have been issued to such
Employee or otherwise credited to an account for the benefit of such Employee.
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<PAGE>
12. Additional Terms and Conditions of Award.
12.1. Nontransferability of Award. In accordance with Section 13.5
of the Plan, no Award or other related benefit may, except as otherwise
specifically provided by the Plan or by law, be transferable in any manner other
than by will or the laws of descent and distribution, and any attempt to
transfer any such Award or other benefit shall be void; provided, however, that
the foregoing shall not restrict the ability of any Employee to transfer any
cash or Common Stock received as part of the Payment Amount. In accordance with
Section 13.5 of the Plan, Awards or other benefits payable under Awards shall
not in any manner be subject to the debts, contracts, liabilities, engagements
or torts of any person who shall be entitled to such Award or benefits, nor
shall they be subject to attachment or legal process for or against such person.
12.2. Withholding Taxes. As a condition precedent to the delivery to
the Employee of cash or Common Stock hereunder and in accordance with Section
13.4 of the Plan, the Company may deduct from any amount (including any Payment
Amount) payable then or thereafter payable by the Company to the Employee, or
may request the Employee to pay to the Company in cash, such amount as the
Company may be required, under all applicable federal, state, local or other
laws or regulations, to withhold and pay over with respect to the Award.
12.3. Compliance with Applicable Law. Each Award is subject to the
condition that if the listing, registration or qualification of the shares of
Common Stock subject to the Award upon any securities exchange or under any law,
or the consent or approval of any governmental body, or the taking of any other
action is necessary or desirable as a condition of, or in connection with, the
vesting or delivery of such shares hereunder, such shares may not be delivered,
in whole or in part, unless such listing, registration, qualification, consent
or approval shall have been effected or obtained.
12.4. Award Subject to the Plan. This Award is subject to the
provisions of the Plan, and shall be interpreted in accordance therewith.
12.5. Certain Computations. (a) For the purposes of Appendix A,
"earnings per share" shall mean the earnings per share of ComEd calculated
without giving effect to (i) any charges associated with any early retirement
program adopted by the Employers or any severance payments made by the
Employers, (ii) any write-off (as opposed to depreciation charges) associated
with any plant, property or equipment of the Employers, (iii) any accounting
effects resulting from any subsequent ICC or judicial proceeding relating to any
order entered by the ICC in Docket No. 94-0065 and (iv) any charges associated
with necessary increases in pension provisions for the Service Annuity Systems
of the Employers which are determined after January 1, 1995; and shall be
adjusted for any stock splits, stock dividends or other similar event.
-5-
<PAGE>
(b) For the purposes of Appendix A, the computation of "operations
and maintenance expenditures" shall exclude (i) charges associated with any
early retirement program adopted by the Employers or any severance payments made
by the Employers, (ii) any charges associated with awards made or paid under the
Plan, (iii) any write-off (as opposed to depreciation charges) included in
operation and maintenance expenditures that relates to any plant, property or
equipment of the Employers, (iv) any accounting effects resulting from any
subsequent ICC or judicial proceeding relating to any order entered by the ICC
in Docket No. 94-0065 and (v) any charges associated with necessary increases in
pension provisions for the Service Annuity Systems of the Employers which are
determined after January 1, 1995.
-6-
<PAGE>
Exhibit (10)-8
Unicom Corporation
Form 10-K File No. 1-11375
Commonwealth Edison Company
Form 10-K File No. 1-1839
As Amended on March 9, 1995
1995 AWARD TO MR. O'CONNOR AND MR. SKINNER
UNDER THE UNICOM CORPORATION LONG-TERM INCENTIVE PLAN
-----------------------------------------------------
Unicom Corporation, an Illinois corporation (the "Company"), hereby
grants to James J. O'Connor and Samuel K. Skinner in accordance with the
provisions of the Unicom Corporation Long-Term Incentive Plan (the "Plan"), a
performance unit award (each, an "Award") in the amount and upon and subject to
the restrictions, terms and conditions set forth below. Capitalized terms not
defined herein shall have the meanings specified in the Plan. The following
chart describes the requirements for each Award level and sets forth the
percentage of Base Pay (as hereinafter defined) allocated to such level:
Level of Award
--------------
Cash Stock
---- -----
Threshold:
If earnings per share on the Company's
Common Stock are at least $2.55 per share* 25% 0%
Target:
If earnings per share on the Company's
Common Stock are at least $2.59 per share* 30% 20%
Distinguished Level:
If earnings per share on the Company's
Common Stock are at least $2.69 per share* 30% 70%
---------------
* For the purposes of determining the Level of Award, the "earnings per
share" amount shall be calculated without giving effect to (i) any charges
associated with any early retirement program approved by the Board of
Directors for employees of the Company or its subsidiaries or any severance
payments made by the Company or its subsidiaries, (ii) any charges
associated with necessary increases in pension provisions for the Service
Annuity Systems of Commonwealth Edison Company ("ComEd") and Commonwealth
Edison Company of Indiana, Inc. ("ComEd-Indiana") which are determined
after January 1, 1995, (iii) any write-off (as opposed to depreciation
charges) associated with any plant, property or equipment of the Company or
its subsidiaries and (iv) any accounting effects resulting from any
subsequent Illinois Commerce Commission ("ICC") or judicial proceeding
relating to any order entered by the ICC in Docket No. 94-0065; and shall
be adjusted for any stock splits, stock dividends or other similar event.
<PAGE>
No award at any level shall be earned or payable if (i) the aggregate
amount actually incurred by ComEd and ComEd-Indiana for operations and
maintenance expenditures (excluding (1) any charges or effects associated with
any of the items referred to in clauses (i) through (iv), inclusive, of the
first sentence of the asterisked footnote to the preceding table and (2) any
charges associated with awards made or paid under the Plan) for the calendar
year 1995 is greater than $2,031 million, (ii) the aggregate amount actually
incurred by ComEd and ComEd-Indiana for capital expenditures for calendar year
1995 is not less than $920 million, or (iii) the Company fails to maintain its
regular quarterly cash dividends on the outstanding Common Stock in an amount at
least equal to $.40 per share (adjusted for any stock-split, stock dividend or
other similar event) during the calendar year 1995.
The value (the "Payment Amount") of an award is determined by
multiplying the performance units (expressed as a percentage) at the achieved
award level by Base Pay, and will result in a "Cash Payment Amount" (determined
by reference to the "Cash" column) and a "Stock Payment Amount" (determined by
reference to the "Stock" column); provided, however, that interpolation shall be
used in determining the amount of any award based on achievement between the
"Threshold" level and the "Distinguished" level. "Base Pay" for Mr. O'Connor
and Mr. Skinner, as the case may be, shall be his monthly scheduled rate of pay
from ComEd as of January 1, 1995, multiplied by 12 together with the 1995 income
from his Deferred Compensation Units (whether received from the Company or
ComEd).
The Award is subject to the provisions of Sections 9 through 12.4
(inclusive) of the 1995 Variable Compensation Award for Management Employees
(including employment requirements and timing of payments).
<PAGE>
Exhibit (10)-9
Unicom Corporation
Form 10-K File No. 1-11375
Commonwealth Edison Company
Form 10-K File No. 1-1839
UNICOM CORPORATION
DEFERRED COMPENSATION UNIT PLAN
1. Purposes. The purposes of the Unicom Corporation Deferred
Compensation Unit Plan (the "Plan") are (i) to align the interests of the
Company's stockholders and recipients of awards under the Plan by linking a
portion of such recipients' compensation to the amount of cash dividends paid
with respect to the Company's Common Stock and (ii) to assure continuity of
efficient management, by providing for awards under the Plan, which may be
wholly or partly in lieu of salary increases, to such persons.
2. Definitions. In addition to the other terms defined in this Plan,
the following terms shall have the following meanings for purposes of this Plan:
"Committee" means the Compensation Committee of the Board of Directors
of the Company.
"Common Stock" means the Common Stock, without par value, of the
Company.
"Company" means Unicom Corporation, an Illinois corporation.
"Current Compensation Unit" means an award entitling the recipient to
receive, following the award and during the continued employment of the
recipient by the Company or its subsidiaries, an amount in cash equal to,
and payable on the payment dates of, the cash dividends such recipient
would have received if on the day of the award one share of Common Stock
had been issued to such recipient; provided, however, that no amounts shall
be payable under such award in respect of non-cash dividends paid on the
Common Stock.
"Retirement Compensation Unit" means an award under Section 4(c) or
4(f) of this Plan entitling the recipient to receive, following the award
and continuing for the recipient's lifetime, an amount equal to, and
payable on the payment dates of, the cash dividends such recipient would
have received if on the day of the award one share of Common Stock had been
issued to such recipient; provided, however: (a) no amount shall be payable
under such award in respect of non-cash
<PAGE>
dividends paid on the Common Stock; (b) payments in respect of such unit in
any calendar year shall not in any event be
(i) less than the average amount of the payments per Current
Compensation Unit during the five calendar years preceding the
termination of employment which gave rise to the award of such
Retirement Compensation Unit (provided that for purposes of this
provision, the payments per Current Compensation Unit in the
calendar years prior to January 1, 1995 shall be deemed to be as
follows: 1994--$1.60, 1993--$1.60, 1992--$2.65, 1991--$3.00 and
1990--$3.00), or
(ii) more than such average amount (or the amount of the payments per
Current Compensation Unit in the calendar year preceding such
termination, if greater), increased at the compound annual rate
of two percent to the end of the calendar year of payment;
and (c) upon the death of a recipient of a Unit, leaving a spouse
surviving, payments on account of such Unit shall continue to be made to
the spouse for the spouse's lifetime, but only if (i) such Unit had
originated from the deceased's employment by the Company or its
subsidiaries and (ii) the surviving spouse was married to such recipient
when his or her period of service with the Company and all of its
subsidiaries terminated.
"Units" means Current Compensation Units and Retirement Compensation
Units.
3. Eligible Participants. Participants in the Plan shall consist of
such key executive and managerial employees of the Company and its subsidiaries
as the Committee in its sole discretion may select from time to time consistent
with the next sentence of this Section 3. The number of active officers and
employees to whom Current Compensation Units may be so awarded in any one
calendar year shall be limited to such number fixed by the Committee annually,
but shall be so limited that the Plan shall remain primarily for the purpose of
providing deferred compensation for a select group of management employees
within the meaning of the Employee Retirement Income Security Act of 1974, as
amended.
4. Awards. (a) Subject to Section 4(b), the Committee shall, from
time to time, award Current Compensation Units, which may be wholly or partly in
lieu of salary increases, to eligible participants. Such awards shall be
evidenced by a written notification to the recipient, which shall indicate the
number of Current Compensation Units so awarded.
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<PAGE>
(b) The total number of Current Compensation Units awarded in any
calendar year shall be limited so that the compensation payable thereon would
not exceed one-tenth of one percent of "consolidated net income on the Common
Stock of the Company" (as hereinafter defined) for the preceding calendar year.
To compute this limitation, the "compensation payable thereon" shall be deemed
to be the amount which would have been paid in the preceding calendar year
either (a) on an equivalent number of units awarded on the record date for the
first cash dividend on the Common Stock paid in that year, or (b) at a rate per
unit equal to five percent of the book value per share of the Common Stock at
the end of that year, whichever results in the lower number of available units.
No Current Compensation Units shall be awarded in any calendar year if total
payments during the preceding calendar year on outstanding Units had reduced
consolidated net income on the Common Stock of the Company for such year by as
much as two percent. As herein used, the term "consolidated net income on the
Common Stock of the Company" shall mean, for any calendar year, such net income
(after all Federal income and excess profits tax provisions) of the Company and
its consolidated subsidiaries, or of the Company alone if there are no
consolidated subsidiaries, as shown in the Annual Report to the Stockholders of
the Company for such year.
(c) Upon the termination of the employment by the Company and its
subsidiaries of a recipient of Current Compensation Units, such recipient's
Current Compensation Units shall automatically be converted into an equivalent
number of Retirement Compensation Units; provided, however, if such termination
of employment is due to the resignation of such recipient, then (i) such
recipient's Current Compensation Units, and any payments in respect thereof,
shall terminate immediately, and (ii) no Retirement Compensation Units shall be
awarded pursuant to this Section 4(c).
(d) If any recipient of Units should at any time engage in a
competitive business activity, such recipient's Units, and any payments in
respect thereof, shall terminate immediately.
(e) The number of outstanding Units shall be adjusted by the
Committee to reflect stock dividends, stock splits or other changes in the
Company's Common Stock.
(f) Notwithstanding the limitation contained in Section 4(b), the
Committee may, from time to time and in such manner and on such terms as it
shall consider to be appropriate, award Current Compensation Units and
Retirement Compensation Units under this Plan in exchange for outstanding
current compensation units and retirement compensation units, respectively,
under the Commonwealth Edison Company Deferred Compensation Plan. Any Units so
issued shall not reduce the number of Current Compensation Units otherwise
issuable under Section 4(b).
5. Administration. The Plan shall be administered and interpreted
by the Committee. The Committee shall have the authority to adopt, alter and
repeal such
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<PAGE>
administrative rules, guidelines and practices governing the Plan and perform
all acts, including the delegation of its administrative responsibilities, as it
shall, from time to time, deem advisable; to construe and interpret the terms
and provisions of the Plan and any award issued under the Plan (and any notices
relating thereto); and to otherwise supervise the administration of the Plan.
The Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any notice of an award in the manner and to the
extent it shall deem necessary to carry the Plan into effect. Any decision,
interpretation or other action made or taken in good faith by or at the
direction of the Committee (or any of its members) arising out of or in
connection with the Plan shall be within its absolute discretion and shall be
final, binding and conclusive on the Company and all employees and participants
and their respective beneficiaries, heirs, executors, administrators, successors
and assigns.
Neither the Committee nor any member thereof shall be liable for any
act, omission, interpretation, construction or determination made in connection
with the Plan in good faith, and the members of the Committee shall be entitled
to indemnification and reimbursement by the Company in respect of any claim,
loss, damage or expense (including attorney's fees) arising therefrom to the
full extent permitted by law and under any directors' and officers' liability
insurance that may be in effect from time to time. In addition, no member of
the Board and no employee of the Company shall be liable for any act or failure
to act hereunder, by any other member or employee or by any agent to whom
duties in connection with the administration of this Plan have been delegated
or, except in circumstances involving a member's or employee's bad faith, gross
negligence or fraud, for any act or failure to act by the member or employee.
A majority of the Committee shall constitute a quorum, and the acts of
a majority of the members present at any meeting at which a quorum is present,
or acts approved in writing by a majority of the Committee without a meeting,
shall be the acts of the Committee.
6. Amendment and Termination. The Board of Directors of the Company
shall have the right to modify or discontinue the Plan at any time, and to
establish a trust fund to ensure the payment of benefits hereunder, provided
that the rights of persons entitled to payments on account of Units previously
awarded shall in nowise be thereby impaired.
7. Miscellany. (a) Unless the Board of Directors takes necessary
action pursuant to Section 6 hereof, this Plan is intended to be unfunded. With
respect to any payments as to which a participant has a fixed and vested
interest but which are not yet made to a participant by the Company, nothing
contained herein shall give any such participant any rights that are greater
than those of a general creditor of the Company.
-4-
<PAGE>
(b) Neither this Plan nor the grant of any award hereunder shall give
any participant or other employee any right with respect to continuance of
employment by the Company or any of its subsidiaries, nor shall they be a
limitation in any way on the right of the Company or any subsidiary by which an
employee is employed to terminate his or her employment at any time.
(c) This Plan and actions taken in connection herewith shall be
governed and construed in accordance with the laws of the State of Illinois
(without regard to applicable Illinois principles of conflict of laws).
-5-
<PAGE>
Exhibit (10)-14
Unicom Corporation
Form 10-K File
UNICOM CORPORATION
RETIREMENT PLAN FOR DIRECTORS
EFFECTIVE SEPTEMBER 1, 1994
I. Purpose
-----------
The Unicom Corporation Retirement Plan for Directors is hereby established
by Unicom Corporation (the "Company") to provide benefits for eligible members
of the Company's Board of Directors as hereinafter set forth.
II. Definitions
----------------
The following words and phrases shall have the meanings set forth below
unless a different meaning is required by the context:
(a) Board: The Board of Directors of the Company.
(b) Company: Unicom Corporation, a corporation organized and existing
under the laws of the State of Illinois, or its successor or successors.
(c) ComEd Plan: The Commonwealth Edison Company Retirement Plan for
Directors Effective January 1, 1987.
(d) Director: Any member of the Board on or after the Effective Date who
is an outside director and who is not and never has been an officer or employee
of the Company or any of its subsidiaries.
(e) Effective Date: September 1, 1994.
<PAGE>
(f) Eligible Director: A Director who meets the eligibility requirements
for retirement benefits set forth in Article III.
(g) Plan: The Unicom Corporation Retirement Plan for Directors, as it may
be amended from time to time.
(h) Service: A Director's service on the Board. For purposes of the
Plan, a Director's Service shall include his or her service as a member of the
Board of Directors of Commonwealth Edison Company for any period prior to
September 1, 1994 as if it were service on the Board.
(i) Termination Date: The date on which an Eligible Director terminates
his or her Service.
III. Eligibility for Retirement Benefits
-----------------------------------------
Eligibility for retirement benefits under the Plan shall be limited to each
Director who has attained at least age 65 and who thereafter, for reasons other
than death, terminates Service while in good standing, provided that such
Director shall have completed at least five full years of Service or at least
three full years of Service if such Director's Service commenced after attaining
age 65.
IV. Amount of Retirement Benefit
---------------------------------
Each Eligible Director shall be entitled to an annual retirement benefit,
for the period provided in Article V, which shall be an amount equal to the
annual retainer (net of any
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<PAGE>
amounts attributable to service on the board of directors of any subsidiary of
the Company) for Board members as in effect when such Eligible Director's
benefit payments commence, adjusted from time to time as provided in Article V
for any changes in the annual retainer for Board members. Such benefit shall be
paid as hereinafter provided.
V. Payment of Retirement Benefits
----------------------------------
Retirement benefit payments shall commence to be paid to an Eligible
Director on the last day of the calendar quarter next following the Eligible
Director's Termination Date. Subsequent benefit payments shall be made on the
last day of each calendar quarter thereafter and shall be paid for a period
equal to the Eligible Director's years of Service. For the purpose of
determining the payment period, fractional years of Service will be rounded up
to the next higher whole year. Each installment of retirement benefit payments
shall be equal to one-fourth of the amount of the annual retainer for Board
members as in effect at the time the installment is paid.
In the event of the Eligible Director's death after his or her Termination
Date but before commencement of payments hereunder or before the Eligible
Director has received all payments to which the Eligible Director is entitled
hereunder, the benefit payments to which the Eligible Director would have been
entitled had the Eligible Director lived shall be paid in the same amount to the
Eligible Director's surviving spouse, if
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<PAGE>
any, using the same payment schedule and amount as would have applied if the
Eligible Director had lived. If there is no surviving spouse at the death of
the Eligible Director or if a surviving spouse dies before receiving any or all
payments to which entitled under the Plan, the Eligible Director's benefits
under the Plan shall terminate.
VI. Pre-Retirement Death Benefits
----------------------------------
(a) If the Service of a Director who is eligible to retire as an Eligible
Director is terminated due to death, such Director's surviving spouse, if any,
shall receive the benefit to which the surviving spouse would have been entitled
had the Director retired and his Termination Date occurred on the day prior to
his or her death.
(b) If the Service of a Director is terminated due to death prior to
attaining age 65 but after attaining age 62 and completing at least five full
years of Service, such Director's surviving spouse, if any, shall receive the
benefit to which the surviving spouse would have been entitled had such Director
attained age 65 and terminated Service on the day prior to his or her death,
except that (i) the amount of each installment of such benefit shall be equal to
one-fourth of the amount of annual retainer for Board members as in effect at
the time the installment is paid and (ii) the benefit shall be paid for a period
equal to the Director's years of Service at the Director's date of death.
-4-
<PAGE>
(c) Payments of any benefits under subparagraphs (a) or (b) shall commence
on the last day of the calendar quarter in which occurs the Director's date of
death. If the Director under subparagraphs (a) or (b) leaves no surviving
spouse, or if a surviving spouse dies before receiving any or all payments to
which entitled under the Plan, the Director's benefits under the Plan shall
terminate.
VII. Disability Benefits
-------------------------
If the Service of a Director is terminated due to disability prior to
attaining age 65 but after attaining age 62, such Director shall be entitled to
payment of benefits, if any, under this Plan on the same basis as he would have
been if he had attained age 65 prior to such termination. For purposes of this
Article VII, disability shall mean a disability that prevents the Director from
performing any and every duty of a member of the Board. The determination of
the Compensation Committee of the Board as to whether a Director is terminated
due to disability shall be final and conclusive.
VIII. Financing of Benefits
----------------------------
The Plan shall be a noncontributory, nonqualified and unfunded plan.
Benefit payments under the Plan shall represent an unsecured general obligation
of the Company and shall be paid by the Company from its general assets. No
special fund or trust
-5-
<PAGE>
shall be created, nor shall any notes or securities be issued with respect to
any benefits under the Plan.
-6-
<PAGE>
IX. Forfeiture of Benefits
---------------------------
As long as a former Director is receiving or is entitled to receive
benefits under the Plan, such former Director will not directly or indirectly
enter into or in any manner take part in any business or other endeavor, either
as an employee, agent, independent contractor, owner or otherwise, which in any
manner competes or conflicts with the business of the Company or is detrimental
to the best interests of the Company, unless the Company gives its prior written
consent thereto. The failure of a former Director to comply with the provisions
of this Article shall result in the forfeiture of all further payments which
otherwise would become due and payable under the Plan to the former Director or
to his or her surviving spouse. Before any such forfeiture, the Company shall
mail notice to the former Director that consideration is being given to
forfeiture pursuant to this Article. On written request of the former Director
within sixty days following the mailing by the Company of the notice, the
Compensation Committee of the Board shall afford the former Director an
opportunity, at any mutually convenient time within that sixty-day period, to
demonstrate to the Compensation Committee that forfeiture of payments would not
be justified.
X. Facility of Payment
-----------------------
Whenever a person entitled to receive any payment under the Plan is a
person under legal disability or a person not adjudicated incompetent but who,
by reason of illness or mental
-7-
<PAGE>
or physical disability, is in the opinion of the Compensation Committee of the
Board unable properly to manage his or her affairs, then such payments shall be
paid in such of the following ways as the Compensation Committee deems best:
(A) to such person directly; (b) to the legally appointed guardian or
conservator of such person; (c) to some relative or friend of such person for
his or her benefit; or (d) for the benefit of such person in such manner as the
Compensation Committee considers advisable. Any payment made in accordance with
the provisions of this Article shall be a complete discharge of any liability
for the making of such payment under the Plan, and the distributee's receipt
shall be a sufficient discharge to the Company.
XI. Administration
-------------------
The Plan shall be administered by the Compensation Committee of the Board,
which shall have full and final authority to interpret the provisions of the
Plan and to make determinations regarding the administration of the Plan. All
decisions and determinations by the Compensation Committee shall be final and
binding upon all parties.
XII. Miscellaneous
-------------------
The Plan shall not affect in any way the rights of a Director under any
deferred compensation agreement between the Director and the Company or any of
its subsidiaries.
-8-
<PAGE>
The Plan may not be cancelled by the Company upon any merger or
consolidation with or acquisition of the Company by any other entity, but shall
be binding upon and inure to the benefit of the successors and assigns of the
Company and the heirs, executors, administrators and assigns of each Director.
No person shall have any right to commute, encumber, pledge or dispose of
any right to receive payments hereunder, nor shall such payments be subject to
seizure, attachment or garnishment for the payments of any debts, judgments,
alimony or separate maintenance obligations or be transferable by operation of
law in the event of bankruptcy, insolvency or otherwise, all payments and rights
hereunder being expressly declared to be nonassignable and nontransferable.
The Plan may be amended from time to time or terminated by the Board at any
time, but no amendment or termination may adversely affect the rights of any
person then receiving benefits under the Plan or who is entitled to receive
benefits under the Plan on account of a Director's prior termination of Service.
This Plan shall be governed by the law of the State of Illinois.
-9-
<PAGE>
Exhibit (10)-16
Unicom Corporation
Form 10-K File No. 1-11375
UNICOM CORPORATION
OUTSIDE DIRECTOR STOCK AWARD PLAN
1. PURPOSE: Unicom Corporation (the "Company") wishes to establish
an Outside Director Stock Award Plan (the "Plan"). The purpose of the Plan is
to increase the proprietary interest of directors who are not employees of the
Company or any of its subsidiaries ("Outside Directors") through the grant of
shares of Common Stock, without par value ("Common Stock"), of the Company.
2. ADMINISTRATION: The Board of Directors of the Company (the
"Board") shall administer and interpret the provisions of this Plan. All
determinations of the Board with respect to the Plan shall be final and binding
upon all persons.
3. GRANTS: As of the beginning of the month immediately following
each Annual Meeting of Shareholders of the Company, beginning with the meeting
to be held in 1995 (each a "Grant Date"), each Outside Director then in office
shall be granted 100 shares of Common Stock.
In the case of an Outside Director who is elected or appointed as a
Director of the Company other than at the Annual Meeting of Shareholders in any
year, such Outside Director shall be granted 100 shares of Common Stock promptly
following such election or appointment.
4. TERMS AND CONDITIONS:
(a) Shares of Common Stock to be granted pursuant to the Plan
will be purchased on behalf of the recipient in the open market in
accordance with applicable rules and regulations.
(b) No shares of Common Stock received under the Plan may be
sold, assigned, transferred or otherwise disposed of for at least six
months after the applicable Grant Date, except in the event of death or
disability of the Outside Director.
(c) A grant of Common Stock hereunder shall be disclosed in the
Company's proxy statement for the year in which the grant was made; and the
Outside Director, as of the Grant Date of such Common Stock, shall become
the
<PAGE>
record holder of such Common Stock and shall immediately become entitled to
all the rights and privileges accorded such Common Stock. In addition,
such Common Stock shall be shown on the appropriate form for reporting
beneficial ownership of securities pursuant to Section 16 of the Securities
Exchange Act of 1934, as amended.
(d) The value of any Common Stock granted to an Outside Director
under this Plan is not intended to be taken into account, and consequently
shall be excluded, in determining the amount of any retirement benefit
otherwise payable to such Outside Director under any of the Company's
retirement plans, including the Commonwealth Edison Company Retirement Plan
for Directors and any similar plan hereafter adopted for the Directors of
the Company. The acceptance by an Outside Director of any grant of Common
Stock under this Plan shall constitute such Outside Director's agreement
to, and confirmation of, such exclusion.
(e) The Board shall appropriately adjust the number of shares for
which grants may be made under this Plan in the event of any
reorganization, recapitalization, stock split, reverse stock split, stock
dividend, exchange or combination of shares, merger, consolidation, rights
offering, or other relevant changes in capitalization.
5. REGULATORY COMPLIANCE: The delivery of any shares under this
Plan may be postponed by the Company for such period as may be required to
comply with Federal or state securities laws, national securities exchange
requirements or any other law or regulation applicable to the delivery of such
shares. The Company shall not be obligated to deliver any shares under this
Plan if such delivery shall constitute a violation of any provision of any law
or any regulation of any governmental authority or any national securities
exchange. In addition, the shares, when delivered, may be subject to
conditions, including transfer restrictions, if such conditions are required to
comply with applicable securities law.
6. NO RIGHT TO CONTINUE AS OUTSIDE DIRECTOR: Nothing contained in
this Plan shall be construed as conferring upon an Outside Director any right to
continue to be associated with the Company as an Outside Director or in any
other capacity.
7. AMENDMENT OR DISCONTINUANCE: The Board may amend, rescind or
terminate this Plan as shall in its judgment be advisable.
8. TAXES: The Company shall not be required to, and shall not,
withhold or otherwise pay on behalf of any Outside Director any Federal, state,
local or
-2-
<PAGE>
other taxes arising in connection with a grant of Common Stock under this Plan.
The payment of any such taxes shall be the sole responsibility of each Outside
Director.
9. GOVERNING LAW: This Plan and all determinations made and actions
taken pursuant hereto shall be governed by the internal laws of the State of
Illinois, except as Federal law may apply.
-3-
<PAGE>
Exhibit (12)
Commonwealth Edison Company
Form 10-K File No. 1-1839
Commonwealth Edison Company and Subsidiary Companies Consolidated
-----------------------------------------------------------------
Computation of Ratios of Earnings to Fixed Charges
and Ratios of Earnings to Fixed Charges and
Preferred and Preference Stock Dividend Requirements
----------------------------------------------------
(Thousands of Dollars)
<TABLE>
<CAPTION>
Twelve Months Ended
----------------------------
Line December 31, December 31,
No. 1993 1994
---- ------------ ------------
<S> <C> <C>
1 Net income $ 112,440 $ 423,946
------------ ------------
2 Net provisions for income taxes and investment tax credits deferred
3 charged to-
4 Operations $ 66,406 $ 300,764
5 Cumulative effect of change in accounting for income taxes (9,738) -
6 Other income (31,655) (23,062)
------------ ------------
7 $ 25,013 $ 277,702
------------ ------------
8 Fixed charges-
9 Interest on debt $ 651,639 $ 621,909
10 Estimated interest component of nuclear fuel and
11 other lease payments, rentals and other interest 49,021 64,885
12 Amortization of debt discount, premium and expense 20,966 22,804
------------ ------------
13 $ 721,626 $ 709,598
------------ ------------
14 Preferred and preference stock dividend requirements-
15 Provisions for preferred and preference stock dividends $ 66,052 $ 64,927
16 Taxes on income required to meet provisions for
17 preferred and preference stock dividends 43,596 42,854
------------ ------------
18 $ 109,648 $ 107,781
------------ ------------
19 Fixed charges and preferred and preference stock
20 dividend requirements $ 831,274 $ 817,379
------------ ------------
21 Earned for fixed charges and preferred and preference stock
22 dividend requirements $ 859,079 $ 1,411,246
------------ ------------
23 Ratios of earnings to fixed charges (line 22 divided by line 13) 1.19 1.99
==== ====
24 Ratios of earnings to fixed charges and preferred and preference
25 stock dividend requirements (line 22 divided by line 20) 1.03 1.73
==== ====
</TABLE>
<PAGE>
Exhibit (21)-1
Unicom Corporation
Form 10-K File No. 1-11375
Unicom Corporation
Subsidiaries of the Company
-----------------------------------
State or
Jurisdiction
in Which
Name Incorporated
---------------------------------------------- ------------
Commonwealth Edison Company * Illinois
Commonwealth Edison Company of Indiana, Inc. * Indiana
Unicom Enterprises Inc. * Illinois
Unicom Thermal Technologies Inc. * Illinois
Edison Development Company Delaware
Cotter Corporation New Mexico
Commonwealth Research Corporation Illinois
Concomber, Ltd. Bermuda
Edison Development Canada Inc. Canada
* Included in the consolidated financial statements.
<PAGE>
Exhibit (21)-2
Commonwealth Edison Company
Form 10-K File No. 1-1839
Commonwealth Edison Company
Subsidiaries of the Company
-----------------------------------
State or
Jurisdiction
in Which
Name Incorporated
---------------------------------------------- ------------
Commonwealth Edison Company of Indiana, Inc. * Indiana
Edison Development Company Delaware
Cotter Corporation New Mexico
Commonwealth Research Corporation Illinois
Concomber, Ltd. Bermuda
Edison Development Canada Inc. Canada
* Included in the consolidated financial statements.
<PAGE>
Exhibit (23)-1
Unicom Corporation
Form 10-K File No. 1-11375
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference in this Form 10-K of our report dated January 27, 1995, on the
consolidated financial statements of Unicom Corporation and subsidiary companies
(Company) as of and for the year ended December 31, 1994 (Report), included in
the Company's Current Report on Form 8-K dated January 27, 1995, to the
inclusion in this Form 10-K of our report dated January 27, 1995, on the
supplemental schedule of the Company as of and for the year ended December 31,
1994, and to the incorporation of such reports into the Company's previously
filed prospectus dated March 18, 1994, constituting part of Form S-4
Registration Statement File No. 33-52109, as amended (relating to Common Stock
of Unicom Corporation), as further amended by Post-Effective Amendment No. 1 on
Form S-8 (relating to Commonwealth Edison Company's Employee Savings and
Investment Plan) and Post-Effective Amendment No. 2 on Form S-8 (relating to
Unicom Corporation's Employee Stock Purchase Plan), and Form S-8 Registration
Statement File No. 33-56991 (relating to Unicom Corporation's Long-Term
Incentive Plan). We also consent to the application of our Report, incorporated
by reference in this Form 10-K, to Commonwealth Edison Company and subsidiary
companies' ratios of earnings to fixed charges and the ratios of earnings to
fixed charges and preferred and preference stock dividend requirements for each
of the three years ended December 31, 1994, 1993 and 1992 appearing on page 14
of Exhibit 99 of the Company's Current Report on Form 8-K dated January 27,
1995.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 28, 1995
<PAGE>
Exhibit (23)-2
Commonwealth Edison Company
Form 10-K File No. 1-1839
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference in this Form 10-K of our report dated January 27, 1995, on the
consolidated financial statements of Commonwealth Edison Company and subsidiary
companies (Company) as of and for the year ended December 31, 1994 (Report),
included in the Company's Current Report on Form 8-K/A-1 dated January 27, 1995,
to the inclusion in this Form 10-K of our report dated January 27, 1995, on the
supplemental schedule of the Company as of and for the year ended December 31,
1994, and to the incorporation of such reports into the Company's previously
filed prospectuses as follows: (1) prospectus dated August 21, 1986,
constituting part of Form S-3 Registration Statement File No. 33-6879, as
amended (relating to the Company's Debt Securities and Common Stock); and (2)
prospectus dated January 7, 1994, constituting part of Form S-3 Registration
Statement File No. 33-51379 (relating to the Company's Debt Securities and
Cumulative Preference Stock). We also consent to the application of our Report,
incorporated by reference in this Form 10-K, to the ratios of earnings to fixed
charges and the ratios of earnings to fixed charges and preferred and preference
stock dividend requirements for each of the three years ended December 31, 1994,
1993 and 1992 appearing on page 13 of Exhibit 99 of the Company's Current Report
on Form 8-K/A-1 dated January 27, 1995.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 28, 1995
<PAGE>
Exhibit (24)-1
Unicom Corporation
Form 10-K File No. 1-11375
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Unicom Corporation, an Illinois
corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K.
SKINNER and DAVID A. SCHOLZ, and each of them, her true and lawful attorneys and
agents, each with full power and authority (acting alone and without the others)
to execute in the name and on behalf of the undersigned as such Director, the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, to be filed with the Securities and Exchange Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby
granting to such attorneys and agents, and each of them, full power of
substitution and revocation in the premises; and hereby ratifying and confirming
all that such attorneys and agents, or any of them, may do or cause to be done
by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
Jean Allard
-----------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that JEAN ALLARD, personally known to me to be the
same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that she signed and delivered
said instrument as her free and voluntary act, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Unicom Corporation, an Illinois
corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K.
SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful attorneys and
agents, each with full power and authority (acting alone and without the others)
to execute in the name and on behalf of the undersigned as such Director, the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, to be filed with the Securities and Exchange Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby
granting to such attorneys and agents, and each of them, full power of
substitution and revocation in the premises; and hereby ratifying and confirming
all that such attorneys and agents, or any of them, may do or cause to be done
by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
James W. Compton
-------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that JAMES W. COMPTON, personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered said
instrument as his free and voluntary act, for the uses and purposes therein set
forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Unicom Corporation, an Illinois
corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K.
SKINNER and DAVID A. SCHOLZ, and each of them, her true and lawful attorneys and
agents, each with full power and authority (acting alone and without the others)
to execute in the name and on behalf of the undersigned as such Director, the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, to be filed with the Securities and Exchange Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby
granting to such attorneys and agents, and each of them, full power of
substitution and revocation in the premises; and hereby ratifying and confirming
all that such attorneys and agents, or any of them, may do or cause to be done
by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
Sue Ling Gin
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that SUE L. GIN, personally known to me to be the
same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that she signed and delivered
said instrument as her free and voluntary act, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Unicom Corporation, an Illinois
corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K.
SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful attorneys and
agents, each with full power and authority (acting alone and without the others)
to execute in the name and on behalf of the undersigned as such Director, the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, to be filed with the Securities and Exchange Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby
granting to such attorneys and agents, and each of them, full power of
substitution and revocation in the premises; and hereby ratifying and confirming
all that such attorneys and agents, or any of them, may do or cause to be done
by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
Donald P. Jacobs
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that DONALD P. JACOBS, personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered said
instrument as his free and voluntary act, for the uses and purposes therein set
forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Unicom Corporation, an Illinois
corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K.
SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful attorneys and
agents, each with full power and authority (acting alone and without the others)
to execute in the name and on behalf of the undersigned as such Director, the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, to be filed with the Securities and Exchange Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby
granting to such attorneys and agents, and each of them, full power of
substitution and revocation in the premises; and hereby ratifying and confirming
all that such attorneys and agents, or any of them, may do or cause to be done
by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
Edgar D. Jannotta
----------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that EDGAR D. JANNOTTA, personally known to me to
be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered said instrument as his free and voluntary act, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Unicom Corporation, an Illinois
corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K.
SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful attorneys and
agents, each with full power and authority (acting alone and without the others)
to execute in the name and on behalf of the undersigned as such Director, the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, to be filed with the Securities and Exchange Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby
granting to such attorneys and agents, and each of them, full power of
substitution and revocation in the premises; and hereby ratifying and confirming
all that such attorneys and agents, or any of them, may do or cause to be done
by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
George E. Johnson
----------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that GEORGE E. JOHNSON, personally known to me to
be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered said instrument as his free and voluntary act, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Unicom Corporation, an Illinois
corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K.
SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful attorneys and
agents, each with full power and authority (acting alone and without the others)
to execute in the name and on behalf of the undersigned as such Director, the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, to be filed with the Securities and Exchange Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby
granting to such attorneys and agents, and each of them, full power of
substitution and revocation in the premises; and hereby ratifying and confirming
all that such attorneys and agents, or any of them, may do or cause to be done
by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
Harvey Kapnick
-----------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that HARVEY KAPNICK, personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered said
instrument as his free and voluntary act, for the uses and purposes therein set
forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Unicom Corporation, an Illinois
corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K.
SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful attorneys and
agents, each with full power and authority (acting alone and without the others)
to execute in the name and on behalf of the undersigned as such Director, the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, to be filed with the Securities and Exchange Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby
granting to such attorneys and agents, and each of them, full power of
substitution and revocation in the premises; and hereby ratifying and confirming
all that such attorneys and agents, or any of them, may do or cause to be done
by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
Byron Lee, Jr.
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that BYRON LEE, JR., personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered said
instrument as his free and voluntary act, for the uses and purposes therein set
forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Unicom Corporation, an Illinois
corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K.
SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful attorneys and
agents, each with full power and authority (acting alone and without the others)
to execute in the name and on behalf of the undersigned as such Director, the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, to be filed with the Securities and Exchange Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby
granting to such attorneys and agents, and each of them, full power of
substitution and revocation in the premises; and hereby ratifying and confirming
all that such attorneys and agents, or any of them, may do or cause to be done
by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
Edward A. Mason
-----------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that EDWARD A. MASON, personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered said
instrument as his free and voluntary act, for the uses and purposes therein set
forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Unicom Corporation, an Illinois
corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K.
SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful attorneys and
agents, each with full power and authority (acting alone and without the others)
to execute in the name and on behalf of the undersigned as such Director, the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, to be filed with the Securities and Exchange Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby
granting to such attorneys and agents, and each of them, full power of
substitution and revocation in the premises; and hereby ratifying and confirming
all that such attorneys and agents, or any of them, may do or cause to be done
by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
F. A. Olson
---------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that FRANK A. OLSON, personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered said
instrument as his free and voluntary act, for the uses and purposes therein set
forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director and Officer of Unicom Corporation, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR and
DAVID A. SCHOLZ and each of them, his true and lawful attorneys and agents, each
with full power and authority (acting alone and without the others) to execute
in the name and on behalf of the undersigned as such Director and Officer, the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, to be filed with the Securities and Exchange Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby
granting to such attorneys and agents, and each of them, full power of
substitution and revocation in the premises; and hereby ratifying and confirming
all that such attorneys and agents, or any of them, may do or cause to be done
by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
Samuel K. Skinner
-----------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that SAMUEL K. SKINNER, personally known to me to
be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered said instrument as his free and voluntary act, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
Exhibit (24)-2
Commonwealth Edison Company
Form 10-K File No. 1-1839
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Commonwealth Edison Company, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR,
SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, her true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the others) to execute in the name and on behalf of the undersigned as
such Director, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
Jean Allard
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that JEAN ALLARD, personally known to me to be the
same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that she signed and delivered
said instrument as her free and voluntary act, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Commonwealth Edison Company, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR,
SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the others) to execute in the name and on behalf of the undersigned as
such Director, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
James W. Compton
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that JAMES W. COMPTON, personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered said
instrument as his free and voluntary act, for the uses and purposes therein set
forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Commonwealth Edison Company, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR,
SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, her true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the others) to execute in the name and on behalf of the undersigned as
such Director, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
Sue Ling Gin
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that SUE L. GIN, personally known to me to be the
same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that she signed and delivered
said instrument as her free and voluntary act, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Commonwealth Edison Company, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR,
SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the others) to execute in the name and on behalf of the undersigned as
such Director, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
Donald P. Jacobs
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that DONALD P. JACOBS, personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered said
instrument as his free and voluntary act, for the uses and purposes therein set
forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Commonwealth Edison Company, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR,
SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the others) to execute in the name and on behalf of the undersigned as
such Director, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
Edgar D. Jannotta
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that EDGAR D. JANNOTTA, personally known to me to
be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered said instrument as his free and voluntary act, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Commonwealth Edison Company, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR,
SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the others) to execute in the name and on behalf of the undersigned as
such Director, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
George E. Johnson
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that GEORGE E. JOHNSON, personally known to me to
be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered said instrument as his free and voluntary act, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Commonwealth Edison Company, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR,
SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the others) to execute in the name and on behalf of the undersigned as
such Director, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
Harvey Kapnick
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that HARVEY KAPNICK, personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered said
instrument as his free and voluntary act, for the uses and purposes therein set
forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Commonwealth Edison Company, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR,
SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the others) to execute in the name and on behalf of the undersigned as
such Director, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
Byron Lee, Jr.
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that BYRON LEE, JR., personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered said
instrument as his free and voluntary act, for the uses and purposes therein set
forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Commonwealth Edison Company, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR,
SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the others) to execute in the name and on behalf of the undersigned as
such Director, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
Edward A. Mason
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that EDWARD A. MASON, personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered said
instrument as his free and voluntary act, for the uses and purposes therein set
forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Commonwealth Edison Company, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR,
SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the others) to execute in the name and on behalf of the undersigned as
such Director, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
F. A. Olson
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that FRANK A. OLSON, personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered said
instrument as his free and voluntary act, for the uses and purposes therein set
forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director and Officer of Commonwealth Edison
Company, an Illinois corporation, does hereby constitute and appoint JAMES J.
O'CONNOR and DAVID A. SCHOLZ and each of them, his true and lawful attorneys and
agents, each with full power and authority (acting alone and without the others)
to execute in the name and on behalf of the undersigned as such Director and
Officer, the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
March, 1995.
Samuel K. Skinner
-----------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that SAMUEL K. SKINNER, personally known to me to
be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered said instrument as his free and voluntary act, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this 9th day of March, 1995.
Mary T. Snyder
-------------------------
Notary Public
(Notary Public Seal)
<PAGE>
Exhibit (99)-1
Unicom Corporation
Form 10-K File No. 1-11375
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section l3 or l5(d) of
the Securities Exchange Act of l934
Date of Report (Date of
earliest event reported): January 27, 1995
Unicom Corporation
(Exact name of registrant as specified in its charter)
Illinois 1-11375 36-3961038
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
37th Floor, 10 South Dearborn Street,
Post Office Box A-3005, Chicago, Illinois 60690-3005
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (312) 394-7399
<PAGE>
The purpose of this Current Report is to file certain financial information
regarding the Registrant (Unicom Corporation) and its subsidiaries. Such
financial information is set forth in the exhibits to this Current Report.
Item 7. Financial Statements, Pro Forma Financial
------- Information and Exhibits
-----------------------------------------
(c) Exhibits
--------
(23) Consent of Independent Public Accountants
(27) Financial Data Schedule of Unicom Corporation
(99) Unicom Corporation and Subsidiary Companies - Certain Financial
Information as of and for the Year Ended December 31, 1994:
--Management's Discussion and Analysis of Financial Condition and
Results of Operations
--Report of Independent Public Accountants
--Statements of Consolidated Income
--Consolidated Balance Sheets
--Statements of Consolidated Capitalization
--Statements of Consolidated Retained Earnings
--Statements of Consolidated Cash Flows
--Notes to Financial Statements
-2-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of l934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNICOM CORPORATION
(Registrant)
By: David A. Scholz
-----------------------
David A. Scholz
Secretary
Date: February 10, 1995
-3-
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
23 Consent of Independent Public Accountants
27 Financial Data Schedule of Unicom Corporation
99 Unicom Corporation and Subsidiary Companies - Certain Financial
Information as of and for the Year Ended December 31, 1994:
--Management's Discussion and Analysis of Financial Condition and
Results of Operations
--Report of Independent Public Accountants
--Statements of Consolidated Income
--Consolidated Balance Sheets
--Statements of Consolidated Capitalization
--Statements of Consolidated Retained Earnings
--Statements of Consolidated Cash Flows
--Notes to Financial Statements
<PAGE>
Exhibit (23)
Unicom Corporation
Form 8-K File No. 1-11375
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference of our report dated January 27, 1995, on Unicom Corporation and
subsidiary companies' consolidated financial statements as of and for the year
ended December 31, 1994, included as an Exhibit to this Form 8-K Current Report
of Unicom Corporation dated January 27, 1995, into Unicom Corporation's
previously filed prospectus dated March 18, 1994, constituting part of Form S-4
Registration Statement File No. 33-52109, as amended (relating to Common Stock
of Unicom Corporation), as further amended by Post-Effective Amendment No. 1 on
Form S-8 (relating to Commonwealth Edison Company's Employee Savings and
Investment Plan) and Post-Effective Amendment No. 2 on Form S-8 (relating to
Unicom Corporation's Employee Stock Purchase Plan), and Form S-8 Registration
Statement File No. 33-56991 (relating to Unicom Corporation's Long-Term
Incentive Plan). We also consent to the application of our report to
Commonwealth Edison Company and subsidiary companies' ratios of earnings to
fixed charges and ratios of earnings to fixed charges and preferred and
preference stock dividend requirements for each of the years ended December 31,
1994, 1993 and 1992 appearing on page 14 of Exhibit 99 of this Form 8-K.
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 10, 1995
<PAGE>
Exhibit (99)
Unicom Corporation
Form 8-K File No. 1-11375
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
INDEX
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Definitions.............................................................. 2
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 3-14
Report of Independent Public Accountants................................. 15
Summary of Selected Consolidated Financial Data.......................... 16
Price Range and Dividends Paid Per Share of Common Stock................. 16
1994 Revenues and Sales.................................................. 16
Consolidated Financial Statements--
Statements of Consolidated Income for the years 1994, 1993 and 1992.... 17
Consolidated Balance Sheets--December 31, 1994 and 1993................ 18-19
Statements of Consolidated Capitalization--December 31, 1994 and 1993.. 20
Statements of Consolidated Retained Earnings for the years 1994, 1993
and 1992.............................................................. 21
Statements of Consolidated Cash Flows for the years 1994, 1993 and
1992.................................................................. 22
Notes to Financial Statements.......................................... 23-43
</TABLE>
1
<PAGE>
DEFINITIONS
Certain terms are used in this Appendix with the following meanings:
<TABLE>
<CAPTION>
TERM MEANING
----------------------- ------------------------------------------------------------------
<S> <C>
AFUDC Allowance for funds used during construction
AMT Alternative minimum tax
CERCLA Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended
CFC Chlorofluorocarbon
Circuit Court Circuit Court of Cook County, Illinois
Clean Air Amendments Clean Air Act Amendments of 1990
ComEd Commonwealth Edison Company, which is a majority-owned subsidiary
of Unicom.
Cotter Cotter Corporation, which is a wholly-owned subsidiary of ComEd.
DOE U.S. Department of Energy
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
Fuel Matters Settlement A settlement relating to the ICC fuel reconciliation proceedings
involving ComEd for the period from 1985 through 1988 and to
future challenges by the settling parties to the prudency of
ComEd's western coal costs for the period from 1989 through 1992.
ICC Illinois Commerce Commission
Illinois EPA Illinois Environmental Protection Agency
Indiana Company Commonwealth Edison Company of Indiana, Inc., which is a wholly-
owned subsidiary of ComEd.
MGP Manufactured gas plant
NEIL Nuclear Electric Insurance Limited
NML Nuclear Mutual Limited
NRC Nuclear Regulatory Commission
Rate Matters Settlement A settlement concerning the proceedings relating to ComEd's 1985
and 1991 ICC rate orders (which orders relate to, among other
things, the recovery of costs associated with ComEd's four most
recently completed nuclear generating units), the proceedings
relating to the reduction in the difference between ComEd's
summer and non-summer residential rates that was effected in the
summer of 1988, outstanding issues relating to the appropriate
interest rate and rate design to be applied to a refund made by
ComEd during 1990 relating to a 1988 ICC rate order, and matters
related to a rider to ComEd's rates that it was required to file
as a result of the change in the federal corporate tax rate made
by the Tax Reform Act of 1986.
Rate Order ICC rate order issued on January 9, 1995
Remand Order ICC rate order issued on January 6, 1993, as subsequently modified
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
Unicom Unicom Corporation
Unicom Enterprises Unicom Enterprises Inc., which is a wholly-owned subsidiary of
Unicom.
Unicom Thermal Unicom Thermal Technologies Inc., which is a wholly-owned
subsidiary of Unicom Enterprises.
Units ComEd's nuclear generating units known as Byron Unit 2 and
Braidwood Units 1 and 2
U.S. EPA U.S. Environmental Protection Agency
</TABLE>
2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
On September 1, 1994, a corporate restructuring took place in which Unicom
became the parent holding company of ComEd and Unicom Enterprises, an
unregulated subsidiary engaged, through a subsidiary, in energy service
activities. The primary purpose of the restructuring was to permit Unicom
Enterprises to engage in energy service activities without the prior approval
of, or being regulated by, the ICC, in part to permit timely responses to
competitive activities which could adversely affect ComEd's utility business.
Notwithstanding the restructuring, ComEd will continue to represent
substantially all of the assets, revenues and net income of Unicom; and
Unicom's resources and results of operations will be largely dependent on, and
will reflect, those of ComEd. Unicom Enterprises' sole subsidiary, Unicom
Thermal, is a development stage company and is not expected to make a material
contribution to the revenues or results of operations of Unicom in the near
future. Consequently, the descriptions that follow focus on the utility
operations of ComEd, although information is provided with respect to the
unregulated operations of Unicom Enterprises.
LIQUIDITY AND CAPITAL RESOURCES
UTILITY OPERATIONS
Capital Budgets. ComEd and its electric utility subsidiary, the Indiana
Company, have a construction program for the three-year period 1995-97 which
consists principally of improvements to ComEd's and the Indiana Company's
existing nuclear and other electric production, transmission and distribution
facilities. It does not include funds (other than for planning) to add new
generating capacity to ComEd's system. The program, as approved by Unicom and
ComEd in December 1994, calls for electric plant and equipment expenditures of
approximately $2,750 million (excluding nuclear fuel expenditures of
approximately $800 million). It is estimated that such construction
expenditures, with cost escalation computed at 3.5% annually, will be as
follows:
<TABLE>
<CAPTION>
THREE-YEAR
1995 1996 1997 TOTAL
---- ---- ---- ----------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Production......................................... $415 $395 $360 $1,170
Transmission and Distribution...................... 410 445 455 1,310
General............................................ 95 90 85 270
---- ---- ---- ------
Total.......................................... $920 $930 $900 $2,750
==== ==== ==== ======
</TABLE>
In October 1994, ComEd made a commitment to provide for the replacement of
the steam generators at its Braidwood Unit 1 and Byron Unit 1 nuclear
generating plants, for service in the years 1998 and 1999, respectively, at a
total estimated cost of approximately $470 million. Approximately $170 million
of this commitment is included in the construction expenditures shown above.
ComEd's forecasts of peak load indicate a need for additional resources to
meet demand, either through generating capacity or through equivalent purchased
power or demand-side management resources, in 1997 and each year thereafter
through the year 2000. The projected resource needs reflect the current
planning reserve margin recommendations of the Mid-America Interconnected
Network, the reliability council of which ComEd is a member. ComEd's forecasts
indicate that the need for additional resources during this period would exist
only during the summer months. ComEd does not expect to make expenditures for
additional capacity to the extent the need for capacity can be met through
cost-effective demand-side management resources, non-utility generation or
other power purchases. To
3
<PAGE>
assess the market potential to provide such cost-effective resources, ComEd
solicited proposals to supply it with cost-effective demand-side management
resources, non-utility generation resources and other-utility power purchases
sufficient to meet forecasted requirements through the year 2000. The responses
to the solicitation suggest that adequate resources to meet ComEd's needs could
be obtained from those sources but ComEd has not yet determined whether those
sources represent the most economical alternative. If ComEd were to build
additional capacity to meet its needs, it would need to make additional
expenditures during the 1995-97 period.
ComEd has not budgeted for a number of projects, particularly at generating
stations, which could be required, but which ComEd does not expect to be
required during the budget period. In particular, ComEd has not budgeted for
the construction of scrubbers at its Kincaid station or for the replacement of
major amounts of piping at its boiling water reactor nuclear stations. See
"Regulation" below for additional information.
Purchase commitments for ComEd and the Indiana Company, principally related
to construction and nuclear fuel, approximated $1,210 million at December 31,
1994. In addition, ComEd has substantial commitments for the purchase of coal
as indicated in the following table.
<TABLE>
<CAPTION>
CONTRACT PERIOD COMMITMENT (1)
----------------- --------- --------------
<S> <C> <C>
Black Butte Coal Co................................... 1995-2007 $1,119
Decker Coal Co........................................ 1995-2015 $ 822
Big Horn Coal Co...................................... 1998 $ 21
Other commitments..................................... 1995-1996 $ 31
</TABLE>
--------
(1) Estimated costs in millions of dollars FOB mine. No estimate of future
escalation has been made.
For additional information concerning these coal contracts and ComEd's fuel
supply, see "Results of Operations" below and Notes 1 and 19 of Notes to
Financial Statements.
ComEd's construction program will be reviewed and modified as necessary to
adapt to changing economic conditions, rate levels and other relevant factors
including changing business and legal needs and requirements. ComEd cannot
anticipate all such possible needs and requirements. While regulatory needs in
particular are more likely, on balance, to require increases in construction
expenditures than decreases, ComEd's financial condition may require
compensating or greater reductions in other construction expenditures.
Capital Resources. ComEd has forecast that internal sources will provide more
than three-fourths of the funds required for ComEd's construction program and
other capital requirements, including nuclear fuel expenditures, contributions
to nuclear decommissioning funds, sinking fund obligations and refinancing of
scheduled debt maturities (the annual sinking fund requirements for ComEd
preference stock and for ComEd and the Indiana Company long-term debt are
summarized in Notes 7 and 8, respectively, of Notes to Financial Statements).
The forecast assumes the rate levels reflected in the Rate Order.
The type and amount of external financing will depend on financial market
conditions and the needs and capital structure of ComEd at the time of such
financing. ComEd's new money financing requirements have increased in recent
years due to higher expenditures and lower operating cash flows resulting from
reduced revenues due to customer refunds and rate level adjustments ordered in
various proceedings related to the level of ComEd's rates and the effects of
the Rate Matters Settlement and the Fuel Matters Settlement. Unicom's balances
of cash and cash investments decreased by approximately $793 million from
December 31, 1993 to December 31, 1994, primarily due to the effects of those
settlements. A portion of ComEd's financing is expected to be provided through
the continued sale and leaseback of nuclear fuel through ComEd's existing
nuclear fuel lease facility. ComEd has approximately $915 million of unused
bank lines of credit at December 31, 1994 which may be borrowed at various
interest rates and which may be secured or unsecured. The interest rate is set
at the time of a borrowing and is based
4
<PAGE>
on several floating rate bank indices plus a spread which is dependent upon
ComEd's credit ratings or on a prime interest rate. Collateral, if required for
the borrowings, would consist of first mortgage bonds issued under and in
accordance with the provisions of ComEd's mortgage. See Note 9 of Notes to
Financial Statements for information concerning lines of credit. See the
Statements of Consolidated Cash Flows for the construction expenditures and
cash flow from operating activities for the years 1994, 1993 and 1992.
During 1994, Unicom and ComEd issued 390,605 shares of common stock for
approximately $8,503,000 under the employee stock plans. During 1994, ComEd
also issued and sold 3,000,000 shares of $2.425 Cumulative Preference Stock;
sold and leased back approximately $306,649,000 of nuclear fuel through its
existing nuclear fuel lease; refinanced $249,200,000 of outstanding pollution
control revenue bonds through the issuance, through the Illinois Development
Finance Authority, of an equivalent amount of lower cost variable rate and
fixed rate bonds (of which $157,000,000 was collaterally secured through the
issuance to the related bond trustee of an equivalent amount of first mortgage
bonds); and issued $300,000,000 of other long-term debt.
As of January 27, 1995, ComEd has an effective "shelf" registration statement
with the SEC for the future sale of up to an additional $805 million of debt
securities and cumulative preference stock for general corporate purposes of
ComEd, including the discharge or refund of other outstanding securities.
Financial Condition. ComEd's financial condition will continue to depend on
its ability to generate revenues to cover its costs and to maintain adequate
debt and preferred and preference stock coverages and common stock equity
earnings. ComEd's management recognizes that competitive and regulatory
circumstances in Illinois may limit its ability to raise its rates.
Consequently, ComEd's financial condition will be affected by, and ComEd's
management is addressing, actions to maintain and increase sales, to control
operating and capital expenditures, and to anticipate competitive activities.
During the past several years, ComEd has instituted cost reduction plans
including various workforce reductions. ComEd reached agreement in August 1993
with its unions regarding certain cost reduction actions. The agreement
provided for a wage freeze until April 1, 1994, changes to reduce health care
plan costs, increased use of part-time employment and changes in holiday
provisions. The agreement also included a continuation of negotiations relative
to other issues. ComEd and union representatives reached agreement in February
1994 and announced an offer of a voluntary early retirement program. This
program is available to ComEd and the Indiana Company management, non-union and
union employees eligible to retire or who would become eligible to retire after
December 31, 1993 and before April 1, 1995. The period for most eligible
employees to elect to participate in the program expired on April 20, 1994. The
charge to income related to the program in 1994 was approximately $20 million
(net of income tax effects) related to employees who accepted the program
during 1994. ComEd estimates that, in total, approximately $21 million (net of
income tax effects) will be charged to income as a result of the program. See
"Regulation" below and Note 12 of Notes to Financial Statements.
The current ratings of ComEd's securities by three principal securities
rating agencies are as follows:
<TABLE>
<CAPTION>
STANDARD DUFF &
MOODY'S & POOR'S PHELPS
------- -------- ------
<S> <C> <C> <C>
First mortgage and secured pollution control
bonds........................................... Baa2 BBB BBB
Publicly-held debentures and unsecured pollution
control obligations............................. Baa3 BBB- BBB-
Convertible preferred stock...................... baa3 BBB- BB+
Preference stock................................. baa3 BBB- BB+
Commercial paper................................. P-2 A-2 Duff 2
</TABLE>
On October 27, 1993, Standard & Poor's changed its "outlook" on ComEd's
ratings from stable to negative as part of its larger assessment of the
electric utility industry. In January 1995, following the issuance of the Rate
Order, Standard & Poor's affirmed its ratings of ComEd's debt, with its ratings
"outlook" remaining negative. In December 1993, Moody's and Duff & Phelps
affirmed their ratings of ComEd's securities, and Moody's rating outlook on
ComEd remained stable.
5
<PAGE>
Business and Competition. The electric utility business has historically been
characterized by retail service monopolies in state or locally franchised
service territories. Investor-owned electric utilities have tended to be
vertically integrated with all aspects of their business subject to pervasive
regulation. Although customers have normally been free to supply their electric
power needs through self-generation, they have not had a choice of electric
suppliers and self-generation has not generally been economical.
The market in which electric utilities like ComEd operate has become more
competitive and many observers believe competition will intensify. Self-
generation can be economical for certain customers, depending on how and when
they use electricity and other customer-specific considerations. A number of
competitors are currently seeking to identify and do business with those
customers. In addition, suppliers of other forms of energy are increasingly
competing to supply energy needs which historically were supplied primarily or
exclusively by electricity.
The Energy Policy Act of 1992 will likely have a significant effect on
companies engaged in the generation, transmission, distribution, purchase and
sale of electricity. This Act, among other things, expands the authority of the
FERC to order electric utilities to transmit or "wheel" wholesale power for
others, and facilitates the creation of non-utility electric generating
companies. Although ComEd cannot now predict the full impact of this Act, it
will likely create and increase competition affecting ComEd.
ComEd is facing increased competition from several non-utility businesses
which seek to provide energy services to users of electricity, especially
larger customers such as industrial, commercial and wholesale customers. Such
suppliers include independent power producers and unregulated energy services
companies. In this regard, natural gas utilities operating in ComEd's service
area have established subsidiary ventures to provide heating, ventilating and
air conditioning services, attempting to attract ComEd's customers. Also,
several utilities in the United States have established unregulated energy
services subsidiaries which pursue business opportunities wherever they exist.
In addition, cogeneration and energy services companies have begun soliciting
ComEd's customers to provide alternatives to using ComEd's electricity. In
October 1993, the ICC granted ComEd the authority to negotiate special discount
contract rates with new or existing industrial customers for up to a total of
400 megawatts of added load, where the customers would not have chosen service
from ComEd for the increased load in the absence of the discount rates. In
addition, in June 1994, the ICC granted ComEd the authority to negotiate
special discount contract rates with up to 25 of its largest existing
customers, where such contracts would be necessary to retain the customers'
existing load on ComEd's system.
ComEd recently negotiated amendments to existing contracts with three of its
wholesale municipal customers, which extended the contracts for an additional
ten-year period past the 1997 expiration dates. ComEd was one of a number of
bidders for providing service to these customers. The contracts became
effective upon FERC approval.
The ICC formed a task force for the purpose of conducting a broad-based and
open examination of the expanding presence of market components within the
electric utility industry. Participants from more than forty organizations,
including representatives from the electric utility industry, are meeting to
examine three broad issues: effects of regulation, competition and future
regulatory and legislative changes. A report examining all sides of the issues
is planned for release in the first half of 1995 to the ICC, the legislature,
the Governor and other Illinois constitutional officers.
Capital Structure. The ratio of ComEd's long-term debt to total
capitalization has decreased to 54.6% at December 31, 1994 from 55.0% at
December 31, 1993. This decrease is related primarily to the retirement and
early redemption of long-term debt and the issuance of cumulative preference
stock.
6
<PAGE>
UNREGULATED OPERATIONS
Unicom Enterprises intends, through subsidiaries, to engage in energy-related
businesses which will not be subject to utility regulation by state or federal
agencies. As of December 31, 1994, Unicom Enterprises had only one subsidiary,
Unicom Thermal, which will provide district cooling services to office and
other buildings from central locations in the city of Chicago. District cooling
involves, in essence, the production of chilled water at a central location and
its circulation from such location to customers' buildings in a closed circuit
of piping. Such water is used to chill air in customers' air conditioning
systems without the use of CFCs. As a result of the Clean Air Amendments, the
manufacture and use of CFCs will be curtailed, commencing in 1996, thereby
creating an excellent marketing opportunity for non-CFC based systems, such as
district cooling. Unicom Thermal is currently a development stage enterprise
and, as such, has generated no sales revenues. Unicom Thermal has secured two
long-term contracts and expects to begin serving customers in the summer of
1995. Unicom Thermal is in the process of negotiating with additional potential
customers.
Capital Budgets. Unicom Thermal has forecasted capital expenditures for the
years of 1995-97 of approximately $95 million, primarily representing the
construction costs of its district cooling facilities and piping system.
Construction of its first district cooling facility is expected to be completed
by May 1995 and is expected to cost approximately $30 million. As of December
31, 1994, Unicom Thermal's purchase commitments, principally related to
construction, were approximately $24 million.
Capital Resources. Unicom expects to obtain funds to invest in Unicom
Enterprises and its subsidiaries principally from dividends that it receives on
its ComEd common stock and from bank borrowings by Unicom Enterprises. While
the amount of dividends on ComEd common stock is expected to be greater than
the amount of dividends on Unicom common stock, the availability of such
dividends is dependent on ComEd's financial performance and cash position.
Other forms of financing by ComEd of Unicom or its other subsidiaries, such as
loans or additional equity investments (none of which is expected), would be
subject to the prior approval of the ICC.
Unicom Enterprises has a $200 million credit facility which will expire in
1997 of which the entire amount was unused as of December 31, 1994. The credit
facility could be used by Unicom Enterprises to finance investments in
nonregulated energy-related businesses and projects, including Unicom Thermal,
and for general corporate purposes. The credit facility is guaranteed by Unicom
and includes certain covenants with respect to Unicom's and Unicom Enterprises'
operations. Interest rates for borrowings under the credit facility would be
set at the time of a borrowing and would be based on either a prime interest
rate or a floating rate bank index plus a spread which will vary with the
credit rating of ComEd's outstanding first mortgage bonds. See Note 9 of Notes
to Financial Statements for additional information regarding certain covenants
with respect to Unicom's and Unicom Enterprises' operations.
REGULATION
ComEd and the Indiana Company are subject to state and federal regulation in
the conduct of their respective businesses, including the operations of Cotter.
Such regulation includes rates, securities issuance, nuclear operations,
environmental and other matters. Particularly in the cases of nuclear
operations and environmental matters, such regulation can and does affect
operational and capital expenditures.
Rate Proceedings. ComEd's revenues, net income, cash flows and plant carrying
costs have been affected directly by various rate-related proceedings. During
the periods presented in the consolidated financial statements, ComEd was
involved in a number of proceedings concerning its rates. The uncertainties
associated with such proceedings and related issues, among other things, led to
the Rate Matters Settlement and the Fuel Matters Settlement (see Note 2 of
Notes to Financial Statements). The effects of the aforementioned rate
proceedings and settlements during the periods presented are discussed below
under "Results of Operations."
7
<PAGE>
On January 9, 1995, the ICC issued its Rate Order in the proceedings relating
to ComEd's February 10, 1994 rate increase request. The Rate Order provides,
among other things, for (i) an increase in ComEd's total revenues of
approximately $301.8 million (excluding add-on revenue taxes) or 5.2%, on an
annual basis, including a $303.2 million increase in base rates, (ii) the
collection of municipal franchise costs as an adder to base rates until May 1,
1995, when such costs will be collected prospectively on an individual
municipality basis through a rider, and (iii) the use of a rider, with annual
review proceedings, to pass on to ratepayers increases or decreases in
estimated costs associated with the decommissioning of ComEd's nuclear
generating units. The rates provided in the Rate Order became effective on
January 14, 1995; however, they are being collected subject to refund as a
result of subsequent judicial action. ComEd expects the Rate Order to be
appealed by the intervenors in the rate proceeding.
In the Rate Order, the ICC determined that the Units were 100% "used and
useful" and that the previously determined reasonable costs of such Units, as
depreciated, should be included in full in ComEd's rate base. The ICC also
determined, however, that ComEd's annual nuclear plant decommissioning cost
collections from its ratepayers should be reduced from the $127 million
previously authorized in the 1991 ICC rate order to $112.7 million. The $112.7
million annual collection amount primarily resulted from the ICC's decision to
exclude from ComEd's costs subject to collection a contingency allowance. As
noted above, the Rate Order establishes a rider which will allow annual
adjustments to decommissioning cost collections outside of the context of a
traditional rate proceeding. Such rider is intended to allow adjustments in
decommissioning cost recoveries from ratepayers as changes in cost estimates
become identifiable. Under Illinois law, decommissioning cost collections are
required to be deposited in external trust funds; and consequently, such
collections do not add to the cash flows available for general corporate
purposes.
Nuclear Matters. During the past several years, the NRC has placed two of
ComEd's nuclear generating stations, Zion station and Dresden station, on its
list of plants to be monitored closely. Although Zion station (which was placed
on the list in early 1991) was removed from that list in February 1993, Dresden
station (which was placed on the list in early 1992) remains on the list. The
NRC concern with Dresden station was that, although processes and programs were
in place to make improvements, the rate of improvement needed to accelerate. In
February 1995, the NRC reported that a sense of progress at Dresden is evident,
but that more time is needed to determine if the improving trend will continue.
Because of the age of the Zion, Dresden and Quad-Cities stations, ComEd
anticipates increased expenditures for operation and maintenance expenses in
order to improve reliability and to meet NRC regulatory expectations.
Accordingly, ComEd has restructured its management of its nuclear stations and
committed additional resources to the stations' operations.
In January 1994, ComEd was notified by the NRC that ComEd's LaSalle County
and Quad-Cities stations were placed on the list of plants with adverse
performance trends. ComEd was informed that the NRC concerns about LaSalle
County station included, among other matters, deficient radiation worker
practices. The NRC concerns with Quad-Cities station included, among other
matters, deficiencies in the condition of certain station equipment and the
effectiveness of the operators of the units in identifying and responding to
certain operational problems. ComEd has provided written and verbal responses
to the NRC and is working to resolve the concerns. In the February 1995 report,
the NRC concluded that LaSalle County had arrested the adverse trends in most
areas and "normal" designation should be returned. Like Dresden and LaSalle
County, the NRC noted that positive developments had been observed at Quad-
Cities but additional time was required to determine if those developments had
been effective in arresting the adverse trends and thus Quad-Cities remains on
the list of plants with adverse performance trends. As noted above, ComEd
anticipates continued increased expenditures in connection with those stations.
In addition, generating station availability and performance during a year may
be issues in fuel reconciliation proceedings in assessing the prudence of fuel
and power purchases during such year. ICC orders have been issued in fuel
reconciliation proceedings for years prior to 1993.
8
<PAGE>
ComEd estimates that it will expend approximately $15 billion, excluding any
contingency allowance, for decommissioning costs primarily during the period
from 2007 through 2032. Such costs, which are estimated to aggregate
approximately $3.5 billion, in current-year (1995) dollars, are expected to be
funded by the external decommissioning trust funds which ComEd established in
compliance with Illinois law and into which ComEd has been making annual
contributions. Future decommissioning cost estimates may be significantly
affected by the adoption of or changes to NRC regulations. See Note 1 of Notes
to Financial Statements under "Depreciation and Decommissioning" for additional
information regarding decommissioning costs.
Environmental Matters. The Clean Air Amendments require reductions in sulfur
dioxide emissions from ComEd's Kincaid station. The Clean Air Amendments also
bar future utility sulfur dioxide emissions except to the extent utilities hold
allowances for their emissions. Allowances which authorize their holder to emit
sulfur dioxide have been issued by the U.S. EPA based largely on historical
levels of sulfur dioxide emissions. These allowances are transferable and
marketable. ComEd's ability to increase generation in the future to meet
expected increased demand for electricity will depend in part on ComEd and the
Indiana Company's ability to acquire additional allowances or to reduce
emissions below otherwise allowable levels from their existing generating
plants. In addition, the Clean Air Amendments require studies to determine what
controls, if any, should be imposed on utilities to control air toxic
emissions, including mercury. ComEd's Clean Air Compliance Plan for Kincaid
station was approved by the ICC on July 8, 1993. In late 1993, however, a
federal court declared the Illinois law under which the approval was received
to be unconstitutional and compliance plans prepared and approved in reliance
on the law to be void. In January 1995, the federal court's decision was
affirmed by the U.S. Court of Appeals. It is not known whether a petition for
rehearing or further appeals will be filed. Under the Compliance Plan approved
by the ICC, ComEd would have been allowed to burn low sulfur Illinois coal at
Kincaid station without the installation of pollution control equipment for the
years 1995 through 1999, and to purchase any necessary emission allowances that
are expected to be available under the Clean Air Amendments during this period.
Also, under the Plan, ComEd expected to install pollution control equipment for
Kincaid station by the year 2000. When the final outcome of the federal
litigation is known, ComEd will determine whether any changes are required.
The Clean Air Amendments also require reductions in nitrogen oxide emissions
from ComEd and the Indiana Company's fossil fuel generating units. The Illinois
EPA has proposed rules with respect to such emissions which would require
modifications to certain of ComEd's boilers inside the Chicago ozone non-
attainment area. The proposed rules are currently under review. The Illinois
EPA is also considering nitrogen oxide emission reductions at ComEd generating
stations outside the Chicago ozone non-attainment area.
RESULTS OF OPERATIONS
Unicom's earnings per common share were $1.66 in 1994, $0.22 in 1993 and
$2.08 in 1992. Substantially all of the results of operations for Unicom are
the results of operations of ComEd. Unicom Enterprises' only subsidiary, Unicom
Thermal, is currently a development stage enterprise, and for the period from
July 30, 1993 (its date of inception) through December 31, 1993 and for the
year 1994 incurred losses that are not material to the results of Unicom and
subsidiary companies as a whole. As such, the following section discusses the
results of operations of ComEd alone.
Net Income. The 1994 results reflect higher revenues as a result of the
favorable comparison to 1993 in which the effects of the Rate Matters
Settlement and the Fuel Matters Settlement were recorded and ComEd's increased
kilowatthour sales to ultimate consumers. The effects of these items were
partially offset by higher operation and maintenance expenses, which include an
after-tax charge for additional pension costs related to an early retirement
program of $20 million or $0.09 per common share. ComEd also recorded a
reduction in the carrying value of its investments in uranium-related
properties in 1994, which reduced net income by $33.8 million or $0.16 per
common share.
9
<PAGE>
The 1993 results were significantly affected by the recording of the effects
of the Rate Matters Settlement and the Fuel Matters Settlement, which reduced
1993 net income by approximately $354 million or $1.66 per common share, in
addition to the effect of the deferred recognition of revenues which ComEd had
recorded during 1993 (approximately $160 million or $0.75 per common share),
and after the partially offsetting effect of recording approximately $269
million or $1.26 per common share in deferred carrying charges, net of income
taxes, as authorized in the Remand Order. The 1993 earnings also reflect a one-
time favorable cumulative effect of $9.7 million or $0.05 per common share as a
result of the adoption of SFAS No. 109, Accounting for Income Taxes, in January
1993. The effect of the non-recurring items was partially offset by a higher
level of kilowatthour sales and lower operation and maintenance expenses.
Excluding non-recurring items, earnings in 1993 would have been $1.83 per
common share.
The 1992 results were significantly affected by the decreased level of
kilowatthour sales due to a cooler than normal summer, higher operation and
maintenance expenses, higher revenues resulting from the full effect of the
rate increase which became effective on March 20, 1991, lower fuel and
purchased power costs and the 1992 reduction to net income of $50 million or
$0.24 per common share to reflect a provision for additional refunds and
interest related to the 1985 ICC rate order. Excluding non-recurring items,
earnings in 1992 would have been $2.32 per common share.
Kilowatthour Sales. Kilowatthour sales to ultimate consumers increased 2.8%
in 1994, the result of increased sales to all classes of customers (except
railroads, which decreased), due in part to warmer summer weather and colder
winter weather as compared to 1993. The service territory economy also improved
during 1994, which contributed to the increase in kilowatthour sales.
Kilowatthour sales to ultimate consumers increased 4.6% in 1993, the result of
increased sales to all classes of customers (except railroads, which
decreased), due primarily to more normal summer weather in 1993 as compared to
1992. Kilowatthour sales to ultimate consumers decreased 4.6% in 1992
principally reflecting lower kilowatthour sales to residential consumers as a
result of a cooler than normal summer. Kilowatthour sales including sales for
resale decreased 3.0% in 1994, increased 16.0% in 1993 and decreased 3.7% in
1992.
Operating Revenues. Operating revenues increased $1,017 million in 1994
principally reflecting the favorable comparison to 1993 in which the effects of
the Rate Matters Settlement and the Fuel Matters Settlement were recorded and
the increased level of kilowatthour sales to ultimate consumers described
above. The increase was partially offset by a decrease in energy costs
recovered under the fuel adjustment provision in ComEd's rates.
Operating revenues decreased $766 million in 1993 principally reflecting the
recording of the effects of the Rate Matters Settlement and the Fuel Matters
Settlement, which reduced 1993 electric operating revenues by $1,282 million.
This reduction was partially offset by a higher level of kilowatthour sales and
an increase in energy costs recovered under the fuel adjustment provision in
ComEd's rates. See "Net Income" above and Note 2 of Notes to Financial
Statements for additional information.
Operating revenues decreased $249 million in 1992 principally reflecting a
lower level of kilowatthour sales due to a cooler than normal summer, a
decrease in the recovery of energy costs under the fuel adjustment provision in
ComEd's rates and a provision for revenue refunds of approximately $18 million
related to the 1985 ICC rate order. The decrease more than offset the full
effect of the rate increase authorized in the 1991 ICC rate order, which became
effective on March 20, 1991.
Fuel Costs. Changes in fuel expense for 1994, 1993 and 1992 primarily
resulted from changes in the average cost of fuel consumed, changes in the mix
of fuel sources of electric energy generated and changes in net generation of
electric energy. Fuel mix is determined primarily by system load, the costs
10
<PAGE>
of fuel consumed and the availability of nuclear generating units. The cost of
fuel consumed, net generation of electric energy and fuel sources of
kilowatthour generation were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Cost of fuel consumed (per million Btu):
Nuclear........................................... $0.53 $0.52 $0.52
Coal.............................................. $2.31 $2.89 $2.96
Oil............................................... $2.89 $3.03 $3.02
Natural gas....................................... $2.27 $2.70 $2.36
Average all fuels................................. $1.08 $1.15 $0.97
Net generation of electric energy (millions of kilo-
watthours)......................................... 90,243 94,266 79,889
Fuel sources of kilowatthour generation:
Nuclear........................................... 71% 75% 83%
Coal.............................................. 25 23 15
Oil............................................... 1 1 1
Natural gas....................................... 3 1 1
------ ------ ------
100% 100% 100%
====== ====== ======
</TABLE>
In February 1992, a $46 million court-ordered refund from the DOE relating to
spent nuclear fuel disposal costs was refunded to ComEd's ratepayers through
the fuel adjustment clause.
Under the Energy Policy Act of 1992, investor-owned electric utilities that
have purchased enrichment services from the DOE are being assessed amounts to
fund a portion of the cost for the decontamination and decommissioning of three
nuclear enrichment facilities previously operated by the DOE. ComEd's portion
of such assessments is estimated to be approximately $15 million per year (to
be adjusted annually for inflation). The Act provides that such assessments are
to be treated as a cost of fuel. See Note 1 of Notes to Financial Statements
under "Deferred Unrecovered Energy Costs" for information related to the
accounting for such costs.
Fuel Supply. Compared to other utilities, ComEd has relatively low average
fuel costs. This results from ComEd's reliance predominantly on lower cost
nuclear generation. ComEd's coal costs, however, are high compared to those of
other utilities. ComEd's western coal contracts and its rail contracts for
delivery of the western coal were renegotiated during 1992 effective as of
January 1, 1993, to provide, among other things, for significant reductions in
the delivered price of the coal over the duration of the contracts. However,
the renegotiated contracts provide for the purchase of certain coal at prices
substantially above currently prevailing market prices and ComEd has
significant purchase commitments under its contracts. In addition, as of
December 31, 1994, ComEd had unrecovered fuel costs in the form of coal
reserves of approximately $498 million. In prior years, ComEd's commitments for
the purchase of coal exceeded its requirements. Rather than take all the coal
it was required to take, ComEd agreed to purchase the coal in place in the form
of coal reserves. For additional information concerning ComEd's coal purchase
commitments, fuel reconciliation proceedings and coal reserves, see "Liquidity
and Capital Resources" above and Notes 1, 2 and 19 of Notes to Financial
Statements.
Purchased Power. Amounts of purchased power are primarily affected by system
load, the availability of ComEd and the Indiana Company's generating units and
the availability and cost of power from other utilities.
The number and average cost of kilowatthours purchased were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----- ---- -----
<S> <C> <C> <C>
Kilowatthours (millions)................................. 2,068 644 2,555
Cost per kilowatthour.................................... 2.86c 1.91c 1.78c
</TABLE>
11
<PAGE>
Deferred Under or Overrecovered Energy Costs--Net. Operating expenses for the
years 1994, 1993 and 1992 reflect the net change in under or overrecovered
allowable energy costs under ComEd's fuel adjustment clause. See "Fuel Costs"
and "Fuel Supply" above and Note 1 of Notes to Financial Statements under
"Deferred Unrecovered Energy Costs."
Operation and Maintenance Expenses. Total operation and maintenance expenses
increased 3% during 1994, decreased 4% during 1993 and increased 9% during
1992. The increase in 1994 primarily reflects an increase in operation and
maintenance expenses associated with pension benefit costs, incentive
compensation programs, nuclear and fossil generating stations, certain other
employee benefits, and certain administrative and general costs, partially
offset by lower expenses associated with transmission and distribution
facilities. The decrease in 1993 primarily reflects a decrease in operation and
maintenance expenses associated with nuclear and fossil generating stations,
lower costs of pension benefits and customer-related activities, a decrease in
the number of employees and lower research costs, partially offset by higher
costs of postretirement health care benefits and the cost related to the 1993
special incentive plan for employees. The increase in 1992 primarily reflects
an increase in operation and maintenance expenses associated with nuclear
generating stations, higher costs of pension and postretirement health care
benefits and an increased number of employees. Wage increases, the effects of
which are reflected in the increases and decreases discussed below, have
increased operation and maintenance expenses during 1994 and 1992. Wages in
1993 were not increased over 1992 levels. Operation and maintenance expenses in
1994 include approximately $20 million for wage increases. The effects of
inflation have increased operation and maintenance costs during the periods and
are also reflected in the increases and decreases discussed below.
The cost of pension benefits (net of amounts charged to construction)
increased $29 million in 1994, decreased $16 million in 1993 and increased $21
million in 1992. The increase in pension benefits in 1994 reflects $34 million
related to employees who elected in 1994 to take early retirements under a 1994
early retirement program. It is estimated that, in total, the program will
result in the recognition of approximately $35 million of pension cost (see
"Liquidity and Capital Resources," subcaption "Financial Condition" above for
additional information). The 1992 pension increase reflects the effect of
ComEd's workforce reduction program in which a charge to income of $26 million
was recorded in 1992. See Note 12 of Notes to Financial Statements for
additional information. Additional costs associated with ComEd's management
workforce reduction program of approximately $11 million were recorded in 1992,
which adversely impacted operation and maintenance expenses for 1992. The cost
of postretirement health care benefits (net of amounts charged to construction)
increased $14 million and $29 million in 1993 and 1992, respectively. The $14
million increase in 1993 reflects an increase in the cost of postretirement
health care benefits of $17 million as a result of adopting on January 1, 1993,
SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions (see Note 13 of Notes to Financial Statements for additional
information). Certain other employee benefits increased $4 million in 1994,
primarily due to an increase in medical costs for active employees.
Operation and maintenance expenses associated with the nuclear generating
stations increased $9 million in 1994, decreased $74 million in 1993 and
increased $105 million in 1992. The increase at the nuclear stations in 1994 is
due to activities undertaken during increased scheduled and non-scheduled
outages. The decrease at the nuclear generating stations in 1993 includes the
effects of ComEd's cost reduction efforts. Future operation and maintenance
expenses associated with nuclear generating stations may be significantly
affected by regulatory, operational and other requirements. See "Nuclear
Matters" under "Regulation" above. Operation and maintenance expenses
associated with the fossil generating stations increased $4 million and
decreased $13 million for 1994 and 1993, respectively. The increase in 1994
reflects, in part, activities undertaken during a greater number of scheduled
overhauls. The decrease in 1993 includes the effects of ComEd's cost reduction
efforts. Research costs also decreased $10 million in 1993 due to the cost
reduction efforts.
12
<PAGE>
Operation and maintenance expenses associated with ComEd's transmission and
distribution system decreased $18 million in 1994. The decrease in 1994
reflects the effects of ComEd's cost containment efforts. Costs of customer-
related activities decreased $13 million in 1993.
Operation and maintenance expenses in 1994 reflect a $50 million cost for
employee incentive compensation plans related to the achievement of certain
financial performance, cost containment and operating performance goals.
Operation and maintenance expenses in 1993 reflect a $36 million special
incentive plan cost for employees related to a sharing of operation and
maintenance savings below 1993 budgeted levels.
Certain administrative and general costs increased an additional $12 million
in 1994 primarily due to increases in the provisions for injuries and damages
and obsolete materials.
In 1993, a provision of $5 million was recorded to reflect the low end of the
range of ComEd's estimate of the liability associated with cleanup costs of
remediation sites other than former MGP sites. In 1991, a provision of $25
million was recorded which reflects the low end of the range of ComEd's
estimate of the liability associated with former MGP sites. See Note 19 of
Notes to Financial Statements for additional information concerning cleanup
costs of remediation sites and former MGP sites.
Depreciation. Depreciation expense increased in 1994 and 1993 as a result of
additions to plant in service. Depreciation expense increased in 1992 as a
result of reflecting in expense a full year's effect of increased
decommissioning costs allowed by the 1991 ICC rate order, which became
effective March 20, 1991. See Note 1 of Notes to Financial Statements for
information concerning depreciation rates and decommissioning costs.
Interest on Debt. Changes in interest on long-term debt and notes payable for
the years 1994, 1993 and 1992 were due to changes in average interest rates and
in the amounts of long-term debt and notes payable outstanding. Changes in
interest on long-term debt also reflected new issues of debt and the retirement
and redemption of issues which were refinanced at generally lower rates of
interest. The average amounts of long-term debt and notes payable outstanding
and average interest rates thereon were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Long-term debt outstanding:
Average amount (millions).......................... $7,934 $8,105 $7,700
Average interest rate.............................. 7.83% 8.03% 8.58%
Notes payable outstanding:
Average amount (millions).......................... $ 9 $ 6 $ 17
Average interest rate.............................. 6.48% 5.83% 4.43%
</TABLE>
Deferred Carrying Charges. In the Remand Order, the ICC provided that, for
ratemaking purposes, deferred carrying charges on the reasonable and "used and
useful" plant costs of the Units for the period April 1, 1989 until
approximately March 20, 1991, the date under the Remand Order that the Units
were reflected in rates, could be deferred and amortized. Approximately $438
million of such costs was capitalized as a regulatory asset in October 1993 and
resulted in an increase to net income for the year 1993 of approximately $269
million or $1.26 per common share. Amortization of deferred carrying charges
for the years 1994 and 1993 amounted to approximately $13 million and $2
million, respectively.
Income Taxes. In the third quarter of 1993, the President of the United
States signed into law a deficit-reduction plan that included, among other
things, an increase in the federal statutory corporate income tax rate from 34%
to 35%, effective January 1, 1993. The recording of the effects of the
increased taxes began in 1993. In addition, a net increase in the deferred
income tax liability was recorded in the third quarter of 1993 which was
primarily offset by regulatory assets net of regulatory liabilities, reflecting
the increase in taxes recoverable in rates to settle net income tax liabilities
recorded in prior years.
13
<PAGE>
Further, the effects of the elimination of a scheduled reduction in a
component of the statutory Illinois income tax rate, which was to have declined
to 4.4% from 4.8%, effective July 1, 1993, were recorded in the third quarter
of 1993.
In 1993, a loss for income tax purposes was recorded. Income tax overpayments
resulting from such loss and other tax refunds, approximating $36 million and
$187 million at December 31, 1994 and 1993, respectively, were included in
receivables in the Consolidated Balance Sheets.
See Note 14 of Notes to Financial Statements for information concerning the
accounting standard adopted in January 1993 which requires an asset and
liability approach for financial accounting and reporting for income taxes
rather than the deferred method.
Decommissioning. The staff of the SEC has questioned certain of the current
accounting practices of the electric utility industry, including ComEd,
regarding the recognition, measurement and classification of decommissioning
costs for nuclear generating stations in financial statements of electric
utilities. In response to these questions, the FASB has agreed to review the
accounting for nuclear decommissioning costs. If current electric utility
industry accounting practices for such decommissioning costs are changed: (1)
annual provisions for decommissioning could increase; (2) the estimated cost
for decommissioning could be recorded as a liability rather than as accumulated
depreciation; and (3) trust fund income from the external decommissioning
trusts could be reported as investment income rather than as a reduction to
decommissioning expense. Unicom does not believe that such changes, if
required, would have an adverse effect on results of operations due to ComEd's
current and future ability to recover decommissioning costs through rates.
Investments in Uranium-Related Properties. In May 1994, ComEd recorded a
reduction in the carrying value of its investments in uranium-related
properties after completing a review of various alternatives and reassessing
the long-term recoverability of those investments. The effects of the reduction
reduced 1994 net income by approximately $33.8 million or $0.16 per common
share.
Other Items. The amounts of AFUDC reflect changes in the average levels of
investment subject to AFUDC and changes in the average annual rates as
discussed in Note 1 of Notes to Financial Statements. AFUDC does not contribute
to the current cash flow of Unicom.
ComEd's ratios of earnings to fixed charges for the years 1994, 1993 and 1992
were 1.99, 1.19 and 2.06, respectively. ComEd's ratios of earnings to fixed
charges and preferred and preference stock dividend requirements for the years
1994, 1993 and 1992 were 1.73, 1.03 and 1.78, respectively.
Business corporations in general have been adversely affected by inflation
because amounts retained after the payment of all costs have been inadequate to
replace, at increased costs, the productive assets consumed. Electric utilities
in particular have been especially affected as a result of their capital
intensive nature and regulation which limits capital recovery and prescribes
installation or modification of facilities to comply with increasingly
stringent safety and environmental requirements. Because the regulatory process
limits the amount of depreciation expense included in ComEd's revenue allowance
to the original cost of utility plant investment, the resulting cash flows are
inadequate to provide for replacement of that investment in future years or
preserve the purchasing power of common equity capital previously invested.
14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Unicom Corporation:
We have audited the accompanying consolidated balance sheets and statements
of consolidated capitalization of Unicom Corporation (an Illinois corporation)
and subsidiary companies as of December 31, 1994 and 1993, and the related
statements of consolidated income, retained earnings and cash flows for each of
the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Unicom Corporation and
subsidiary companies as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
As discussed in Notes 13 and 14, effective January 1, 1993, the Company
changed its method of accounting for postretirement health care benefits and
income taxes, respectively.
Arthur Andersen LLP
Chicago, Illinois
January 27, 1995
15
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
(MILLIONS OF DOLLARS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C> <C>
Operating revenues.................. $ 6,278 $ 5,260 $ 6,026 $ 6,276 $ 5,311
Net income.......................... $ 355 $ 46 $ 443 $ 17 $ 46
Earnings per common share........... $ 1.66 $ 0.22 $ 2.08 $ 0.08 $ 0.22
Cash dividends declared per common
share.............................. $ 1.60 $ 1.60 $ 2.30 $ 3.00 $ 3.00
Total assets (at end of year)....... $23,121 $24,383 $20,993(1) $17,365 $17,889
Long-term obligations at end of year
excluding current portion:
Long-term debt and preference
stock subject to mandatory
redemption requirements.......... $ 7,745 $ 7,861 $ 7,913 $ 7,081 $ 7,341
Accrued spent nuclear fuel dis-
posal fee and related interest... $ 590 $ 567 $ 549 $ 530 $ 500
Capital lease obligations......... $ 433 $ 323 $ 347 $ 396 $ 387
Other long-term obligations....... $ 1,754 $ 1,718 $ 666 $ 341 $ 225
</TABLE>
--------
(1) See Note 14 of Notes to Financial Statements for additional information.
PRICE RANGE* AND DIVIDENDS PAID PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
1994 (BY QUARTERS) 1993 (BY QUARTERS)
--------------------------- ---------------------------
FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price range:
High................. 24 3/4 24 7/8 26 28 3/4 30 5/8 31 5/8 29 7/8 28 1/4
Low.................. 20 5/8 21 1/4 22 25 1/8 27 3/8 27 3/8 25 5/8 22 7/8
Cash dividends paid.... 40c 40c 40c 40c 40c 40c 40c 40c
</TABLE>
* As reported as NYSE Composite Transactions for Unicom on and after September
1, 1994 and for ComEd prior to that date.
--------
Unicom's common stock is traded on the New York, Chicago and Pacific stock
exchanges, with the ticker symbol UCM. At December 31, 1994, there were
approximately 182,000 holders of record of Unicom's common stock.
1994 REVENUES AND SALES
<TABLE>
<CAPTION>
ELECTRIC
OPERATING INCREASE/ KILOWATTHOUR INCREASE/
REVENUES(1) (DECREASE) SALES (DECREASE) INCREASE
(THOUSANDS) OVER 1993 (MILLIONS) OVER 1993 CUSTOMERS OVER 1993
----------- ---------- ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Residential............. $2,273,763 (2.9)% 21,376 2.7 % 3,047,354 1.3%
Small commercial and
industrial............. 1,917,084 (2.3)% 24,320 3.7 % 286,793 1.1%
Large commercial and
industrial............. 1,381,251 (3.9)% 23,450 2.3 % 1,528 1.7%
Public authorities...... 452,512 (4.5)% 6,885 2.1 % 12,059 0.3%
Electric railroads...... 26,179 (5.1)% 397 (1.8)% 2 --
---------- ------ ---------
Ultimate consumers--
total.................. $6,050,789 (3.1)% 76,428 2.8 % 3,347,736 1.2%
Provisions for revenue
refunds--ultimate
consumers.............. (15,909) -- --
---------- ------ ---------
Ultimate consumers--net. $6,034,880 76,428 3,347,736
Sales for resale........ 187,147 8,743 18
Other revenues.......... 55,494 -- --
---------- ------ ---------
$6,277,521 19.3 % 85,171 (3.0)% 3,347,754 1.2%
========== ====== =========
</TABLE>
--------
(1) See Note 2 of Notes to Financial Statements and the Statements of
Consolidated Income for information related to revenue refunds.
16
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME (NOTE 1)
The following Statements of Consolidated Income for the years 1994, 1993 and
1992 reflect the results of past operations and are not intended as any
representation as to results of operations for any future period. Future
operations will necessarily be affected by various and diverse factors and
developments, including changes in electric rates, population, business
activity, taxes, environmental control, energy use, fuel supply, cost of labor,
fuel and purchased power and other matters, the nature and effect of which
cannot now be determined.
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
(THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Operating Revenues (Notes 2 and 3):
Operating revenues....................... $6,293,430 $6,547,205 $6,044,693
Provisions for revenue refunds........... (15,909) (1,286,765) (18,372)
---------- ---------- ----------
$6,277,521 $5,260,440 $6,026,321
---------- ---------- ----------
Operating Expenses and Taxes:
Fuel (Notes 1, 2, 10 and 19)............. $1,049,853 $1,170,935 $ 841,321
Purchased power.......................... 59,123 12,303 45,579
Deferred (under)/overrecovered energy
costs--net (Note 1)..................... 1,940 (1,757) (30,254)
Operation................................ 1,533,335 1,457,689 1,529,849
Maintenance.............................. 561,320 581,714 587,778
Depreciation (Note 1).................... 887,466 862,766 836,129
Recovery of regulatory assets............ 15,453 5,235 3,330
Taxes (except income) (Note 15).......... 787,852 701,913 743,909
Income taxes (Notes 1 and 14)--
Current--Federal....................... 156,429 (19,930) 139,857
--State................................ 1,913 (7,623) 21,531
Deferred--Federal--net................. 103,385 88,052 97,066
--State--net........................... 65,017 34,752 45,829
Investment tax credits deferred--net
(Notes 1 and 14)........................ (28,757) (29,424) (32,506)
---------- ---------- ----------
$5,194,329 $4,856,625 $4,829,418
---------- ---------- ----------
Operating Income........................... $1,083,192 $ 403,815 $1,196,903
---------- ---------- ----------
Other Income and (Deductions):
Interest on long-term debt............... $ (621,225) $ (651,181) $ (660,429)
Interest on notes payable................ (557) (334) (775)
Allowance for funds used during construc-
tion (Note 1)--
Borrowed funds......................... 18,912 16,930 17,213
Equity funds........................... 22,628 20,618 19,960
Income taxes applicable to nonoperating
activities (Notes 1 and 14)............. 27,074 29,913 6,275
Income tax reduction for disallowed plant
costs................................... -- 792 --
Deferred carrying charges (Note 2)....... -- 438,183 --
Interest and other costs for 1993 Settle-
ments (Note 2).......................... (21,464) (98,674) --
Provision for dividends on preferred and
preference stocks of
Commonwealth Edison Company............. (64,927) (66,052) (70,539)
Miscellaneous--net (Note 17)............. (88,699) (57,360) (65,166)
---------- ---------- ----------
$ (728,258) $ (367,165) $ (753,461)
---------- ---------- ----------
Net Income Before Cumulative Effect of
Change In Accounting for Income Taxes..... $ 354,934 $ 36,650 $ 443,442
Cumulative Effect of Change In Accounting
for Income Taxes.......................... -- 9,738 --
---------- ---------- ----------
Net Income................................. $ 354,934 $ 46,388 $ 443,442
========== ========== ==========
Average Number of Common Shares Outstand-
ing....................................... 214,031 213,508 212,929
Earnings Per Common Share Before Cumulative
Effect of Change In Accounting for Income
Taxes..................................... $ 1.66 $ 0.17 $ 2.08
Cumulative Effect of Change In Accounting
for Income Taxes.......................... -- 0.05 --
---------- ---------- ----------
Earnings Per Common Share.................. $ 1.66 $ 0.22 $ 2.08
========== ========== ==========
Cash Dividends Declared Per Common Share... $ 1.60 $ 1.60 $ 2.30
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
17
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (NOTE 1)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
ASSETS 1994 1993
------ ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Utility Plant (Notes 1, 3, 8, 16 and 18):
Plant and equipment, at original cost (includes
construction work in progress of $1,043 million
and $1,040 million, respectively)................. $26,257,665 $25,581,003
Less--Accumulated provision for depreciation....... 9,623,756 8,790,519
----------- -----------
$16,633,909 $16,790,484
Nuclear fuel, at amortized cost.................... 689,424 662,562
----------- -----------
$17,323,333 $17,453,046
----------- -----------
Investments and Other Property:
Nuclear decommissioning funds (Notes 1 and 11)..... $ 880,944 $ 706,841
Subsidiary companies (Notes 1 and 17).............. 118,051 122,332
Other, at cost (Note 17)........................... 41,292 74,371
----------- -----------
$ 1,040,287 $ 903,544
----------- -----------
Current Assets:
Cash............................................... $ 1,927 $ 743
Temporary cash investments (Note 11)............... 75,008 247,119
Other cash investments (Note 11)................... 19,588 641,575
Special deposits (Note 11)......................... 29,603 32,635
Receivables (Note 1)--
Customers........................................ 463,241 427,613
Taxes............................................ 36,228 186,687
Other............................................ 67,389 66,963
Provisions for uncollectible accounts............ (10,720) (10,910)
Coal and fuel oil, at average cost................. 108,872 111,752
Materials and supplies, at average cost............ 384,612 402,714
Deferred unrecovered energy costs (Note 1)......... 48,697 43,885
Deferred income taxes related to current assets and
liabilities (Note 14)--
Loss carryforward................................ 10,090 175,197
Other............................................ 110,267 169,477
Prepayments and other.............................. 57,050 42,190
----------- -----------
$ 1,401,852 $ 2,537,640
----------- -----------
Deferred Charges and Other Noncurrent Assets:
Regulatory assets (Notes 1 and 14)................. $ 2,604,270 $ 2,698,465
Unrecovered energy costs (Note 1).................. 643,438 680,243
Other.............................................. 108,308 109,949
----------- -----------
$ 3,356,016 $ 3,488,657
----------- -----------
$23,121,488 $24,382,887
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
18
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (NOTE 1)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
CAPITALIZATION AND LIABILITIES 1994 1993
------------------------------ ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Capitalization (see accompanying statements):
Common stock equity.................................. $ 5,448,127 $ 5,421,893
Preferred and preference stocks of Commonwealth
Edison Company--
Without mandatory redemption requirements.......... 508,147 441,445
Subject to mandatory redemption requirements....... 292,163 309,964
Long-term debt of subsidiary companies............... 7,453,206 7,550,762
----------- -----------
$13,701,643 $13,724,064
----------- -----------
Current Liabilities:
Notes payable--bank loans (Note 9)................... $ 7,150 $ 5,950
Current portion of long-term debt, redeemable prefer-
ence stock and capitalized lease obligations of sub-
sidiary companies (Note 11)......................... 560,545 630,260
Accounts payable..................................... 350,958 444,080
Accrued interest..................................... 182,745 186,825
Accrued taxes........................................ 206,973 132,362
Dividends payable.................................... 102,647 101,047
Estimated revenue refunds and related interest
(Note 2)............................................ -- 1,166,308
Customer deposits.................................... 44,514 45,757
Other................................................ 85,845 143,519
----------- -----------
$ 1,541,377 $ 2,856,108
----------- -----------
Deferred Credits and Other Noncurrent Liabilities:
Deferred income taxes (Note 14)...................... $ 4,383,347 $ 4,448,548
Accumulated deferred investment tax credits (Notes 1
and 14)............................................. 717,752 746,508
Accrued spent nuclear fuel disposal fee and related
interest (Note 10).................................. 589,757 566,527
Obligations under capital leases of subsidiary compa-
nies (Note 16)...................................... 433,184 323,175
Regulatory liabilities (Notes 1 and 14).............. 699,426 782,338
Other (Notes 1, 12 and 13)........................... 1,055,002 935,619
----------- -----------
$ 7,878,468 $ 7,802,715
----------- -----------
Commitments and Contingent Liabilities (Note 19)
$23,121,488 $24,382,887
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
19
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CAPITALIZATION (NOTE 1)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Common Stock Equity (Notes 4 and 5):
Common stock, without par value--
Outstanding--214,340,067 shares and 213,751,147
shares, respectively.............................. $ 4,890,931 $ 4,876,535
Preference stock expense of Commonwealth Edison
Company............................................ (3,775) (3,794)
Retained earnings................................... 560,971 549,152
----------- -----------
$ 5,448,127 $ 5,421,893
----------- -----------
Preferred and Preference Stocks of Commonwealth Edison
Company--
Without Mandatory Redemption Requirements
(Notes 4, 6 and 11):
Preference stock, cumulative, without par value--
Outstanding--13,499,549 shares and 10,499,549
shares, respectively............................ $ 504,957 $ 432,320
$1.425 convertible preferred stock, cumulative,
without par value--
Outstanding--100,323 shares and 286,949 shares,
respectively.................................... 3,190 9,125
Prior preferred stock, cumulative, $100 par value
per share--
No shares outstanding............................ -- --
----------- -----------
$ 508,147 $ 441,445
----------- -----------
Subject to Mandatory Redemption Requirements
(Notes 4, 7 and 11):
Preference stock, cumulative, without par value--
Outstanding--3,113,205 shares and 3,290,290
shares, respectively............................ $ 309,964 $ 327,653
Current redemption requirements for preference
stock included in current liabilities............ (17,801) (17,689)
----------- -----------
$ 292,163 $ 309,964
----------- -----------
Long-Term Debt of Subsidiary Companies (Notes 8 and
11):
First mortgage bonds:
Maturing 1995 through 1999--5 1/4% to 7%.......... $ 818,000 $ 818,000
Maturing 2000 through 2009--5.30% to 10 3/8%...... 2,220,500 2,204,600
Maturing 2010 through 2019--5.85% to 10 5/8%...... 1,106,000 1,106,000
Maturing 2020 through 2023--7 3/4% to 9 7/8%...... 1,870,000 1,870,000
----------- -----------
$ 6,014,500 $ 5,998,600
Sinking fund debentures, due 1999 through 2011--
2 3/4% to 7 5/8%................................... 112,593 120,185
Pollution control obligations, due 2004 through
2014--5 7/8% to 11 3/8%............................ 337,200 353,200
Other long-term debt................................ 1,451,449 1,598,625
Current maturities of long-term debt included in
current liabilities................................ (395,554) (446,724)
Unamortized net debt discount and premium (Note 1).. (66,982) (73,124)
----------- -----------
$ 7,453,206 $ 7,550,762
----------- -----------
$13,701,643 $13,724,064
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
20
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS (NOTE 1)
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Balance at Beginning of Year....................... $549,152 $847,186 $ 893,702
Add--Net income.................................... 354,934 46,388 443,442
-------- -------- ----------
$904,086 $893,574 $1,337,144
-------- -------- ----------
Deduct--
Cash dividends declared on common stock......... $342,561 $341,683 $ 489,768
Other capital stock transactions--net........... 554 2,739 190
-------- -------- ----------
$343,115 $344,422 $ 489,958
-------- -------- ----------
Balance at End of Year............................. $560,971 $549,152 $ 847,186
======== ======== ==========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
21
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS (NOTE 1)
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Cash Flow From Operating Activities:
Net income............................. $ 354,934 $ 46,388 $ 443,442
Adjustments to reconcile net income to
net cash provided by operating activ-
ities:
Depreciation and amortization........ 929,365 911,139 874,156
Deferred income taxes and investment
tax credits--net.................... 126,281 84,500 109,850
Cumulative effect of change in ac-
counting for income taxes........... -- (9,738) --
Equity component of allowance for
funds used during construction...... (22,628) (20,618) (19,960)
Provisions for revenue refunds and
related interest.................... 37,548 1,354,197 73,370
Revenue refunds and related interest. (1,221,650) (190,723) (248,360)
Recovery/(deferral) of regulatory
assets/deferred carrying charges--
net................................. 15,453 (432,948) 3,330
Provisions/(payments) for liability
for early retirement and separation
costs--net.......................... 33,580 (1,816) 27,814
Net effect on cash flows of changes
in:
Receivables........................ 114,215 (157,405) 70,776
Coal and fuel oil.................. 2,880 215,382 (111,333)
Materials and supplies............. 18,102 1,834 1,990
Accounts payable adjusted for nu-
clear fuel lease principal pay-
ments and early retirement and
separation costs--net............. 116,565 278,946 315,822
Accrued interest and taxes......... 70,531 (39,234) (85,633)
Other changes in certain current
assets and liabilities............ (54,653) (6,637) (9,031)
Other--net........................... 133,325 109,361 (52,433)
----------- ----------- -----------
$ 653,848 $ 2,142,628 $ 1,393,800
----------- ----------- -----------
Cash Flow From Investing Activities:
Construction expenditures.............. $ (739,679) $ (842,591) $ (995,881)
Nuclear fuel expenditures.............. (257,264) (261,370) (220,347)
Equity component of allowance for
funds used during construction........ 22,628 20,618 19,960
Contributions to nuclear
decommissioning funds................. (132,550) (132,550) (123,573)
Investment in subsidiary companies..... (49) -- (268)
Other cash investments and special de-
posits................................ 621,987 (619,349) 23,853
----------- ----------- -----------
$ (484,927) $(1,835,242) $(1,296,256)
----------- ----------- -----------
Cash Flow From Financing Activities:
Issuance of securities--
Long-term debt........................ $ 546,289 $ 1,927,296 $ 1,962,737
Capital stock......................... 81,037 80,585 15,568
Retirement and redemption of securi-
ties--
Long-term debt........................ (703,930) (1,900,540) (1,214,730)
Capital stock......................... (17,709) (93,081) (50,069)
Deposits and securities held for re-
tirement and redemption of securi-
ties.................................. 3,191 241,731 (245,028)
Premium paid on early redemption of
long-term debt........................ (4,564) (78,395) (10,809)
Cash dividends paid on common stock.... (342,322) (341,505) (563,953)
Proceeds from sale/leaseback of nu-
clear fuel............................ 306,649 204,254 190,830
Nuclear fuel lease principal payments.. (209,689) (245,968) (245,877)
Increase in short-term borrowings...... 1,200 350 3,600
----------- ----------- -----------
$ (339,848) $ (205,273) $ (157,731)
----------- ----------- -----------
Increase (Decrease) In Cash and Tempo-
rary Cash Investments.................. $ (170,927) $ 102,113 $ (60,187)
Cash and Temporary Cash Investments at
Beginning of Year...................... 247,862 145,749 205,936
----------- ----------- -----------
Cash and Temporary Cash Investments at
End of Year............................ $ 76,935 $ 247,862 $ 145,749
=========== =========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
22
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Corporate Structure and Basis of Presentation. Unicom was incorporated in
January 1994, and became the parent corporation of ComEd and Unicom Enterprises
in a corporate restructuring that became effective on September 1, 1994.
Previously, Unicom Enterprises was a wholly-owned subsidiary of ComEd. The
restructuring was accounted for by the pooling-of-interests method. Under this
method, the assets, liabilities and ownership interests of each of the
companies are combined at their existing recorded amounts as of the
restructuring date, and the financial statements are presented herein as if the
restructuring took place as of the earliest period shown. In the restructuring,
each of the 214,185,572 outstanding shares of ComEd common stock, par value
$12.50 per share, was converted into one fully paid and non-assessable share of
Unicom common stock, without par value. ComEd, an electric utility, is the
principal subsidiary of Unicom. Unicom Enterprises is an unregulated subsidiary
engaged, through Unicom Thermal, in energy service activities. Unicom Thermal
will provide district cooling services to office and other buildings from
central locations in the city of Chicago. Unicom Thermal expects to begin
serving customers in the summer of 1995.
The consolidated financial statements include the accounts of Unicom, ComEd,
the Indiana Company and the consolidated accounts of Unicom Enterprises. All
significant intercompany transactions have been eliminated. ComEd's investments
in other subsidiary companies, which are not material in relation to ComEd's
financial position and results of operations, are accounted for in accordance
with the equity method of accounting. The preferred and preference stocks,
common stock purchase warrants, first mortgage bonds and other debt obligations
of ComEd and the Indiana Company were unchanged in the restructuring and remain
outstanding securities and obligations of ComEd and the Indiana Company.
Regulation. ComEd is subject to regulation as to accounting, service and
ratemaking policies and practices by the ICC and FERC. ComEd's accounting
policies and the accompanying consolidated financial statements conform to
generally accepted accounting principles applicable to rate-regulated
enterprises and reflect the effects of the ratemaking process. Such effects
concern mainly the time at which various items enter into the determination of
net income in order to follow the principle of matching costs and revenues.
Customer Receivables and Revenues. ComEd is engaged principally in the
production, purchase, transmission, distribution and sale of electricity to a
diverse base of residential, commercial and industrial customers. ComEd's
electric service territory has an area of approximately 11,540 square miles and
an estimated population of approximately 8.2 million as of December 31, 1994,
approximately 8.1 million as of December 31, 1993 and approximately 8.2 million
as of December 31, 1992. It includes the city of Chicago, an area of about 225
square miles with an estimated population of three million from which ComEd
derived approximately one-third of its ultimate consumer revenues in 1994.
ComEd had approximately 3.3 million electric customers at December 31, 1994.
Depreciation and Decommissioning. Depreciation is provided on the straight-
line basis by amortizing the cost of depreciable plant and equipment over
estimated composite service lives. The 1991 ICC rate order directed ComEd to
depreciate non-nuclear plant and equipment at annual rates developed for each
class of plant based on their composite service lives (unchanged by the Rate
Order). Provisions for depreciation were at average annual rates of 3.13%,
3.12% and 3.12% of average depreciable utility plant and equipment for the
years 1994, 1993 and 1992, respectively. The annual rate for nuclear plant and
equipment is 2.88%, which excludes separately collected decommissioning costs.
Nuclear plant decommissioning costs are accrued over the expected service
lives of the related nuclear generating units. The accrual is based on an
annual levelized cost of the unrecovered portion of
23
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
estimated decommissioning costs which are escalated for expected inflation to
the expected time of decommissioning and are net of expected earnings on the
trust funds. See "Decommissioning" under "Management's Discussion and Analysis
of Financial Condition and Results of Operations," subcaption "Results of
Operations," for a discussion of questions raised by the staff of the SEC and a
FASB review regarding the electric utility industry method of accounting for
decommissioning costs. Dismantling is expected to occur relatively soon after
the end of the useful life of each related generating station. The accrual for
decommissioning is based on the prompt removal method authorized by the NRC
guidelines. ComEd's twelve operating units have estimated remaining service
lives ranging from 11 to 33 years. ComEd's first nuclear unit, Dresden Unit 1,
is retired and will be dismantled upon the retirement of the remaining units at
that station, which is consistent with the regulatory treatment for the related
decommissioning costs.
Based on ComEd's most recent study, decommissioning costs, including the cost
of decontamination and dismantling but excluding a contingency allowance, are
estimated to aggregate $3.5 billion in current-year (1995) dollars. ComEd
estimates that it will expend approximately $15 billion, excluding any
contingency allowance, for decommissioning costs primarily during the period
from 2007 to 2032. Such costs are expected to be funded by the external
decommissioning trust funds which ComEd established in compliance with Illinois
law and into which ComEd has been making annual contributions. Contingency
allowances used in decommissioning cost estimates provide for currently
unforeseeable costs that are likely to occur after decommissioning begins and
generally range from 20% to 25% of the identifiable costs. Future
decommissioning cost estimates may be significantly affected by the adoption of
or changes to NRC regulations.
On January 9, 1995, the ICC issued its Rate Order in the proceedings relating
to ComEd's February 10, 1994 rate increase request. In the Rate Order, the ICC
determined that ComEd's annual nuclear plant decommissioning cost collections
from its ratepayers should be reduced from the $127 million previously
authorized in the 1991 ICC rate order to $112.7 million. The $112.7 million
annual collection amount primarily resulted from the ICC's decision to exclude
from ComEd's costs subject to collection a contingency allowance. However, the
Rate Order establishes a rider which will allow annual adjustments to
decommissioning cost collections outside of the context of a traditional rate
proceeding. Such rider is intended to allow adjustments in decommissioning cost
recoveries from ratepayers as changes in cost estimates become identifiable.
Under Illinois law, decommissioning cost collections are required to be
deposited in external trust funds; and, consequently, such collections do not
add to the cash flows available for general corporate purposes.
As a result of the Rate Order, beginning January 14, 1995, the effective date
of the order, ComEd will collect and accrue $112.7 million annually for
decommissioning costs. The assumptions used to calculate the $112.7 million
decommissioning cost accrual include: the decommissioning cost estimate of $3.5
billion in current-year (1995) dollars, after-tax earnings on the tax-qualified
and nontax-qualified decommissioning funds of 7.30% and 6.26%, respectively, as
well as an escalation rate for future decommissioning costs of 5.3%. The annual
accrual of $112.7 million provided over the lives of the nuclear plants,
coupled with the expected fund earnings and amounts previously recovered in
rates, is expected to aggregate approximately $15 billion.
For the twelve operating nuclear units, decommissioning costs are recorded as
portions of depreciation expense and accumulated provision for depreciation on
the Statements of Consolidated Income and the Consolidated Balance Sheets,
respectively. As of December 31, 1994, the total decommissioning costs included
in the accumulated provision for depreciation were approximately $988 million.
For ComEd's retired nuclear unit, Dresden Unit 1, the total estimated liability
at December 31, 1994 in current-year (1995) dollars of approximately $235
million was recorded on the Consolidated
24
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Balance Sheets as a noncurrent liability and the unrecovered portion of the
liability of approximately $141 million was recorded as a regulatory asset.
Illinois law requires ComEd to establish external trusts to hold
decommissioning funds, and the ICC has approved ComEd's funding plan which
provides for annual contributions of current accruals and ratable contributions
of past accruals over the remaining service lives of the nuclear plants. At
December 31, 1994, the past accruals that are required to be contributed to the
external trusts aggregate $201 million. The fair value of funds accumulated in
the external trusts at December 31, 1994 was approximately $881 million which
includes pre-tax unrealized appreciation of $4 million. The earnings on the
external trusts accumulate in the fund balance and in the accumulated provision
for depreciation. Such earnings on the external trust funds for the years 1994,
1993 and 1992, which have been recorded as a component of depreciation expense
on the Statements of Consolidated Income, were $37,519,000, $40,828,000 and
$32,443,000, respectively.
Amortization of Nuclear Fuel. The cost of nuclear fuel is amortized to fuel
expense based on the quantity of heat produced using the unit of production
method. As authorized by the ICC, provisions for spent nuclear fuel disposal
costs have been recorded at a level required to recover the fee payable on
current nuclear-generated and sold electricity and the current interest accrual
on the one-time fee payable to the DOE for nuclear generation prior to April 7,
1983. The one-time fee and interest thereon have been recovered and the current
fee and current interest on the one-time fee are currently being recovered
through the fuel adjustment clause. See Note 10 for further information
concerning the disposal of spent nuclear fuel, the one-time fee and the current
interest accrual on the one-time fee. Nuclear fuel expenses, including leased
fuel costs and provisions for spent nuclear fuel disposal costs, for the years
1994, 1993 and 1992 were $358,027,000, $385,894,000 and $366,821,000,
respectively.
Income Taxes. Deferred income taxes are provided for income and expense items
recognized for financial accounting purposes in periods that differ from those
for income tax purposes. Income taxes deferred in prior years are charged or
credited to income as the book/tax timing differences reverse. Prior years'
deferred investment tax credits are amortized through credits to income
generally over the lives of the related property. Income tax credits resulting
from interest charges applicable to nonoperating activities, principally
construction, are classified as other income.
For additional information relating to income taxes, including information
related to the adoption in January 1993 of SFAS No. 109, Accounting for Income
Taxes, which requires an asset and liability approach to accounting for income
taxes, see Note 14. In addition, see "Income Taxes" under the subcaption
"Results of Operations," in "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
AFUDC. In accordance with the uniform systems of accounts prescribed by
regulatory authorities, ComEd capitalizes AFUDC, compounded semiannually, which
represents the estimated cost of funds used to finance its construction
program. The equity component of AFUDC is recorded on an after-tax basis and
the borrowed funds component of AFUDC is recorded on a pre-tax basis. The
average annual capitalization rates for the years 1994, 1993 and 1992 were
9.85%, 10.05% and 10.31%, respectively. AFUDC does not contribute to the
current cash flow of Unicom or ComEd. For additional information regarding
AFUDC, see Note 14.
Interest. Total interest costs incurred on debt, leases and other obligations
for the years 1994, 1993 and 1992 were $729,765,000, $778,653,000 and
$777,122,000, respectively.
Debt Discount, Premium and Expense. Discount, premium and expense on long-
term debt of subsidiary companies are being amortized over the lives of the
respective issues.
25
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Loss on Reacquired Debt. Consistent with regulatory treatment, the net loss
from ComEd's reacquisition of first mortgage bonds, sinking fund debentures and
pollution control obligations prior to their scheduled maturity dates is
deferred and amortized over the lives of the long-term debt issued to finance
the reacquisition.
Deferred Unrecovered Energy Costs. The uniform fuel adjustment clause adopted
by the ICC provides for the recovery of changes in fossil and nuclear fuel
costs and the energy portion of purchased power costs as compared to the fuel
and purchased energy costs included in ComEd's base rates. As authorized by the
ICC, ComEd has recorded under or overrecoveries of allowable fuel and energy
costs which, under the clause, are recoverable or refundable in subsequent
months. Deferred unrecovered energy costs also include amounts to be recovered
through the fuel adjustment clause for assessments by the DOE to fund a portion
of the cost for the decontamination and decommissioning of three nuclear
enrichment facilities previously operated by the DOE. As of December 31, 1994
and 1993, an asset of approximately $191 million and $202 million,
respectively, was recorded, of which the current portion of approximately $15
million has been included in current assets on the Consolidated Balance Sheets.
As of December 31, 1994 and 1993, a corresponding liability of approximately
$165 million and $177 million, respectively, was recorded in other noncurrent
liabilities and approximately $15 million and $29 million, respectively, was
recorded in other current liabilities.
At December 31, 1994 and 1993, ComEd had unrecovered fuel costs in the form
of coal reserves of approximately $498 million and $517 million, respectively.
In prior years, ComEd's commitments for the purchase of coal exceeded its
requirements. Rather than take all the coal it was required to take, ComEd
agreed to purchase the coal in place in the form of coal reserves. ComEd has
been allowed to recover from its customers the costs of the coal reserves
through its fuel adjustment clause as the coal is used for the generation of
electricity. ComEd expects to recover the costs of the coal reserves by the
year 2007. However, ComEd is not earning a return on the expenditures for coal
reserves prior to the coal reserves being used for the generation of
electricity by including the coal reserves in rate base. Unrecovered fuel costs
expected to be recovered within one year amounting to approximately $31 million
and $24 million at December 31, 1994 and 1993, respectively, have been included
on the Consolidated Balance Sheets in current assets as deferred unrecovered
energy costs. See Note 19 for additional information concerning ComEd's coal
commitments.
Regulatory Assets and Liabilities. Regulatory assets include the unamortized
portions of certain rate case and consultant costs associated with the prudency
audits of ComEd's Byron and Braidwood stations which the ICC allowed to be
deferred and amortized for ratemaking purposes, consultant costs associated
with the prudency audits of certain other significant plant addition audit
costs which the ICC allowed to be deferred and amortized for ratemaking
purposes, unamortized deferred depreciation related to Byron Unit 1 which the
ICC allowed to be deferred and amortized over the remaining life of the unit,
unamortized losses on ComEd's reacquired debt, unamortized deferred carrying
charges associated with the Units which the ICC allowed to be deferred and
amortized for ratemaking purposes, a regulatory asset for the unrecovered
portion of nuclear decommissioning costs for ComEd's Dresden Unit 1 and a
regulatory asset related to income taxes recorded in compliance with SFAS No.
109, which was adopted in January 1993. A regulatory liability related to
income taxes was also recorded in compliance with SFAS No. 109.
For additional information relating to deferred carrying charges, see
"Deferred Carrying Charges," under the subcaption "Results of Operations," in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Certain Investments. Effective January 1, 1994, SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities, was adopted. SFAS No. 115
addresses the accounting and reporting for
26
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
investments in equity securities that have readily determinable fair values and
for all investments in debt securities. For additional information, see Note
11.
Reclassifications. Certain prior year amounts have been reclassified to
conform with current period presentation. These reclassifications had no effect
on net income.
Statements of Consolidated Cash Flows. For purposes of the Statements of
Consolidated Cash Flows, temporary cash investments, generally investments
maturing within three months at the time of purchase, are considered to be cash
equivalents. Supplemental information required by SFAS No. 95 for the years
1994, 1993 and 1992 was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Supplemental Cash Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized).......... $645,658 $677,682 $652,501
Income taxes (net of refunds)................. $ (4,923) $103,014 $238,052
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Capital lease obligations of subsidiary
companies incurred............................. $309,997 $215,751 $193,677
</TABLE>
(2) SETTLEMENTS RELATING TO CERTAIN RATE MATTERS
Under the Rate Matters Settlement, effective as of November 4, 1993, ComEd
reduced its rates by approximately $339 million annually and commenced
refunding approximately $1.26 billion (including revenue taxes), plus interest
at five percent on the unpaid balance, through temporarily reduced rates over
an initial refund period which ended in November 1994 (to be followed by a
reconciliation period of no more than five months). ComEd had previously
deferred the recognition of revenues during 1993 as a result of developments in
the proceedings related to the 1991 ICC rate order, which resulted in a
reduction to 1993 net income of approximately $160 million or $0.75 per common
share. The recording of the effects of the Rate Matters Settlement in October
1993 reduced 1993 net income by approximately $292 million or $1.37 per common
share, in addition to the approximately $160 million effect of the deferred
recognition of revenues and after the partially offsetting effect of recording
approximately $269 million or $1.26 per common share in deferred carrying
charges, net of income taxes, authorized in the Remand Order. The deferred
recognition of revenues was eliminated in October 1993 at the time the
provisions for revenue refunds related to the Rate Matters Settlement, which
reflected those deferred revenues, were recorded.
Under the Fuel Matters Settlement, effective as of December 2, 1993, ComEd
commenced paying approximately $108 million (including revenue taxes) to its
customers through temporarily reduced collections under its fuel adjustment
clause over a twelve-month period which ended in November 1994. The recording
of the effects of the Fuel Matters Settlement in October 1993 reduced 1993 net
income by approximately $62 million or $0.29 per common share.
(3) OTHER RATE MATTERS
On January 9, 1995, the ICC issued its Rate Order in the proceedings relating
to ComEd's February 10, 1994 rate increase request. The Rate Order provides,
among other things, for (i) an increase in ComEd's total revenues of
approximately $301.8 million (excluding add-on revenue taxes) or 5.2%, on an
annual basis, including a $303.2 million increase in base rates, (ii) the
collection of municipal franchise costs as an adder to base rates until May 1,
1995, when such costs will be collected prospectively on an
27
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
individual municipality basis through a rider, and (iii) the use of a rider,
with annual review proceedings, to pass on to ratepayers increases or decreases
in estimated costs associated with the decommissioning of ComEd's nuclear
generating units. See Note 1 under "Depreciation and Decommissioning" for
information related to the level of decommissioning cost collections allowed in
the Rate Order. The rates provided in the Rate Order became effective on
January 14, 1995; however, they are being collected subject to refund as a
result of subsequent judicial action. ComEd expects the Rate Order to be
appealed by the intervenors in the rate proceeding.
In the Rate Order, the ICC determined that the Units were 100% "used and
useful" and that the previously determined reasonable costs of such Units, as
depreciated, should be included in full in ComEd's rate base.
(4) AUTHORIZED SHARES AND VOTING RIGHTS OF CAPITAL STOCK
At December 31, 1994, Unicom's authorized shares consisted of 400,000,000
shares of common stock. The authorized shares of ComEd preferred and preference
stocks at December 31, 1994 were: preference stock--23,423,205 shares; $1.425
convertible preferred stock--100,323 shares; and prior preferred stock--850,000
shares. The preference and prior preferred stocks are issuable in series and
may be issued with or without mandatory redemption requirements. Holders of
outstanding Unicom shares are entitled to one vote for each share held on each
matter submitted to a vote of such shareholders; and holders of outstanding
ComEd shares are entitled to one vote for each share held on each matter
submitted to a vote of such shareholders. All such shares have the right to
cumulate votes in elections for the directors of the corporation which issued
the shares.
(5) COMMON STOCK
At December 31, 1994, shares of Unicom common stock were reserved for the
following purposes:
<TABLE>
<S> <C>
Long-Term Incentive Plan........................................ 4,000,000
Employee Stock Purchase Plan.................................... 1,117,163
Employee Savings and Investment Plan............................ 480,403
---------
5,597,566
=========
</TABLE>
Common stock for the years 1994, 1993 and 1992 was issued as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Shares of Common Stock Issued--
Employee Stock Purchase Plan........................ 305,205 268,594 374,815
Employee Savings and Investment Plan................ 85,400 153,400 235,900
Conversion of $1.425 convertible preferred stock.... 185,041 22,375 16,221
Conversion of warrants.............................. 13,274 1,374 1,300
------- ------- -------
588,920 445,743 628,236
======= ======= =======
<CAPTION>
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Amount of Common Stock Issued......................... $14,781 $12,211 $16,122
======= ======= =======
</TABLE>
At December 31, 1994 and 1993, 83,751 and 128,699 ComEd common stock purchase
warrants, respectively, were outstanding. The warrants entitle the holders to
convert such warrants into common stock of ComEd at a conversion rate of one
share of common stock for three warrants. During 1994, 1993 and 1992, $558,000,
$53,000 and $48,000 of warrants, respectively, were converted into ComEd common
stock.
28
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(6) COMED PREFERRED AND PREFERENCE STOCKS WITHOUT MANDATORY REDEMPTION
REQUIREMENTS
During 1994, 3,000,000 shares of ComEd preference stock without mandatory
redemption requirements were issued and no shares of ComEd preferred or
preference stocks without mandatory redemption requirements were redeemed. No
shares of ComEd preferred or preference stocks without mandatory redemption
requirements were issued or redeemed during 1993 or 1992. The series of ComEd
preference stock without mandatory redemption requirements outstanding at
December 31, 1994 are summarized as follows:
<TABLE>
<CAPTION>
INVOLUNTARY
SHARES AGGREGATE REDEMPTION LIQUIDATION
SERIES OUTSTANDING STATED VALUE PRICE(A) PRICE(A)
------ ----------- ------------ ---------- -----------
(THOUSANDS
OF DOLLARS)
<S> <C> <C> <C> <C>
$1.90 4,249,549 $106,239 $ 25.25 $25.00
$2.00 2,000,000 51,560 $ 26.04 $25.00
$1.96 2,000,000 52,440 $ 27.11 $25.00
$7.24 750,000 74,340 $101.00 $99.12
$8.40 750,000 74,175 $101.00 $98.90
$8.38 750,000 73,566 $100.16 $98.09
$2.425 3,000,000 72,637 $ 25.00 $25.00
---------- --------
13,499,549 $504,957
========== ========
</TABLE>
--------
(a) Per share plus accrued and unpaid dividends, if any.
The outstanding shares of ComEd's $1.425 convertible preferred stock are
convertible at the option of the holders thereof, at any time, into common
stock of ComEd at the rate of 1.02 shares of common stock for each share of
convertible preferred stock, subject to future adjustment. The convertible
preferred stock may be redeemed by ComEd at $42 per share, plus accrued and
unpaid dividends, if any. The involuntary liquidation price of the $1.425
convertible preferred stock is $31.80 per share, plus accrued and unpaid
dividends, if any. During 1994, 1993 and 1992, 186,626 shares, 21,942 shares
and 15,911 shares, respectively, of the convertible preferred stock were
converted into ComEd common stock.
(7) COMED PREFERENCE STOCK SUBJECT TO MANDATORY REDEMPTION REQUIREMENTS
During 1994 and 1992, no shares of ComEd preference stock subject to
mandatory redemption requirements were issued. During 1993, 700,000 shares of
ComEd preference stock subject to mandatory redemption requirements were
issued. The series of ComEd preference stock subject to mandatory redemption
requirements outstanding at December 31, 1994 are summarized as follows:
<TABLE>
<CAPTION>
SHARES AGGREGATE
SERIES OUTSTANDING STATED VALUE OPTIONAL REDEMPTION PRICE(A)
-------------- ----------- ------------ --------------------------------------------------
(THOUSANDS
OF DOLLARS)
<S> <C> <C> <C>
$8.20 285,705 $ 28,571 $103 through October 31, 1997; and $101 thereafter
$8.40 Series B 390,000 38,737 $101
$8.85 337,500 33,750 $103 through July 31, 1998; and $101 thereafter
$9.25 750,000 75,000 $103 through July 31, 1999; and $101 thereafter
$9.00 650,000 64,431 Non-callable
$6.875 700,000 69,475 Non-callable
--------- --------
3,113,205 $309,964
========= ========
</TABLE>
--------
(a) Per share plus accrued and unpaid dividends, if any.
29
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
The annual sinking fund requirements and sinking fund and involuntary
liquidation prices per share of the outstanding series of ComEd preference
stock subject to mandatory redemption requirements are summarized as follows:
<TABLE>
<CAPTION>
SINKING
FUND INVOLUNTARY
SERIES ANNUAL SINKING FUND REQUIREMENT PRICE(A) LIQUIDATION PRICE(A)
--------- ----------------------------------- -------- -------------------
<S> <C> <C> <C>
$8.20 35,715 shares $100 $100.00
$8.40
Series B 30,000 shares(b) $100 $ 99.326
$8.85 37,500 shares $100 $100.00
$9.25 75,000 shares $100 $100.00
$9.00 130,000 shares beginning in 1996(b) $100 $ 99.125
$6.875 (c) $100 $ 99.25
</TABLE>
--------
(a) Per share plus accrued and unpaid dividends, if any.
(b) ComEd has a non-cumulative option to increase the annual sinking fund
payment on each sinking fund redemption date to retire an additional number
of shares, not in excess of the sinking fund requirement, at the applicable
redemption price.
(c) All shares are required to be redeemed on May 1, 2000.
Annual remaining sinking fund requirements through 1999 on ComEd preference
stock outstanding at December 31, 1994 will aggregate $17,822,000 in 1995,
$30,822,000 in 1996, $30,822,000 in 1997, $30,822,000 in 1998 and $30,822,000
in 1999. During 1994, 1993 and 1992, 177,085 shares, 1,835,155 shares and
793,132 shares, respectively, of ComEd preference stock subject to mandatory
redemption requirements were reacquired to meet sinking fund requirements.
Sinking fund requirements due within one year are included in current
liabilities.
On November 1, 1992, ComEd redeemed 300,000 shares of its $2.875 Series of
preference stock at the optional redemption price of $25 per share and 75,000
shares of its $11.70 Series of preference stock at the optional redemption
price of $100 per share, plus accrued and unpaid dividends.
On June 28, 1993, ComEd redeemed the remaining 170,810 shares of its $2.875
Series of preference stock and all 1,050,000 shares of its $2.375 Series of
preference stock, both at the optional redemption price of $25.25 per share,
plus accrued and unpaid dividends.
On November 1, 1993, ComEd redeemed the remaining 75,000 shares of its $11.70
Series of preference stock (150,000 shares had been redeemed on August 1, 1993
at the optional redemption price of $105 per share, plus accrued and unpaid
dividends). Of the remaining 75,000 shares, 37,500 shares were redeemed to meet
the November 1, 1993 mandatory sinking fund requirement and 37,500 shares were
redeemed as a permitted optional sinking fund payment, both at the sinking fund
redemption price of $100 per share, plus accrued and unpaid dividends.
On November 1, 1993, ComEd redeemed all 210,000 shares of its $9.30 Series of
preference stock, of which 70,000 shares were redeemed at the optional
redemption price of $101.03 per share, plus accrued and unpaid dividends,
70,000 shares were redeemed to meet the November 1, 1993 mandatory sinking fund
requirement and 70,000 shares were redeemed as a permitted optional sinking
fund payment, the latter two at the sinking fund redemption price of $100 per
share, plus accrued and unpaid dividends.
(8) LONG-TERM DEBT OF SUBSIDIARY COMPANIES
Sinking fund requirements and scheduled maturities remaining through 1999 for
ComEd and the Indiana Company's first mortgage bonds, sinking fund debentures
and other long-term debt outstanding at December 31, 1994, after deducting
sinking fund debentures reacquired for satisfaction of future sinking fund
requirements, are summarized as follows: 1995--$395,554,000; 1996--
$331,429,000; 1997--$689,397,000; 1998--$350,017,000; and 1999--$152,445,000.
30
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
At December 31, 1994, ComEd's outstanding first mortgage bonds maturing
through 1999 were as follows:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
SERIES ----------------------
------ (THOUSANDS OF DOLLARS)
<S> <C>
6 1/8% due May 15, 1995............................ $103,000
5 1/4% due April 1, 1996........................... 50,000
5 3/4% due November 1, 1996........................ 50,000
5 3/4% due December 1, 1996........................ 50,000
7% due February 1, 1997............................ 150,000
5 3/8% due April 1, 1997........................... 50,000
6 1/4% due October 1, 1997......................... 60,000
6 1/4% due February 1, 1998........................ 50,000
6% due March 15, 1998.............................. 130,000
6 3/4% due July 1, 1998............................ 50,000
6 3/8% due October 1, 1998......................... 75,000
--------
$818,000
========
</TABLE>
Other ComEd long-term debt outstanding at December 31, 1994 is summarized as
follows:
<TABLE>
<CAPTION>
PRINCIPAL
DEBT SECURITY AMOUNT INTEREST RATE PROVISIONS
------------- ---------- -------------------------------------------
(THOUSANDS
OF
DOLLARS)
<S> <C> <C>
Notes:
Medium Term Notes, Series 1N
due various dates through
April 1, 1998 $ 73,500 Interest rates ranging from 9.27% to 9.65%
Medium Term Notes, Series 2N
due various dates through
July 1, 1996 24,000 Interest rates ranging from 9.79% to 9.874%
Medium Term Notes, Series 3N
due various dates through
October 15, 2004 322,250 Interest rates ranging from 8.92% to 9.20%
Medium Term Notes, Series 4N
due various dates through
May 15, 1997 46,000 Interest rates ranging from 8.11% to 8.875%
Notes due July 15, 1995 100,000 Fixed interest rate of 5.50%
Notes due February 15, 1997 150,000 Fixed interest rate of 7.00%
Notes due July 15, 1997 100,000 Fixed interest rate of 6.50%
Notes due October 15, 2005 235,000 Fixed interest rate of 6.40%
----------
$1,050,750
----------
Long-Term Notes Payable to Banks:
Notes due July 31, 1995 $ 150,000 Prevailing interest rates averaging 6.28125%
at December 31, 1994
Note due January 9, 1996 100,000 Prevailing interest rate of 6.6875%
at December 31, 1994
Note due June 1, 1997 150,000 Prevailing interest rate of 5.675%
at December 31, 1994
----------
$ 400,000
----------
Purchase Contract Obligations:
Woodstock due January 2, 1997 $ 186 Fixed interest rate of 4.50%
Hinsdale due April 30, 2005 513 Fixed interest rate of 3.00%
----------
$ 699
----------
$1,451,449
==========
</TABLE>
31
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Long-term debt maturing within one year has been included in current
liabilities.
ComEd's outstanding first mortgage bonds are secured by a lien on
substantially all property and franchises, other than expressly excepted
property, owned by ComEd.
In December 1994, ComEd placed in escrow with a trustee sufficient funds to
redeem on March 1, 1995 all of the 10 3/8% Pollution Control Revenue Bonds,
Series 1985 and the 10 5/8% Pollution Control Revenue Bonds, Series 1985
previously issued on its behalf by the Illinois Development Finance Authority,
effecting the extinguishment of such bonds. At December 31, 1994, $141 million
outstanding principal amount of such bonds was not reflected on the
Consolidated Balance Sheets.
(9) LINES OF CREDIT
ComEd had total bank lines of credit of approximately $922 million and unused
bank lines of credit of approximately $915 million at December 31, 1994. Of
that amount, $915 million (of which $175 million expires on October 2, 1995,
$72 million expires in equal quarterly installments commencing on December 31,
1996 and ending on September 30, 1998 and $668 million expires in equal
quarterly installments commencing on December 31, 1997 and ending on September
30, 1999) may be borrowed on secured or unsecured notes of ComEd at various
interest rates. The interest rate is set at the time of a borrowing and is
based on several floating rate bank indices plus a spread which is dependent
upon ComEd's credit ratings, or on a prime interest rate. Amounts under the
remaining lines of credit may be borrowed at prevailing prime interest rates on
unsecured notes of ComEd. Collateral, if required for the borrowings, would
consist of first mortgage bonds issued under and in accordance with the
provisions of ComEd's mortgage. ComEd is obligated to pay commitment fees with
respect to $915 million of such lines of credit.
Unicom Enterprises has a $200 million credit facility which will expire in
1997 of which the entire amount was unused as of December 31, 1994. The credit
facility can be used by Unicom Enterprises to finance investments in
nonregulated energy-related businesses and projects, including Unicom Thermal,
and for general corporate purposes. The credit facility is guaranteed by Unicom
and includes certain covenants with respect to Unicom's and Unicom Enterprises'
operations. Such covenants include, among other things, (i) a requirement that
Unicom and its consolidated subsidiaries maintain a tangible net worth at least
$10 million over that of ComEd and its consolidated subsidiaries, (ii) a
requirement that Unicom's consolidated debt to consolidated capitalization not
exceed 0.65 to 1, (iii) restrictions on the indebtedness for borrowed money
that Unicom (excluding ComEd) and Unicom Enterprises may incur, and (iv) a
requirement that Unicom own 100% of the outstanding stock of Unicom Enterprises
and at least 80% of the outstanding stock of ComEd; and provide that Unicom may
not declare or pay dividends during the continuance of an event of default.
Interest rates for borrowings under the credit facility would be set at the
time of a borrowing and would be based on either a prime interest rate or a
floating rate bank index plus a spread which will vary with the credit rating
of ComEd's outstanding first mortgage bonds.
(10) DISPOSAL OF SPENT NUCLEAR FUEL
Under the Nuclear Waste Policy Act of 1982, the DOE is responsible for the
selection and development of repositories for, and the disposal of, spent
nuclear fuel and high-level radioactive waste. ComEd, as required by that Act,
has signed a contract with the DOE to provide for the disposal of spent nuclear
fuel and high-level radioactive waste from ComEd's nuclear generating stations
beginning not later than January 1998. The contract with the DOE requires ComEd
to pay the DOE a one-time fee applicable to nuclear generation through April 6,
1983 of approximately $277 million, with interest to date
32
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
of payment, and a fee payable quarterly equal to one mill per kilowatthour of
nuclear-generated and sold electricity after April 6, 1983. ComEd has elected
to pay the one-time fee, with interest, just prior to the first scheduled
delivery of spent nuclear fuel to the DOE, which is scheduled to occur not
later than January 1998; however, this delivery schedule is expected to be
delayed significantly. The liability for the one-time fee and the related
interest is reflected in the Consolidated Balance Sheets.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
financial instruments either held or issued and outstanding. The disclosure of
such information does not purport to be a market valuation of Unicom and
subsidiary companies as a whole. The impact of any realized or unrealized gains
or losses related to such financial instruments on the financial position or
results of operations of Unicom and subsidiary companies is primarily dependent
on the treatment authorized under future ComEd ratemaking proceedings.
Investments. Securities included in nuclear decommissioning funds have been
classified and accounted for as "available for sale" securities. The estimated
fair value of the nuclear decommissioning funds, as determined by the trustee,
is based on published market data. The net earnings of the nuclear
decommissioning funds, which are recorded as increases to the accumulated
provision for depreciation (only the realized portion prior to January 1,
1994), for the years 1994, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Gross proceeds from sales of securities....... $ 811,368 $ 388,684 $ 342,854
Less cost based on specific identification.... (811,997) (377,734) (335,105)
--------- --------- ---------
Realized gains (losses) on sales of securi-
ties......................................... $ (629) $ 10,950 $ 7,749
Other realized fund earnings net of expenses.. 38,148 29,878 24,694
--------- --------- ---------
Total realized net earnings of the funds...... $ 37,519 $ 40,828 $ 32,443
Unrealized gains (losses)..................... (57,948) 30,969 8,592
--------- --------- ---------
Total net earnings (losses) of the funds..... $ (20,429) $ 71,797 $ 41,035
========= ========= =========
</TABLE>
Financial instruments included in investments and other property, subcaption
other, at a cost of approximately $5 million and $4 million at December 31,
1994 and 1993, respectively, are not material in relation to other financial
instruments of Unicom and subsidiary companies; therefore, an estimate of the
fair value of these instruments has not been made.
Current Assets. Cash, temporary cash investments and other cash investments,
which include U.S. Government Obligations and other short-term marketable
securities, and special deposits, which primarily includes cash deposited for
the redemption, refund or discharge of debt securities, are stated at cost,
which approximates their fair value because of the short maturity of these
instruments. The securities included in these categories have been classified
as "available for sale" securities.
Capitalization. The estimated fair values of ComEd preferred and preference
stocks (without and subject to mandatory redemption requirements) and long-term
debt of subsidiary companies, including the current portions thereof, have been
obtained from an independent consultant. Estimated fair values exclude accrued
interest and preferred and preference stock dividends. Long-term notes payable
to banks in the amounts of $400 million and $250 million at December 31, 1994
and 1993, respectively, for which interest is paid at prevailing rates, are
included in the consolidated financial statements at cost, which approximates
their fair value. Purchase contract obligations included in long-term debt at a
cost of approximately $1 million at December 31, 1994 and 1993, are not
material in relation to other financial
33
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
instruments of Unicom and subsidiary companies; therefore, an estimate of the
fair value of these instruments has not been made.
Current Liabilities. The carrying value of notes payable, which consists of
bank loans maturing within one year, approximates the fair value because of the
short maturity of these instruments. See "Capitalization" above for a
discussion of the fair value of the current portion of long-term debt and
redeemable preference stock.
Other Noncurrent Liabilities. The carrying value of accrued spent nuclear
fuel disposal fee and related interest represents the settlement value as of
December 31, 1994 and 1993; therefore, the carrying value is equal to the fair
value.
Estimated Fair Values of Financial Instruments. The estimated fair values of
financial instruments other than those instruments reflected in the
consolidated financial statements at cost which approximates fair value, as of
December 31, 1994 and 1993, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
--------------------------------- --------------------------------
UNREALIZED
GAINS UNREALIZED
COST BASIS (LOSSES) FAIR VALUE COST BASIS GAINS FAIR VALUE
---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Nuclear Decommissioning
Funds:
Short-term
investments.......... $ 65,203 $ 106 $ 65,309 $ 22,030 $ 4 $ 22,034
U.S. Government and
Agency issues........ 94,450 (562) 93,888 25,113 14 25,127
Municipal bonds....... 478,074 (7,301) 470,773 598,559 49,851 648,410
Common stock.......... 220,395 9,069 229,464 48,282 10,974 59,256
Other................. 18,788 2,722 21,510 12,857 1,139 13,996
---------- --------- ---------- ---------- -------- ----------
$ 876,910 $ 4,034 $ 880,944 $ 706,841 $ 61,982 $ 768,823
========== ========= ========== ========== ======== ==========
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
--------------------------------- --------------------------------
CARRYING UNREALIZED CARRYING UNREALIZED
VALUE (GAINS) FAIR VALUE VALUE LOSSES FAIR VALUE
---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Capitalization
(including current
portion):
Preferred and
preference stocks of
Commonwealth Edison
Company.............. $ 818,111 $ (64,443) $ 753,668 $ 769,098 $ 7,015 $ 776,113
Long-term debt of
subsidiary companies. $7,448,236 $(450,429) $6,997,807 $7,746,734 $412,241 $8,158,975
</TABLE>
At December 31, 1994, the debt securities held by the nuclear decommissioning
funds had the following maturities:
<TABLE>
<CAPTION>
COST FAIR
BASIS VALUE
-------- --------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Within 1 year........................................... $ 65,203 $ 65,309
1 through 5 years....................................... 57,463 56,949
5 through 10 years...................................... 211,690 211,645
Over 10 years........................................... 299,816 292,379
</TABLE>
34
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(12) PENSION BENEFITS
ComEd and the Indiana Company have non-contributory defined benefit pension
plans which cover all regular employees. Benefits under these plans reflect
each employee's compensation, years of service and age at retirement. Funding
is based upon actuarially determined contributions that take into account the
amount deductible for income tax purposes and the minimum contribution required
under the Employee Retirement Income Security Act of 1974, as amended.
Actuarial valuations were determined as of January 1, 1994 and 1993.
During 1992, ComEd and the Indiana Company implemented a workforce reduction
program designed to reduce the management workforce. This program included an
early retirement program and voluntary and involuntary separation plans. The
early retirement program resulted in the recognition during the second half of
1992 of an additional $26 million of pension cost and an increase to the
projected benefit obligation of that $26 million plus an additional $39 million
of unrecognized net loss. ComEd and the Indiana Company also recognized in 1992
a charge to expense of $11 million primarily related to the cost of the
separation plans. The total charge to income of $37 million in 1992 was
approximately $23 million after reflecting income tax effects.
During 1994, an early retirement program was implemented for ComEd and the
Indiana Company employees eligible to retire or who would become eligible to
retire after December 31, 1993 and before April 1, 1995. During 1994, 671
employees from ComEd and the Indiana Company accepted the program, resulting in
the recognition of an additional $34 million of pension cost and an increase to
the projected benefit obligation of that $34 million and an additional $41
million of unrecognized net loss. The charge to income after reflecting income
tax effects was approximately $20 million for 1994. It is estimated that in
total approximately 700 employees will accept the early retirement program,
resulting in the recognition of a total of $35 million of pension cost and a
total increase to the projected benefit obligation of that $35 million and an
additional $42 million of unrecognized net loss.
The funded status of these plans at December 31, 1994 and 1993 was as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Actuarial present value of accumulated pension plan
benefits:
Vested benefit obligation......................... $(2,071,000) $(1,984,000)
Nonvested benefit obligation...................... (442,000) (460,000)
----------- -----------
Accumulated benefit obligation.................... $(2,513,000) $(2,444,000)
Effect of projected future compensation levels.... (423,000) (470,000)
----------- -----------
Projected benefit obligation...................... $(2,936,000) $(2,914,000)
Fair value of plan assets, invested primarily in eq-
uity index funds, other managed equity and fixed
income investments, U.S. Government, government-
sponsored corporation and agency securities and
listed corporate obligations....................... 2,545,000 2,742,000
----------- -----------
Plan assets less than projected benefit obligation.. $ (391,000) $ (172,000)
Unrecognized prior service cost..................... 22,000 24,000
Unrecognized transition asset....................... (155,000) (168,000)
Unrecognized net loss............................... 228,000 99,000
----------- -----------
Accrued pension liability......................... $ (296,000) $ (217,000)
=========== ===========
</TABLE>
35
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
The assumed discount rates were 8.0% and 7.5% at December 31, 1994 and 1993,
respectively, and the assumed annual rate of increase in future compensation
levels was 4.0%. These rates were used in determining the projected benefit
obligations, the accumulated benefit obligations and the vested benefit
obligations.
Pension costs were determined under the rules prescribed by SFAS No. 87,
including the use of the projected unit credit actuarial cost method and the
following actuarial assumptions for the years 1994, 1993 and 1992:
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Annual discount rate.......................................... 7.50% 7.50% 7.50%
Annual rate of increase in future compensation levels......... 4.00% 4.00% 4.00%
Annual long-term rate of return on plan assets................ 9.50% 9.50% 9.50%
</TABLE>
The components of pension costs, portions of which were recorded as
components of construction costs, for the years 1994, 1993 and 1992 were as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost.................................... $ 97,000 $ 96,000 $ 98,000
Interest cost on projected benefit obligation... 213,000 204,000 189,000
Actual loss (return) on plan assets............. 39,000 (310,000) (179,000)
Early retirement program cost................... 34,000 -- 26,000
Net amortization and deferral................... (304,000) 61,000 (67,000)
--------- --------- ---------
$ 79,000 $ 51,000 $ 67,000
========= ========= =========
</TABLE>
In addition, an employee savings and investment plan is available to all
regular employees who have completed three months of service. Each
participating employee may contribute up to 20% of such employee's base pay and
the participating companies match such contribution equal to 70% of up to the
first 5% of contributed base salary. During 1994, 1993 and 1992, the
participating companies contributed $22,756,000, $21,948,000 and $20,023,000,
respectively.
(13) POSTRETIREMENT HEALTH CARE BENEFITS
ComEd and the Indiana Company provide certain postretirement health care
benefits for retirees and their dependents and for the surviving dependents of
eligible employees and retirees. Substantially all of the employees become
eligible for postretirement health care benefits when they reach retirement age
while working for the companies. ComEd and the Indiana Company fund the
liability for postretirement health care benefits through a trust fund based
upon actuarially determined contributions that take into account the amount
deductible for income tax purposes. Actuarial valuations were determined as of
January 1, 1994 and 1993.
For the years 1980 through 1992, the liability for postretirement health care
benefits and the related provisions for postretirement health care were accrued
based on the aggregate cost actuarial method and attributed over participants'
employment periods from the date of hire to the retirement date. On January 1,
1993, SFAS No. 106, Employers' Accounting for Postretirement Benefits Other
Than Pensions, was adopted, which requires that the liability and related
provisions for postretirement benefits be determined based on the projected
unit credit actuarial cost method and attributed over employment periods of
plan participants to the date of eligibility for postretirement benefits rather
than over the entire employment period. By adopting the new standard in January
1993, ComEd and the Indiana Company estimate that for the year 1993,
postretirement costs increased $20 million, resulting in a decrease in
36
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
1993 net income of $10 million or $0.05 per common share, net of income taxes
and the portion of the costs charged to construction. The transition obligation
shown in the following schedule is being amortized over 20.6 years.
The funded status of the plan at December 31, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Actuarial present value of accumulated
postretirement health care obligation:
Retirees.......................................... $ (524,000) $ (434,000)
Active fully eligible participants................ (7,000) (72,000)
Other participants................................ (560,000) (591,000)
----------- -----------
Accumulated benefit obligation.................... $(1,091,000) $(1,097,000)
Fair value of plan assets, invested primarily in S&P
500 common stocks, equity and fixed income mutual
funds, and U.S. Government and listed corporate ob-
ligations.......................................... 502,000 457,000
----------- -----------
Plan assets less than accumulated postretirement
health care obligation............................. $ (589,000) $ (640,000)
Unrecognized transition obligation.................. 531,000 559,000
Unrecognized net gain............................... (60,000) (6,000)
----------- -----------
Accrued liability for postretirement health care.... $ (118,000) $ (87,000)
=========== ===========
</TABLE>
For 1993 and 1994, different health care cost trends are used for pre-
Medicare and post-Medicare expenses. Pre-Medicare trend rates are 14.5% for
1993 grading down in 0.5% annual increments to 5%. Post-Medicare trend rates
are 12% for 1993 grading down in 0.5% annual increments to 5%. The effect of a
1% increase in the assumed health care cost trend rates for each future year
would increase the accumulated postretirement health care obligation at January
1, 1994 by approximately $200 million and increase the aggregate of the service
and interest cost components of plan costs by approximately $28 million for the
year 1994. The assumed discount rates used were 8.0% and 7.5% at December 31,
1994 and 1993, respectively, and was 7.5% for the years 1994 and 1993. The
annual long-term rate of return on plan assets was 9.5%, or 9.1% for the year
1993 and 9.04% for the year 1994, after including income tax effects.
The components of postretirement health care costs, portions of which were
recorded as components of construction costs, for 1994 and 1993 were as
follows:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Service cost................................... $ 47,000 $ 45,000
Interest cost on accumulated benefit obliga-
tion.......................................... 81,000 74,000
Actual loss (return) on plan assets............ 9,000 (41,000)
Amortization of transition obligation.......... 29,000 29,000
Other.......................................... (49,000) 9,000
----------- -----------
$ 117,000 $ 116,000
=========== ===========
</TABLE>
37
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(14) INCOME TAXES
The components of the net deferred income tax liability at December 31, 1994
and 1993 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1993
---------- ----------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Deferred income tax liabilities:
Accelerated cost recovery and liberalized deprecia-
tion, net of removal costs.......................... $3,266,930 $3,095,855
Overheads capitalized................................ 266,159 286,287
Repair allowance..................................... 210,655 210,302
Regulatory assets recoverable through future rates... 1,791,395 1,863,587
Deferred income tax assets:
Postretirement benefits.............................. (177,991) (134,590)
Unbilled revenues.................................... (90,396) (98,164)
Loss carryforward.................................... (10,090) (175,197)
Alternative minimum tax.............................. (283,331) (137,328)
Unamortized investment tax credits to be settled
through future rates................................ (471,058) (489,891)
Other regulatory liabilities to be settled through
future rates........................................ (179,755) (236,236)
Other--net........................................... (59,528) (80,751)
---------- ----------
Net deferred income tax liability...................... $4,262,990 $4,103,874
========== ==========
</TABLE>
The $159 million increase in the net deferred income tax liability from
December 31, 1993 to December 31, 1994 is comprised of a $156 million net
increase to deferred income tax expense and a $3 million increase in regulatory
assets net of regulatory liabilities pertaining to income taxes for the year.
The components of net income tax expense charged to continuing operations for
the years 1994, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Operating income:
Current income taxes........................... $158,342 $(27,553) $161,388
Deferred income taxes.......................... 168,402 122,804 142,895
Investment tax credits deferred--net........... (28,757) (29,424) (32,506)
Other (income) and deductions.................... (22,498) (31,076) (6,537)
-------- -------- --------
Net income taxes charged to continuing opera-
tions........................................... $275,489 $ 34,751 $265,240
======== ======== ========
</TABLE>
38
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Provisions for current and deferred federal and state income taxes and
amortization of investment tax credits resulted in the following effective
income tax rates for the years 1994, 1993 and 1992:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Net income before cumulative effect of change in
accounting for income taxes..................... $354,934 $ 36,650 $443,442
Net income taxes charged to continuing
operations...................................... 275,489 34,751 265,240
Provision for dividends on preferred and prefer-
ence stocks of Commonwealth Edison Company...... 64,927 66,052 70,539
-------- -------- --------
Pre-tax income before provision for dividends on
preferred and preference stocks of Commonwealth
Edison Company.................................. $695,350 $137,453 $779,221
======== ======== ========
Effective income tax rate........................ 39.6% 25.3% 34.0%
======== ======== ========
</TABLE>
The principal differences between net income taxes charged to continuing
operations and the amounts computed at the federal statutory rate of 35% for
the years 1994 and 1993 and 34% for 1992 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Federal income taxes computed at statutory rate.. $243,373 $ 48,109 $264,935
Equity component of AFUDC which was excluded from
taxable income.................................. (7,920) (7,216) (6,786)
Amortization of investment tax credits........... (28,810) (29,421) (26,560)
State income taxes, net of federal income taxes.. 40,140 13,138 43,455
Differences between book and tax accounting,
primarily property related deductions........... 26,505 2,063 250
Other--net....................................... 2,201 8,078 (10,054)
-------- -------- --------
Net income taxes charged to continuing
operations...................................... $275,489 $ 34,751 $265,240
======== ======== ========
</TABLE>
Current federal income tax liabilities were recorded that include excess
amounts of AMT over the regular federal income tax, which amounts were also
recorded as decreases to deferred federal income taxes. The excess amounts of
AMT can be carried forward indefinitely as a credit against future years'
regular federal income tax liabilities. In 1993, a loss was recorded for income
tax purposes which may be carried forward through 2008. It is currently
expected that the loss carryforward will be utilized by the expiration date.
Effective January 1, 1993, SFAS No. 109 was adopted. SFAS No. 109 requires an
asset and liability approach to accounting for income taxes which replaces the
deferred method formerly used. Under the asset and liability approach, the
deferred income tax liability represents the income tax effect of temporary
differences between financial accounting and income tax bases of assets and
liabilities and is determined at the presently enacted income tax rates. The
SFAS No. 109 adjustments to ComEd's deferred income tax liability related to
utility operations represents income taxes recoverable or returnable through
future rates and have been recorded as regulatory assets and regulatory
liabilities on the Consolidated Balance Sheets. The cumulative effect of the
change in the method of accounting for income taxes resulted in an increase to
net income in 1993 of $9.7 million or $0.05 per common share, due primarily to
the reduction of deferred income taxes on nonregulated activities (primarily
nonconsolidated subsidiaries) accrued in prior years at income tax rates in
excess of the presently enacted income tax rates. The effect of the
39
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
implementation entry on regulated activities was to record regulatory assets of
$1,546 million primarily related to the equity component of AFUDC which was
recorded on an after-tax basis, the borrowed funds component of AFUDC which was
previously recorded net of tax and other temporary differences for which the
related tax effects were not previously recorded; regulatory liabilities of
$577 million primarily related to recognition of the deferred income tax
effects of unamortized investment tax credits and to the changes in prior
years' income tax rates; and a net increase to the deferred income tax
liability of $969 million.
(15) TAXES, EXCEPT INCOME TAXES
Provisions for taxes, except income taxes, for the years 1994, 1993 and 1992
were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Illinois public utility revenue............... $211,263 $199,498 $204,004
Illinois invested capital..................... 109,373 111,126 107,207
Municipal utility gross receipts.............. 145,011 107,232 129,250
Real estate................................... 180,221 162,560 162,151
Municipal compensation........................ 72,647 56,878 73,323
Other--net.................................... 69,337 64,619 67,974
-------- -------- --------
$787,852 $701,913 $743,909
======== ======== ========
</TABLE>
(16) LEASE OBLIGATIONS OF SUBSIDIARY COMPANIES
On November 23, 1993, ComEd consolidated its nuclear fuel lease arrangements
into a new arrangement. Under the new arrangement, ComEd may sell and lease
back nuclear fuel from a lessor who may borrow an aggregate of $700 million
(consisting of $300 million of commercial paper or bank borrowings and $400
million of intermediate term notes) to finance the transactions. The commercial
paper/bank borrowing portion currently will expire on November 23, 1996, but
ComEd plans to ask for an extension of the expiration date. At December 31,
1994, ComEd's obligation to the lessor for leased nuclear fuel amounted to $617
million. ComEd has agreed to make lease payments which cover the amortization
of the nuclear fuel used in ComEd's reactors plus the lessor's related
financing costs. ComEd has an obligation for spent nuclear fuel disposal costs
of leased nuclear fuel.
Future minimum rental payments, net of executory costs, at December 31, 1994
for capital leases are estimated to aggregate $628 million, including $239
million in 1995, $159 million in 1996, $108 million in 1997, $51 million in
1998, $37 million in 1999 and $34 million in 2000-2043. The estimated interest
component of such rental payments aggregates $70 million. The estimated
portions of obligations due within one year under capital leases are included
in current liabilities and approximated $147 million and $166 million at
December 31, 1994 and 1993, respectively.
Future minimum rental payments at December 31, 1994 for operating leases are
estimated to aggregate $148 million, including $9 million in 1995, $9 million
in 1996, $9 million in 1997, $8 million in 1998, $8 million in 1999 and $105
million in 2000-2024.
(17) INVESTMENTS IN URANIUM-RELATED PROPERTIES
In May 1994, ComEd recorded a reduction in the carrying value of its
investments in uranium-related properties after completing a review of various
alternatives and reassessing the long-term recoverability of those investments.
The effects of the reduction reduced 1994 net income by approximately $33.8
million or $0.16 per common share.
40
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(18) JOINT PLANT OWNERSHIP
ComEd has a 75% undivided ownership interest in the Quad-Cities nuclear
generating station. Further, ComEd is responsible for 75% of all costs which
are charged to appropriate investment, operation or maintenance accounts and
provides its own financing. At December 31, 1994, for its share of ownership in
the station, ComEd had an investment of $537 million in production and
transmission plant in service (before reduction of $172 million for the related
accumulated provision for depreciation) and $76 million in construction work in
progress.
(19) COMMITMENTS AND CONTINGENT LIABILITIES
Purchase commitments, principally related to construction and nuclear fuel,
approximated $1,234 million at December 31, 1994, comprised of approximately
$1,210 million for ComEd and the Indiana Company and approximately $24 million
for Unicom Thermal. In addition, ComEd has substantial commitments for the
purchase of coal under long-term contracts. ComEd's coal costs are high
compared to those of other utilities. ComEd's western coal contracts and its
rail contracts for delivery of the western coal were renegotiated during 1992
effective as of January 1, 1993, to provide, among other things, for
significant reductions in the delivered price of the coal over the duration of
the contracts. However, the renegotiated contracts provide for the purchase of
certain coal at prices substantially above currently prevailing market prices
and ComEd has significant purchase commitments under its contracts. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," subcaption "Liquidity and Capital Resources," for additional
information regarding ComEd's purchase commitments.
ComEd is a member of NML, established to provide insurance coverage against
property damage to members' nuclear generating facilities. The members are
subject to a retrospective premium adjustment in the event losses exceed
accumulated reserve funds. Capital has been accumulated in the reserve funds of
NML to the extent that ComEd would not be liable for a retrospective premium
adjustment in the event of a single incident. However, ComEd could be subject
to a maximum assessment of approximately $57 million in any policy year, in the
event losses exceed accumulated reserve funds.
ComEd also is a member of NEIL, which provides insurance coverage against the
cost of replacement power obtained during certain prolonged accidental outages
of nuclear generating units and coverage for property losses in excess of $500
million occurring at nuclear stations. All companies insured with NEIL are
subject to retrospective premium adjustments if losses exceed accumulated
reserve funds. Capital has been accumulated in the reserve funds of NEIL to the
extent that ComEd would not be liable for a retrospective premium adjustment in
the event of a single incident under the replacement power coverage and the
property damage coverage. However, ComEd could be subject to maximum
assessments, in any policy year, of approximately $28 million and $89 million
in the event losses exceed accumulated reserve funds under the replacement
power and property damage coverages, respectively.
The NRC's indemnity for public liability coverage under the Price-Anderson
Act is supported by a mandatory industry-wide program under which owners of
nuclear generating facilities could be assessed in the event of nuclear
incidents. Based on the number of nuclear reactors with operating licenses,
ComEd would currently be subject to a maximum assessment of $991 million in the
event of an incident, limited to a maximum of $125 million in any calendar
year.
In addition, ComEd participates in the American Nuclear Insurers and Mutual
Atomic Energy Liability Underwriters Master Worker Program which provides
coverage for worker tort claims filed for bodily injury caused by the nuclear
energy hazard. The coverage applies to workers whose "nuclear related
41
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
employment" began after January 1, 1988. ComEd would currently be subject to a
maximum assessment of approximately $37 million in the event losses exceed
accumulated reserve funds.
Shareholder derivative lawsuits were filed on October 1, 1992 and on April
14, 1993 in the Circuit Court against current and former directors of ComEd
alleging that they breached their fiduciary duty and duty of care to ComEd in
connection with the management of the activities associated with the
construction of ComEd's four most recently completed nuclear generating units.
The lawsuits sought restitution to ComEd by the defendants for unquantified and
undefined losses and costs alleged to have been incurred by ComEd. Both
lawsuits were dismissed by the Circuit Court; however, appeals are pending
before the Illinois Appellate Court.
During 1989 and 1991, actions were brought in federal and state courts in
Colorado against ComEd and its subsidiary, Cotter, seeking unspecified damages
and injunctive relief based on allegations that Cotter has permitted
radioactive and other hazardous material to be released from its mill into
areas owned or occupied by the plaintiffs resulting in property damage and
potential adverse health effects. In February 1994, a federal jury returned
nominal dollar verdicts on eight bellwether plaintiffs' claims in these cases.
Plaintiffs have appealed those judgments. Although the remaining cases will
necessarily involve the resolution of numerous contested issues of fact and
law, Unicom's determination is that these actions will not have a material
impact on its financial position or results of operations.
ComEd is involved in administrative and legal proceedings concerning air
quality, water quality and other matters. The outcome of these proceedings may
require increases in future construction expenditures and operating expenses
and changes in operating procedures. ComEd and its subsidiaries are or are
likely to become parties to proceedings initiated by the U.S. EPA, state
agencies and/or other responsible parties under CERCLA with respect to a number
of sites, including MGP sites, or may voluntarily undertake to investigate and
remediate sites for which they may be liable under CERCLA.
ComEd generally did not operate MGPs as a corporate entity but did, however,
acquire MGP sites as part of the absorption of smaller utilities and as vacant
real estate on which ComEd facilities have been constructed. To date, ComEd has
identified 44 former MGP sites for which it may be liable for remediation.
ComEd presently estimates that its costs of former MGP site investigation and
remediation will aggregate from $25 million to $150 million in current-year
(1995) dollars. It is expected that the costs associated with investigation and
remediation of former MGP sites will be incurred over a period of approximately
20 to 30 years. Because ComEd is not able to determine the most probable
liability for such MGP costs, in accordance with accounting standards, a
reserve of approximately $25 million has been recorded as of December 31, 1994
and 1993, which reflects the low end of the range of ComEd's estimate of the
liability associated with former MGP sites. In addition, as of December 31,
1994 and 1993, a reserve of $8 million and $5 million, respectively, has been
recorded representing ComEd's estimate of the liability associated with cleanup
costs of remediation sites other than former MGP sites. Unicom presently
estimates that ComEd's costs of investigating and remediating the former MGP
and other remediation sites pursuant to CERCLA and state environmental laws
will not have a material impact on the financial position or results of
operations of Unicom and subsidiary companies. These cost estimates are based
on currently available information regarding the responsible parties likely to
share in the costs of responding to site contamination, the extent of
contamination at sites for which the investigation has not yet been completed
and the cleanup levels to which sites are expected to have to be remediated.
The Clean Air Amendments require reductions in sulfur dioxide emissions from
ComEd's Kincaid station. The Clean Air Amendments also bar future utility
sulfur dioxide emissions except to the extent utilities hold allowances for
their emissions. Allowances which authorize their holder to emit sulfur dioxide
42
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONCLUDED
have been issued by the U.S. EPA based largely on historical levels of sulfur
dioxide emissions. These allowances are transferable and marketable. ComEd's
ability to increase generation in the future to meet expected increased demand
for electricity will depend in part on ComEd and the Indiana Company's ability
to acquire additional allowances or to reduce emissions below otherwise
allowable levels from their existing generating plants. In addition, the Clean
Air Amendments require studies to determine what controls, if any, should be
imposed on utilities to control air toxic emissions, including mercury. ComEd's
Clean Air Compliance Plan for Kincaid station was approved by the ICC on July
8, 1993. In late 1993, however, a federal court declared the Illinois law under
which the approval was received to be unconstitutional and compliance plans
prepared and approved in reliance on the law to be void. In January 1995, the
federal court's decision was affirmed by the U.S. Court of Appeals. It is not
known whether a petition for rehearing or further appeals will be filed. Under
the Compliance Plan approved by the ICC, ComEd would have been allowed to burn
low sulfur Illinois coal at Kincaid station without the installation of
pollution control equipment for the years 1995 through 1999, and to purchase
any necessary emission allowances that are expected to be available under the
Clean Air Amendments during this period. Also, under the Plan, ComEd expected
to install pollution control equipment for Kincaid station by the year 2000.
When the final outcome of the federal litigation is known, ComEd will determine
whether any changes are required.
(20) QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
AVERAGE EARNINGS
NUMBER OF (LOSS)
OPERATING NET COMMON PER
OPERATING INCOME INCOME SHARES COMMON
THREE MONTHS ENDED REVENUES (LOSS) (LOSS) OUTSTANDING SHARE
------------------ ---------- --------- --------- ----------- --------
(THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
March 31, 1993........ $1,483,385 $ 240,840 $ 60,575 213,337 $ 0.28
June 30, 1993......... $1,430,547 $ 237,223 $ 58,051 213,466 $ 0.27
September 30, 1993.... $1,872,448 $ 456,227 $ 270,558 213,550 $ 1.27
December 31, 1993..... $ 474,060 $(530,475) $(342,796)(a) 213,680 $(1.60)
March 31, 1994........ $1,524,750 $ 213,014 $ 36,020 213,780 $ 0.17
June 30, 1994......... $1,432,166 $ 184,891 $ (23,339) 213,923 $(0.11)
September 30, 1994.... $1,855,276 $ 438,883 $ 263,661 214,138 $ 1.23
December 31, 1994..... $1,465,329 $ 246,404 $ 78,592 214,283 $ 0.37
</TABLE>
--------
(a) See Note 2 for information concerning the Rate Matters Settlement, which
lowered the level of ComEd's rates and provided for substantial customer
refunds, and the Fuel Matters Settlement, which provided for payments to
customers.
43
<PAGE>
Exhibit (99)-2
Commonwealth Edison Company
Form 10-K File No. 1-1839
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A-1
CURRENT REPORT
Pursuant to Section l3 or l5(d) of
the Securities Exchange Act of l934
Date of Report (Date of
earliest event reported): January 27, 1995
Commonwealth Edison Company
(Exact name of registrant as specified in its charter)
Illinois 1-1839 36-0938600
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
37th Floor, 10 South Dearborn Street,
Post Office Box 767, Chicago, Illinois 60690-0767
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (312) 394-4321
<PAGE>
The purpose of this Amendment No. 1 is to amend the exhibits to the
Registrant's (Commonwealth Edison Company) Current Report on Form 8-K dated
January 27, 1995, by refiling those exhibits in their entirety.
Item 7. Financial Statements, Pro Forma Financial
------- Information and Exhibits
-----------------------------------------
(c) Exhibits
--------
(23) Consent of Independent Public Accountants
(27) Financial Data Schedule of Commonwealth Edison Company
(99) Commonwealth Edison Company and Subsidiary Companies -Certain
Financial Information as of and for the Year Ended December 31,
1994:
--Management's Discussion and Analysis of Financial
Condition and Results of Operations
--Report of Independent Public Accountants
--Statements of Consolidated Income
--Consolidated Balance Sheets
--Statements of Consolidated Capitalization
--Statements of Consolidated Retained Earnings
--Statements of Consolidated Premium on Common Stock
and Other Paid-in Capital
--Statements of Consolidated Cash Flows
--Notes to Financial Statements
-2-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of l934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Commonwealth Edison Company
(Registrant)
By: David A. Scholz
---------------------
David A. Scholz
Secretary
Date: March 24, 1995
-3-
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
23 Consent of Independent Public Accountants
27 Financial Data Schedule of Commonwealth Edison
Company
99 Commonwealth Edison Company and Subsidiary Companies - Certain
Financial Information as of and for the Year Ended December 31,
1994:
--Management's Discussion and Analysis of Financial
Condition and Results of Operations
--Report of Independent Public Accountants
--Statements of Consolidated Income
--Consolidated Balance Sheets
--Statements of Consolidated Capitalization
--Statements of Consolidated Retained Earnings
--Statements of Consolidated Premium on Common Stock
and Other Paid-in Capital
--Statements of Consolidated Cash Flows
--Notes to Financial Statements
<PAGE>
Exhibit (23)
Commonwealth Edison Company
Form 8-K/A-1 File No. 1-1839
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference of our report dated January 27, 1995, on Commonwealth Edison
Company and subsidiary companies' consolidated financial statements as of and
for the year ended December 31, 1994, included as an Exhibit to this Form
8-K/A-1 Current Report of Commonwealth Edison Company dated January 27, 1995,
into Commonwealth Edison Company's previously filed prospectuses as follows: (1)
prospectus dated August 21, 1986, constituting part of Form S-3 Registration
Statement File No. 33-6879, as amended (relating to the Company's Debt
Securities and Common Stock); and (2) prospectus dated January 7, 1994,
constituting part of Form S-3 Registration Statement File No. 33-51379 (relating
to the Company's Debt Securities and Cumulative Preference Stock). We also
consent to the application of our report to the ratios of earnings to fixed
charges and the ratios of earnings to fixed charges and preferred and preference
stock dividend requirements for each of the years ended December 31, 1994, 1993
and 1992 appearing on page 13 of Exhibit 99 of this Form 8-K/A-1.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 24, 1995
<PAGE>
Exhibit (99)
Commonwealth Edison
Company
Form 8-K/A-1 File No. 1-1839
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
INDEX
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Definitions.............................................................. 2
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 3-13
Report of Independent Public Accountants................................. 14
Summary of Selected Consolidated Financial Data.......................... 15
Price Range and Dividends Paid Per Share of Common Stock................. 15
1994 Revenues and Sales.................................................. 15
Consolidated Financial Statements--
Statements of Consolidated Income for the years 1994, 1993 and 1992.... 16
Consolidated Balance Sheets--December 31, 1994 and 1993................ 17-18
Statements of Consolidated Capitalization--December 31, 1994 and 1993.. 19
Statements of Consolidated Retained Earnings for the years 1994, 1993
and 1992.............................................................. 20
Statements of Consolidated Premium on Common Stock and Other Paid-In
Capital for the years 1994, 1993 and 1992............................. 20
Statements of Consolidated Cash Flows for the years 1994, 1993 and
1992.................................................................. 21
Notes to Financial Statements.......................................... 22-43
</TABLE>
1
<PAGE>
DEFINITIONS
Certain terms are used in this Appendix with the following meanings:
<TABLE>
<CAPTION>
TERM MEANING
----------------------- ------------------------------------------------------------------
<S> <C>
AFUDC Allowance for funds used during construction
AMT Alternative minimum tax
CERCLA Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended
Circuit Court Circuit Court of Cook County, Illinois
Clean Air Amendments Clean Air Act Amendments of 1990
ComEd Commonwealth Edison Company, which is a majority-owned subsidiary
of Unicom.
Cotter Cotter Corporation, which is a wholly-owned subsidiary of ComEd.
DOE U.S. Department of Energy
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
Fuel Matters Settlement A settlement relating to the ICC fuel reconciliation proceedings
involving ComEd for the period from 1985 through 1988 and to
future challenges by the settling parties to the prudency of
ComEd's western coal costs for the period from 1989 through 1992.
ICC Illinois Commerce Commission
Illinois EPA Illinois Environmental Protection Agency
Indiana Company Commonwealth Edison Company of Indiana, Inc., which is a wholly-
owned subsidiary of ComEd.
MGP Manufactured gas plant
NEIL Nuclear Electric Insurance Limited
NML Nuclear Mutual Limited
NRC Nuclear Regulatory Commission
Rate Matters Settlement A settlement concerning the proceedings relating to ComEd's 1985
and 1991 ICC rate orders (which orders relate to, among other
things, the recovery of costs associated with ComEd's four most
recently completed nuclear generating units), the proceedings
relating to the reduction in the difference between ComEd's
summer and non-summer residential rates that was effected in the
summer of 1988, outstanding issues relating to the appropriate
interest rate and rate design to be applied to a refund made by
ComEd during 1990 relating to a 1988 ICC rate order, and matters
related to a rider to ComEd's rates that it was required to file
as a result of the change in the federal corporate tax rate made
by the Tax Reform Act of 1986.
Rate Order ICC rate order issued on January 9, 1995
Remand Order ICC rate order issued on January 6, 1993, as subsequently modified
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
Unicom Unicom Corporation
Unicom Enterprises Unicom Enterprises Inc., which is a wholly-owned subsidiary of
Unicom.
Units ComEd's nuclear generating units known as Byron Unit 2 and
Braidwood Units 1 and 2
U.S. EPA U.S. Environmental Protection Agency
</TABLE>
2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
On September 1, 1994, a corporate restructuring took place in which Unicom
became the parent holding company of ComEd and Unicom Enterprises, an
unregulated subsidiary engaged, through a subsidiary, in energy service
activities. The primary purpose of the restructuring was to permit Unicom
Enterprises to engage in energy service activities without the prior approval
of, or being regulated by, the ICC, in part to permit timely responses to
competitive activities which could adversely affect ComEd's utility business.
LIQUIDITY AND CAPITAL RESOURCES
Capital Budgets. ComEd and its electric utility subsidiary, the Indiana
Company, have a construction program for the three-year period 1995-97 which
consists principally of improvements to ComEd's and the Indiana Company's
existing nuclear and other electric production, transmission and distribution
facilities. It does not include funds (other than for planning) to add new
generating capacity to ComEd's system. The program, as approved by Unicom and
ComEd in December 1994, calls for electric plant and equipment expenditures of
approximately $2,750 million (excluding nuclear fuel expenditures of
approximately $800 million). It is estimated that such construction
expenditures, with cost escalation computed at 3.5% annually, will be as
follows:
<TABLE>
<CAPTION>
THREE-YEAR
1995 1996 1997 TOTAL
---- ---- ---- ----------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Production......................................... $415 $395 $360 $1,170
Transmission and Distribution...................... 410 445 455 1,310
General............................................ 95 90 85 270
---- ---- ---- ------
Total.......................................... $920 $930 $900 $2,750
==== ==== ==== ======
</TABLE>
In October 1994, ComEd made a commitment to provide for the replacement of
the steam generators at its Braidwood Unit 1 and Byron Unit 1 nuclear
generating plants, for service in the years 1998 and 1999, respectively, at a
total estimated cost of approximately $470 million. Approximately $170 million
of this commitment is included in the construction expenditures shown above.
ComEd's forecasts of peak load indicate a need for additional resources to
meet demand, either through generating capacity or through equivalent purchased
power or demand-side management resources, in 1997 and each year thereafter
through the year 2000. The projected resource needs reflect the current
planning reserve margin recommendations of the Mid-America Interconnected
Network, the reliability council of which ComEd is a member. ComEd's forecasts
indicate that the need for additional resources during this period would exist
only during the summer months. ComEd does not expect to make expenditures for
additional capacity to the extent the need for capacity can be met through
cost-effective demand-side management resources, non-utility generation or
other power purchases. To assess the market potential to provide such cost-
effective resources, ComEd solicited proposals to supply it with cost-effective
demand-side management resources, non-utility generation resources and other-
utility power purchases sufficient to meet forecasted requirements through the
year 2000. The responses to the solicitation suggest that adequate resources to
meet ComEd's needs could be obtained from those sources but ComEd has not yet
determined whether those sources represent the most economical alternative. If
ComEd were to build additional capacity to meet its needs, it would need to
make additional expenditures during the 1995-97 period.
ComEd has not budgeted for a number of projects, particularly at generating
stations, which could be required, but which ComEd does not expect to be
required during the budget period. In particular,
3
<PAGE>
ComEd has not budgeted for the construction of scrubbers at its Kincaid station
or for the replacement of major amounts of piping at its boiling water reactor
nuclear stations. See "Regulation" below for additional information.
Purchase commitments for ComEd and the Indiana Company, principally related
to construction and nuclear fuel, approximated $1,210 million at December 31,
1994. In addition, ComEd has substantial commitments for the purchase of coal
as indicated in the following table.
<TABLE>
<CAPTION>
CONTRACT PERIOD COMMITMENT (1)
-------- --------- --------------
<S> <C> <C>
Black Butte Coal Co................................... 1995-2007 $1,119
Decker Coal Co........................................ 1995-2015 $ 822
Big Horn Coal Co...................................... 1998 $ 21
Other commitments..................................... 1995-1996 $ 31
</TABLE>
--------
(1) Estimated costs in millions of dollars FOB mine. No estimate of future
escalation has been made.
For additional information concerning these coal contracts and ComEd's fuel
supply, see "Results of Operations" below and Notes 1 and 19 of Notes to
Financial Statements.
ComEd's construction program will be reviewed and modified as necessary to
adapt to changing economic conditions, rate levels and other relevant factors
including changing business and legal needs and requirements. ComEd cannot
anticipate all such possible needs and requirements. While regulatory needs in
particular are more likely, on balance, to require increases in construction
expenditures than decreases, ComEd's financial condition may require
compensating or greater reductions in other construction expenditures.
Capital Resources. ComEd has forecast that internal sources will provide more
than three-fourths of the funds required for ComEd's construction program and
other capital requirements, including nuclear fuel expenditures, contributions
to nuclear decommissioning funds, sinking fund obligations and refinancing of
scheduled debt maturities (the annual sinking fund requirements for preference
stock and long-term debt are summarized in Notes 7 and 8, respectively, of
Notes to Financial Statements). The forecast assumes the rate levels reflected
in the Rate Order.
The type and amount of external financing will depend on financial market
conditions and the needs and capital structure of ComEd at the time of such
financing. ComEd's new money financing requirements have increased in recent
years due to higher expenditures and lower operating cash flows resulting from
reduced revenues due to customer refunds and rate level adjustments ordered in
various proceedings related to the level of ComEd's rates and the effects of
the Rate Matters Settlement and the Fuel Matters Settlement. ComEd's balances
of cash and cash investments decreased by approximately $814 million from
December 31, 1993 to December 31, 1994, primarily due to the effects of those
settlements. A portion of ComEd's financing is expected to be provided through
the continued sale and leaseback of nuclear fuel through ComEd's existing
nuclear fuel lease facility. ComEd has approximately $915 million of unused
bank lines of credit at December 31, 1994 which may be borrowed at various
interest rates and which may be secured or unsecured. The interest rate is set
at the time of a borrowing and is based on several floating rate bank indices
plus a spread which is dependent upon ComEd's credit ratings or on a prime
interest rate. Collateral, if required for the borrowings, would consist of
first mortgage bonds issued under and in accordance with the provisions of
ComEd's mortgage. See Note 9 of Notes to Financial Statements for information
concerning lines of credit. See the Statements of Consolidated Cash Flows for
the construction expenditures and cash flow from operating activities for the
years 1994, 1993 and 1992.
From January through August 1994, ComEd issued 236,110 shares of common stock
for approximately $5,435,000 under its employee stock plans. During 1994, ComEd
also issued and sold 3,000,000 shares of $2.425 Cumulative Preference Stock;
sold and leased back approximately
4
<PAGE>
$306,649,000 of nuclear fuel through its existing nuclear fuel lease;
refinanced $249,200,000 of outstanding pollution control revenue bonds through
the issuance, through the Illinois Development Finance Authority, of an
equivalent amount of lower cost variable rate and fixed rate bonds (of which
$157,000,000 was collaterally secured through the issuance to the related bond
trustee of an equivalent amount of first mortgage bonds); and issued
$300,000,000 of other long-term debt.
As of January 27, 1995, ComEd has an effective "shelf" registration statement
with the SEC for the future sale of up to an additional $805 million of debt
securities and cumulative preference stock for general corporate purposes of
ComEd, including the discharge or refund of other outstanding securities.
Financial Condition. ComEd's financial condition will continue to depend on
its ability to generate revenues to cover its costs and to maintain adequate
debt and preferred and preference stock coverages and common stock equity
earnings. ComEd's management recognizes that competitive and regulatory
circumstances in Illinois may limit its ability to raise its rates.
Consequently, ComEd's financial condition will be affected by, and ComEd's
management is addressing, actions to maintain and increase sales, to control
operating and capital expenditures, and to anticipate competitive activities.
During the past several years, ComEd has instituted cost reduction plans
including various workforce reductions. ComEd reached agreement in August 1993
with its unions regarding certain cost reduction actions. The agreement
provided for a wage freeze until April 1, 1994, changes to reduce health care
plan costs, increased use of part-time employment and changes in holiday
provisions. The agreement also included a continuation of negotiations relative
to other issues. ComEd and union representatives reached agreement in February
1994 and announced an offer of a voluntary early retirement program. This
program is available to ComEd and the Indiana Company management, non-union and
union employees eligible to retire or who would become eligible to retire after
December 31, 1993 and before April 1, 1995. The period for most eligible
employees to elect to participate in the program expired on April 20, 1994. The
charge to income related to the program in 1994 was approximately $20 million
(net of income tax effects) related to employees who accepted the program
during 1994. ComEd estimates that, in total, approximately $21 million (net of
income tax effects) will be charged to income as a result of the program. See
"Regulation" below and Note 12 of Notes to Financial Statements.
The current ratings of ComEd's securities by three principal securities
rating agencies are as follows:
<TABLE>
<CAPTION>
STANDARD DUFF &
MOODY'S & POOR'S PHELPS
------- -------- ------
<S> <C> <C> <C>
First mortgage and secured pollution control
bonds........................................... Baa2 BBB BBB
Publicly-held debentures and unsecured pollution
control obligations............................. Baa3 BBB- BBB-
Convertible preferred stock...................... baa3 BBB- BB+
Preference stock................................. baa3 BBB- BB+
Commercial paper................................. P-2 A-2 Duff 2
</TABLE>
On October 27, 1993, Standard & Poor's changed its "outlook" on ComEd's
ratings from stable to negative as part of its larger assessment of the
electric utility industry. In January 1995, following the issuance of the Rate
Order, Standard & Poor's affirmed its ratings of ComEd's debt, with its ratings
"outlook" remaining negative. In December 1993, Moody's and Duff & Phelps
affirmed their ratings of ComEd's securities, and Moody's rating outlook on
ComEd remained stable.
Business and Competition. The electric utility business has historically been
characterized by retail service monopolies in state or locally franchised
service territories. Investor-owned electric utilities have tended to be
vertically integrated with all aspects of their business subject to pervasive
regulation. Although customers have normally been free to supply their electric
power needs through self-generation, they have not had a choice of electric
suppliers and self-generation has not generally been economical.
5
<PAGE>
The market in which electric utilities like ComEd operate has become more
competitive and many observers believe competition will intensify. Self-
generation can be economical for certain customers, depending on how and when
they use electricity and other customer-specific considerations. A number of
competitors are currently seeking to identify and do business with those
customers. In addition, suppliers of other forms of energy are increasingly
competing to supply energy needs which historically were supplied primarily or
exclusively by electricity.
The Energy Policy Act of 1992 will likely have a significant effect on
companies engaged in the generation, transmission, distribution, purchase and
sale of electricity. This Act, among other things, expands the authority of the
FERC to order electric utilities to transmit or "wheel" wholesale power for
others, and facilitates the creation of non-utility electric generating
companies. Although ComEd cannot now predict the full impact of this Act, it
will likely create and increase competition affecting ComEd.
ComEd is facing increased competition from several non-utility businesses
which seek to provide energy services to users of electricity, especially
larger customers such as industrial, commercial and wholesale customers. Such
suppliers include independent power producers and unregulated energy services
companies. In this regard, natural gas utilities operating in ComEd's service
area have established subsidiary ventures to provide heating, ventilating and
air conditioning services, attempting to attract ComEd's customers. Also,
several utilities in the United States have established unregulated energy
services subsidiaries which pursue business opportunities wherever they exist.
In addition, cogeneration and energy services companies have begun soliciting
ComEd's customers to provide alternatives to using ComEd's electricity. In
October 1993, the ICC granted ComEd the authority to negotiate special discount
contract rates with new or existing industrial customers for up to a total of
400 megawatts of added load, where the customers would not have chosen service
from ComEd for the increased load in the absence of the discount rates. In
addition, in June 1994, the ICC granted ComEd the authority to negotiate
special discount contract rates with up to 25 of its largest existing
customers, where such contracts would be necessary to retain the customers'
existing load on ComEd's system.
ComEd recently negotiated amendments to existing contracts with three of its
wholesale municipal customers, which extended the contracts for an additional
ten-year period past the 1997 expiration dates. ComEd was one of a number of
bidders for providing service to these customers. The contracts became
effective upon FERC approval.
The ICC formed a task force for the purpose of conducting a broad-based and
open examination of the expanding presence of market components within the
electric utility industry. Participants from more than forty organizations,
including representatives from the electric utility industry, are meeting to
examine three broad issues: effects of regulation, competition and future
regulatory and legislative changes. A report examining all sides of the issues
is planned for release in the first half of 1995 to the ICC, the legislature,
the Governor and other Illinois constitutional officers.
Capital Structure. The ratio of long-term debt to total capitalization has
decreased to 54.6% at December 31, 1994 from 55.0% at December 31, 1993. This
decrease is related primarily to the retirement and early redemption of long-
term debt and the issuance of cumulative preference stock.
REGULATION
ComEd and the Indiana Company are subject to state and federal regulation in
the conduct of their respective businesses, including the operations of Cotter.
Such regulation includes rates, securities issuance, nuclear operations,
environmental and other matters. Particularly in the cases of nuclear
operations and environmental matters, such regulation can and does affect
operational and capital expenditures.
6
<PAGE>
Rate Proceedings. ComEd's revenues, net income, cash flows and plant carrying
costs have been affected directly by various rate-related proceedings. During
the periods presented in the consolidated financial statements, ComEd was
involved in a number of proceedings concerning its rates. The uncertainties
associated with such proceedings and related issues, among other things, led to
the Rate Matters Settlement and the Fuel Matters Settlement (see Note 2 of
Notes to Financial Statements). The effects of the aforementioned rate
proceedings and settlements during the periods presented are discussed below
under "Results of Operations."
On January 9, 1995, the ICC issued its Rate Order in the proceedings relating
to ComEd's February 10, 1994 rate increase request. The Rate Order provides,
among other things, for (i) an increase in ComEd's total revenues of
approximately $301.8 million (excluding add-on revenue taxes) or 5.2%, on an
annual basis, including a $303.2 million increase in base rates, (ii) the
collection of municipal franchise costs as an adder to base rates until May 1,
1995, when such costs will be collected prospectively on an individual
municipality basis through a rider, and (iii) the use of a rider, with annual
review proceedings, to pass on to ratepayers increases or decreases in
estimated costs associated with the decommissioning of ComEd's nuclear
generating units. The rates provided in the Rate Order became effective on
January 14, 1995; however, they are being collected subject to refund as a
result of subsequent judicial action. ComEd expects the Rate Order to be
appealed by the intervenors in the rate proceeding.
In the Rate Order, the ICC determined that the Units were 100% "used and
useful" and that the previously determined reasonable costs of such Units, as
depreciated, should be included in full in ComEd's rate base. The ICC also
determined, however, that ComEd's annual nuclear plant decommissioning cost
collections from its ratepayers should be reduced from the $127 million
previously authorized in the 1991 ICC rate order to $112.7 million. The $112.7
million annual collection amount primarily resulted from the ICC's decision to
exclude from ComEd's costs subject to collection a contingency allowance. As
noted above, the Rate Order establishes a rider which will allow annual
adjustments to decommissioning cost collections outside of the context of a
traditional rate proceeding. Such rider is intended to allow adjustments in
decommissioning cost recoveries from ratepayers as changes in cost estimates
become identifiable. Under Illinois law, decommissioning cost collections are
required to be deposited in external trust funds; and consequently, such
collections do not add to the cash flows available for general corporate
purposes.
Nuclear Matters. During the past several years, the NRC has placed two of
ComEd's nuclear generating stations, Zion station and Dresden station, on its
list of plants to be monitored closely. Although Zion station (which was placed
on the list in early 1991) was removed from that list in February 1993, Dresden
station (which was placed on the list in early 1992) remains on the list. The
NRC concern with Dresden station was that, although processes and programs were
in place to make improvements, the rate of improvement needed to accelerate. In
February 1995, the NRC reported that a sense of progress at Dresden is evident,
but that more time is needed to determine if the improving trend will continue.
Because of the age of the Zion, Dresden and Quad-Cities stations, ComEd
anticipates increased expenditures for operation and maintenance expenses in
order to improve reliability and to meet NRC regulatory expectations.
Accordingly, ComEd has restructured its management of its nuclear stations and
committed additional resources to the stations' operations.
In January 1994, ComEd was notified by the NRC that ComEd's LaSalle County
and Quad-Cities stations were placed on the list of plants with adverse
performance trends. ComEd was informed that the NRC concerns about LaSalle
County station included, among other matters, deficient radiation worker
practices. The NRC concerns with Quad-Cities station included, among other
matters, deficiencies in the condition of certain station equipment and the
effectiveness of the operators of the units in identifying and responding to
certain operational problems. ComEd has provided written and verbal responses
to the NRC and is working to resolve the concerns. In the February 1995 report,
the NRC concluded that LaSalle County had arrested the adverse trends in most
areas and "normal" designation should be
7
<PAGE>
returned. Like Dresden and LaSalle County, the NRC noted that positive
developments had been observed at Quad-Cities but additional time was required
to determine if those developments had been effective in arresting the adverse
trends and thus Quad-Cities remains on the list of plants with adverse
performance trends. As noted above, ComEd anticipates continued increased
expenditures in connection with those stations. In addition, generating station
availability and performance during a year may be issues in fuel reconciliation
proceedings in assessing the prudence of fuel and power purchases during such
year. ICC orders have been issued in fuel reconciliation proceedings for years
prior to 1993.
ComEd estimates that it will expend approximately $15 billion, excluding any
contingency allowance, for decommissioning costs primarily during the period
from 2007 through 2032. Such costs, which are estimated to aggregate
approximately $3.5 billion, in current-year (1995) dollars, are expected to be
funded by the external decommissioning trust funds which ComEd established in
compliance with Illinois law and into which ComEd has been making annual
contributions. Future decommissioning cost estimates may be significantly
affected by the adoption of or changes to NRC regulations. See Note 1 of Notes
to Financial Statements under "Depreciation and Decommissioning" for additional
information regarding decommissioning costs.
Environmental Matters. The Clean Air Amendments require reductions in sulfur
dioxide emissions from ComEd's Kincaid station. The Clean Air Amendments also
bar future utility sulfur dioxide emissions except to the extent utilities hold
allowances for their emissions. Allowances which authorize their holder to emit
sulfur dioxide have been issued by the U.S. EPA based largely on historical
levels of sulfur dioxide emissions. These allowances are transferable and
marketable. ComEd's ability to increase generation in the future to meet
expected increased demand for electricity will depend in part on ComEd and the
Indiana Company's ability to acquire additional allowances or to reduce
emissions below otherwise allowable levels from their existing generating
plants. In addition, the Clean Air Amendments require studies to determine what
controls, if any, should be imposed on utilities to control air toxic
emissions, including mercury. ComEd's Clean Air Compliance Plan for Kincaid
station was approved by the ICC on July 8, 1993. In late 1993, however, a
federal court declared the Illinois law under which the approval was received
to be unconstitutional and compliance plans prepared and approved in reliance
on the law to be void. In January 1995, the federal court's decision was
affirmed by the U.S. Court of Appeals. It is not known whether a petition for
rehearing or further appeals will be filed. Under the Compliance Plan approved
by the ICC, ComEd would have been allowed to burn low sulfur Illinois coal at
Kincaid station without the installation of pollution control equipment for the
years 1995 through 1999, and to purchase any necessary emission allowances that
are expected to be available under the Clean Air Amendments during this period.
Also, under the Plan, ComEd expected to install pollution control equipment for
Kincaid station by the year 2000. When the final outcome of the federal
litigation is known, ComEd will determine whether any changes are required.
The Clean Air Amendments also require reductions in nitrogen oxide emissions
from ComEd and the Indiana Company's fossil fuel generating units. The Illinois
EPA has proposed rules with respect to such emissions which would require
modifications to certain of ComEd's boilers inside the Chicago ozone non-
attainment area. The proposed rules are currently under review. The Illinois
EPA is also considering nitrogen oxide emission reductions at ComEd generating
stations outside the Chicago ozone non-attainment area.
RESULTS OF OPERATIONS
Net Income on Common Stock. ComEd's 1994 results reflect higher revenues as a
result of the favorable comparison to 1993 in which the effects of the Rate
Matters Settlement and the Fuel Matters Settlement were recorded and ComEd's
increased kilowatthour sales to ultimate consumers. The effects of these items
were partially offset by higher operation and maintenance expenses, which
include an after-tax charge for additional pension costs related to an early
retirement program of $20 million or $0.09
8
<PAGE>
per common share. ComEd also recorded a reduction in the carrying value of its
investments in uranium-related properties in 1994, which reduced net income by
$33.8 million or $0.16 per common share.
The 1993 results were significantly affected by the recording of the effects
of the Rate Matters Settlement and the Fuel Matters Settlement, which reduced
1993 net income by approximately $354 million or $1.66 per common share, in
addition to the effect of the deferred recognition of revenues which ComEd had
recorded during 1993 (approximately $160 million or $0.75 per common share),
and after the partially offsetting effect of recording approximately $269
million or $1.26 per common share in deferred carrying charges, net of income
taxes, as authorized in the Remand Order. The 1993 earnings also reflect a one-
time favorable cumulative effect of $9.7 million or $0.05 per common share as a
result of the adoption of SFAS No. 109, Accounting for Income Taxes, in January
1993. The effect of the non-recurring items was partially offset by a higher
level of kilowatthour sales and lower operation and maintenance expenses.
Excluding non-recurring items, earnings in 1993 would have been $1.83 per
common share.
The 1992 results were significantly affected by the decreased level of
kilowatthour sales due to a cooler than normal summer, higher operation and
maintenance expenses, higher revenues resulting from the full effect of the
rate increase which became effective on March 20, 1991, lower fuel and
purchased power costs and the 1992 reduction to net income of $50 million or
$0.24 per common share to reflect a provision for additional refunds and
interest related to the 1985 ICC rate order. Excluding non-recurring items,
earnings in 1992 would have been $2.32 per common share.
Kilowatthour Sales. Kilowatthour sales to ultimate consumers increased 2.8%
in 1994, the result of increased sales to all classes of customers (except
railroads, which decreased), due in part to warmer summer weather and colder
winter weather as compared to 1993. The service territory economy also improved
during 1994, which contributed to the increase in kilowatthour sales.
Kilowatthour sales to ultimate consumers increased 4.6% in 1993, the result of
increased sales to all classes of customers (except railroads, which
decreased), due primarily to more normal summer weather in 1993 as compared to
1992. Kilowatthour sales to ultimate consumers decreased 4.6% in 1992
principally reflecting lower kilowatthour sales to residential consumers as a
result of a cooler than normal summer. Kilowatthour sales including sales for
resale decreased 3.0% in 1994, increased 16.0% in 1993 and decreased 3.7% in
1992.
Electric Operating Revenues. Operating revenues increased $1,017 million in
1994 principally reflecting the favorable comparison to 1993 in which the
effects of the Rate Matters Settlement and the Fuel Matters Settlement were
recorded and the increased level of kilowatthour sales to ultimate consumers
described above. The increase was partially offset by a decrease in energy
costs recovered under the fuel adjustment provision in ComEd's rates.
Operating revenues decreased $766 million in 1993 principally reflecting the
recording of the effects of the Rate Matters Settlement and the Fuel Matters
Settlement, which reduced 1993 electric operating revenues by $1,282 million.
This reduction was partially offset by a higher level of kilowatthour sales and
an increase in energy costs recovered under the fuel adjustment provision in
ComEd's rates. See "Net Income on Common Stock" above and Note 2 of Notes to
Financial Statements for additional information.
Operating revenues decreased $249 million in 1992 principally reflecting a
lower level of kilowatthour sales due to a cooler than normal summer, a
decrease in the recovery of energy costs under the fuel adjustment provision in
ComEd's rates and a provision for revenue refunds of approximately $18 million
related to the 1985 ICC rate order. The decrease more than offset the full
effect of the rate increase authorized in the 1991 ICC rate order, which became
effective on March 20, 1991.
Fuel Costs. Changes in fuel expense for 1994, 1993 and 1992 primarily
resulted from changes in the average cost of fuel consumed, changes in the mix
of fuel sources of electric energy generated and
9
<PAGE>
changes in net generation of electric energy. Fuel mix is determined primarily
by system load, the costs of fuel consumed and the availability of nuclear
generating units. The cost of fuel consumed, net generation of electric energy
and fuel sources of kilowatthour generation were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Cost of fuel consumed (per million Btu):
Nuclear........................................... $0.53 $0.52 $0.52
Coal.............................................. $2.31 $2.89 $2.96
Oil............................................... $2.89 $3.03 $3.02
Natural gas....................................... $2.27 $2.70 $2.36
Average all fuels................................. $1.08 $1.15 $0.97
Net generation of electric energy (millions of
kilowatthours)................................... 90,243 94,266 79,889
Fuel sources of kilowatthour generation:
Nuclear........................................... 71% 75% 83%
Coal.............................................. 25 23 15
Oil............................................... 1 1 1
Natural gas....................................... 3 1 1
------ ------ ------
100% 100% 100%
====== ====== ======
</TABLE>
In February 1992, a $46 million court-ordered refund from the DOE relating to
spent nuclear fuel disposal costs was refunded to ComEd's ratepayers through
the fuel adjustment clause.
Under the Energy Policy Act of 1992, investor-owned electric utilities that
have purchased enrichment services from the DOE are being assessed amounts to
fund a portion of the cost for the decontamination and decommissioning of three
nuclear enrichment facilities previously operated by the DOE. ComEd's portion
of such assessments is estimated to be approximately $15 million per year (to
be adjusted annually for inflation). The Act provides that such assessments are
to be treated as a cost of fuel. See Note 1 of Notes to Financial Statements
under "Deferred Unrecovered Energy Costs" for information related to the
accounting for such costs.
Fuel Supply. Compared to other utilities, ComEd has relatively low average
fuel costs. This results from ComEd's reliance predominantly on lower cost
nuclear generation. ComEd's coal costs, however, are high compared to those of
other utilities. ComEd's western coal contracts and its rail contracts for
delivery of the western coal were renegotiated during 1992 effective as of
January 1, 1993, to provide, among other things, for significant reductions in
the delivered price of the coal over the duration of the contracts. However,
the renegotiated contracts provide for the purchase of certain coal at prices
substantially above currently prevailing market prices and ComEd has
significant purchase commitments under its contracts. In addition, as of
December 31, 1994, ComEd had unrecovered fuel costs in the form of coal
reserves of approximately $498 million. In prior years, ComEd's commitments for
the purchase of coal exceeded its requirements. Rather than take all the coal
it was required to take, ComEd agreed to purchase the coal in place in the form
of coal reserves. For additional information concerning ComEd's coal purchase
commitments, fuel reconciliation proceedings and coal reserves, see "Liquidity
and Capital Resources" above and Notes 1, 2 and 19 of Notes to Financial
Statements.
Purchased Power. Amounts of purchased power are primarily affected by system
load, the availability of ComEd and the Indiana Company's generating units and
the availability and cost of power from other utilities.
The number and average cost of kilowatthours purchased were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----- ---- -----
<S> <C> <C> <C>
Kilowatthours (millions)................................. 2,068 644 2,555
Cost per kilowatthour.................................... 2.86c 1.91c 1.78c
</TABLE>
10
<PAGE>
Deferred Under or Overrecovered Energy Costs--Net. Operating expenses for the
years 1994, 1993 and 1992 reflect the net change in under or overrecovered
allowable energy costs under ComEd's fuel adjustment clause. See "Fuel Costs"
and "Fuel Supply" above and Note 1 of Notes to Financial Statements under
"Deferred Unrecovered Energy Costs."
Operation and Maintenance Expenses. Total operation and maintenance expenses
increased 2% during 1994, decreased 4% during 1993 and increased 9% during
1992. The increase in 1994 primarily reflects an increase in operation and
maintenance expenses associated with pension benefit costs, incentive
compensation programs, nuclear and fossil generating stations, certain other
employee benefits, and certain administrative and general costs, partially
offset by lower expenses associated with transmission and distribution
facilities. The decrease in 1993 primarily reflects a decrease in operation and
maintenance expenses associated with nuclear and fossil generating stations,
lower costs of pension benefits and customer-related activities, a decrease in
the number of employees and lower research costs, partially offset by higher
costs of postretirement health care benefits and the cost related to the 1993
special incentive plan for employees. The increase in 1992 primarily reflects
an increase in operation and maintenance expenses associated with nuclear
generating stations, higher costs of pension and postretirement health care
benefits and an increased number of employees. Wage increases, the effects of
which are reflected in the increases and decreases discussed below, have
increased operation and maintenance expenses during 1994 and 1992. Wages in
1993 were not increased over 1992 levels. Operation and maintenance expenses in
1994 include approximately $20 million for wage increases. The effects of
inflation have increased operation and maintenance costs during the periods and
are also reflected in the increases and decreases discussed below.
The cost of pension benefits (net of amounts charged to construction)
increased $29 million in 1994, decreased $16 million in 1993 and increased $21
million in 1992. The increase in pension benefits in 1994 reflects $34 million
related to employees who elected in 1994 to take early retirements under a 1994
early retirement program. It is estimated that, in total, the program will
result in the recognition of approximately $35 million of pension cost (see
"Liquidity and Capital Resources," subcaption "Financial Condition" above for
additional information). The 1992 pension increase reflects the effect of
ComEd's workforce reduction program in which a charge to income of $26 million
was recorded in 1992. See Note 12 of Notes to Financial Statements for
additional information. Additional costs associated with ComEd's management
workforce reduction program of approximately $11 million were recorded in 1992,
which adversely impacted operation and maintenance expenses for 1992. The cost
of postretirement health care benefits (net of amounts charged to construction)
increased $14 million and $29 million in 1993 and 1992, respectively. The $14
million increase in 1993 reflects an increase in the cost of postretirement
health care benefits of $17 million as a result of adopting on January 1, 1993,
SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions (see Note 13 of Notes to Financial Statements for additional
information). Certain other employee benefits increased $4 million in 1994,
primarily due to an increase in medical costs for active employees.
Operation and maintenance expenses associated with the nuclear generating
stations increased $9 million in 1994, decreased $74 million in 1993 and
increased $105 million in 1992. The increase at the nuclear stations in 1994 is
due to activities undertaken during increased scheduled and non-scheduled
outages. The decrease at the nuclear generating stations in 1993 includes the
effects of ComEd's cost reduction efforts. Future operation and maintenance
expenses associated with nuclear generating stations may be significantly
affected by regulatory, operational and other requirements. See "Nuclear
Matters" under "Regulation" above. Operation and maintenance expenses
associated with the fossil generating stations increased $4 million and
decreased $13 million for 1994 and 1993, respectively. The increase in 1994
reflects, in part, activities undertaken during a greater number of scheduled
overhauls. The decrease in 1993 includes the effects of ComEd's cost reduction
efforts. Research costs also decreased $10 million in 1993 due to the cost
reduction efforts.
11
<PAGE>
Operation and maintenance expenses associated with ComEd's transmission and
distribution system decreased $18 million in 1994. The decrease in 1994
reflects the effects of cost containment efforts. Costs of customer-related
activities decreased $13 million in 1993.
Operation and maintenance expenses in 1994 reflect a $50 million cost for
employee incentive compensation plans related to the achievement of certain
financial performance, cost containment and operating performance goals.
Operation and maintenance expenses in 1993 reflect a $36 million special
incentive plan cost for employees related to a sharing of operation and
maintenance savings below 1993 budgeted levels.
Certain administrative and general costs increased an additional $12 million
in 1994 primarily due to increases in the provisions for injuries and damages
and obsolete materials.
In 1993, a provision of $5 million was recorded to reflect the low end of the
range of ComEd's estimate of the liability associated with cleanup costs of
remediation sites other than former MGP sites. In 1991, a provision of $25
million was recorded which reflects the low end of the range of ComEd's
estimate of the liability associated with former MGP sites. See Note 19 of
Notes to Financial Statements for additional information concerning cleanup
costs of remediation sites and former MGP sites.
Depreciation. Depreciation expense increased in 1994 and 1993 as a result of
additions to plant in service. Depreciation expense increased in 1992 as a
result of reflecting in expense a full year's effect of increased
decommissioning costs allowed by the 1991 ICC rate order, which became
effective March 20, 1991. See Note 1 of Notes to Financial Statements for
information concerning depreciation rates and decommissioning costs.
Interest on Debt. Changes in interest on long-term debt and notes payable for
the years 1994, 1993 and 1992 were due to changes in average interest rates and
in the amounts of long-term debt and notes payable outstanding. Changes in
interest on long-term debt also reflected new issues of debt and the retirement
and redemption of issues which were refinanced at generally lower rates of
interest. The average amounts of long-term debt and notes payable outstanding
and average interest rates thereon were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Long-term debt outstanding:
Average amount (millions).......................... $7,934 $8,105 $7,700
Average interest rate.............................. 7.83% 8.03% 8.58%
Notes payable outstanding:
Average amount (millions).......................... $ 9 $ 6 $ 17
Average interest rate.............................. 6.48% 5.83% 4.43%
</TABLE>
Deferred Carrying Charges. In the Remand Order, the ICC provided that, for
ratemaking purposes, deferred carrying charges on the reasonable and "used and
useful" plant costs of the Units for the period April 1, 1989 until
approximately March 20, 1991, the date under the Remand Order that the Units
were reflected in rates, could be deferred and amortized. Approximately $438
million of such costs was capitalized as a regulatory asset in October 1993 and
resulted in an increase to net income for the year 1993 of approximately $269
million or $1.26 per common share. Amortization of deferred carrying charges
for the years 1994 and 1993 amounted to approximately $13 million and $2
million, respectively.
Income Taxes. In the third quarter of 1993, the President of the United
States signed into law a deficit-reduction plan that included, among other
things, an increase in the federal statutory corporate income tax rate from 34%
to 35%, effective January 1, 1993. The recording of the effects of the
increased taxes began in 1993. In addition, a net increase in the deferred
income tax liability was recorded in the third quarter of 1993 which was
primarily offset by regulatory assets net of regulatory liabilities, reflecting
the increase in taxes recoverable in rates to settle net income tax liabilities
recorded in prior years.
12
<PAGE>
Further, the effects of the elimination of a scheduled reduction in a
component of the statutory Illinois income tax rate, which was to have declined
to 4.4% from 4.8%, effective July 1, 1993, were recorded in the third quarter
of 1993.
In 1993, a loss for income tax purposes was recorded. Income tax overpayments
resulting from such loss and other tax refunds, approximating $36 million and
$187 million at December 31, 1994 and 1993, respectively, were included in
receivables in the Consolidated Balance Sheets.
See Note 14 of Notes to Financial Statements for information concerning the
accounting standard adopted in January 1993 which requires an asset and
liability approach for financial accounting and reporting for income taxes
rather than the deferred method.
Decommissioning. The staff of the SEC has questioned certain of the current
accounting practices of the electric utility industry, including ComEd,
regarding the recognition, measurement and classification of decommissioning
costs for nuclear generating stations in financial statements of electric
utilities. In response to these questions, the FASB has agreed to review the
accounting for nuclear decommissioning costs. If current electric utility
industry accounting practices for such decommissioning costs are changed: (1)
annual provisions for decommissioning could increase; (2) the estimated cost
for decommissioning could be recorded as a liability rather than as accumulated
depreciation; and (3) trust fund income from the external decommissioning
trusts could be reported as investment income rather than as a reduction to
decommissioning expense. ComEd does not believe that such changes, if required,
would have an adverse effect on results of operations due to its current and
future ability to recover decommissioning costs through rates.
Investments in Uranium-Related Properties. In May 1994, ComEd recorded a
reduction in the carrying value of its investments in uranium-related
properties after completing a review of various alternatives and reassessing
the long-term recoverability of those investments. The effects of the reduction
reduced 1994 net income by approximately $33.8 million or $0.16 per common
share.
Other Items. The amounts of AFUDC reflect changes in the average levels of
investment subject to AFUDC and changes in the average annual rates as
discussed in Note 1 of Notes to Financial Statements. AFUDC does not contribute
to the current cash flow of ComEd.
The ratios of earnings to fixed charges for the years 1994, 1993 and 1992
were 1.99, 1.19 and 2.06, respectively. The ratios of earnings to fixed charges
and preferred and preference stock dividend requirements for the years 1994,
1993 and 1992 were 1.73, 1.03 and 1.78, respectively.
Business corporations in general have been adversely affected by inflation
because amounts retained after the payment of all costs have been inadequate to
replace, at increased costs, the productive assets consumed. Electric utilities
in particular have been especially affected as a result of their capital
intensive nature and regulation which limits capital recovery and prescribes
installation or modification of facilities to comply with increasingly
stringent safety and environmental requirements. Because the regulatory process
limits the amount of depreciation expense included in ComEd's revenue allowance
to the original cost of utility plant investment, the resulting cash flows are
inadequate to provide for replacement of that investment in future years or
preserve the purchasing power of common equity capital previously invested.
13
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Commonwealth Edison Company:
We have audited the accompanying consolidated balance sheets and statements
of consolidated capitalization of Commonwealth Edison Company (an Illinois
corporation) and subsidiary companies as of December 31, 1994 and 1993, and the
related statements of consolidated income, retained earnings, premium on common
stock and other paid-in capital and cash flows for each of the three years in
the period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Commonwealth Edison Company
and subsidiary companies as of December 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
As discussed in Notes 13 and 14, effective January 1, 1993, the Company
changed its method of accounting for postretirement health care benefits and
income taxes, respectively.
Arthur Andersen LLP
Chicago, Illinois
January 27, 1995
14
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
(MILLIONS OF DOLLARS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C> <C>
Electric operating revenues...... $ 6,278 $ 5,260 $ 6,026 $ 6,276 $ 5,311
Net income....................... $ 424 $ 112 $ 514 $ 95 $ 128
Earnings per common share........ $ 1.68 $ 0.22 $ 2.08 $ 0.08 $ 0.22
Cash dividends declared per com-
mon share....................... $ 1.60(2) $ 1.60 $ 2.30 $ 3.00 $ 3.00
Total assets (at end of year).... $23,076 $24,380 $20,993(1) $17,365 $17,889
Long-term obligations at end of
year excluding current portion:
Long-term debt and preference
stock subject to mandatory re-
demption requirements......... $ 7,745 $ 7,861 $ 7,913 $ 7,081 $ 7,341
Accrued spent nuclear fuel dis-
posal fee and related inter-
est........................... $ 590 $ 567 $ 549 $ 530 $ 500
Capital lease obligations...... $ 431 $ 321 $ 347 $ 396 $ 387
Other long-term obligations.... $ 1,754 $ 1,718 $ 666 $ 341 $ 225
</TABLE>
--------
(1) See Note 14 of Notes to Financial Statements for additional information.
(2) Does not include a special dividend (consisting of $40 million cash and
the stock of Unicom Enterprises Inc.) effected on September 1, 1994 in
connection with the holding company corporate restructuring.
PRICE RANGE* AND DIVIDENDS PAID PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
1994 (BY QUARTERS) 1993 (BY QUARTERS)
--------------------------- ---------------------------
FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST
------ ----- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price range:
High................. -- -- 26 28 3/4 30 5/8 31 5/8 29 7/8 28 1/4
Low.................. -- -- 22 25 1/8 27 3/8 27 3/8 25 5/8 22 7/8
Cash dividends paid.... 40c 40c** 40c 40c 40c 40c 40c 40c
</TABLE>
* As reported as NYSE Composite Transactions.
** Does not include a special dividend (consisting of $40 million cash and the
stock of Unicom Enterprises Inc.) effected on September 1, 1994 in
connection with the holding company corporate restructuring.
--------
Prior to the corporate restructuring on September 1, 1994, ComEd's common
stock was traded on the New York, Chicago and Pacific stock exchanges, with
the ticker symbol CWE. See Note 1 of Notes to Financial Statements for
additional information.
1994 REVENUES AND SALES
<TABLE>
<CAPTION>
ELECTRIC
OPERATING INCREASE/ KILOWATTHOUR INCREASE/
REVENUES(1) (DECREASE) SALES (DECREASE) INCREASE
(THOUSANDS) OVER 1993 (MILLIONS) OVER 1993 CUSTOMERS OVER 1993
----------- ---------- ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Residential............. $2,273,763 (2.9)% 21,376 2.7 % 3,047,354 1.3%
Small commercial and
industrial............. 1,917,084 (2.3)% 24,320 3.7 % 286,793 1.1%
Large commercial and
industrial............. 1,381,251 (3.9)% 23,450 2.3 % 1,528 1.7%
Public authorities...... 452,512 (4.5)% 6,885 2.1 % 12,059 0.3%
Electric railroads...... 26,179 (5.1)% 397 (1.8)% 2 --
---------- ------ ---------
Ultimate consumers--
total................... $6,050,789 (3.1)% 76,428 2.8 % 3,347,736 1.2%
Provisions for revenue
refunds--ultimate
consumers.............. (15,909) -- --
---------- ------ ---------
Ultimate consumers--net. $6,034,880 76,428 3,347,736
Sales for resale........ 187,147 8,743 18
Other revenues.......... 55,494 -- --
---------- ------ ---------
$6,277,521 19.3 % 85,171 (3.0)% 3,347,754 1.2%
========== ====== =========
</TABLE>
--------
(1) See Note 2 of Notes to Financial Statements and the Statements of
Consolidated Income for information related to revenue refunds.
15
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME
The following Statements of Consolidated Income for the years 1994, 1993 and
1992 reflect the results of past operations and are not intended as any
representation as to results of operations for any future period. Future
operations will necessarily be affected by various and diverse factors and
developments, including changes in electric rates, population, business
activity, taxes, environmental control, energy use, fuel supply, cost of labor,
fuel and purchased power and other matters, the nature and effect of which
cannot now be determined.
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
(THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Electric Operating Revenues (Notes 2
and 3):
Operating revenues....................... $6,293,430 $6,547,205 $6,044,693
Provisions for revenue refunds........... (15,909) (1,286,765) (18,372)
---------- ---------- ----------
$6,277,521 $5,260,440 $6,026,321
---------- ---------- ----------
Electric Operating Expenses and Taxes:
Fuel (Notes 1, 2, 10 and 19)............. $1,049,853 $1,170,935 $ 841,321
Purchased power.......................... 59,123 12,303 45,579
Deferred (under)/overrecovered energy
costs--net (Note 1)..................... 1,940 (1,757) (30,254)
Operation................................ 1,525,258 1,455,986 1,529,849
Maintenance.............................. 561,320 581,714 587,778
Depreciation (Note 1).................... 887,432 862,766 836,129
Recovery of regulatory assets............ 15,453 5,235 3,330
Taxes (except income) (Note 15).......... 787,796 701,913 743,909
Income taxes (Notes 1 and 14)--
Current--Federal....................... 158,301 (19,930) 139,857
--State................................ 1,913 (7,623) 21,531
Deferred--Federal--net................. 104,290 88,631 97,066
--State--net........................... 65,017 34,752 45,829
Investment tax credits deferred--net
(Notes 1 and 14)........................ (28,757) (29,424) (32,506)
---------- ---------- ----------
$5,188,939 $4,855,501 $4,829,418
---------- ---------- ----------
Electric Operating Income.................. $1,088,582 $ 404,939 $1,196,903
---------- ---------- ----------
Other Income and (Deductions):
Interest on long-term debt............... $ (621,225) $ (651,181) $ (660,429)
Interest on notes payable................ (557) (334) (775)
Allowance for funds used during construc-
tion (Note 1)--
Borrowed funds......................... 18,912 16,930 17,213
Equity funds........................... 22,628 20,618 19,960
Income taxes applicable to nonoperating
activities (Notes 1 and 14)............. 27,074 29,913 6,275
Income tax reduction for disallowed plant
costs................................... -- 792 --
Deferred carrying charges (Note 2)....... -- 438,183 --
Interest and other costs for 1993 Settle-
ments (Note 2).......................... (21,464) (98,674) --
Miscellaneous--net (Note 17)............. (90,004) (58,484) (65,166)
---------- ---------- ----------
$ (664,636) $ (302,237) $ (682,922)
---------- ---------- ----------
Net Income Before Cumulative Effect of
Change In Accounting for Income Taxes..... $ 423,946 $ 102,702 $ 513,981
Cumulative Effect of Change In Accounting
for Income Taxes.......................... -- 9,738 --
---------- ---------- ----------
Net Income................................. $ 423,946 $ 112,440 $ 513,981
Provision for Dividends on Preferred and
Preference Stocks......................... 64,927 66,052 70,539
---------- ---------- ----------
Net Income on Common Stock................. $ 359,019 $ 46,388 $ 443,442
========== ========== ==========
Average Number of Common Shares Outstand-
ing....................................... 214,008 213,508 212,929
Earnings Per Common Share Before Cumulative
Effect of Change In Accounting for Income
Taxes..................................... $ 1.68 $ 0.17 $ 2.08
Cumulative Effect of Change In Accounting
for Income Taxes.......................... -- 0.05 --
---------- ---------- ----------
Earnings Per Common Share.................. $ 1.68 $ 0.22 $ 2.08
========== ========== ==========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
16
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
ASSETS 1994 1993
------ ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Utility Plant (Notes 1, 3, 8, 16 and 18):
Plant and equipment, at original cost (includes
construction work in progress of $1,043 million
and $1,040 million, respectively)................. $26,257,665 $25,581,003
Less--Accumulated provision for depreciation....... 9,623,756 8,790,519
----------- -----------
$16,633,909 $16,790,484
Nuclear fuel, at amortized cost.................... 689,424 662,562
----------- -----------
$17,323,333 $17,453,046
----------- -----------
Investments and Other Property:
Nuclear decommissioning funds (Notes 1 and 11)..... $ 880,944 $ 706,841
Subsidiary companies (Notes 1 and 17).............. 118,051 123,708
Other, at cost (Note 17)........................... 18,613 72,272
----------- -----------
$ 1,017,608 $ 902,821
----------- -----------
Current Assets:
Cash............................................... $ 84 $ 636
Temporary cash investments (Note 11)............... 53,566 244,726
Other cash investments (Note 11)................... 19,588 641,575
Special deposits (Note 11)......................... 29,603 32,635
Receivables (Note 1)--
Customers........................................ 463,385 427,613
Taxes............................................ 36,083 186,687
Other............................................ 68,434 68,727
Provisions for uncollectible accounts............ (10,720) (10,910)
Coal and fuel oil, at average cost................. 108,872 111,752
Materials and supplies, at average cost............ 384,612 402,714
Deferred unrecovered energy costs (Note 1)......... 48,697 43,885
Deferred income taxes related to current assets and
liabilities (Note 14)--
Loss carryforward................................ 10,090 175,197
Other............................................ 110,267 169,477
Prepayments and other.............................. 56,449 42,190
----------- -----------
$ 1,379,010 $ 2,536,904
----------- -----------
Deferred Charges and Other Noncurrent Assets:
Regulatory assets (Notes 1 and 14)................. $ 2,604,270 $ 2,698,465
Unrecovered energy costs (Note 1).................. 643,438 680,243
Other.............................................. 108,308 108,782
----------- -----------
$ 3,356,016 $ 3,487,490
----------- -----------
$23,075,967 $24,380,261
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
17
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
CAPITALIZATION AND LIABILITIES 1994 1993
------------------------------ ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Capitalization (see accompanying statements):
Common stock equity.................................. $ 5,401,423 $ 5,421,893
Preferred and preference stocks without mandatory
redemption requirements............................. 508,147 441,445
Preference stock subject to mandatory redemption
requirements........................................ 292,163 309,964
Long-term debt....................................... 7,453,206 7,550,762
----------- -----------
$13,654,939 $13,724,064
----------- -----------
Current Liabilities:
Notes payable--bank loans (Note 9)................... $ 7,150 $ 5,950
Current portion of long-term debt, redeemable prefer-
ence stock and capitalized lease obligations
(Note 11)........................................... 560,335 630,050
Accounts payable..................................... 351,370 442,867
Accrued interest..................................... 182,745 186,825
Accrued taxes........................................ 209,269 132,362
Dividends payable.................................... 102,585 101,047
Estimated revenue refunds and related interest
(Note 2)............................................ -- 1,166,308
Customer deposits.................................... 44,514 45,757
Other................................................ 85,845 143,519
----------- -----------
$ 1,543,813 $ 2,854,685
----------- -----------
Deferred Credits and Other Noncurrent Liabilities:
Deferred income taxes (Note 14)...................... $ 4,383,876 $ 4,449,127
Accumulated deferred investment tax credits (Notes 1
and 14)............................................. 717,752 746,508
Accrued spent nuclear fuel disposal fee and related
interest (Note 10).................................. 589,757 566,527
Obligations under capital leases (Note 16)........... 431,402 321,393
Regulatory liabilities (Notes 1 and 14).............. 699,426 782,338
Other (Notes 1, 12 and 13)........................... 1,055,002 935,619
----------- -----------
$ 7,877,215 $ 7,801,512
----------- -----------
Commitments and Contingent Liabilities (Note 19)
$23,075,967 $24,380,261
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
18
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CAPITALIZATION
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Common Stock Equity (Notes 4 and 5):
Common stock, $12.50 par value per share--
Outstanding--214,191,021 shares and 213,751,147
shares, respectively............................ $ 2,677,387 $ 2,671,889
Premium on common stock and other paid-in capital. 2,222,941 2,217,110
Capital stock and warrant expense................. (16,240) (16,258)
Retained earnings................................. 517,335 549,152
----------- -----------
$ 5,401,423 $ 5,421,893
----------- -----------
Preferred and Preference Stocks Without Mandatory
Redemption Requirements (Notes 4, 6 and 11):
Preference stock, cumulative, without par value--
Outstanding--13,499,549 shares and 10,499,549
shares, respectively............................ $ 504,957 $ 432,320
$1.425 convertible preferred stock, cumulative,
without par value--
Outstanding--100,323 shares and 286,949 shares,
respectively.................................... 3,190 9,125
Prior preferred stock, cumulative, $100 par value
per share--
No shares outstanding............................ -- --
----------- -----------
$ 508,147 $ 441,445
----------- -----------
Preference Stock Subject to Mandatory Redemption
Requirements (Notes 4, 7 and 11):
Preference stock, cumulative, without par value--
Outstanding--3,113,205 shares and 3,290,290
shares, respectively............................ $ 309,964 $ 327,653
Current redemption requirements for preference
stock included in current liabilities............ (17,801) (17,689)
----------- -----------
$ 292,163 $ 309,964
----------- -----------
Long-Term Debt (Notes 8 and 11):
First mortgage bonds:
Maturing 1995 through 1999--5 1/4% to 7%........ $ 818,000 $ 818,000
Maturing 2000 through 2009--5.30% to 10 3/8%.... 2,220,500 2,204,600
Maturing 2010 through 2019--5.85% to 10 5/8%.... 1,106,000 1,106,000
Maturing 2020 through 2023--7 3/4% to 9 7/8%.... 1,870,000 1,870,000
----------- -----------
$ 6,014,500 $ 5,998,600
Sinking fund debentures, due 1999 through 2011--
2 3/4% to 7 5/8%................................. 112,593 120,185
Pollution control obligations, due 2004 through
2014--5 7/8% to 11 3/8%.......................... 337,200 353,200
Other long-term debt.............................. 1,451,449 1,598,625
Current maturities of long-term debt included in
current liabilities.............................. (395,554) (446,724)
Unamortized net debt discount and premium
(Note 1)......................................... (66,982) (73,124)
----------- -----------
$ 7,453,206 $ 7,550,762
----------- -----------
$13,654,939 $13,724,064
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
19
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Balance at Beginning of Year...................... $549,152 $847,186 $ 893,702
Add--Net income................................... 423,946 112,440 513,981
-------- -------- ----------
$973,098 $959,626 $1,407,683
-------- -------- ----------
Deduct--
Dividends declared on--
Common stock.................................. $390,281 $341,683 $ 489,768
Preferred and preference stocks............... 65,381 65,688 70,101
Loss on reacquired preference stock............. 101 3,103 628
-------- -------- ----------
$455,763 $410,474 $ 560,497
-------- -------- ----------
Balance at End of Year............................ $517,335 $549,152 $ 847,186
======== ======== ==========
</TABLE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED PREMIUM ON COMMON STOCK
AND OTHER PAID-IN CAPITAL
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Balance at Beginning of Year.................. $2,217,110 $2,210,524 $2,202,496
Add--Premium on issuance of common stock and
gain on reacquired preference stock.......... 5,831 6,586 8,028
---------- ---------- ----------
Balance at End of Year........................ $2,222,941 $2,217,110 $2,210,524
========== ========== ==========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
20
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Cash Flow From Operating Activities:
Net income............................. $ 423,946 $ 112,440 $ 513,981
Adjustments to reconcile net income to
net cash provided by operating activ-
ities:
Depreciation and amortization........ 929,325 911,136 874,156
Deferred income taxes and investment
tax credits--net.................... 127,186 85,079 109,850
Cumulative effect of change in ac-
counting for income taxes........... -- (9,738) --
Equity component of allowance for
funds used during construction...... (22,628) (20,618) (19,960)
Provisions for revenue refunds and
related interest.................... 37,548 1,354,197 73,370
Revenue refunds and related interest. (1,221,650) (190,723) (248,360)
Recovery/(deferral) of regulatory
assets/deferred carrying charges--
net................................. 15,453 (432,948) 3,330
Provisions/(payments) for liability
for early retirement and separation
costs--net.......................... 33,580 (1,816) 27,814
Net effect on cash flows of changes
in:
Receivables........................ 114,935 (159,169) 70,776
Coal and fuel oil.................. 2,880 215,382 (111,333)
Materials and supplies............. 18,102 1,834 1,990
Accounts payable adjusted for nu-
clear fuel lease principal pay-
ments and early retirement and
separation costs--net............. 118,190 277,733 315,822
Accrued interest and taxes......... 72,827 (39,234) (85,633)
Other changes in certain current
assets and liabilities............ (54,052) (6,637) (9,031)
Other--net........................... 125,431 108,924 (51,555)
----------- ----------- -----------
$ 721,073 $ 2,205,842 $ 1,465,217
----------- ----------- -----------
Cash Flow From Investing Activities:
Construction expenditures.............. $ (720,602) $ (841,525) $ (995,881)
Nuclear fuel expenditures.............. (257,264) (261,370) (220,347)
Equity component of allowance for
funds used during construction........ 22,628 20,618 19,960
Contributions to nuclear
decommissioning funds................. (132,550) (132,550) (123,573)
Investment in subsidiary companies..... (49) -- (268)
Other cash investments and special de-
posits................................ 621,987 (619,349) 23,853
----------- ----------- -----------
$ (465,850) $(1,834,176) $(1,296,256)
----------- ----------- -----------
Cash Flow From Financing Activities:
Issuance of securities--
Long-term debt........................ $ 546,289 $ 1,927,296 $ 1,962,737
Capital stock......................... 77,970 80,585 15,568
Retirement and redemption of securi-
ties--
Long-term debt........................ (703,930) (1,900,540) (1,214,730)
Capital stock......................... (17,709) (93,081) (50,069)
Deposits and securities held for re-
tirement and redemption of securi-
ties.................................. 3,191 241,731 (245,028)
Premium paid on early redemption of
long-term debt........................ (4,564) (78,395) (10,809)
Cash dividends paid on capital stock... (446,342) (408,285) (635,370)
Proceeds from sale/leaseback of nu-
clear fuel............................ 306,649 204,254 190,830
Nuclear fuel lease principal payments.. (209,689) (245,968) (245,877)
Increase in short-term borrowings...... 1,200 350 3,600
----------- ----------- -----------
$ (446,935) $ (272,053) $ (229,148)
----------- ----------- -----------
Increase (Decrease) In Cash and Tempo-
rary Cash Investments.................. $ (191,712) $ 99,613 $ (60,187)
Cash and Temporary Cash Investments at
Beginning of Year...................... 245,362 145,749 205,936
----------- ----------- -----------
Cash and Temporary Cash Investments at
End of Year............................ $ 53,650 $ 245,362 $ 145,749
=========== =========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
21
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Holding Company Restructuring. Effective September 1, 1994, Unicom became the
parent corporation of ComEd and Unicom Enterprises in a corporate
restructuring. Previously, Unicom Enterprises was a wholly-owned subsidiary of
ComEd. The restructuring was accounted for by the pooling-of-interests method.
In the restructuring, each of the 214,185,572 outstanding shares of ComEd
common stock, par value $12.50 per share, was converted into one fully paid and
non-assessable share of Unicom common stock, without par value. In addition,
the outstanding shares of the common stock of CECo Merging Corporation (a
wholly-owned subsidiary of ComEd created to effect the restructuring) were
converted into the same number of shares of ComEd common stock, par value
$12.50 per share, outstanding immediately prior to the restructuring. The
preferred and preference stocks, common stock purchase warrants, first mortgage
bonds and other debt obligations of ComEd and the Indiana Company were
unchanged in the restructuring and remain outstanding securities and
obligations of ComEd and the Indiana Company.
Principles of Consolidation. The consolidated financial statements include
the accounts of ComEd and the Indiana Company. All significant intercompany
transactions have been eliminated. ComEd's investments in other subsidiary
companies, which are not material in relation to ComEd's financial position and
results of operations, are accounted for in accordance with the equity method
of accounting.
Regulation. ComEd is subject to regulation as to accounting, service and
ratemaking policies and practices by the ICC and FERC. ComEd's accounting
policies and the accompanying consolidated financial statements conform to
generally accepted accounting principles applicable to rate-regulated
enterprises and reflect the effects of the ratemaking process. Such effects
concern mainly the time at which various items enter into the determination of
net income in order to follow the principle of matching costs and revenues.
Customer Receivables and Revenues. ComEd is engaged principally in the
production, purchase, transmission, distribution and sale of electricity to a
diverse base of residential, commercial and industrial customers. ComEd's
electric service territory has an area of approximately 11,540 square miles and
an estimated population of approximately 8.2 million as of December 31, 1994,
approximately 8.1 million as of December 31, 1993 and approximately 8.2 million
as of December 31, 1992. It includes the city of Chicago, an area of about 225
square miles with an estimated population of three million from which ComEd
derived approximately one-third of its ultimate consumer revenues in 1994.
ComEd had approximately 3.3 million electric customers at December 31, 1994.
Depreciation and Decommissioning. Depreciation is provided on the straight-
line basis by amortizing the cost of depreciable plant and equipment over
estimated composite service lives. The 1991 ICC rate order directed ComEd to
depreciate non-nuclear plant and equipment at annual rates developed for each
class of plant based on their composite service lives (unchanged by the Rate
Order). Provisions for depreciation were at average annual rates of 3.13%,
3.12% and 3.12% of average depreciable utility plant and equipment for the
years 1994, 1993 and 1992, respectively. The annual rate for nuclear plant and
equipment is 2.88% which excludes separately collected decommissioning costs.
Nuclear plant decommissioning costs are accrued over the expected service
lives of the related nuclear generating units. The accrual is based on an
annual levelized cost of the unrecovered portion of estimated decommissioning
costs which are escalated for expected inflation to the expected time of
decommissioning and are net of expected earnings on the trust funds. See
"Decommissioning" under "Management's Discussion and Analysis of Financial
Condition and Results of Operations," subcaption "Results of Operations," for a
discussion of questions raised by the staff of the SEC and a FASB review
regarding the electric utility industry method of accounting for
decommissioning costs. Dismantling is
22
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
expected to occur relatively soon after the end of the useful life of each
related generating station. The accrual for decommissioning is based on the
prompt removal method authorized by the NRC guidelines. ComEd's twelve
operating units have estimated remaining service lives ranging from 11 to 33
years. ComEd's first nuclear unit, Dresden Unit 1, is retired and will be
dismantled upon the retirement of the remaining units at that station, which is
consistent with the regulatory treatment for the related decommissioning costs.
Based on ComEd's most recent study, decommissioning costs, including the cost
of decontamination and dismantling but excluding a contingency allowance, are
estimated to aggregate $3.5 billion in current-year (1995) dollars. ComEd
estimates that it will expend approximately $15 billion, excluding any
contingency allowance, for decommissioning costs primarily during the period
from 2007 to 2032. Such costs are expected to be funded by the external
decommissioning trust funds which ComEd established in compliance with Illinois
law and into which ComEd has been making annual contributions. Contingency
allowances used in decommissioning cost estimates provide for currently
unforeseeable costs that are likely to occur after decommissioning begins and
generally range from 20% to 25% of the identifiable costs. Future
decommissioning cost estimates may be significantly affected by the adoption of
or changes to NRC regulations.
On January 9, 1995, the ICC issued its Rate Order in the proceedings relating
to ComEd's February 10, 1994 rate increase request. In the Rate Order, the ICC
determined that ComEd's annual nuclear plant decommissioning cost collections
from its ratepayers should be reduced from the $127 million previously
authorized in the 1991 ICC rate order to $112.7 million. The $112.7 million
annual collection amount primarily resulted from the ICC's decision to exclude
from ComEd's costs subject to collection a contingency allowance. However, the
Rate Order establishes a rider which will allow annual adjustments to
decommissioning cost collections outside of the context of a traditional rate
proceeding. Such rider is intended to allow adjustments in decommissioning cost
recoveries from ratepayers as changes in cost estimates become identifiable.
Under Illinois law, decommissioning cost collections are required to be
deposited in external trust funds; and, consequently, such collections do not
add to the cash flows available for general corporate purposes.
As a result of the Rate Order, beginning January 14, 1995, the effective date
of the order, ComEd will collect and accrue $112.7 million annually for
decommissioning costs. The assumptions used to calculate the $112.7 million
decommissioning cost accrual include: the decommissioning cost estimate of $3.5
billion in current-year (1995) dollars, after-tax earnings on the tax-qualified
and nontax-qualified decommissioning funds of 7.30% and 6.26%, respectively, as
well as an escalation rate for future decommissioning costs of 5.3%. The annual
accrual of $112.7 million provided over the lives of the nuclear plants,
coupled with the expected fund earnings and amounts previously recovered in
rates, is expected to aggregate approximately $15 billion.
For the twelve operating nuclear units, decommissioning costs are recorded as
portions of depreciation expense and accumulated provision for depreciation on
the Statements of Consolidated Income and the Consolidated Balance Sheets,
respectively. As of December 31, 1994, the total decommissioning costs included
in the accumulated provision for depreciation were approximately $988 million.
For ComEd's retired nuclear unit, Dresden Unit 1, the total estimated liability
at December 31, 1994 in current-year (1995) dollars of approximately $235
million was recorded on the Consolidated Balance Sheets as a noncurrent
liability and the unrecovered portion of the liability of approximately $141
million was recorded as a regulatory asset.
Illinois law requires ComEd to establish external trusts to hold
decommissioning funds, and the ICC has approved ComEd's funding plan which
provides for annual contributions of current accruals and
23
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
ratable contributions of past accruals over the remaining service lives of the
nuclear plants. At December 31, 1994, the past accruals that are required to be
contributed to the external trusts aggregate $201 million. The fair value of
funds accumulated in the external trusts at December 31, 1994 was approximately
$881 million which includes pre-tax unrealized appreciation of $4 million. The
earnings on the external trusts accumulate in the fund balance and in the
accumulated provision for depreciation. Such earnings on the external trust
funds for the years 1994, 1993 and 1992, which have been recorded as a
component of depreciation expense on the Statements of Consolidated Income,
were $37,519,000, $40,828,000 and $32,443,000, respectively.
Amortization of Nuclear Fuel. The cost of nuclear fuel is amortized to fuel
expense based on the quantity of heat produced using the unit of production
method. As authorized by the ICC, provisions for spent nuclear fuel disposal
costs have been recorded at a level required to recover the fee payable on
current nuclear-generated and sold electricity and the current interest accrual
on the one-time fee payable to the DOE for nuclear generation prior to April 7,
1983. The one-time fee and interest thereon have been recovered and the current
fee and current interest on the one-time fee are currently being recovered
through the fuel adjustment clause. See Note 10 for further information
concerning the disposal of spent nuclear fuel, the one-time fee and the current
interest accrual on the one-time fee. Nuclear fuel expenses, including leased
fuel costs and provisions for spent nuclear fuel disposal costs, for the years
1994, 1993 and 1992 were $358,027,000, $385,894,000 and $366,821,000,
respectively.
Income Taxes. ComEd will be included in the consolidated federal and state
income tax returns filed by Unicom. Current and deferred income taxes of the
consolidated group are allocated to ComEd as if ComEd filed separate tax
returns. Deferred income taxes are provided for income and expense items
recognized for financial accounting purposes in periods that differ from those
for income tax purposes. Income taxes deferred in prior years are charged or
credited to income as the book/tax timing differences reverse. Prior years'
deferred investment tax credits are amortized through credits to income
generally over the lives of the related property. Income tax credits resulting
from interest charges applicable to nonoperating activities, principally
construction, are classified as other income.
For additional information relating to income taxes, including information
related to the adoption in January 1993 of SFAS No. 109, Accounting for Income
Taxes, which requires an asset and liability approach to accounting for income
taxes, see Note 14. In addition, see "Income Taxes" under the subcaption
"Results of Operations," in "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
AFUDC. In accordance with the uniform systems of accounts prescribed by
regulatory authorities, ComEd capitalizes AFUDC, compounded semiannually, which
represents the estimated cost of funds used to finance its construction
program. The equity component of AFUDC is recorded on an after-tax basis and
the borrowed funds component of AFUDC is recorded on a pre-tax basis. The
average annual capitalization rates for the years 1994, 1993 and 1992 were
9.85%, 10.05% and 10.31%, respectively. AFUDC does not contribute to the
current cash flow of ComEd. For additional information regarding AFUDC, see
Note 14.
Interest. Total interest costs incurred on debt, leases and other obligations
for the years 1994, 1993 and 1992 were $729,545,000, $778,639,000 and
$777,122,000, respectively.
Debt Discount, Premium and Expense. Discount, premium and expense on long-
term debt are being amortized over the lives of the respective issues.
Loss on Reacquired Debt. Consistent with regulatory treatment, the net loss
from reacquisition of first mortgage bonds, sinking fund debentures and
pollution control obligations prior to their scheduled maturity dates is
deferred and amortized over the lives of the long-term debt issued to finance
the reacquisition.
24
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Deferred Unrecovered Energy Costs. The uniform fuel adjustment clause adopted
by the ICC provides for the recovery of changes in fossil and nuclear fuel
costs and the energy portion of purchased power costs as compared to the fuel
and purchased energy costs included in ComEd's base rates. As authorized by the
ICC, ComEd has recorded under or overrecoveries of allowable fuel and energy
costs which, under the clause, are recoverable or refundable in subsequent
months. Deferred unrecovered energy costs also include amounts to be recovered
through the fuel adjustment clause for assessments by the DOE to fund a portion
of the cost for the decontamination and decommissioning of three nuclear
enrichment facilities previously operated by the DOE. As of December 31, 1994
and 1993, an asset of approximately $191 million and $202 million,
respectively, was recorded, of which the current portion of approximately $15
million has been included in current assets on the Consolidated Balance Sheets.
As of December 31, 1994 and 1993, a corresponding liability of approximately
$165 million and $177 million, respectively, was recorded in other noncurrent
liabilities and approximately $15 million and $29 million, respectively, was
recorded in other current liabilities.
At December 31, 1994 and 1993, ComEd had unrecovered fuel costs in the form
of coal reserves of approximately $498 million and $517 million, respectively.
In prior years, ComEd's commitments for the purchase of coal exceeded its
requirements. Rather than take all the coal it was required to take, ComEd
agreed to purchase the coal in place in the form of coal reserves. ComEd has
been allowed to recover from its customers the costs of the coal reserves
through its fuel adjustment clause as the coal is used for the generation of
electricity. ComEd expects to recover the costs of the coal reserves by the
year 2007. However, ComEd is not earning a return on the expenditures for coal
reserves prior to the coal reserves being used for the generation of
electricity by including the coal reserves in rate base. Unrecovered fuel costs
expected to be recovered within one year amounting to approximately $31 million
and $24 million at December 31, 1994 and 1993, respectively, have been included
on the Consolidated Balance Sheets in current assets as deferred unrecovered
energy costs. See Note 19 for additional information concerning ComEd's coal
commitments.
Regulatory Assets and Liabilities. Regulatory assets include the unamortized
portions of certain rate case and consultant costs associated with the prudency
audits of ComEd's Byron and Braidwood stations which the ICC allowed to be
deferred and amortized for ratemaking purposes, consultant costs associated
with the prudency audits of certain other significant plant addition audit
costs which the ICC allowed to be deferred and amortized for ratemaking
purposes, unamortized deferred depreciation related to Byron Unit 1 which the
ICC allowed to be deferred and amortized over the remaining life of the unit,
unamortized losses on ComEd's reacquired debt, unamortized deferred carrying
charges associated with the Units which the ICC allowed to be deferred and
amortized for ratemaking purposes, a regulatory asset for the unrecovered
portion of nuclear decommissioning costs for ComEd's Dresden Unit 1 and a
regulatory asset related to income taxes recorded in compliance with SFAS No.
109, which was adopted in January 1993. A regulatory liability related to
income taxes was also recorded in compliance with SFAS No. 109.
For additional information relating to deferred carrying charges, see
"Deferred Carrying Charges," under the subcaption "Results of Operations," in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Certain Investments. Effective January 1, 1994, SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities, was adopted. SFAS No. 115
addresses the accounting and reporting for investments in equity securities
that have readily determinable fair values and for all investments in debt
securities. For additional information, see Note 11.
Reclassifications. Certain prior year amounts have been reclassified to
conform with current period presentation. These reclassifications had no effect
on net income.
25
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Statements of Consolidated Cash Flows. For purposes of the Statements of
Consolidated Cash Flows, temporary cash investments, generally investments
maturing within three months at the time of purchase, are considered to be cash
equivalents. Supplemental information required by SFAS No. 95 for the years
1994, 1993 and 1992 was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Supplemental Cash Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized).......... $645,424 $677,669 $652,501
Income taxes (net of refunds)................. $ (4,923) $103,014 $238,052
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Capital lease obligations incurred.............. $309,716 $213,758 $193,677
</TABLE>
(2) SETTLEMENTS RELATING TO CERTAIN RATE MATTERS
Under the Rate Matters Settlement, effective as of November 4, 1993, ComEd
reduced its rates by approximately $339 million annually and commenced
refunding approximately $1.26 billion (including revenue taxes), plus interest
at five percent on the unpaid balance, through temporarily reduced rates over
an initial refund period which ended in November 1994 (to be followed by a
reconciliation period of no more than five months). ComEd had previously
deferred the recognition of revenues during 1993 as a result of developments in
the proceedings related to the 1991 ICC rate order, which resulted in a
reduction to 1993 net income of approximately $160 million or $0.75 per common
share. The recording of the effects of the Rate Matters Settlement in October
1993 reduced 1993 net income by approximately $292 million or $1.37 per common
share, in addition to the approximately $160 million effect of the deferred
recognition of revenues and after the partially offsetting effect of recording
approximately $269 million or $1.26 per common share in deferred carrying
charges, net of income taxes, authorized in the Remand Order. The deferred
recognition of revenues was eliminated in October 1993 at the time the
provisions for revenue refunds related to the Rate Matters Settlement, which
reflected those deferred revenues, were recorded.
Under the Fuel Matters Settlement, effective as of December 2, 1993, ComEd
commenced paying approximately $108 million (including revenue taxes) to its
customers through temporarily reduced collections under its fuel adjustment
clause over a twelve-month period which ended in November 1994. The recording
of the effects of the Fuel Matters Settlement in October 1993 reduced 1993 net
income by approximately $62 million or $0.29 per common share.
(3) OTHER RATE MATTERS
On January 9, 1995, the ICC issued its Rate Order in the proceedings relating
to ComEd's February 10, 1994 rate increase request. The Rate Order provides,
among other things, for (i) an increase in ComEd's total revenues of
approximately $301.8 million (excluding add-on revenue taxes) or 5.2%, on an
annual basis, including a $303.2 million increase in base rates, (ii) the
collection of municipal franchise costs as an adder to base rates until May 1,
1995, when such costs will be collected prospectively on an individual
municipality basis through a rider, and (iii) the use of a rider, with annual
review proceedings, to pass on to ratepayers increases or decreases in
estimated costs associated with the decommissioning of ComEd's nuclear
generating units. See Note 1 under "Depreciation and Decommissioning" for
information related to the level of decommissioning cost collections allowed in
the Rate Order. The rates provided in the Rate Order became effective on
January 14, 1995; however, they are being collected
26
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
subject to refund as a result of subsequent judicial action. ComEd expects the
Rate Order to be appealed by the intervenors in the rate proceeding.
In the Rate Order, the ICC determined that the Units were 100% "used and
useful" and that the previously determined reasonable costs of such Units, as
depreciated, should be included in full in ComEd's rate base.
(4) AUTHORIZED SHARES AND VOTING RIGHTS OF CAPITAL STOCK
At December 31, 1994, the authorized shares of ComEd capital stock were:
common stock--250,000,000 shares; preference stock--23,423,205 shares; $1.425
convertible preferred stock--100,323 shares; and prior preferred stock--850,000
shares. The preference and prior preferred stocks are issuable in series and
may be issued with or without mandatory redemption requirements. Holders of
shares at any time outstanding, regardless of class, are entitled to one vote
for each share held on each matter submitted to a vote at a meeting of
shareholders, with the right to cumulate votes in all elections for directors.
(5) COMMON STOCK
At December 31, 1994, shares of common stock were reserved for the following
purposes:
<TABLE>
<S> <C>
Conversion of $1.425 convertible preferred stock.................. 102,329
Conversion of warrants............................................ 27,917
-------
130,246
=======
</TABLE>
Common stock for the years 1994, 1993 and 1992 was issued as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Employee Stock Purchase Plan........................ 154,710 268,594 374,815
Employee Savings and Investment Plan................ 81,400 153,400 235,900
Conversion of $1.425 convertible preferred stock.... 190,050 22,375 16,221
Conversion of warrants.............................. 13,714 1,374 1,300
------- ------- -------
439,874 445,743 628,236
======= ======= =======
</TABLE>
At December 31, 1994 and 1993, 83,751 and 128,699 common stock purchase
warrants, respectively, were outstanding. The warrants entitle the holders to
convert such warrants into common stock at a conversion rate of one share of
common stock for three warrants.
27
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(6) PREFERRED AND PREFERENCE STOCKS WITHOUT MANDATORY REDEMPTION REQUIREMENTS
During 1994, 3,000,000 shares of preference stock without mandatory
redemption requirements were issued and no shares of preferred or preference
stocks without mandatory redemption requirements were redeemed. No shares of
preferred or preference stocks without mandatory redemption requirements were
issued or redeemed during 1993 or 1992. The series of preference stock without
mandatory redemption requirements outstanding at December 31, 1994 are
summarized as follows:
<TABLE>
<CAPTION>
INVOLUNTARY
SHARES AGGREGATE REDEMPTION LIQUIDATION
SERIES OUTSTANDING STATED VALUE PRICE(A) PRICE(A)
------- ----------- ------------ ---------- -----------
(THOUSANDS
OF DOLLARS)
<S> <C> <C> <C> <C>
$1.90 4,249,549 $106,239 $ 25.25 $25.00
$2.00 2,000,000 51,560 $ 26.04 $25.00
$1.96 2,000,000 52,440 $ 27.11 $25.00
$7.24 750,000 74,340 $101.00 $99.12
$8.40 750,000 74,175 $101.00 $98.90
$8.38 750,000 73,566 $100.16 $98.09
$2.425 3,000,000 72,637 $ 25.00 $25.00
---------- --------
13,499,549 $504,957
========== ========
</TABLE>
--------
(a) Per share plus accrued and unpaid dividends, if any.
The outstanding shares of $1.425 convertible preferred stock are convertible
at the option of the holders thereof, at any time, into common stock at the
rate of 1.02 shares of common stock for each share of convertible preferred
stock, subject to future adjustment. The convertible preferred stock may be
redeemed by ComEd at $42 per share, plus accrued and unpaid dividends, if any.
The involuntary liquidation price of the $1.425 convertible preferred stock is
$31.80 per share, plus accrued and unpaid dividends, if any. During 1994, 1993
and 1992, 186,626 shares, 21,942 shares and 15,911 shares, respectively, of the
convertible preferred stock were converted into common stock.
(7) PREFERENCE STOCK SUBJECT TO MANDATORY REDEMPTION REQUIREMENTS
During 1994 and 1992, no shares of preference stock subject to mandatory
redemption requirements were issued. During 1993, 700,000 shares of preference
stock subject to mandatory redemption requirements were issued. The series of
preference stock subject to mandatory redemption requirements outstanding at
December 31, 1994 are summarized as follows:
<TABLE>
<CAPTION>
SHARES AGGREGATE
SERIES OUTSTANDING STATED VALUE OPTIONAL REDEMPTION PRICE(A)
-------------- ----------- ------------ --------------------------------------------------
(THOUSANDS
OF DOLLARS)
<S> <C> <C> <C>
$8.20 285,705 $ 28,571 $103 through October 31, 1997; and $101 thereafter
$8.40 Series B 390,000 38,737 $101
$8.85 337,500 33,750 $103 through July 31, 1998; and $101 thereafter
$9.25 750,000 75,000 $103 through July 31, 1999; and $101 thereafter
$9.00 650,000 64,431 Non-callable
$6.875 700,000 69,475 Non-callable
--------- --------
3,113,205 $309,964
========= ========
</TABLE>
--------
(a) Per share plus accrued and unpaid dividends, if any.
28
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
The annual sinking fund requirements and sinking fund and involuntary
liquidation prices per share of the outstanding series of preference stock
subject to mandatory redemption requirements are summarized as follows:
<TABLE>
<CAPTION>
SINKING
FUND INVOLUNTARY
SERIES ANNUAL SINKING FUND REQUIREMENT PRICE(a) LIQUIDATION PRICE(a)
------- ----------------------------------- ------- -------------------
<S> <C> <C> <C>
$8.20 35,715 shares $100 $100.00
$8.40 Series B 30,000 shares(b) $100 $ 99.326
$8.85 37,500 shares $100 $100.00
$9.25 75,000 shares $100 $100.00
$9.00 130,000 shares beginning in 1996(b) $100 $ 99.125
$6.875 (c) $100 $ 99.25
</TABLE>
--------
(a) Per share plus accrued and unpaid dividends, if any.
(b) ComEd has a non-cumulative option to increase the annual sinking fund
payment on each sinking fund redemption date to retire an additional number
of shares, not in excess of the sinking fund requirement, at the applicable
redemption price.
(c) All shares are required to be redeemed on May 1, 2000.
Annual remaining sinking fund requirements through 1999 on preference stock
outstanding at December 31, 1994 will aggregate $17,822,000 in 1995,
$30,822,000 in 1996, $30,822,000 in 1997, $30,822,000 in 1998 and $30,822,000
in 1999. During 1994, 1993 and 1992, 177,085 shares, 1,835,155 shares and
793,132 shares, respectively, of preference stock subject to mandatory
redemption requirements were reacquired to meet sinking fund requirements.
Sinking fund requirements due within one year are included in current
liabilities.
On November 1, 1992, ComEd redeemed 300,000 shares of its $2.875 Series of
preference stock at the optional redemption price of $25 per share and 75,000
shares of its $11.70 Series of preference stock at the optional redemption
price of $100 per share, plus accrued and unpaid dividends.
On June 28, 1993, ComEd redeemed the remaining 170,810 shares of its $2.875
Series of preference stock and all 1,050,000 shares of its $2.375 Series of
preference stock, both at the optional redemption price of $25.25 per share,
plus accrued and unpaid dividends.
On November 1, 1993, ComEd redeemed the remaining 75,000 shares of its $11.70
Series of preference stock (150,000 shares had been redeemed on August 1, 1993
at the optional redemption price of $105 per share, plus accrued and unpaid
dividends). Of the remaining 75,000 shares, 37,500 shares were redeemed to meet
the November 1, 1993 mandatory sinking fund requirement and 37,500 shares were
redeemed as a permitted optional sinking fund payment, both at the sinking fund
redemption price of $100 per share, plus accrued and unpaid dividends.
On November 1, 1993, ComEd redeemed all 210,000 shares of its $9.30 Series of
preference stock, of which 70,000 shares were redeemed at the optional
redemption price of $101.03 per share, plus accrued and unpaid dividends,
70,000 shares were redeemed to meet the November 1, 1993 mandatory sinking fund
requirement and 70,000 shares were redeemed as a permitted optional sinking
fund payment, the latter two at the sinking fund redemption price of $100 per
share, plus accrued and unpaid dividends.
29
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) LONG-TERM DEBT
Sinking fund requirements and scheduled maturities remaining through 1999 for
first mortgage bonds, sinking fund debentures and other long-term debt
outstanding at December 31, 1994, after deducting sinking fund debentures
reacquired for satisfaction of future sinking fund requirements, are summarized
as follows: 1995--$395,554,000; 1996--$331,429,000; 1997--$689,397,000; 1998--
$350,017,000; and 1999--$152,445,000.
At December 31, 1994, outstanding first mortgage bonds maturing through 1999
were as follows:
<TABLE>
<CAPTION>
SERIES PRINCIPAL AMOUNT
------ ----------------------
(THOUSANDS OF DOLLARS)
<S> <C>
6 1/8% due May 15, 1995.................. $103,000
5 1/4% due April 1, 1996................. 50,000
5 3/4% due November 1, 1996.............. 50,000
5 3/4% due December 1, 1996.............. 50,000
7% due February 1, 1997.................. 150,000
5 3/8% due April 1, 1997................. 50,000
6 1/4% due October 1, 1997............... 60,000
6 1/4% due February 1, 1998.............. 50,000
6% due March 15, 1998.................... 130,000
6 3/4% due July 1, 1998.................. 50,000
6 3/8% due October 1, 1998............... 75,000
--------
$818,000
========
</TABLE>
30
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Other long-term debt outstanding at December 31, 1994 is summarized as
follows:
<TABLE>
<CAPTION>
PRINCIPAL
DEBT SECURITY AMOUNT INTEREST RATE PROVISIONS
--------------------------------- ---------- -----------------------------------------------------------------
(THOUSANDS
OF
DOLLARS)
<S> <C> <C>
Notes:
Medium Term Notes, Series 1N $ 73,500 Interest rates ranging from 9.27% to 9.65%
due various dates through April
1, 1998
Medium Term Notes, Series 2N 24,000 Interest rates ranging from 9.79% to 9.874%
due various dates through July
1, 1996
Medium Term Notes, Series 3N 322,250 Interest rates ranging from 8.92% to 9.20%
due various dates through
October 15, 2004
Medium Term Notes, Series 4N 46,000 Interest rates ranging from 8.11% to 8.875%
due various dates through May
15, 1997
Notes due July 15, 1995 100,000 Fixed interest rate of 5.50%
Notes due February 15, 1997 150,000 Fixed interest rate of 7.00%
Notes due July 15, 1997 100,000 Fixed interest rate of 6.50%
Notes due October 15, 2005 235,000 Fixed interest rate of 6.40%
----------
$1,050,750
----------
Long-Term Notes Payable to Banks:
Notes due July 31, 1995 $ 150,000 Prevailing interest rates averaging 6.28125% at December 31, 1994
Note due January 9, 1996 100,000 Prevailing interest rate of 6.6875% at December 31, 1994
Note due June 1, 1997 150,000 Prevailing interest rate of 5.675% at December 31, 1994
----------
$ 400,000
----------
Purchase Contract Obligations:
Woodstock due January 2, 1997 $ 186 Fixed interest rate of 4.50%
Hinsdale due April 30, 2005 513 Fixed interest rate of 3.00%
----------
$ 699
----------
$1,451,449
==========
</TABLE>
Long-term debt maturing within one year has been included in current
liabilities.
The outstanding first mortgage bonds are secured by a lien on substantially
all property and franchises, other than expressly excepted property, owned by
ComEd.
In December 1994, ComEd placed in escrow with a trustee sufficient funds to
redeem on March 1, 1995 all of the 10 3/8% Pollution Control Revenue Bonds,
Series 1985 and the 10 5/8% Pollution Control Revenue Bonds, Series 1985
previously issued on its behalf by the Illinois Development Finance Authority,
effecting the extinguishment of such bonds. At December 31, 1994, $141 million
outstanding principal amount of such bonds was not reflected on the
Consolidated Balance Sheets.
(9) LINES OF CREDIT
ComEd had total bank lines of credit of approximately $922 million and unused
bank lines of credit of approximately $915 million at December 31, 1994. Of
that amount, $915 million (of which $175 million expires on October 2, 1995,
$72 million expires in equal quarterly installments commencing on December 31,
1996 and ending on September 30, 1998 and $668 million expires in equal
quarterly installments commencing on December 31, 1997 and ending on September
30, 1999) may be borrowed on secured or unsecured notes of ComEd at various
interest rates. The interest rate is set at the time of a borrowing
31
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
and is based on several floating rate bank indices plus a spread which is
dependent upon ComEd's credit ratings, or on a prime interest rate. Amounts
under the remaining lines of credit may be borrowed at prevailing prime
interest rates on unsecured notes of ComEd. Collateral, if required for the
borrowings, would consist of first mortgage bonds issued under and in
accordance with the provisions of ComEd's mortgage. ComEd is obligated to pay
commitment fees with respect to $915 million of such lines of credit.
(10) DISPOSAL OF SPENT NUCLEAR FUEL
Under the Nuclear Waste Policy Act of 1982, the DOE is responsible for the
selection and development of repositories for, and the disposal of, spent
nuclear fuel and high-level radioactive waste. ComEd, as required by that Act,
has signed a contract with the DOE to provide for the disposal of spent nuclear
fuel and high-level radioactive waste from ComEd's nuclear generating stations
beginning not later than January 1998. The contract with the DOE requires ComEd
to pay the DOE a one-time fee applicable to nuclear generation through April 6,
1983 of approximately $277 million, with interest to date of payment, and a fee
payable quarterly equal to one mill per kilowatthour of nuclear-generated and
sold electricity after April 6, 1983. ComEd has elected to pay the one-time
fee, with interest, just prior to the first scheduled delivery of spent nuclear
fuel to the DOE, which is scheduled to occur not later than January 1998;
however, this delivery schedule is expected to be delayed significantly. The
liability for the one-time fee and the related interest is reflected in the
Consolidated Balance Sheets.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
financial instruments either held or issued and outstanding. The disclosure of
such information does not purport to be a market valuation of ComEd and
subsidiary companies as a whole. The impact of any realized or unrealized gains
or losses related to such financial instruments on the financial position or
results of operations of ComEd and subsidiary companies is primarily dependent
on the treatment authorized under future ratemaking proceedings.
Investments. Securities included in nuclear decommissioning funds have been
classified and accounted for as "available for sale" securities. The estimated
fair value of the nuclear decommissioning funds, as determined by the trustee,
is based on published market data. The net earnings of the nuclear
decommissioning funds, which are recorded as increases to the accumulated
provision for depreciation (only the realized portion prior to January 1,
1994), for the years 1994, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Gross proceeds from sales of securities....... $ 811,368 $ 388,684 $ 342,854
Less cost based on specific identification.... (811,997) (377,734) (335,105)
--------- --------- ---------
Realized gains (losses) on sales of securi-
ties......................................... $ (629) $ 10,950 $ 7,749
Other realized fund earnings net of expenses.. 38,148 29,878 24,694
--------- --------- ---------
Total realized net earnings of the funds...... $ 37,519 $ 40,828 $ 32,443
Unrealized gains (losses)..................... (57,948) 30,969 8,592
--------- --------- ---------
Total net earnings (losses) of the funds..... $ (20,429) $ 71,797 $ 41,035
========= ========= =========
</TABLE>
Financial instruments included in investments and other property, subcaption
other, at a cost of approximately $5 million and $4 million at December 31,
1994 and 1993, respectively, are not material in relation to other financial
instruments of ComEd and subsidiary companies; therefore, an estimate of the
fair value of these instruments has not been made.
32
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Current Assets. Cash, temporary cash investments and other cash investments,
which include U.S. Government Obligations and other short-term marketable
securities, and special deposits, which primarily includes cash deposited for
the redemption, refund or discharge of debt securities, are stated at cost,
which approximates their fair value because of the short maturity of these
instruments. The securities included in these categories have been classified
as "available for sale" securities.
Capitalization. The estimated fair values of preferred and preference stocks
(without and subject to mandatory redemption requirements) and long-term debt,
including the current portions thereof, have been obtained from an independent
consultant. Estimated fair values exclude accrued interest and preferred and
preference stock dividends. Long-term notes payable to banks in the amounts of
$400 million and $250 million at December 31, 1994 and 1993, respectively, for
which interest is paid at prevailing rates, are included in the consolidated
financial statements at cost, which approximates their fair value. Purchase
contract obligations included in long-term debt at a cost of approximately $1
million at December 31, 1994 and 1993, are not material in relation to other
financial instruments of ComEd and subsidiary companies; therefore, an estimate
of the fair value of these instruments has not been made.
Current Liabilities. The carrying value of notes payable, which consists of
bank loans maturing within one year, approximates the fair value because of the
short maturity of these instruments. See "Capitalization" above for a
discussion of the fair value of the current portion of long-term debt and
redeemable preference stock.
Other Noncurrent Liabilities. The carrying value of accrued spent nuclear
fuel disposal fee and related interest represents the settlement value as of
December 31, 1994 and 1993; therefore, the carrying value is equal to the fair
value.
33
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Estimated Fair Values of Financial Instruments. The estimated fair values of
financial instruments other than those instruments reflected in the
consolidated financial statements at cost which approximates fair value, as of
December 31, 1994 and 1993, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
--------------------------------- --------------------------------
UNREALIZED
GAINS UNREALIZED
COST BASIS (LOSSES) FAIR VALUE COST BASIS GAINS FAIR VALUE
---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Nuclear Decommissioning
Funds:
Short-term invest-
ments................ $ 65,203 $ 106 $ 65,309 $ 22,030 $ 4 $ 22,034
U.S. Government and
Agency issues........ 94,450 (562) 93,888 25,113 14 25,127
Municipal bonds....... 478,074 (7,301) 470,773 598,559 49,851 648,410
Common stock.......... 220,395 9,069 229,464 48,282 10,974 59,256
Other................. 18,788 2,722 21,510 12,857 1,139 13,996
---------- --------- ---------- ---------- -------- ----------
$ 876,910 $ 4,034 $ 880,944 $ 706,841 $ 61,982 $ 768,823
========== ========= ========== ========== ======== ==========
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
--------------------------------- --------------------------------
CARRYING UNREALIZED CARRYING UNREALIZED
VALUE (GAINS) FAIR VALUE VALUE LOSSES FAIR VALUE
---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Capitalization (includ-
ing current portion):
Preferred and
preference stocks ... $ 818,111 $ (64,443) $ 753,668 $ 769,098 $ 7,015 $ 776,113
Long-term debt........ $7,448,236 $(450,429) $6,997,807 $7,746,734 $412,241 $8,158,975
</TABLE>
At December 31, 1994, the debt securities held by the nuclear decommissioning
funds had the following maturities:
<TABLE>
<CAPTION>
COST FAIR
BASIS VALUE
-------- --------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Within 1 year........................................... $ 65,203 $ 65,309
1 through 5 years....................................... 57,463 56,949
5 through 10 years...................................... 211,690 211,645
Over 10 years........................................... 299,816 292,379
</TABLE>
34
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(12) PENSION BENEFITS
ComEd and the Indiana Company have non-contributory defined benefit pension
plans which cover all regular employees. Benefits under these plans reflect
each employee's compensation, years of service and age at retirement. Funding
is based upon actuarially determined contributions that take into account the
amount deductible for income tax purposes and the minimum contribution required
under the Employee Retirement Income Security Act of 1974, as amended.
Actuarial valuations were determined as of January 1, 1994 and 1993.
During 1992, ComEd and the Indiana Company implemented a workforce reduction
program designed to reduce the management workforce. This program included an
early retirement program and voluntary and involuntary separation plans. The
early retirement program resulted in the recognition during the second half of
1992 of an additional $26 million of pension cost and an increase to the
projected benefit obligation of that $26 million plus an additional $39 million
of unrecognized net loss. ComEd and the Indiana Company also recognized in 1992
a charge to expense of $11 million primarily related to the cost of the
separation plans. The total charge to income of $37 million in 1992 was
approximately $23 million after reflecting income tax effects.
During 1994, an early retirement program was implemented for ComEd and the
Indiana Company employees eligible to retire or who would become eligible to
retire after December 31, 1993 and before April 1, 1995. During 1994, 671
employees from ComEd and the Indiana Company accepted the program, resulting in
the recognition of an additional $34 million of pension cost and an increase to
the projected benefit obligation of that $34 million and an additional $41
million of unrecognized net loss. The charge to income after reflecting income
tax effects was approximately $20 million for 1994. It is estimated that in
total approximately 700 employees will accept the early retirement program,
resulting in the recognition of a total of $35 million of pension cost and a
total increase to the projected benefit obligation of that $35 million and an
additional $42 million of unrecognized net loss.
The funded status of these plans at December 31, 1994 and 1993 was as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Actuarial present value of accumulated pension plan
benefits:
Vested benefit obligation......................... $(2,071,000) $(1,984,000)
Nonvested benefit obligation...................... (442,000) (460,000)
----------- -----------
Accumulated benefit obligation.................... $(2,513,000) $(2,444,000)
Effect of projected future compensation levels.... (423,000) (470,000)
----------- -----------
Projected benefit obligation...................... $(2,936,000) $(2,914,000)
Fair value of plan assets, invested primarily in eq-
uity index funds, other managed equity and fixed
income investments, U.S. Government, government-
sponsored corporation and agency securi-
ties and listed corporate obligations.............. 2,545,000 2,742,000
----------- -----------
Plan assets less than projected benefit obligation.. $ (391,000) $ (172,000)
Unrecognized prior service cost..................... 22,000 24,000
Unrecognized transition asset....................... (155,000) (168,000)
Unrecognized net loss............................... 228,000 99,000
----------- -----------
Accrued pension liability......................... $ (296,000) $ (217,000)
=========== ===========
</TABLE>
35
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
The assumed discount rates were 8.0% and 7.5% at December 31, 1994 and 1993,
respectively, and the assumed annual rate of increase in future compensation
levels was 4.0%. These rates were used in determining the projected benefit
obligations, the accumulated benefit obligations and the vested benefit
obligations.
Pension costs were determined under the rules prescribed by SFAS No. 87,
including the use of the projected unit credit actuarial cost method and the
following actuarial assumptions for the years 1994, 1993 and 1992:
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Annual discount rate.......................................... 7.50% 7.50% 7.50%
Annual rate of increase in future compensation levels......... 4.00% 4.00% 4.00%
Annual long-term rate of return on plan assets................ 9.50% 9.50% 9.50%
</TABLE>
The components of pension costs, portions of which were recorded as
components of construction costs, for the years 1994, 1993 and 1992 were as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost..................................................... $ 97,000 $ 96,000 $ 98,000
Interest cost on projected benefit obligation.................... 213,000 204,000 189,000
Actual loss (return) on plan assets.............................. 39,000 (310,000) (179,000)
Early retirement program cost.................................... 34,000 -- 26,000
Net amortization and deferral.................................... (304,000) 61,000 (67,000)
--------- --------- ---------
$ 79,000 $ 51,000 $ 67,000
========= ========= =========
</TABLE>
In addition, an employee savings and investment plan is available to all
regular employees who have completed three months of service. Each
participating employee may contribute up to 20% of such employee's base pay and
ComEd and the Indiana Company match such contribution equal to 70% of up to the
first 5% of contributed base salary. During 1994, 1993 and 1992, ComEd and the
Indiana Company contributed $22,750,000, $21,948,000 and $20,023,000,
respectively.
(13) POSTRETIREMENT HEALTH CARE BENEFITS
ComEd and the Indiana Company provide certain postretirement health care
benefits for retirees and their dependents and for the surviving dependents of
eligible employees and retirees. Substantially all of the employees become
eligible for postretirement health care benefits when they reach retirement age
while working for the companies. ComEd and the Indiana Company fund the
liability for postretirement health care benefits through a trust fund based
upon actuarially determined contributions that take into account the amount
deductible for income tax purposes. Actuarial valuations were determined as of
January 1, 1994 and 1993.
For the years 1980 through 1992, the liability for postretirement health care
benefits and the related provisions for postretirement health care were accrued
based on the aggregate cost actuarial method and attributed over participants'
employment periods from the date of hire to the retirement date. On January 1,
1993, SFAS No. 106, Employers' Accounting for Postretirement Benefits Other
Than Pensions, was adopted, which requires that the liability and related
provisions for postretirement benefits be determined based on the projected
unit credit actuarial cost method and attributed over employment periods of
plan participants to the date of eligibility for postretirement benefits rather
than over the entire
36
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
employment period. By adopting the new standard in January 1993, ComEd and the
Indiana Company estimate that for the year 1993, postretirement costs increased
$20 million, resulting in a decrease in 1993 net income of $10 million or $0.05
per common share, net of income taxes and the portion of the costs charged to
construction. The transition obligation shown in the following schedule is
being amortized over 20.6 years.
The funded status of the plan at December 31, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Actuarial present value of accumulated
postretirement health care obligation:
Retirees.......................................... $ (524,000) $ (434,000)
Active fully eligible participants................ (7,000) (72,000)
Other participants................................ (560,000) (591,000)
----------- -----------
Accumulated benefit obligation.................... $(1,091,000) $(1,097,000)
Fair value of plan assets, invested primarily in S&P
500 common stocks, equity and fixed income mutual
funds, and U.S. Government and listed corporate ob-
ligations.......................................... 502,000 457,000
----------- -----------
Plan assets less than accumulated postretirement
health care obligation............................. $ (589,000) $ (640,000)
Unrecognized transition obligation.................. 531,000 559,000
Unrecognized net gain............................... (60,000) (6,000)
----------- -----------
Accrued liability for postretirement health care.... $ (118,000) $ (87,000)
=========== ===========
</TABLE>
For 1993 and 1994, different health care cost trends are used for pre-
Medicare and post-Medicare expenses. Pre-Medicare trend rates are 14.5% for
1993 grading down in 0.5% annual increments to 5%. Post-Medicare trend rates
are 12% for 1993 grading down in 0.5% annual increments to 5%. The effect of a
1% increase in the assumed health care cost trend rates for each future year
would increase the accumulated postretirement health care obligation at January
1, 1994 by approximately $200 million and increase the aggregate of the service
and interest cost components of plan costs by approximately $28 million for the
year 1994. The assumed discount rates used were 8.0% and 7.5% at December 31,
1994 and 1993, respectively, and was 7.5% for the years 1994 and 1993. The
annual long-term rate of return on plan assets was 9.5%, or 9.1% for the year
1993 and 9.04% for the year 1994, after including income tax effects.
The components of postretirement health care costs, portions of which were
recorded as components of construction costs, for 1994 and 1993 were as
follows:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Service cost................................... $ 47,000 $ 45,000
Interest cost on accumulated benefit obliga-
tion.......................................... 81,000 74,000
Actual loss (return) on plan assets............ 9,000 (41,000)
Amortization of transition obligation.......... 29,000 29,000
Other.......................................... (49,000) 9,000
----------- -----------
$ 117,000 $ 116,000
=========== ===========
</TABLE>
37
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(14) INCOME TAXES
The components of the net deferred income tax liability at December 31, 1994
and 1993 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1993
---------- ----------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Deferred income tax liabilities:
Accelerated cost recovery and liberalized deprecia-
tion, net of removal costs.......................... $3,266,930 $3,095,855
Overheads capitalized................................ 266,159 286,287
Repair allowance..................................... 210,655 210,302
Regulatory assets recoverable through future rates... 1,791,395 1,863,587
Deferred income tax assets:
Postretirement benefits.............................. (177,991) (134,590)
Unbilled revenues.................................... (90,396) (98,164)
Loss carryforward.................................... (10,090) (175,197)
Alternative minimum tax.............................. (283,331) (137,328)
Unamortized investment tax credits to be settled
through future rates................................ (471,058) (489,891)
Other regulatory liabilities to be settled through
future rates........................................ (179,755) (236,236)
Other--net........................................... (58,999) (80,172)
---------- ----------
Net deferred income tax liability...................... $4,263,519 $4,104,453
========== ==========
</TABLE>
The $159 million increase in the net deferred income tax liability from
December 31, 1993 to December 31, 1994 is comprised of a $156 million net
increase to deferred income tax expense and a $3 million increase in regulatory
assets net of regulatory liabilities pertaining to income taxes for the year.
The components of net income tax expense charged to continuing operations for
the years 1994, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Electric operating income:
Current income taxes........................... $160,214 $(27,553) $161,388
Deferred income taxes.......................... 169,307 123,383 142,895
Investment tax credits deferred--net........... (28,757) (29,424) (32,506)
Other (income) and deductions.................... (23,062) (31,655) (6,537)
-------- -------- --------
Net income taxes charged to continuing opera-
tions........................................... $277,702 $ 34,751 $265,240
======== ======== ========
</TABLE>
38
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Provisions for current and deferred federal and state income taxes and
amortization of investment tax credits resulted in the following effective
income tax rates for the years 1994, 1993 and 1992:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Pre-tax book income (in thousands)................ $701,648 $137,453 $779,221
Effective income tax rate......................... 39.6% 25.3% 34.0%
</TABLE>
The principal differences between net income taxes charged to continuing
operations and the amounts computed at the federal statutory rate of 35% for
the years 1994 and 1993 and 34% for 1992 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Federal income taxes computed at statutory rate.. $245,577 $ 48,109 $264,935
Equity component of AFUDC which was excluded from
taxable income.................................. (7,920) (7,216) (6,786)
Amortization of investment tax credits........... (28,810) (29,421) (26,560)
State income taxes, net of federal income taxes.. 40,140 13,138 43,455
Differences between book and tax accounting, pri-
marily property related deductions.............. 26,505 2,063 250
Other--net....................................... 2,210 8,078 (10,054)
-------- -------- --------
Net income taxes charged to continuing opera-
tions........................................... $277,702 $ 34,751 $265,240
======== ======== ========
</TABLE>
Current federal income tax liabilities were recorded that include excess
amounts of AMT over the regular federal income tax, which amounts were also
recorded as decreases to deferred federal income taxes. The excess amounts of
AMT can be carried forward indefinitely as a credit against future years'
regular federal income tax liabilities. In 1993, a loss was recorded for income
tax purposes which may be carried forward through 2008. It is currently
expected that the loss carryforward will be utilized by the expiration date.
Effective January 1, 1993, SFAS No. 109 was adopted. SFAS No. 109 requires an
asset and liability approach to accounting for income taxes which replaces the
deferred method formerly used. Under the asset and liability approach, the
deferred income tax liability represents the income tax effect of temporary
differences between financial accounting and income tax bases of assets and
liabilities and is determined at the presently enacted income tax rates. The
SFAS No. 109 adjustments to ComEd's deferred income tax liability related to
utility operations represents income taxes recoverable or returnable through
future rates and have been recorded as regulatory assets and regulatory
liabilities on the Consolidated Balance Sheets. The cumulative effect of the
change in the method of accounting for income taxes resulted in an increase to
net income in 1993 of $9.7 million or $0.05 per common share, due primarily to
the reduction of deferred income taxes on nonregulated activities (primarily
nonconsolidated subsidiaries) accrued in prior years at income tax rates in
excess of the presently enacted income tax rates. The effect of the
implementation entry on regulated activities was to record regulatory assets of
$1,546 million primarily related to the equity component of AFUDC which was
recorded on an after-tax basis, the borrowed funds component of AFUDC which was
previously recorded net of tax and other temporary differences for which the
related tax effects were not previously recorded; regulatory liabilities of
$577 million primarily related to recognition of the deferred income tax
effects of unamortized investment tax credits and to the changes in prior
years' income tax rates; and a net increase to the deferred income tax
liability of $969 million.
39
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(15) TAXES, EXCEPT INCOME TAXES
Provisions for taxes, except income taxes, for the years 1994, 1993 and 1992
were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Illinois public utility revenue............... $211,263 $199,498 $204,004
Illinois invested capital..................... 109,373 111,126 107,207
Municipal utility gross receipts.............. 145,011 107,232 129,250
Real estate................................... 180,221 162,560 162,151
Municipal compensation........................ 72,647 56,878 73,323
Other--net.................................... 69,281 64,619 67,974
-------- -------- --------
$787,796 $701,913 $743,909
======== ======== ========
</TABLE>
(16) LEASE OBLIGATIONS
On November 23, 1993, ComEd consolidated its nuclear fuel lease arrangements
into a new arrangement. Under the new arrangement, ComEd may sell and lease
back nuclear fuel from a lessor who may borrow an aggregate of $700 million
(consisting of $300 million of commercial paper or bank borrowings and $400
million of intermediate term notes) to finance the transactions. The commercial
paper/bank borrowing portion currently will expire on November 23, 1996, but
ComEd plans to ask for an extension of the expiration date. At December 31,
1994, ComEd's obligation to the lessor for leased nuclear fuel amounted to $617
million. ComEd has agreed to make lease payments which cover the amortization
of the nuclear fuel used in ComEd's reactors plus the lessor's related
financing costs. ComEd has an obligation for spent nuclear fuel disposal costs
of leased nuclear fuel.
Future minimum rental payments, net of executory costs, at December 31, 1994
for capital leases are estimated to aggregate $615 million, including $239
million in 1995, $159 million in 1996, $108 million in 1997, $51 million in
1998, $37 million in 1999 and $21 million in 2000-2002. The estimated interest
component of such rental payments aggregates $57 million. The estimated
portions of obligations due within one year under capital leases are included
in current liabilities and approximated $147 million and $166 million at
December 31, 1994 and 1993, respectively.
Future minimum rental payments at December 31, 1994 for operating leases are
estimated to aggregate $148 million, including $9 million in 1995, $9 million
in 1996, $9 million in 1997, $8 million in 1998, $8 million in 1999 and $105
million in 2000-2024.
(17) INVESTMENTS IN URANIUM-RELATED PROPERTIES
In May 1994, ComEd recorded a reduction in the carrying value of its
investments in uranium-related properties after completing a review of various
alternatives and reassessing the long-term recoverability of those investments.
The effects of the reduction reduced 1994 net income by approximately $33.8
million or $0.16 per common share.
(18) JOINT PLANT OWNERSHIP
ComEd has a 75% undivided ownership interest in the Quad-Cities nuclear
generating station. Further, ComEd is responsible for 75% of all costs which
are charged to appropriate investment, operation or maintenance accounts and
provides its own financing. At December 31, 1994, for its share of ownership in
the station, ComEd had an investment of $537 million in production and
transmission plant in service (before reduction of $172 million for the related
accumulated provision for depreciation) and $76 million in construction work in
progress.
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COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(19) COMMITMENTS AND CONTINGENT LIABILITIES
Purchase commitments, principally related to construction and nuclear fuel,
approximated $1,210 million at December 31, 1994. In addition, ComEd has
substantial commitments for the purchase of coal under long-term contracts.
ComEd's coal costs are high compared to those of other utilities. ComEd's
western coal contracts and its rail contracts for delivery of the western coal
were renegotiated during 1992 effective as of January 1, 1993, to provide,
among other things, for significant reductions in the delivered price of the
coal over the duration of the contracts. However, the renegotiated contracts
provide for the purchase of certain coal at prices substantially above
currently prevailing market prices and ComEd has significant purchase
commitments under its contracts. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," subcaption "Liquidity and
Capital Resources," for additional information regarding ComEd's purchase
commitments.
ComEd is a member of NML, established to provide insurance coverage against
property damage to members' nuclear generating facilities. The members are
subject to a retrospective premium adjustment in the event losses exceed
accumulated reserve funds. Capital has been accumulated in the reserve funds of
NML to the extent that ComEd would not be liable for a retrospective premium
adjustment in the event of a single incident. However, ComEd could be subject
to a maximum assessment of approximately $57 million in any policy year, in the
event losses exceed accumulated reserve funds.
ComEd also is a member of NEIL, which provides insurance coverage against the
cost of replacement power obtained during certain prolonged accidental outages
of nuclear generating units and coverage for property losses in excess of $500
million occurring at nuclear stations. All companies insured with NEIL are
subject to retrospective premium adjustments if losses exceed accumulated
reserve funds. Capital has been accumulated in the reserve funds of NEIL to the
extent that ComEd would not be liable for a retrospective premium adjustment in
the event of a single incident under the replacement power coverage and the
property damage coverage. However, ComEd could be subject to maximum
assessments, in any policy year, of approximately $28 million and $89 million
in the event losses exceed accumulated reserve funds under the replacement
power and property damage coverages, respectively.
The NRC's indemnity for public liability coverage under the Price-Anderson
Act is supported by a mandatory industry-wide program under which owners of
nuclear generating facilities could be assessed in the event of nuclear
incidents. Based on the number of nuclear reactors with operating licenses,
ComEd would currently be subject to a maximum assessment of $991 million in the
event of an incident, limited to a maximum of $125 million in any calendar
year.
In addition, ComEd participates in the American Nuclear Insurers and Mutual
Atomic Energy Liability Underwriters Master Worker Program which provides
coverage for worker tort claims filed for bodily injury caused by the nuclear
energy hazard. The coverage applies to workers whose "nuclear related
employment" began after January 1, 1988. ComEd would currently be subject to a
maximum assessment of approximately $37 million in the event losses exceed
accumulated reserve funds.
Shareholder derivative lawsuits were filed on October 1, 1992 and on April
14, 1993 in the Circuit Court against current and former directors of ComEd
alleging that they breached their fiduciary duty and duty of care to ComEd in
connection with the management of the activities associated with the
construction of ComEd's four most recently completed nuclear generating units.
The lawsuits sought restitution to ComEd by the defendants for unquantified and
undefined losses and costs alleged to have been incurred by ComEd. Both
lawsuits were dismissed by the Circuit Court; however, appeals are pending
before the Illinois Appellate Court.
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<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
During 1989 and 1991, actions were brought in federal and state courts in
Colorado against ComEd and its subsidiary, Cotter, seeking unspecified damages
and injunctive relief based on allegations that Cotter has permitted
radioactive and other hazardous material to be released from its mill into
areas owned or occupied by the plaintiffs resulting in property damage and
potential adverse health effects. In February 1994, a federal jury returned
nominal dollar verdicts on eight bellwether plaintiffs' claims in these cases.
Plaintiffs have appealed those judgments. Although the remaining cases will
necessarily involve the resolution of numerous contested issues of fact and
law, ComEd's determination is that these actions will not have a material
impact on its financial position or results of operations.
ComEd is involved in administrative and legal proceedings concerning air
quality, water quality and other matters. The outcome of these proceedings may
require increases in future construction expenditures and operating expenses
and changes in operating procedures. ComEd and its subsidiaries are or are
likely to become parties to proceedings initiated by the U.S. EPA, state
agencies and/or other responsible parties under CERCLA with respect to a number
of sites, including MGP sites, or may voluntarily undertake to investigate and
remediate sites for which they may be liable under CERCLA.
ComEd generally did not operate MGPs as a corporate entity but did, however,
acquire MGP sites as part of the absorption of smaller utilities and as vacant
real estate on which ComEd facilities have been constructed. To date, ComEd has
identified 44 former MGP sites for which it may be liable for remediation.
ComEd presently estimates that its costs of former MGP site investigation and
remediation will aggregate from $25 million to $150 million in current-year
(1995) dollars. It is expected that the costs associated with investigation and
remediation of former MGP sites will be incurred over a period of approximately
20 to 30 years. Because ComEd is not able to determine the most probable
liability for such MGP costs, in accordance with accounting standards, a
reserve of approximately $25 million has been recorded as of December 31, 1994
and 1993, which reflects the low end of the range of ComEd's estimate of the
liability associated with former MGP sites. In addition, as of December 31,
1994 and 1993, a reserve of $8 million and $5 million, respectively, has been
recorded representing ComEd's estimate of the liability associated with cleanup
costs of remediation sites other than former MGP sites. ComEd presently
estimates that its costs of investigating and remediating the former MGP and
other remediation sites pursuant to CERCLA and state environmental laws will
not have a material impact on the financial position or results of operations
of ComEd and subsidiary companies. These cost estimates are based on currently
available information regarding the responsible parties likely to share in the
costs of responding to site contamination, the extent of contamination at sites
for which the investigation has not yet been completed and the cleanup levels
to which sites are expected to have to be remediated.
The Clean Air Amendments require reductions in sulfur dioxide emissions from
ComEd's Kincaid station. The Clean Air Amendments also bar future utility
sulfur dioxide emissions except to the extent utilities hold allowances for
their emissions. Allowances which authorize their holder to emit sulfur dioxide
have been issued by the U.S. EPA based largely on historical levels of sulfur
dioxide emissions. These allowances are transferable and marketable. ComEd's
ability to increase generation in the future to meet expected increased demand
for electricity will depend in part on ComEd and the Indiana Company's ability
to acquire additional allowances or to reduce emissions below otherwise
allowable levels from their existing generating plants. In addition, the Clean
Air Amendments require studies to determine what controls, if any, should be
imposed on utilities to control air toxic emissions, including mercury. ComEd's
Clean Air Compliance Plan for Kincaid station was approved by the ICC on July
8, 1993. In late 1993, however, a federal court declared the Illinois law under
which the approval was received to be unconstitutional and compliance plans
prepared and approved in reliance on the law to be void. In January 1995, the
federal court's decision was affirmed by the U.S. Court of Appeals. It is not
known whether a petition for rehearing or further appeals will be filed. Under
the Compliance Plan approved by
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COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONCLUDED
the ICC, ComEd would have been allowed to burn low sulfur Illinois coal at
Kincaid station without the installation of pollution control equipment for the
years 1995 through 1999, and to purchase any necessary emission allowances that
are expected to be available under the Clean Air Amendments during this period.
Also, under the Plan, ComEd expected to install pollution control equipment for
Kincaid station by the year 2000. When the final outcome of the federal
litigation is known, ComEd will determine whether any changes are required.
(20) QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NET AVERAGE EARNINGS
ELECTRIC INCOME NUMBER OF (LOSS)
ELECTRIC OPERATING NET (LOSS) ON COMMON PER
OPERATING INCOME INCOME COMMON SHARES COMMON
THREE MONTHS ENDED REVENUES (LOSS) (LOSS) STOCK OUTSTANDING SHARE
------------------- ---------- --------- --------- --------- ----------- --------
(THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
March 31, 1993.......... $1,483,385 $ 240,840 $ 77,212 $ 60,575 213,337 $ 0.28
June 30, 1993........... $1,430,547 $ 237,223 $ 75,094 $ 58,051 213,466 $ 0.27
September 30, 1993...... $1,872,448 $ 456,227 $ 287,123 $ 270,558 213,550 $ 1.27
December 31, 1993....... $ 474,060 $(529,351) $(326,989) $(342,796)(a) 213,680 $(1.60)
March 31, 1994.......... $1,524,750 $ 213,014 $ 51,565 $ 36,020 213,780 $ 0.17
June 30, 1994........... $1,432,166 $ 184,891 $ (7,856) $ (23,339) 213,923 $(0.11)
September 30, 1994...... $1,855,532 $ 443,138 $ 283,608 $ 266,642 214,138 $ 1.25
December 31, 1994....... $1,465,073 $ 247,539 $ 96,629 $ 79,696 214,190 $ 0.37
</TABLE>
--------
(a) See Note 2 for information concerning the Rate Matters Settlement, which
lowered the level of ComEd's rates and provided for substantial customer
refunds, and the Fuel Matters Settlement, which provided for payments to
customers.
43
