<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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, 1996
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
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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:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
- --------------------------- 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. [X]
- -------------------------------------------------------------------------------
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<PAGE>
COMMONWEALTH EDISON COMPANY Securities Registered Pursuant to Section 12(b) of
the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- --------------------------------------- ---------------------------
First Mortgage Bonds:
7 5/8% Series 25, due June 1,
2003
8% Series 26, due October 15, New York
2003
8 1/8% Series 35, due January 15,
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; and $8.40 Series B
New York, Chicago and
Pacific
$2.425 New York
8.48% ComEd-Obligated Mandatorily
Redeemable Preferred Securities of
Subsidiary Trust
New York
THE ESTIMATED AGGREGATE MARKET VALUE OF UNICOM CORPORATION'S 216,108,691
shares of outstanding Common Stock, without par value, was approximately
$4,800,000,000 as of February 28, 1997. In excess of 99.9% 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, Cumulative Preference Stock
and Company-Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trusts was approximately $970,000,000 as of February 28, 1997.
Unicom Corporation held in excess of 99.99% of the 214,218,990 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
31, 1997 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 to be filed prior to April 30, 1997 relating to its Annual Meeting
of shareholders to be held on May 29, 1997 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 dated
January 31, 1997 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 to be filed prior to April 30, 1997 relating
to its Annual Meeting of shareholders to be held on May 29, 1997 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, 1996
This document contains the Annual Reports on Form 10-K for the fiscal year
ended December 31, 1996 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 Unicom Corporation or to any other companies affiliated
with Unicom Corporation.
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Definitions............................................................... 1
ANNUAL REPORT ON FORM 10-K FOR UNICOM CORPORATION:
Part I
Item 1. Business........................................................ 2
General............................................................... 2
Changes in the Electric Utility Industry.............................. 3
Net Electric Generating Capability.................................... 6
Construction Program.................................................. 6
Rate Matters.......................................................... 9
Fuel Supply........................................................... 10
Regulation............................................................ 11
Employees............................................................. 18
Interconnections...................................................... 18
Franchises............................................................ 18
Executive Officers of the Registrant.................................. 19
Operating Statistics.................................................. 20
Forward Looking Information........................................... 21
Item 2. Properties...................................................... 21
Item 3. Legal Proceedings............................................... 22
Item 4. Submission of Matters to a Vote of Security Holders............. 23
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters................................................................ 23
Item 6. Selected Financial Data......................................... 24
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of
Operations...................................................... 24
Item 8. Financial Statements and Supplementary Data..................... 24
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................ 24
Part III
Item 10. Directors and Executive Officers of the Registrant............. 24
Item 11. Executive Compensation......................................... 25
Item 12. Security Ownership of Certain Beneficial Owners and Manage-
ment................................................................... 25
Item 13. Certain Relationships and Related Transactions................. 25
</TABLE>
i
<PAGE>
UNICOM CORPORATION
AND
COMMONWEALTH EDISON COMPANY
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
TABLE OF CONTENTS (CONCLUDED)
<TABLE>
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PAGE
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<S> <C>
ANNUAL REPORT ON FORM 10-K FOR COMMONWEALTH EDISON COMPANY:
Part I
Item 1. Business........................................................ 26
Item 2. Properties...................................................... 27
Item 3. Legal Proceedings............................................... 27
Item 4. Submission of Matters to a Vote of Security Holders............. 27
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters................................................................ 28
Item 6. Selected Financial Data......................................... 28
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 28
Item 8. Financial Statements and Supplementary Data..................... 28
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................ 28
Part III
Item 10. Directors and Executive Officers of the Registrant............. 28
Item 11. Executive Compensation......................................... 28
Item 12. Security Ownership of Certain Beneficial Owners and Management. 28
Item 13. Certain Relationships and Related Transactions................. 28
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............................................................... 29
Report of Independent Public Accountants on Supplemental Schedule to
Unicom Corporation..................................................... 37
Report of Independent Public Accountants on Supplemental Schedule to
Commonwealth Edison Company............................................ 38
Schedule II--Valuation and Qualifying Accounts.......................... 39
Signature Page to Unicom Corporation Annual Report on Form 10-K......... 40
Signature Page to Commonwealth Edison Company Annual Report on
Form 10-K.............................................................. 41
</TABLE>
ii
<PAGE>
DEFINITIONS
The following terms are used in this document with the following meanings:
<TABLE>
<CAPTION>
TERM MEANING
-------------------- ---------------------------------------------------------
<C> <S>
BWR Boiling water reactor
CERCLA Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended
CFC Chlorofluorocarbon
Clean Air Amendments Clean Air Act Amendments of 1990
ComEd Commonwealth Edison Company
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
FERC Order FERC Open Access Order No. 888 issued in April 1996
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
ISO Independent System Operator
January 31, 1997 Unicom's Current Report on Form 8-K including auditor's
Form 8-K Reports opinion dated January 31, 1997 and ComEd's Current
Report on Form 8-K including auditor's opinion dated
January 31, 1997
MAIN Mid-America Interconnected Network
MGP Manufactured gas plant
NLRB National Labor Relations Board
NPDES National Pollutant Discharge Elimination System
NPL National Priorities List
NRC Nuclear Regulatory Commission
PRPs Potentially responsible parties under CERCLA
PTAB Property Tax Appeals Board
Rate Order ICC rate order issued in January 1995, as subsequently
modified
Remand Order ICC rate order issued in January 1993, as subsequently
modified
SEC Securities and Exchange Commission
Trust ComEd Financing I, which is a wholly-owned subsidiary
trust of ComEd.
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>
1
<PAGE>
ANNUAL REPORT ON FORM 10-K FOR UNICOM CORPORATION
PART I
ITEM 1. BUSINESS.
GENERAL
Unicom was incorporated in January 1994 and became the parent holding
company of ComEd and Unicom Enterprises in a corporate restructuring that
became effective on September 1, 1994. ComEd, an electric utility, is the
principal subsidiary of Unicom. Unicom Enterprises is an unregulated
subsidiary of Unicom and is engaged, through subsidiaries, in energy service
activities. Unicom also has one other subsidiary that was formed to engage in
unregulated activities. 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.
ComEd continues to represent substantially all of the assets, revenues and
net income of Unicom; and Unicom's resources and results of operations are
largely dependent on, and reflect, those of ComEd. Consequently, the following
discussion focuses on ComEd's utility operations although information is also
provided about Unicom's unregulated operations.
Utility Operations
ComEd is engaged principally in the production, purchase, transmission,
distribution and sale of electricity to a diverse base of residential,
commercial, industrial and wholesale customers. 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 11,300 square
miles and an estimated population of approximately eight million as of
December 31, 1996. It includes the city of Chicago, an area of about 225
square miles with an estimated population of approximately three million from
which ComEd derived approximately one-third of its ultimate consumer revenues
in 1996. ComEd had approximately 3.4 million electric customers at December
31, 1996. 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.
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 Enterprises is engaged, through its subsidiaries, in energy service
activities which are not subject to utility regulation by state or federal
agencies. Its principal subsidiary, Unicom Thermal, currently provides
district cooling services to office and other buildings in the city of Chicago
under a non-exclusive use agreement with Chicago expiring in 2014. District
cooling involves, in essence, the production of chilled water at a central
location(s) and its circulation to customers' buildings through a closed
circuit of supply and return piping. Such water is circulated through
customers' premises primarily for air conditioning. This process is used in
lieu of self-generated cooling. As a result of the Clean Air Amendments, the
manufacture of CFCs has been curtailed, commencing in January 1996, thereby
creating an excellent marketing opportunity for non-CFC based systems, such as
Unicom Thermal's district cooling. Unicom Thermal is involved in or
considering district cooling projects in
2
<PAGE>
other cities, including a project in Boston with Boston Edison Technologies
Group, Inc., a project in Windsor, Ontario, Canada with Ontario Hydro and a
project in Houston, Texas with Houston Light and Power Energy Services
Company.
CHANGES IN THE ELECTRIC UTILITY INDUSTRY
Unicom and its predominant business, electric energy generation,
transmission and distribution, are in a period of fundamental change in the
manner in which customers obtain, and energy suppliers provide, energy
services. These changes are attributable to changes in technology, the
relaxation of regulatory barriers to utilities' respective service territories
as well as to efforts to change the manner in which electric utilities are
regulated. Federal law and regulations have been amended to provide for open
transmission system access, and various states are considering, or have
adopted, new regulatory structures to allow access by some or all customers to
energy suppliers in addition to the local utility.
ComEd and other energy suppliers, energy customers and other interested
parties have been active participants in the discussions related to the
economic and technical issues associated with reform. As a result of these
efforts, legislation was introduced in Illinois during January 1997 which is
intended to provide both electric service providers and their customers with
an orderly transition to a less regulated market for electric service. Under
the legislative proposal, utilities would be granted a period in which to
offer direct access experiments that would allow them and customers to gain
experience with the effects of such access, with a requirement to provide such
access starting in 2000. Such a requirement would be phased-in to customers
over several years, starting with larger load customers. The legislation would
provide utilities with an opportunity to recover costs, which might not
otherwise be recoverable, in charges for electric service in a less regulated
market through, among other things, cost savings and a transition charge for
customers who use alternate suppliers of electric power and energy. The
legislation would provide for a leveling of certain regulatory oversight and
tax provisions among electric service providers in Illinois and would also
allow certain restructurings of utility operations in order to facilitate
their response to a competitive environment. The legislation would also
provide for annual base rate decreases of 1.5 percent, starting in 2000 and
continuing through 2004. ComEd supports the proposed legislation and believes
there is support among a number of constituencies for its provisions. Other
legislative proposals have also been introduced for consideration, which
contain different provisions with respect to timing and cost recovery. The
Governor of Illinois has formed a three-person advisory committee to advise
with respect to electric utility deregulation issues. No assurance can be
given as to when any such legislation may be adopted or in what form it may be
adopted.
In response to changes in the industry, ComEd has implemented certain
customer initiatives designed to improve and strengthen customer relationships
and is undertaking an evaluation of its operations and assets, particularly
generating assets, with a view toward positioning itself for market and
industry changes. As discussed below, ComEd's actions to date have included a
five-year base rate cap, efforts to control expenditure growth through
personnel reductions, operational efficiencies and sales of generating plants.
Although ComEd's operating results and financial condition have historically
been affected by various rate proceedings, ComEd expects that these industry
changes, and ComEd's activities anticipating or responding to them, will
directly impact its operating results and financial condition over the next
several years.
Electric Utility Industry. The electric utility industry has historically
consisted of vertically integrated companies which combine generation,
transmission and distribution assets; serving customers within relatively
defined service territories; and operating under extensive regulation with
respect to rates, operations and other matters. Utilities operated under a
regulatory compact with the state, with a statutory obligation to serve all of
the electricity needs within their service territory in a
3
<PAGE>
nondiscriminatory manner. Historically, investment and operating decisions
have been made based upon the utilities' respective assessment of those
current and projected needs of its customers. In view of this obligation,
regulation has focused on investment and operating costs, and rates have been
based on a recovery of some or all of such prudently incurred costs plus a
return on invested capital. Such rate regulation, and the ability of utilities
to recover investment and other costs through rates, has provided the basis
for recording certain costs as regulatory assets. These assets represent costs
which are allocated over future periods reflecting related regulatory
treatment, rather than expensed in the current period.
As noted previously, the United States electric utility industry is in a
process of fundamental change as state legislators and regulators re-examine
their approach to regulation and its objectives and consider a transition to a
competitive or market-based system of pricing for electric energy. Although
the process and approach have varied from state to state in terms of the
elements and timing of implementation, it is evident that the question is no
longer if, but rather how and when there will be a more competitive
electricity market. The Federal Energy Policy Act of 1992, among other things,
empowered FERC to introduce a greater level of competition into the wholesale
marketplace for electric energy. In April 1996, the FERC Order was issued
requiring utilities to file open access tariffs with regard to their
transmission systems. These tariffs set forth the terms, including prices,
under which other parties and the utility's wholesale marketing function may
use the utility's transmission system. ComEd has filed an open access tariff
with the FERC. The FERC Order requires the separation of the transmission
operations and wholesale marketing functions so as to ensure that unaffiliated
third parties have access to the same information as to system availability
and other requirements. The FERC Order further requires utilities to operate
an electronic bulletin board to make transmission price and access data
available to all potential users. A key feature of the FERC Order is that it
contemplates full recovery of a utility's costs "stranded" by competition.
These costs are "stranded" or "strandable" to the extent market-based rates
would be insufficient to allow for their full recovery. To recover stranded
costs, the utility must show that it had a reasonable expectation that it
would continue to serve the customer in question under its regulatory compact.
An important element of reform proposals under consideration is the ability
of other suppliers to provide energy in competition with a utility within its
service territory. This element generally has included consideration of some
future form of "retail wheeling," whereby a utility's transmission and
distribution system is made available to other energy suppliers for delivery
of their services to retail customers. In addition, some governmental
entities, such as cities, may elect to "municipalize" a utility's distribution
facilities through condemnation proceedings. Such municipalities would then be
able to purchase electric power on a wholesale basis and resell it to
customers over the newly acquired facilities. The FERC Order provides for the
recovery of a utility's investment stranded by municipalization. While
municipalization is possible under the present regulatory system, ComEd is not
required to grant alternative electric suppliers access to its distribution
system through any type of "retail wheeling."
Presumably, under such a modified regulatory structure, customers will base
energy purchase decisions on a combination of factors, including price,
reliability and service. In addition to the potential effects on revenues and
marketing and sales efforts, such changes can raise the question as to whether
an affected utility's rates are based on cost-based regulation, allowing
recovery of incurred costs, or are based on something else, i.e., the
marketplace. Under generally accepted accounting principles, the latter
determination would require the write off of regulatory assets and liabilities
and would require an examination as to the recoverability in revenues of other
incurred costs, with any portion determined to be unrecoverable being subject
to write off. Various approaches have been proposed to deal with such
strandable costs, from full recovery, as provided in the FERC Order, to no
recovery, as proposed by at least some of the participants in virtually all
legislative debates on regulatory reform proposals. For additional
information, see "Regulatory Assets and Liabilities" in Note 1 of Notes to
Financial Statements in the January 31, 1997 Form 8-K Reports.
4
<PAGE>
Retail wheeling and municipalization are significant issues for electric
utility companies, including ComEd, because of their potential to strand a
utility's costs. Without the development of a more fully competitive
marketplace, it is not possible to develop an estimate of strandable costs
with any degree of accuracy. Any calculation of potentially strandable costs
requires that a set of assumptions be made, including the timing of open
access (customer choice), the extent of open access allowed, potential market
prices over time, sales and load growth forecasts, operating performance over
time, allowed rates over time, cost structure over time, mitigation
opportunities and strandable cost recoveries. The calculation of strandable
costs is extremely sensitive to the assumptions made, and the resulting
estimates are potentially misleading if removed from the context in which they
were calculated. At this point in time, ComEd does not subscribe to a certain
set of assumptions or a particular estimate. The proposed legislation
described above, which ComEd supports, would provide utilities the opportunity
to recover their stranded costs, if any. However, ComEd believes the amount of
its strandable costs could be material without allowance for recovery of costs
and investments it incurred under its regulatory compact, including its duty
to serve. Most reform proposals anticipating increased competition include
some form of stranded cost recovery. ComEd is taking steps, such as cost-
control measures, improving generating station reliability and additional
depreciation, to minimize its potential stranded investment. See "Rate
Matters" for additional information.
ComEd. ComEd is responding, and is undertaking a significant planning effort
with respect to further responses, to the developments within the utility
industry. During the past several years such efforts have focused on cost
reductions, including personnel reductions, efficiencies in purchasing and
inventory management, and an incentive compensation system keyed to cost
reduction and control. Notwithstanding these efforts, ComEd's costs remain
high in comparison to its neighboring utilities.
ComEd is examining its assets, particularly generating assets, with a view
toward rationalizing their investment and operating costs against their
ability to contribute to the revenues of ComEd under various market scenarios.
Such an assessment involves the consideration of numerous factors, including
revenue contribution, operating costs, impacts on ComEd's service obligations,
purchase commitments and remaining assets, and the impact of various options.
Such options include continued operation, indefinite suspension from
operation, sale to a third party and retirement or closure. If ComEd retired
or closed a generating plant, particularly a nuclear plant, without regulatory
or legislative provision for continued recovery of its investment, such
retirement could have a material impact on ComEd's and Unicom's financial
position and results of operations.
On April 17, 1996, ComEd announced that it had finalized agreements to sell
two of its coal-fired generating stations, representing approximately 1,600
megawatts of generating capacity. Under the agreements, State Line and Kincaid
stations would be sold for a total of $250 million, which approximates the
book value of the stations. The net proceeds, after income tax effects, would
be approximately $200 million, which would be used to retire or redeem
existing debt. Under the terms of the sales, ComEd would enter into exclusive
15-year purchased power agreements for the output of the plants. The
agreements are subject to regulatory approval, and proceedings have been
pending before the ICC since May 1996 to obtain those approvals. Numerous
parties have intervened in the proceedings, including various governmental and
consumer groups and ComEd's principal union. Although the Administrative Law
Judges have entered a proposed order recommending approval of the
transactions, the ICC continues to debate various aspects of the proposed
order and has not yet voted on it. ComEd's union has also filed a lawsuit in
state court alleging that the labor provisions of the Kincaid agreement are
violative of state law and are seeking to enjoin the ICC proceedings. ComEd
had previously filed an action in federal court seeking confirmation that the
state law is preempted by federal labor law, and ComEd believes that the
union's allegations are without merit. These actions were consolidated in
federal court, which has since ruled in favor of ComEd. The Union has appealed
and also has filed a grievance under its collective bargaining agreement with
ComEd claiming that ComEd is required by that agreement to require the Kincaid
purchaser to assume the terms of that agreement. The Union has also filed an
unfair labor practice charge with the NLRB
5
<PAGE>
against the Kincaid purchaser regarding the purchaser's alleged failure to
bargain in good faith with the Union. The State Line and Kincaid agreements
give the purchasers the right to terminate the agreements if a closing has not
occurred prior to December 31, 1996 for State Line and June 30, 1997 for
Kincaid. Such closing has not occurred as of February 28, 1997.
With respect to its transmission assets, ComEd is participating with
approximately 20 other electric utility companies in an effort to form an ISO
for the midwest United States. Under the structure currently contemplated, the
ISO would set standard transmission rates and facilitate compliance with the
FERC Order. In addition, while individual utility companies would continue to
own their transmission lines, the ISO would oversee regional planning to avoid
transmission constraints. Creation of the ISO will be subject to further
negotiations among the parties as well as federal and state regulatory
approval.
ComEd is also taking actions to strengthen its relationship with its
customers. On December 11, 1995, ComEd instituted a five-year base rate cap for
all of its customers. The base rate cap does not affect ComEd's fuel cost or
nuclear decommissioning cost recovery provisions. See "Rate Matters" for
additional information about ComEd's base rate cap and other initiatives
intended to give customers more choice and control over the services they seek
and the price they pay.
NET ELECTRIC GENERATING CAPABILITY
ComEd and the Indiana Company consider their owned (non-summer) generating
capability to be 22,511,000 kilowatts. After deducting summer limitations of
557,000 kilowatts, ComEd and the Indiana Company consider their net summer
generating capability to be 21,954,000 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 generating units being
temporarily out of service for inspection, maintenance, refueling, repairs or
modifications required by regulatory authorities. See "Regulation," subcaption
"Nuclear" and "Item 2. Properties."
ComEd's highest peak load experienced to date occurred on August 14, 1995 and
was 19,212,000 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.
CONSTRUCTION PROGRAM
Utility Operations
ComEd and the Indiana Company have a construction program for the year 1997,
which consists principally of improvements to their existing nuclear and other
electric production, transmission and distribution facilities. It does not
include funds to add new generating capacity to ComEd's system. The program, as
currently approved by ComEd, calls for electric plant and equipment
expenditures of approximately $982 million (excluding nuclear fuel expenditures
of approximately $322 million). It is estimated that such construction
expenditures will be as follows:
<TABLE>
<CAPTION>
1997
----
(MILLIONS
OF DOLLARS)
<S> <C>
Production............................................... $420
Transmission and Distribution............................ 421
General.................................................. 141
----
Total................................................... $982
----
----
</TABLE>
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Such construction program includes the replacement of the steam generators
at ComEd's Braidwood Unit 1 and Byron Unit 1 nuclear generating units expected
to be placed in service prior to year-end 1998. The estimated replacement cost
is approximately $460 million, including approximately $80 million for the
cost of removal of the existing steam generators. Approximately $130 million
of this estimated cost is included in the construction expenditures shown
above. Approximately $140 million has been incurred through December 31, 1996.
In addition, ComEd has continued to monitor the degradation of the steam
generators at its Zion nuclear generating station. Recent studies indicate
that the degradation is continuing and that replacement may be required sooner
than 2005. No amount has been included in ComEd's construction budget for
replacement of these steam generators, since ComEd has not decided whether or
when to effect a replacement. Based upon its experience with the replacement
activities at Braidwood and Byron, and depending on the timing of any
replacement at Zion, ComEd believes such cost could be approximately $435
million if a decision to replace is made. See "Regulation," subcaption
"Nuclear" for additional information relating to the replacement of the steam
generators and ComEd's evaluation of the need to make additional expenditures
to supplement generating capacity in light of generating outages expected in
the midwestern power grid during 1997.
ComEd and the Indiana Company's construction expenditures during 1996 were
$950 million.
ComEd's gross investment in nuclear generating capacity (excluding nuclear
fuel) is $14.3 billion at December 31, 1996, 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, 1996 were $4,407 million and $469 million, respectively.
ComEd periodically reviews its projection of probable future demand for
electricity in its service territory. It currently projects 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, through equivalent purchased power
or through the development of additional demand-side management resources, in
1998 and each year thereafter. However, it believes that adequate resources,
including cost-effective demand-side management resources, non-utility
generation resources and other-utility power purchases, could be obtained in
sufficient quantities to meet such forecasted needs. If ComEd instead were to
build additional capacity to meet its needs, it would need to make additional
capital expenditures during 1997.
The 1997 construction program includes approximately $6 million for
environmental control facilities. Expenditures on such facilities were $16
million, $16 million and $24 million during 1996, 1995 and 1994, respectively.
Purchase commitments for ComEd and the Indiana Company, principally related
to construction and nuclear fuel, approximated $1,018 million at December 31,
1996. In addition, ComEd's estimated commitments for the purchase of coal are
indicated in the following table.
<TABLE>
<CAPTION>
CONTRACT PERIOD COMMITMENT(1)
-------- --------- -------------
<S> <C> <C>
Black Butte Coal Co............................... 1997-2000 $807
Decker Coal Co. .................................. 1997-2014 $582
Big Horn Coal Co. ................................ 1998 $ 22
</TABLE>
--------
(1) In millions of dollars, excluding transportation costs. 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 21 of Notes to Financial
Statements in the January 31, 1997 Form 8-K Reports.
7
<PAGE>
ComEd forecasts 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. See Notes 7 and 9 of Notes to Financial Statements in the
January 31, 1997 Form 8-K Reports for the summaries of the annual sinking fund
requirements and scheduled maturities for ComEd preference stock and long-term
debt, respectively. The forecast assumes the rate levels reflected in the Rate
Order (which is the subject of a pending appeal before the Illinois Appellate
Court) remain in effect. See "Rate Matters" herein for additional information.
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. 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. See Note 18 of Notes to Financial Statements in
the January 31, 1997 Form 8-K Reports for more information concerning ComEd's
nuclear fuel lease facility. ComEd has approximately $906 million of unused
bank lines of credit at December 31, 1996 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 the credit ratings of ComEd's
outstanding first mortgage bonds 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 10
of Notes to Financial Statements in the January 31, 1997 Form 8-K Reports for
information concerning lines of credit. See the Statements of Consolidated
Cash Flows in the January 31, 1997 Form 8-K Reports for the construction
expenditures and cash flow from operating activities for the years 1996, 1995
and 1994.
During 1996, ComEd sold and leased back approximately $317 million of
nuclear fuel through its existing nuclear fuel lease facility. In addition,
ComEd issued $199 million of pollution control obligations, the proceeds of
which were used to redeem an equivalent amount of other pollution control
obligations. In January 1997, ComEd issued $150 million principal amount of
7.375% Notes due January 15, 2004, $150 million principal amount of 7.625%
Notes due January 15, 2007 and $150 million principal amount of 8.50% Company-
obligated preferred securities of subsidiary trust due January 15, 2027, the
proceeds of which were used to discharge current maturities of long-term debt
and to redeem on March 11, 1997 $200 million principal amount of First
Mortgage 9 1/2% Bonds, Series 57, due May 1, 2016. See the Statements of
Consolidated Cash Flows and Note 4 of Notes to Financial Statements in the
January 31, 1997 Form 8-K Reports for information regarding common stock
activity.
As of February 28, 1997, ComEd has an effective "shelf" registration
statement with the SEC for the future sale of up to an additional $505 million
of debt securities and cumulative preference stock for general corporate
purposes of ComEd, including the discharge or refund of other outstanding
securities.
Unregulated Operations
Unicom has approved capital expenditures for 1997 of approximately $56
million for Unicom Thermal, primarily representing the construction costs of
its district cooling facilities in Chicago and its share of construction costs
in Boston and Windsor. Unicom Thermal's first two district cooling facilities
in Chicago began serving customers in May 1995 and July 1996. Its third
district cooling facility in Chicago is scheduled to be completed in 1997. As
of December 31, 1996, Unicom Thermal's purchase commitments, principally
related to construction, were approximately $42 million.
Unicom expects to obtain funds to invest in its unregulated subsidiaries
principally from dividends received on its ComEd common stock and from bank
borrowings. The availability of ComEd's dividends to Unicom is dependent on
ComEd's financial performance and cash position. Other forms of financing by
ComEd to Unicom or the unregulated subsidiaries of Unicom, such as loans or
additional equity investments, none of which is expected, would be subject to
prior approval by the ICC.
8
<PAGE>
Unicom Enterprises has a $200 million credit facility which will expire in
1999, of which $105 million was unused as of December 31, 1996. The credit
facility can be used by Unicom Enterprises to finance investments in
unregulated 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 are set at the time of
a borrowing and are based on either a prime interest rate or a floating rate
bank index plus a spread which varies with the credit rating of ComEd's
outstanding first mortgage bonds. See Note 10 of Notes to Financial Statements
in Unicom's January 31, 1997 Form 8-K Report for additional information
regarding certain covenants with respect to Unicom's and Unicom Enterprises'
operations.
The foregoing paragraphs in this "Construction Program" section include
forward-looking statements with respect to the future levels of capital
expenditures which are necessarily based upon assumptions regarding estimated
costs and availability of materials and services as well as contingencies.
Unforeseen events or conditions may require changes in the scope of work with
consequent changes in the timing and level of the projected expenditures. In
addition, changes in laws and regulations, or their interpretation and
enforcement, can affect the scope of certain projects, the manner in which
they are undertaken and the costs associated therewith. While ComEd and Unicom
Thermal give consideration to such factors in developing their respective
budgets, such consideration cannot predict the course of future events or
anticipate the interaction of multiple factors beyond management's control
upon project timing and cost. Consequently, actual results could differ
materially from those described.
RATE MATTERS
On January 9, 1995, the ICC issued its Rate Order in the proceedings
relating to ComEd's February 1994 rate increase request. The Rate Order
provided, 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 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 31, 1997 Form 8-K Reports for additional information related to
the level of decommissioning cost collections. The ICC also 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 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. As of December 31, 1996, electric
operating revenues of approximately $651 million (excluding revenue taxes) are
subject to refund. Intervenors and ComEd have filed appeals of the Rate Order
with the Illinois Appellate Court, and oral argument was heard on January 28,
1997.
On December 11, 1995, ComEd announced a series of customer initiatives as
part of its larger ongoing effort to address the need to give all customer
classes the opportunity to benefit from increased competition in the electric
utility business, while retaining the benefits (such as reliability) of
current regulation and ensuring utilities' cost recovery for commitments made
under the obligation to serve customers. The initiatives include a five-year
cap on base electric rates at current levels and various customer service and
incentive pricing programs designed to allow customers more choice and control
over the services they seek and the prices they pay. These initiatives are in
addition to previously implemented special discount contract rate programs for
new or existing industrial customers. ComEd anticipates the initiatives will
be fully implemented in 1997 and will reduce its revenues by approximately $40
million annually (including the effects of previously implemented
9
<PAGE>
initiatives and before income tax effects) primarily through changes in energy
utilization. Additionally in September 1996, the ICC approved ComEd's
additional depreciation initiative for 1996. ComEd's costs increased by $30
million in 1996 (before income tax effects), through the increase in
depreciation charges on its nuclear generating units. ComEd also continues to
consider the possibility of additional depreciation options. ComEd expects the
effects of these initiatives will be offset through increased revenues by
growth in its sales.
Under ComEd's initiatives, the five-year base rate cap at current levels
became effective in December 1995 and will extend until January 1, 2001. The
rate cap does not affect ComEd's fuel cost or nuclear decommissioning cost
recovery provisions. ComEd's fuel cost variances will continue to be collected
through its fuel adjustment clause, and such collections will continue to be
subject to annual reconciliation proceedings before the ICC. Likewise, nuclear
decommissioning costs will continue to be collected as described in Note 1 of
Notes to Financial Statements under "Depreciation and Decommissioning" in the
January 31, 1997 Form 8-K Reports.
See "Changes in the Electric Utility Industry" herein for information
regarding the legislative proposal supported by ComEd.
FUEL SUPPLY
The kilowatthour generation of ComEd and the Indiana Company for 1996 was
provided from the following fuel sources: nuclear 67%, coal 30%, oil 1% and
natural gas 2%. The lower nuclear generation as a percentage of total
generation for 1996 compared to recent prior years is primarily due to
scheduled and non-scheduled outages at certain of ComEd's nuclear generating
stations. See "Regulation," subcaption "Nuclear."
Nuclear Fuel
ComEd has uranium concentrate inventory, supply contracts and subsidiary
resources sufficient to meet all of its uranium concentrate requirements
through 1997 and portions of its uranium concentrate requirements for periods
beyond 1997. ComEd's contracted conversion services are sufficient to meet all
of its uranium conversion requirements through 1998. All of ComEd's enrichment
requirements have been contracted through September 1999 and portions of its
enrichment requirements for periods beyond 1999. Commitments for fuel
fabrication have been obtained for ComEd's nuclear units at least through
2005. 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.
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
uranium enrichment facilities owned and 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) to 2007. 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" in
the Janaury 31, 1997 Form 8-K Reports for information related to the
accounting for such costs.
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, 1997, coal inventories approximated 35 days.
The average cost per ton of coal consumed by ComEd and the Indiana Company for
the years 1994, 1995 and 1996, including transportation charges, was $39.50,
$41.72 and $41.16, respectively.
10
<PAGE>
Compared to other utilities, ComEd has relatively low average fuel costs as
a result of its 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 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, 1996, ComEd
had unrecovered fuel costs in the form of coal reserves of approximately $364
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, see
"Construction Program," subcaption "Utility Operations" above. For additional
information regarding ComEd's fuel reconciliation proceedings and coal
reserves, see "Fuel Adjustment Clause" below and Note 1 of Notes to Financial
Statements in the January 31, 1997 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 four of
the five units at Collins station to dual fuel capability (residual oil and
natural gas) was completed during 1994 and 1996 and a fifth unit is currently
being converted. 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 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 Note 1 of Notes to Financial Statements in
the January 31, 1997 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 within 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 within 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.
11
<PAGE>
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.
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. The DOE advised ComEd in
December 1996 that it anticipates it will be unable to begin acceptance of
spent nuclear fuel by January 1998. It is expected this delivery schedule will
be delayed significantly. Extended delays in spent nuclear fuel acceptance by
the DOE would lead to ComEd's consideration of costly storage alternatives.
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. As provided for under the contract, ComEd has elected to pay
the one-time fee, with interest, just prior to the first 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 adequate for some years to come. Dresden station has spent fuel
capacity through the year 2001, Zion station has capacity through 2004, Quad
Cities has capacity through 2006 and all of the other stations have capacity
through at least 2008. ComEd is developing on site dry cask spent fuel storage
for Dresden Unit 1 at a budgeted cost of $21 million. The Dresden Unit 1
facility will use existing technology procured to meet the federal
requirements for both storage and transportation of spent nuclear fuel. The
facility is expected to be used by 1999. Meeting other spent fuel storage
requirements beyond the years stated above could require new and separate
storage facilities. The full costs for ComEd's other nuclear units 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. Between July 1, 1994 and July 1, 1995, there were
no commercial operating sites in the United States for the disposal of low-
level radioactive waste available to ComEd. However, the Barnwell, South
Carolina low-level radioactive waste site was reopened on July 1, 1995 and is
available to ComEd. ComEd entered into an agreement with the Barnwell site
operator and began shipping waste to Barnwell on August 17, 1995. Illinois has
entered into a compact with the state of Kentucky, which has been approved by
Congress as required by the
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<PAGE>
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. ComEd
anticipates the possibility of continuing difficulties in disposing of low-
level radioactive waste. Since the reopening and availability of the Barnwell
site, ComEd continues to reevaluate its options.
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 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.
Nuclear operations have been, and remain, an important focus of ComEd--given
the impact of such operations on overall operating and maintenance
expenditures and the ability of nuclear power plants to produce electric
energy at a relatively low marginal cost. ComEd operates a large number of
nuclear plants, ranging from the older Zion, Dresden and Quad Cities stations
to the more recently completed LaSalle, Byron and Braidwood stations, and is
intent upon safe, reliable and efficient operation. These plants were
constructed over a period of time in which technology, construction procedures
and regulatory initiatives and oversight have evolved, with the result that
older plants generally require greater attention and resources to meet
regulatory requirements and expectations as well as to maintain operational
reliability.
On January 29, 1997, the NRC determined that ComEd's Dresden nuclear
generating station should remain on the NRC's list of plants to be monitored
closely, where it has been since being placed on that list in 1992. The NRC
also determined that ComEd's LaSalle and Zion nuclear generating stations
should be added to that list. Although in each case the NRC recognized that
ComEd had undertaken significant management changes and had accomplished a
number of performance improvements, it expressed concern with specific issues
at each station and expressed a general concern with the sustainability of
improvements as the basis for its determination. The listing of the plants
does not prevent ComEd from operating the generating units; however, it does
mean that the NRC will devote additional resources to monitoring ComEd's
operating performance and that ComEd will need to work to demonstrate to the
NRC the sustainability of improvements which it believes it has undertaken and
is continuing to implement. In addition, an operational event occurred in the
Zion station control room during February 1997. As a result, the NRC Regional
staff has issued a letter confirming ComEd's commitment to conduct a
comprehensive assessment of the event and to develop and implement a program
to ensure adequate personnel performance in the future, including upgraded
operator training. ComEd must brief the staff on the results of its
investigation, its proposed corrective actions and other matters prior to
restarting either Zion unit, both of which are currently out of service.
In late January 1997, the NRC also took the unusual additional step of
requiring ComEd to submit information to allow the NRC to determine what
actions, if any, should be taken to assure that ComEd can safely operate its
six nuclear generating stations while sustaining performance improvement at
each site. The request also requires ComEd to submit information regarding the
criteria that it has established, or plans to establish, to measure
performance and to explain ComEd's proposed actions if the criteria are not
met. The request states the NRC staff's concerns with the "cyclical safety
performance of ComEd nuclear stations," noting the presence on the list of
plants to be monitored closely of Dresden, LaSalle and Zion stations at
various times during the past ten years. It also noted concerns regarding
"ComEd's ability to establish lasting and effective programs that result in
sustained performance improvement." The request does acknowledge the
management and organizational changes implemented by ComEd, including the
"additional focus placed on management
13
<PAGE>
and leadership, accountability, the problem identification and corrective
action processes, material condition improvement, work control, and radiation
protection." It also acknowledges improvements seen at Dresden and Quad Cities
stations; but indicated at the same time performance declines were observed at
both LaSalle and Zion stations. The problems identified by the NRC are
consistent with weaknesses that had been identified in station self-
assessments initiated by ComEd; and management had already undertaken to
develop and implement programs designed to address these issues. ComEd has
prepared a response to the NRC which ComEd's management believes provides
sufficient information to demonstrate its ability to operate its nuclear
generating stations while sustaining performance improvements. ComEd expects
to submit this response to the NRC on March 28, 1997.
ComEd has devoted, and intends to continue to devote, significant resources
to the management and operations of its nuclear generating stations. Over the
past several years, it has increased and reinforced station management with
managers drawn from other utilities which have resolved similar operational
and performance issues. It has also sought to identify, anticipate and address
operating and performance issues in a safe, cost-effective manner while
seeking to improve the availability and capacity factors of its nuclear
generating units.
ComEd's activities with respect to its nuclear generating stations have
included improvements in operating and personnel procedures and repair and
replacement of equipment and can result in longer unit outages. In this
regard, ComEd's management decided to continue the present unit outages at its
LaSalle station until the identified performance issues have been
appropriately addressed. Zion station is also presently out of service. ComEd
presently expects the LaSalle outage to extend into the fall of 1997.
Similarly, the current Zion Unit 2 outage is expected to extend into and
likely beyond the summer of 1997, and Zion Unit 1 is expected to be out of
service until early 1998. As noted above, the Company must brief the NRC
regional staff as to certain matters before restarting either Zion unit.
The LaSalle and Zion outages are part of several outages of nuclear and
fossil generating stations that several utilities operating in the Midwestern
power grid (including ComEd) are expecting during 1997. ComEd is evaluating
the need for reinforcement of its available generating and transmission
capacity and the availability of power from third parties in light of these
regional circumstances. Such evaluation includes consideration of additional
expenditures of approximately $50 million, a portion of which is capital,
relating to enhancing generating station availability, transmission
reinforcement and purchasing power from other utilities, as well as
consideration of methods of managing customer demand for power. Such
expenditures could include demand charges for purchased power which are not
recoverable through the fuel adjustment clause under these circumstances, but
do not reflect the related energy costs for such purchased power.
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 1994. In 1996, an intervenor
filed testimony in the fuel reconciliation proceeding for 1994 seeking a
refund of approximately $90 million 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. ComEd believes the remedial
actions taken to minimize the impact of stress corrosion cracking on BWR
stainless steel reactor coolant piping have been successfully completed on
Dresden Units 2 and 3, Quad Cities Units 1 and 2 and LaSalle Units 1 and 2.
Future work on this piping will consist of routine inspections and repairs. As
a result of ComEd's experience with the effects of inter-granular stress
corrosion of stainless steel materials in BWRs, an inspection,
14
<PAGE>
repair and mitigation program of reactor vessel internals has been
implemented. This effort is intended to prevent non-budgeted costs and
refueling outage extensions resulting from unanticipated repairs occurring
during a refueling outage. For 1997, estimated expenditures for installation
of mitigation systems for LaSalle and Dresden stations are $1.7 million and
$9.4 million, respectively.
ComEd is replacing the steam generators at Byron Unit 1 and Braidwood Unit
1. The steam generator replacements are currently expected to be placed in
service prior to year-end 1998. The estimated replacement cost is
approximately $460 million, including approximately $80 million for the cost
of removal of the existing steam generators. Approximately $130 million of
this estimated cost is included in the 1997 construction program.
Approximately $140 million has been incurred through December 31, 1996. In
addition, ComEd has continued to monitor the degradation of the steam
generators at its Zion nuclear generating station. Recent studies indicate
that the degradation is continuing and that replacement may be required sooner
than 2005. No amount has been included in ComEd's construction budget for
replacement of these steam generators, since ComEd has not decided whether or
when to effect a replacement. Based upon its experience with the replacement
activities at Braidwood and Byron, and depending on the timing of any
replacement at Zion, ComEd believes such cost could be approximately $435
million if a decision to replace is made.
As of December 31, 1996, ComEd estimated that it will expend approximately
$15.5 billion, excluding any contingency allowance, for decommissioning costs
primarily during the period from 2007 through 2032. Such costs, estimated at
December 31, 1996 to aggregate $3.9 billion in current-year (1997) dollars,
are expected to be funded by external decommissioning trusts 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 as
well as changes in the assumptions used in making such estimates including
changes in technology, available alternatives for the disposal of nuclear
waste, and inflation. See Note 1 of Notes to Financial Statements under
"Depreciation and Decommissioning" in the January 31, 1997 Form 8-K Reports
for additional information regarding decommissioning costs.
During the year 1996, civil penalties were imposed on ComEd on seven
occasions for violations of NRC regulations in amounts aggregating $450,000.
Since January 1, 1997, civil penalties were imposed on ComEd on three
occasions for violations of NRC regulations in amounts aggregating $850,000.
To ComEd's knowledge there are four current enforcement issues 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
15
<PAGE>
emission sources. Permits authorizing operation of ComEd's fossil fuel
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 pending
applications for 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 Quad Cities station.
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 in March 1995. ComEd is presently
following state activities to promulgate rules implementing the final
guidance, and assessing the extent to which such 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 nitrogen oxide emissions from
ComEd's and the Indiana Company's fossil fuel generating units. In January
1996, the U.S. EPA issued a final rule exempting existing sources inside the
Chicago ozone non-attainment area from further nitrogen oxide emission
reductions; however, this exemption is limited pending further study of ozone
transport. The Illinois EPA is also considering nitrogen oxide emission
reductions at ComEd generating stations outside the Chicago ozone non-
attainment area also due to ozone transport. Under the Acid Rain program, the
U.S. EPA will prepare nitrogen oxide emission regulations that would apply to
all of ComEd's boilers with a compliance date of January 1, 2000. These
regulations were finalized on December 19, 1996 and include limits for cyclone
and tangentially fired boilers of 0.86 and 0.40 lbs/mm Btu, respectively.
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 a
cleanup, can be sued for costs associated with a U.S. EPA directed cleanup,
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
16
<PAGE>
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 (1997) dollars. It is expected that the costs associated with
investigation and remediation of former MGP sites will be incurred over a
period of 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 included on the Consolidated
Balance Sheets in the January 31, 1997 Form 8-K Reports as of December 31,
1996, 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,
1996, a reserve of $8 million has been included on the Consolidated Balance
Sheets in the January 31, 1997 Form 8-K Reports representing ComEd's estimate
of the liability associated with cleanup costs of remediation sites other than
former MGP sites. Approximately half of this reserve relates to anticipated
cleanup costs associated with a property formerly used as a tannery which was
purchased by ComEd in 1973. 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.
In 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 near 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. On or about
October 31, 1996, ComEd and the U.S. Government filed with the Court a joint
statement indicating that they had reached an agreement in principle to settle
ComEd's total liability for a total payment of $1.35 million in cash and
services.
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 or has caused a diminution in property values
of land adjacent to these facilities. 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,
17
<PAGE>
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
Unicom and its subsidiary companies employed 16,871 people at December 31,
1996. ComEd and the Indiana Company had approximately 16,845 employees at
December 31, 1996, of which approximately 9,270 ComEd employees were
represented by Local 15 of the IBEW and 131 Indiana Company employees were
represented by Local 12502 of the United Steelworkers of America. The existing
collective bargaining agreement with Local 15 provides, among other things,
for a term expiring on September 30, 1997, a retroactive wage increase to
April 1, 1995 (substantially all of which had been accrued on ComEd's books as
of December 31, 1995), a further wage increase of approximately 2.7% effective
on April 1, 1996 and a 1.5% wage increase effective on April 1, 1997. In
addition, the agreement provides that union employees are eligible to receive
1995 and 1996 incentive payments dependent upon the achievement of certain
corporate and individual goals and reflects a previously implemented voluntary
separation offer to employees who accepted and left ComEd's employ by year-end
1995. For the term of the agreement, a revision to the provision relative to
contracting work was negotiated which will give ComEd the flexibility needed
to deal with personnel relocations and repositioning following the voluntary
separation employee reduction, as well as to smooth out the peaks and valleys
in the labor requirements of the business. This flexibility will provide a
stable work environment for ComEd's employees.
The supplemental agreements covering life insurance, savings and investment
plan, healthcare coverage for medical, dental and vision are effective through
September 30, 1997. The supplemental agreement covering pension benefits is
effective through September 30, 1999.
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, MidAmerican Energy 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 14 other Midwest power systems are regular members of MAIN (which
also includes 23 associate members and five affiliate members). 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 customers located within the city of Chicago.
18
<PAGE>
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, 1996 the expiration dates of the
electric franchises held in the 396 municipalities outside of the city of
Chicago capable of granting franchises and in which ComEd currently provides
electric service.
<TABLE>
<CAPTION>
ESTIMATED
NUMBER OF AGGREGATE
FRANCHISE EXPIRATION PERIODS MUNICIPALITIES POPULATION
- ---------------------------- -------------- ----------
<S> <C> <C>
1997-2006............................................. 3 89,000
2007-2017............................................. 11 97,000
2018-2028............................................. 3 4,000
2029-2039............................................. 1 *
2040 and subsequent years............................. 375 4,032,000
No stated time limit.................................. 3 61,000
</TABLE>
- --------
*Less than 1,000 people.
EXECUTIVE OFFICERS OF THE REGISTRANT
The effective year of election of the executive officers to their present
positions and the prior positions they have held with Unicom or other
companies since January 1, 1992 are described below.
<TABLE>
<CAPTION>
NAME AND AGE POSITION
-------------- ------------------------------------------------------------
<S> <C>
James J. Chairman and Chief Executive Officer of Unicom since 1994
O'Connor, 60 and Chairman and Chief Executive Officer of ComEd since
1980.
Leo F. Mullin, Vice Chairman of Unicom since 1995; Vice Chairman of ComEd
54 since 1995; President and Chief Operating Officer of First
Chicago Corporation, 1993 to 1995 and Chairman, President
and Chief Executive Officer of American National Bank and
Trust Company of Chicago, 1992 to 1993.
Samuel K. President of Unicom since 1994; President of ComEd since
Skinner, 58 1993; General Chairman of Republican National Committee,
1992 to 1993 and Chief of Staff to President of the United
States, 1992.
Donald A. Senior Vice President of Unicom since 1995; President of
Petkus, 55 Unicom Thermal since 1995; Senior Vice President of ComEd
since 1992 and Vice President of ComEd, 1992.
John C. Vice President of Unicom since 1994 and Vice President of
Bukovski, 54 ComEd since 1989.
John T. Vice President of Unicom since 1996; Vice President of ComEd
Costello, 48 since 1996; Manager of Corporate Relations of ComEd, 1995
to 1996 and Manager of Public Affairs of ComEd, 1992 to
1995.
Thomas J. Vice President of Unicom since 1996; Vice President of ComEd
McCaffrey, 52 since 1996; Vice President of Mercer Management Consulting,
1995 to 1996 and Corporate Senior Vice President of First
Chicago Corporation, 1992 to 1994.
Roger F. Comptroller of Unicom since 1994 and Comptroller of ComEd
Kovack, 48 since 1989.
Dennis F. Treasurer of Unicom since 1994 and Treasurer of ComEd since
O'Brien, 51 1989.
David A. Secretary of Unicom since 1994 and Secretary of ComEd since
Scholz, 55 1989.
</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 29, 1997.
There are no family relationships among the executive officers, directors
and nominees for director of Unicom.
19
<PAGE>
OPERATING STATISTICS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Operating Revenues (thousands of dol-
lars)(1):
Residential............................... $2,541,873 $2,621,038 $2,273,763
Small commercial and industrial........... 2,113,716 2,073,998 1,917,084
Large commercial and industrial........... 1,445,708 1,425,784 1,381,251
Public authorities........................ 503,004 487,142 452,512
Electric railroads........................ 29,651 26,894 26,179
Provisions for revenue refunds--ultimate
consumers................................ -- -- (15,909)
Sales for resale (net of provisions for
revenue refunds)......................... 235,041 207,256 187,147
Other revenues............................ 68,031 67,933 55,494
---------- ---------- ----------
Total.................................. $6,937,024 $6,910,045 $6,277,521
---------- ---------- ----------
---------- ---------- ----------
Sales (millions of kilowatthours):
Residential............................... 22,310 23,303 21,376
Small commercial and industrial........... 25,131 25,313 24,320
Large commercial and industrial........... 23,896 23,777 23,450
Public authorities........................ 7,336 7,158 6,885
Electric railroads........................ 424 390 397
Sales for resale.......................... 12,178 11,412 8,743
---------- ---------- ----------
Total.................................. 91,275 91,353 85,171
---------- ---------- ----------
---------- ---------- ----------
Sources of Electric Energy (millions of
kilowatthours):
Generation--
Nuclear.................................. 62,610 70,261 63,795
Fossil................................... 30,315 26,231 26,361
Fast-start peaking units................. 123 116 87
---------- ---------- ----------
Net generation......................... 93,048 96,608 90,243
Purchased power........................... 6,129 2,475 2,071
Company use and losses.................... (7,902) (7,730) (7,143)
---------- ---------- ----------
Total.................................. 91,275 91,353 85,171
---------- ---------- ----------
---------- ---------- ----------
Cost of Fuel Consumed (per million Btu):
Nuclear................................... $0.53 $0.52 $0.53
Coal...................................... $2.41 $2.43 $2.31
Oil....................................... $3.41 $3.06 $2.89
Natural gas............................... $2.75 $1.85 $2.27
Average all fuels......................... $1.17 $1.05 $1.08
Peak Load (kilowatts)...................... 18,916,000 19,212,000 17,928,000
Number of Customers (at end of year):
Residential............................... 3,102,101 3,079,381 3,047,354
Small commercial and industrial........... 289,803 288,848 286,793
Large commercial and industrial........... 1,550 1,539 1,528
Public authorities........................ 12,142 12,039 12,059
Electric railroads and resale............. 46 26 20
---------- ---------- ----------
Total.................................. 3,405,642 3,381,833 3,347,754
---------- ---------- ----------
---------- ---------- ----------
Average Annual Revenue Per Residential Cus-
tomer
(excluding light bulb service)............ $819.52 $852.18 $748.10
Average Use Per Residential Customer
(kilowatthours)........................... 7,213 7,598 7,056
Average Revenue Per Kilowatthour(2):
Residential (excluding light bulb serv-
ice)..................................... 11.36c 11.22c 10.60c
Small commercial and industrial........... 8.41c 8.19c 7.88c
Large commercial and industrial........... 6.05c 6.00c 5.89c
</TABLE>
- --------
(1) See "Rate Matters" 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 was as follows:
<TABLE>
<CAPTION>
1994
--------------------------------
AFTER DEDUCTIONS FOR
--------------------------------
PROVISIONS FOR REVENUE
REVENUE REFUNDS REFUNDS CREDITED
--------------- ----------------
<S> <C> <C>
Residential 10.57c 8.22c
Small commercial
and industrial 7.86c 6.43c
Large commercial
and industrial 5.88c 4.76c
</TABLE>
20
<PAGE>
FORWARD LOOKING INFORMATION
Certain portions of these Annual Reports contain forward looking statements
with respect to the consequences of future events, including estimates of
costs associated with certain actions and outcomes. Unforeseen events or
conditions may require changes in the factors affecting such estimates and the
projected results thereof. Consequently, actual results could differ
materially from the estimates presented. See the last paragraph under the
subheading "Construction Program" in "Item 1. Business" for additional
information regarding certain caveats affecting forward looking statements.
Forward looking information is contained in various sections of these Annual
Reports, including, without limitation, (i) "Item 1. Business" under the
subheading "Regulation--Nuclear," with respect to the estimated costs of
decommissioning nuclear generating stations, (ii) "Item 1. Business" under the
subheading "Construction Program," regarding ComEd's construction program
budget, (iii) "Item 1. Business" under the subheadings "Construction Program"
and "Regulation--Nuclear," regarding the time frame for steam generator
replacement at ComEd's Zion nuclear generating station, (iv) "Item 1.
Business" under the subheading "Regulation--Environmental," regarding cleanup
costs associated with MGP and other remediation sites and (v) "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Item 8. Financial Statements and Supplementary Data" which,
in the case of Unicom, incorporate portions of Unicom's January 31, 1997 Form
8-K Report which contain forward looking information as described therein, in
the case of ComEd, incorporate portions of ComEd's January 31, 1997 Form 8-K
Report which contain forward looking information as described therein.
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 66%, 10%, 21% 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 1,321,000
----------
Net non-summer generating capability 22,511,000
Deduct--Summer limitations 557,000
----------
Net summer generating capability 21,954,000
==========
</TABLE>
- --------
(1) Excludes the 25% undivided interest of MidAmerican Energy 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.
21
<PAGE>
Major electric transmission lines owned and in service are as follows:
<TABLE>
<CAPTION>
VOLTAGE CIRCUIT
(VOLTS) MILES
------- -------
<S> <C>
765,000........................................................... 90
345,000........................................................... 2,533
138,000........................................................... 2,725
</TABLE>
ComEd's electric distribution system includes 38,040 pole line miles of
overhead lines and 32,850 cable miles of underground lines. A total of
approximately 1,320,350 poles are included in ComEd's distribution system, of
which about 590,630 poles are owned jointly with telephone companies.
ITEM 3. LEGAL PROCEEDINGS.
During 1989 and 1991, actions were brought in federal and state courts in
Colorado against ComEd and 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, which verdicts were upheld
on appeal. The remaining claims in the 1989 actions are the subject of a
settlement agreement entered into by counsel for the plaintiffs and Cotter. If
the settlement agreement is implemented, the 1989 actions will be dismissed.
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 July 1995, the Chicago area experienced several consecutive days of
unusually high temperatures coupled with high humidity. Between July 12 and
14, 1995, ComEd experienced record demand for electricity. On July 14, 1995, a
fire in a substation caused a power outage to approximately 40,000 customers.
Other equipment failures in the same general area caused certain of these
customers to be without power for up to 48 hours. In the wake of these power
outages, three class action lawsuits were filed against ComEd seeking recovery
of damages for property losses allegedly suffered. One suit seeks at least $10
million in damages; the others seek unspecified damages. One individual suit
was also filed seeking damages less than $100,000 for property losses.
ComEd has appeals pending in applicable counties in connection with property
tax assessments for its Byron, Braidwood and LaSalle nuclear generating
stations. These proceedings seek refunds and reduced valuations resulting in
lower property taxes for the challenged and subsequent years. In January 1996,
the PTAB rendered a decision substantially adopting ComEd's positions with
respect to the Byron nuclear station. Thereafter, the Ogle County Board of
Review issued a revised assessment. ComEd has received tax bills for 1995
taxes, payable in 1996, based on the revised assessment. However, certain Ogle
County taxing bodies have filed legal actions challenging both the PTAB
decision and the Board of Review assessment. ComEd has also challenged the
assessment, on the grounds that it does not fully implement the PTAB decision.
ComEd continues to challenge tax assessments with respect to other properties.
The reduction in ComEd's provision for real estate taxes in 1995 and 1996
reflects the bills received.
On November 1, 1996, the City of Chicago, Illinois filed a demand for the
appointment of an Adjustment Board before the American Arbitration Association
under the provisions of its franchise agreement with ComEd. In its demand, the
City alleges, among other items, that ComEd has failed to carry out certain
commitments related to system reliability under the franchise agreement which
requires ComEd to budget $1 billion in expenditures for transmission and
distribution enhancements within or for the benefit of Chicago over a ten year
period that commenced in January 1992. ComEd is disputing the City's
allegations. During the five years since January 1992, ComEd has expended
approximately $426 million to enhance electric service reliability and energy
supply for the City, and it continues to review, and budget appropriately, for
needed projects.
22
<PAGE>
See "Item 1. Business," subcaptions "Rate Matters," "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.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
ComEd's securities and other securities guaranteed by ComEd are currently
rated by three principal securities rating agencies 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- BBB-
Preference stock.................................... baa3 BBB- BBB-
ComEd-obligated mandatorily redeemable preferred se-
curities
of the Trust....................................... baa3 BBB- BBB-
Commercial paper.................................... P-2 A-2 D-2
</TABLE>
In January 1997, Moody's changed the rating outlook on ComEd's securities
from "stable" to "negative" and Duff & Phelps added ComEd's securities to
"Rating Watch-Down." As of March 1997, Standard & Poor'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
23
<PAGE>
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").
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 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 D-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 Cash Dividends Paid Per Share of Common
Stock" on page 3 of Unicom's January 31, 1997 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 3,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 4 through 16, and the audited consolidated financial
statements and notes thereto on pages 17 through 45 of Unicom's January 31,
1997 Form 8-K Report. Reference is also made to "Item 1. Business,"
subcaptions "Construction Program," "Regulation" and "Changes in the Electric
Utility Industry" for additional information.
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 Unicom's Annual Meeting of shareholders to be held on
May 29, 1997 is incorporated herein by reference to the information under the
heading "Security Ownership of Certain Beneficial Owners and Management" in
Unicom's definitive Proxy Statement ("1997 Proxy Statement") to be filed with
the SEC prior to April 30, 1997 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
24
<PAGE>
Annual Report on Form 10-K under "Item 1. Business," subcaption "Executive
Officers of the Registrant" and under the heading "Security Ownership of
Certain Beneficial Owners and Management" of Unicom's 1997 Proxy Statement,
which are incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by Item 11 is incorporated herein by reference to
the information labelled "Compensation of Directors" and the paragraphs under
the heading "Executive Compensation" (other than the paragraphs under the
heading "Corporate Governance and Compensation Committee Report on Executive
Compensation") of Unicom's 1997 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" in Unicom's 1997 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
25
<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
The effective year of election of the executive officers to their present
positions and the prior positions they have held with ComEd or other companies
since January 1, 1992 are described below.
<TABLE>
<CAPTION>
NAME AND AGE POSITION
------------ --------------------------------------------------------------
<S> <C>
James J. Chairman and Chief Executive Officer of ComEd since 1980 and
O'Connor, Chairman and Chief Executive Officer of Unicom since 1994.
60
Leo F. Vice Chairman of ComEd since 1995; Vice Chairman of Unicom
Mullin, 54 since 1995; President and Chief Operating Officer of First
Chicago Corporation, 1993 to 1995 and Chairman, President and
Chief Executive Officer of American National Bank and Trust
Company of Chicago, 1992 to 1993.
Samuel K. President of ComEd since 1993; President of Unicom since 1994;
Skinner, 58 General Chairman of Republican National Committee, 1992 to
1993 and Chief of Staff to President of the United States,
1992.
Thomas J. Executive Vice President of ComEd since January 1997; Senior
Maiman, 58 Vice President of ComEd, 1992 to January 1997 and Vice Presi-
dent of ComEd, 1992.
Robert J. Executive Vice President of ComEd since January 1997; Senior
Manning, 54 Vice President of ComEd, 1992 to January 1997 and Vice Presi-
dent of ComEd, 1992.
Donald A. Senior Vice President of ComEd since 1992; Vice President of
Petkus, 55 ComEd, 1992; Senior Vice President of Unicom since 1995 and
President of Unicom Thermal since 1995.
Cordell Senior Vice President of ComEd, 1987 to 1997 (Announced re-
Reed, 59 tirement in January 1997).
Michael J. Senior Vice President of ComEd since 1993 and Vice President
Wallace, 49 of ComEd, 1992 to 1993.
John C. Vice President of ComEd since 1989 and Vice President of
Bukovski, Unicom since 1994.
54
Frank M. Vice President of ComEd since January 1997; Governmental Af-
Clark, 51 fairs Vice President 1996 to January 1997 and Governmental
Affairs Manager, 1992 to 1996.
John T. Vice President of ComEd since 1996; Manager of Corporate Rela-
Costello, tions of ComEd, 1995 to 1996; Manager of Public Affairs of
48 ComEd, 1992 to 1995 and Vice President of Unicom since 1996.
Louis O. Vice President of ComEd since 1992 and Assistant Vice Presi-
DelGeorge, dent of ComEd, 1992.
49
William H. Vice President of ComEd since 1992 and Manager of Marketing
Downey, 52 and Customer Services of ComEd, 1992.
William H. Vice President of ComEd since 1994; Manager of Quality of
Dunbar, ComEd, 1992 to 1994 and Division Vice President of ComEd--
Jr., 56 Chicago North, 1992.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
NAME AND AGE POSITION
------------ --------------------------------------------------------------
<S> <C>
J. Stanley Vice President of ComEd since 1987.
Graves, 60
Harold W. Vice President of ComEd since 1995; Executive Vice President
Keiser, 53 and Chief Operating Officer of Entergy Operations, Inc., 1993
to 1995 and Senior Vice President of Pennsylvania Power &
Light Company, 1992 to 1993.
Emerson W. Vice President of ComEd since 1992 and Fossil Engineering and
Lacey, 55 Construction Manager of ComEd, 1992.
Thomas J. Vice President of ComEd since 1996; Vice President of Unicom
McCaffrey, since 1996; Vice President of Mercer Management Consulting,
52 1995 to 1996 and Corporate Senior Vice President of First
Chicago Corporation, 1992 to 1994.
Paul D. Vice President of ComEd since 1992 and Manager of Transmission
McCoy, 46 and Distribution Operations of ComEd, 1992.
Robert A. Vice President of ComEd 1994 to 1996 (Resigned January 1997)
Paul, 53 and Corporate Purchasing Manager of Digital Equipment Corpo-
ration, 1992 to 1994.
J. Stephen Vice President of ComEd since 1994 and Senior Vice President
Perry, 58 of Illinois Power Company, 1992 to 1994.
James A. Vice President of ComEd since 1993 and General Manager of Fuel
Small, 53 Services of Georgia Power Company, 1992 to 1993.
Pamela B. Vice President and General Counsel of ComEd since 1993 and
Strobel, 44 Partner of Sidley & Austin, 1992 to 1993.
Roger F. Comptroller of ComEd since 1989 and Comptroller of Unicom
Kovack, 48 since 1994.
Dennis F. Treasurer of ComEd since 1989 and Treasurer of Unicom since
O'Brien, 51 1994.
David A. Secretary of ComEd since 1989 and Secretary of Unicom since
Scholz, 55 1994.
</TABLE>
The present term of office of each of the above executive officers, except
for Mr. Reed and Mr. Paul, extends to the first meeting of ComEd's Board of
Directors after the next annual election of Directors scheduled to be held on
May 29, 1997.
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.
27
<PAGE>
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 "Cash Dividends Paid Per Share of Common Stock" on page 3 of
ComEd's January 31, 1997 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 3,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 4 through 15, and the audited consolidated financial
statements and notes thereto on pages 16 through 42 of ComEd's January 31,
1997 Form 8-K Report. Reference is also made to "Item 1. Business,"
subcaptions "Changes in the Electric Utility Industry," "Construction
Program," and "Regulation" for additional information.
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 29, 1997 is incorporated herein by reference to information under the
heading "Security Ownership of Certain Beneficial Owners and Management" in
ComEd's definitive Information Statement ("1997 Information Statement") to be
filed with the SEC prior to April 30, 1997 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 under the heading "Security Ownership of Certain Beneficial
Owners and Management" in ComEd's 1997 Information Statement, which are
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by Item 11 is incorporated herein by reference to
the paragraph labelled "Compensation of Directors" and the paragraphs under
the heading "Executive Compensation" (other than the paragraphs under the
heading "Corporate Governance and Compensation Committee Report on Executive
Compensation") of ComEd's 1997 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" of ComEd's 1997 Information
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
28
<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 31,
1997 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 31, 1997 Form 8-K
Report, and into the ComEd Annual Report on Form 10-K by
reference to the indicated page or pages of ComEd's January
31, 1997 Form 8-K Report:
Report of Independent Public Accountants.................... 17 16
Statements of Consolidated Income for the years 1996, 1995
and 1994................................................... 18 17
Consolidated Balance Sheets--December 31, 1996 and 1995..... 19-20 18-19
Statements of Consolidated Capitalization--December 31, 1996
and 1995................................................... 21 20
Statements of Consolidated Retained Earnings for the years
1996, 1995 and 1994........................................ 22 21
Statements of Consolidated Cash Flows for the years 1996,
1995 and 1994.............................................. 23 22
Notes to Financial Statements............................... 24-45 23-42
</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.............................. 37 x
Report of Independent Public Accountants on
Supplemental Schedule.............................. 38 x
Schedule II--Valuation and Qualifying Accounts for
each of the three years in the period
ended
December 31, 1996........................ 39 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.
29
<PAGE>
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, 1996, the assets of the nonconsolidated
subsidiaries in the aggregate approximated 1% of ComEd's consolidated
assets. The 1996 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. (File No. 1-11375, Form 10-K for the year
ended
December 31, 1994, Exhibit (3)-1). 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." (File No.
1-1839, Form 10-K for the year ended December
31, 1994, Exhibit (3)-2). x
(3)-3 By-Laws of Unicom Corporation, effective January
28, 1994 as amended through January 29, 1997. x
(3)-4 By-Laws of Commonwealth Edison Company, effective
September 2, 1988 as amended through January 29,
1997. x
*(4)-1 Mortgage of ComEd to Illinois Merchants Trust
Company, Trustee (Harris Trust and Savings Bank,
as current successor Trustee), dated July 1,
1923, Supplemental Indenture thereto dated Au-
gust 1, 1944, and amendments and supplements
thereto dated, respectively, 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, Janu-
ary 15, 1977 and June 3, 1977 (File No. 2-60201,
Form S-7, Exhibit 2-1). x
*(4)-2 Supplemental Indentures to Mortgage dated July 1,
1923 dated, respectively, May 17, 1978, August
31, 1978, June 18, 1979, June 20, 1980, April
16, 1981, April 30, 1982, April 15, 1983, April
13, 1984 and April 15, 1985 (File No. 2-99665,
Form S-3, Exhibit (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>
30
<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 Indentures to Mortgage dated July 1,
1923 dated, respectively, February 15, 1990 and
June 15, 1990 (File No. 33-38232, Form S-3, Ex-
hibits (4)-11 and (4)-12). x
*(4)-6 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)-7 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)-8 Supplemental Indenture to Mortgage dated July 1,
1923 dated May 15, 1992 (File No. 33-48542, Form
S-3, Exhibit (4)-14). x
*(4)-9 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)-10 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)-11 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)-12 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)-13 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)-14 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)-15 Supplemental Indenture to Mortgage dated July 1,
1923 dated December 1, 1994 (File No. 1-1839,
Form 10-K for the year ended December 31, 1994,
Exhibit (4)-16). x
(4)-16 Supplemental Indenture to Mortgage dated July 1,
1923 dated June 1, 1996. x
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
------- ------------------------------------------------- ------ -----
<C> <S> <C> <C>
*(4)-17 Instrument of Resignation, Appointment and Ac-
ceptance dated January 31, 1996, under the pro-
visions of the Mortgage dated July 1, 1923, and
Indentures Supplemental thereto (File No. 1-
1839, Form 10-K for the year ended December 31,
1995, Exhibit (4)-28). x
*(4)-18 Instrument dated as of January 31, 1996, for
trustee under the Mortgage dated July 1, 1923
and Indentures Supplemental thereto (File No. 1-
1839, Form 10-K for the year ended December 31,
1995, Exhibit (4)-29). x
*(4)-19 Indentures of ComEd to The First National Bank of
Chicago, Trustee (Amalgamated Bank of Chicago,
as current successor Trustee), dated April 1,
1949, October 1, 1949, October 1, 1950, October
1, 1954, January 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)-20 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)-21 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)-22 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)-23 Supplemental Indenture to Indenture dated Septem-
ber 1, 1987 dated July 14, 1989 (File No. 33-
32929, Form S-3, Exhibit (4)-16). x
*(4)-24 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)-25 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)-26 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)-27 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
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
------- ------------------------------------------------- ------ -----
<C> <S> <C> <C>
*(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 September 30, 1996,
among Commonwealth Edison Company and certain of
the Banks party to the Credit Agreement dated as
of October 1, 1991. x
(4)-31 Amended and Restated Credit Agreement dated as of
November 15, 1996, among Unicom Enterprises
Inc., the Banks Named Therein and Citibank, N.A. x
(4)-32 Amended and Restated Guaranty dated as of Novem-
ber 15, 1996, by Unicom Corporation in favor of
the Lenders and LC Banks parties to the afore-
mentioned Credit Agreement with Unicom Enter-
prises Inc. (included as Exhibit E in Exhibit
(4)-31). x
*(4)-33 Guaranty dated November 22, 1994, by Unicom Cor-
poration in favor of Citibank, N.A. (File No. 1-
11375, Form 10-K for the year ended December 31,
1994, Exhibit (4)-37). x
(4)-34 Indenture dated September 1, 1995 between ComEd
and Wilmington Trust Company. x
(4)-35 First Supplemental Indenture dated September 19,
1995 to Indenture dated September 1, 1995 x
(4)-36 Second Supplemental Indenture dated January 24,
1997 to Indenture dated September 1, 1995. 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)- Unicom Corporation Long-Term Incentive Plan (File
2 No. 1-1839, ComEd Proxy Statement dated March
26, 1993, Exhibit A). x
+*(10)- Amendment to Unicom Corporation Long-Term Incen-
3 tive Plan, effective September 1, 1994 (File No.
33-56991, Form S-8, Exhibit (4)-4). x
+*(10)- 1994 Long-Term Performance Unit Award for Execu-
4 tive and Group Level Employees 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
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
------- ------------------------------------------------- ------ -----
<C> <S> <C> <C>
+*(10)- 1995 Long-Term Performance Unit Award for Execu-
5 tive and Group Level Employees Payable in 1998
under the Unicom Corporation Long-Term Incentive
Plan, as amended (File No. 1-11375 and 1-1839,
Form 10-K for the year ended December 31, 1995,
Exhibit (10)-6). x x
+*(10)- 1996 Long-Term Performance Unit Award for Execu-
6 tive and Group Level Employees Payable in 1999
under the Unicom Corporation Long-Term Incentive
Plan (File Nos. 1-11375 and 1-1839, Form 10-K
for the year ended December 31, 1995, Exhibit
(10)-9). x x
+*(10)-7 1996 Variable Compensation Award for Management
Employees under the Unicom Corporation Long-Term
Incentive Plan (File Nos. 1-11375 and 1-1839,
Form 10-K for the year ended December 31, 1995,
Exhibit (10)-10). x x
+*(10)-8 1996 Award to Mr. O'Connor, Mr. Mullin and Mr.
Skinner under the Unicom Corporation Long-Term
Incentive Plan (File Nos. 1-11375 and 1-1839,
Form 10-K for the year ended December 31, 1995,
Exhibit (10)-11). x x
+ (10)-9 Unicom Corporation General Provisions Regarding
1996 Stock Option Awards Granted under the
Unicom Corporation Long-Term Incentive Plan. x x
+ (10)- Unicom Corporation General Provisions Regarding
10 1996B Stock Option Awards Granted under the
Unicom Corporation Long-Term Incentive Plan. x x
+ (10)- 1997 Long-Term Performance Unit Award for Execu-
11 tive and Group Level Employees Payable in 2000
under the Unicom Corporation Long-Term Incentive
Plan. x x
+ (10)- 1997 Annual Incentive Award for Managment Employ-
12 ees under the Unicom Corporation Long-Term In-
centive Plan. x x
+ (10)- 1997 Award to Mr. O'Connor, Mr. Mullin and Mr.
13 Skinner under the Unicom Corporation Long-Term
Incentive Plan. x x
+*(10)- Unicom Corporation Deferred Compensation Unit
14 Plan, as amended (File Nos. 1-11375 and 1-1839,
Form 10-K for the year ended December 31, 1995,
Exhibit (10)-12). x x
+*(10)- Deferred Compensation Plan (included in Article
15 Five of Exhibit (3)-2 above). x
+*(10)- Management Incentive Compensation Plan, effective
16 January 1, 1989 (File No. 1-1839, Form 10-K for
the year ended December 31, 1988, Exhibit (10)-
4). x
+*(10)- Amendments to Management Incentive Compensation
17 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)- Amendment to Management Incentive Compensation
18 Plan, dated March 21, 1991 (File No. 1-1839,
Form 10-K for the year ended December 31, 1991,
Exhibit (10)-6). x
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
------- ------------------------------------------------- ------ -----
<C> <S> <C> <C>
+ (10)- Retirement Plan for Directors, effective Septem-
19 ber 1, 1994, as amended through March 12, 1997. x
+ (10)- Retirement Plan for Directors, effective January
20 1, 1987, as amended through March 12, 1997. x
+*(10)- Unicom Corporation 1996 Directors' Fee Plan (File
21 No. 1-11375, Unicom Proxy Statement dated April
8, 1996, Appendix A). x x
+*(10)- Executive Group Life Insurance Plan (File No. 1-
22 1839, Form 10-K for the year ended December 31,
1980, Exhibit (10)-3). x
+*(10)- Amendment to the Executive Group Life Insurance
23 Plan (File No. 1-1839, Form 10-K for the year
ended December 31, 1981, Exhibit (10)-4). x
+*(10)- Amendment to the Executive Group Life Insurance
24 Plan dated December 12, 1986 (File No. 1-1839,
Form 10-K for the year ended December 31, 1986,
Exhibit (10)-6). x
+*(10)- Amendment of Executive Group Life Insurance Plan
25 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)- Commonwealth Edison Company Supplemental Manage-
26 ment Retirement Plan (File No. 1-1839, Form 10-K
for the year ended December 31, 1985, Exhibit
(10)-6). x
+*(10)- Amendment of Executive Group Life Insurance Plan
27 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)- Letter Agreement dated December 16, 1992 between
28 Com-
monwealth 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)- Amendment dated May 31, 1995 to Letter Agreement
29 dated December 16, 1992 between Commonwealth Ed-
ison Company and Samuel K. Skinner (File No.
1-1839, Form 10-K for the year ended
December 31, 1995, Exhibit (10)-27). x
+ (10)- Amendments dated December 11, 1996 and March 24,
30 1997 to Letter Agreement dated December 16, 1992
between Commonwealth Edison Company and Samuel
K. Skinner. x
+*(10)- Letter Agreement dated November 14, 1995 between
31 Commonwealth Edison Company and Leo F. Mullin
(File No. 1-1839, Form 10-K for the year ended
December 31, 1995, Exhibit (10)-28). x
+ (10)- Amendment dated March 24, 1997 to Letter Agree-
32 ment dated November 14, 1995 between Common-
wealth Edison Company and Leo F. Mullin. x
+*(10)- Commonwealth Edison Company Excess Benefit Sav-
33 ings Plan (File No. 1-1839, Form 10-Q for the
quarter ended June 30, 1994, Exhibit (10)-2). x
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
------- ------------------------------------------------- ------ -----
<C> <S> <C> <C>
+*(10)- Amendment No. 1 to Commonwealth Edison Company
34 Excess Benefit Savings Plan dated May 24, 1995
(File No. 1-1839, Form 10-K for the year ended
December 31, 1995, Exhibit (10)-30). x
+*(10)- Unicom Corporation Stock Bonus Deferral Plan
35 (File Nos. 1-11375 and 1-1839, Form 10-K for the
year ended December 31, 1995, Exhibit (10)-31). x 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 Compa-
ny. 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 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 31, 1997. x
(99)-2 Commonwealth Edison Company's Current Report on
Form 8-K dated January 31, 1997. 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.
36
<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 31, 1997.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in 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 31, 1997
37
<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 31, 1997.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in 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 31, 1997
38
<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, 1994
- ----------------------------
Reserve Deducted From Assets
in Consolidated Balance
Sheet:
Provision for uncollectible
accounts (a).............. $10,910 $ (190) $ -- $ -- $10,720
======= ======= ====== ======== =======
Estimated Obsolete Materi-
als....................... $13,066 $13,650 $ -- $(13,026)(b) $13,690
======= ======= ====== ======== =======
Other Reserves:
Estimated liabilities asso-
ciated with remediation
costs and former manufac-
tured gas plant sites..... $29,522 $ 5,039 $ -- $ (2,039)(c) $32,522
======= ======= ====== ======== =======
Accumulated provision for
injuries and damages...... $56,734 $20,270 $7,802 $(29,494)(d) $55,312
======= ======= ====== ======== =======
FOR THE YEAR ENDED DECEMBER
31, 1995
- ----------------------------
Reserve Deducted From Assets
in Consolidated Balance
Sheet:
Provision for uncollectible
accounts (a).............. $10,720 $ 1,108 $ -- $ -- $11,828
======= ======= ====== ======== =======
Estimated Obsolete Materi-
als....................... $13,690 $15,350 $ -- $(12,865)(b) $16,175
======= ======= ====== ======== =======
Other Reserves:
Estimated liabilities asso-
ciated with remediation
costs and former manufac-
tured gas plant sites..... $32,522 $ 2,271 $ -- $ (2,271)(c) $32,522
======= ======= ====== ======== =======
Accumulated provision for
injuries and damages...... $55,312 $21,135 $4,671 $(23,142)(d) $57,976
======= ======= ====== ======== =======
FOR THE YEAR ENDED DECEMBER
31, 1996
- ----------------------------
Reserve Deducted From Assets
in Consolidated Balance
Sheet:
Provision for uncollectible
accounts (a).............. $11,828 $ 1,065 $ -- $ -- $12,893
======= ======= ====== ======== =======
Estimated Obsolete Materi-
als....................... $16,175 $12,000 $ -- $(15,873)(b) $12,302
======= ======= ====== ======== =======
Other Reserves:
Estimated liabilities asso-
ciated with remediation
costs and former manufac-
tured gas plant sites..... $32,522 $ 1,706 $ -- $ (1,706)(c) $32,522
======= ======= ====== ======== =======
Accumulated provision for
injuries and damages...... $57,976 $13,325 $3,280 $(20,609)(d) $53,972
======= ======= ====== ======== =======
</TABLE>
Notes:
(a) Bad debt losses, net of recoveries, and provisions for uncollectible
accounts were charged to operating expense and amounted to $25,287,000,
$26,278,000 and $41,846,000 in 1994, 1995 and 1996, respectively.
(b) Writeoff of obsolete materials.
(c) Expenditures for site investigation and cleanup costs.
(d) Payments of claims and related costs.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
39
<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 28TH
DAY OF MARCH 1997.
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 28TH DAY OF
MARCH 1997.
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 (principal
John C. Bukovski financial officer)
Roger F. Kovack Comptroller (principal
- ---------------------------- accounting officer)
Roger F. Kovack
Jean Allard* Director
Edward A. Brennan* Director
James W. Compton* Director
Bruce DeMars* Director
Sue L. Gin* Director
Donald P. Jacobs Director
Edgar D. Jannotta Director
George E. Johnson* Director
Edward A. Mason* Director
Leo F. Mullin* Vice Chairman and
Frank A. Olson Director
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]
40
<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 28TH
DAY OF MARCH 1997.
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 28TH DAY OF
MARCH 1997.
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 (principal
John C. Bukovski financial officer)
Roger F. Kovack Comptroller (principal
- ---------------------------- accounting officer)
Roger F. Kovack
Jean Allard* Director
Edward A. Brennan* Director
James W. Compton* Director
Bruce DeMars* Director
Sue L. Gin* Director
Donald P. Jacobs* Director
Edgar D. Jannotta Director
George E. Johnson* Director
Edward A. Mason* Director
Leo F. Mullin* Vice Chairman and
Frank A. Olson Director
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]
41
<PAGE>
UNICOM CORPORATION
COMMONWEALTH EDISON COMPANY
FILE NO.'S 1-11375
AND 1-1839
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. (File No. 1-11375, Form 10-K for the year
ended
December 31, 1994, Exhibit (3)-1). 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." (File No.
1-1839, Form 10-K for the year ended December
31, 1994, Exhibit (3)-2). x
(3)-3 By-Laws of Unicom Corporation, effective January
28, 1994 as amended through January 29, 1997. x
(3)-4 By-Laws of Commonwealth Edison Company, effective
September 2, 1988 as amended through January 29,
1997. x
*(4)-1 Mortgage of ComEd to Illinois Merchants Trust
Company, Trustee (Harris Trust and Savings Bank,
as current successor Trustee), dated July 1,
1923, Supplemental Indenture thereto dated Au-
gust 1, 1944, and amendments and supplements
thereto dated, respectively, 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, Janu-
ary 15, 1977 and June 3, 1977 (File No. 2-60201,
Form S-7, Exhibit 2-1). x
*(4)-2 Supplemental Indentures to Mortgage dated July 1,
1923 dated, respectively, May 17, 1978, August
31, 1978, June 18, 1979, June 20, 1980, April
16, 1981, April 30, 1982, April 15, 1983, April
13, 1984 and April 15, 1985 (File No. 2-99665,
Form S-3, Exhibit (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>
1
<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 Indentures to Mortgage dated July 1,
1923 dated, respectively, February 15, 1990 and
June 15, 1990 (File No. 33-38232, Form S-3, Ex-
hibits (4)-11 and (4)-12). x
*(4)-6 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)-7 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)-8 Supplemental Indenture to Mortgage dated July 1,
1923 dated May 15, 1992 (File No. 33-48542, Form
S-3, Exhibit (4)-14). x
*(4)-9 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)-10 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)-11 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)-12 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)-13 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)-14 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)-15 Supplemental Indenture to Mortgage dated July 1,
1923 dated December 1, 1994 (File No. 1-1839,
Form 10-K for the year ended December 31, 1994,
Exhibit (4)-16). x
(4)-16 Supplemental Indenture to Mortgage dated July 1,
1923 dated June 1, 1996. x
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
------- ------------------------------------------------- ------ -----
<C> <S> <C> <C>
*(4)-17 Instrument of Resignation, Appointment and Ac-
ceptance dated January 31, 1996, under the pro-
visions of the Mortgage dated July 1, 1923, and
Indentures Supplemental thereto (File No. 1-
1839, Form 10-K for the year ended December 31,
1995, Exhibit (4)-28). x
*(4)-18 Instrument dated as of January 31, 1996, for
trustee under the Mortgage dated July 1, 1923
and Indentures Supplemental thereto (File No. 1-
1839, Form 10-K for the year ended December 31,
1995, Exhibit (4)-29). x
*(4)-19 Indentures of ComEd to The First National Bank of
Chicago, Trustee (Amalgamated Bank of Chicago,
as current successor Trustee), dated April 1,
1949, October 1, 1949, October 1, 1950, October
1, 1954, January 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)-20 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)-21 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)-22 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)-23 Supplemental Indenture to Indenture dated Septem-
ber 1, 1987 dated July 14, 1989 (File No. 33-
32929, Form S-3, Exhibit (4)-16). x
*(4)-24 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)-25 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)-26 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)-27 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
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
------- ------------------------------------------------- ------ -----
<C> <S> <C> <C>
*(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 September 30, 1996,
among Commonwealth Edison Company and certain of
the Banks party to the Credit Agreement dated as
of October 1, 1991. x
(4)-31 Amended and Restated Credit Agreement dated as of
November 15, 1996, among Unicom Enterprises
Inc., the Banks Named Therein and Citibank, N.A. x
(4)-32 Amended and Restated Guaranty dated as of Novem-
ber 15, 1996, by Unicom Corporation in favor of
the Lenders and LC Banks parties to the afore-
mentioned Credit Agreement with Unicom Enter-
prises Inc. (included as Exhibit E in Exhibit
(4)-31). x
*(4)-33 Guaranty dated November 22, 1994, by Unicom Cor-
poration in favor of Citibank, N.A. (File No. 1-
11375, Form 10-K for the year ended December 31,
1994, Exhibit (4)-37). x
(4)-34 Indenture dated September 1, 1995 between ComEd
and Wilmington Trust Company. x
(4)-35 First Supplemental Indenture dated September 19,
1995 to Identure dated September 1, 1995. x
(4)-36 Second Supplemental Indenture dated January 24,
1997 to Indenture dated September 1, 1995. x
*(10)-1 Nuclear Fuel Lease Agreement dated as of November
23, 1993, between ComEd 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)- Unicom Corporation Long-Term Incentive Plan (File
2 No. 1-1839, ComEd Proxy Statement dated March
26, 1993, Exhibit A). x
+*(10)- Amendment to Unicom Corporation Long-Term Incen-
3 tive Plan, effective September 1, 1994 (File No.
33-56991, Form S-8, Exhibit (4)-4). x
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
------- ------------------------------------------------- ------ -----
<C> <S> <C> <C>
+*(10)- 1994 Long-Term Performance Unit Award for Execu-
4 tive and Group Level Employees 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)- 1995 Long-Term Performance Unit Award for Execu-
5 tive and Group Level Employees Payable in 1998
under the Unicom Corporation Long-Term Incentive
Plan, as amended (File No. 1-11375 and 1-1839,
Form 10-K for the year ended December 31, 1995,
Exhibit (10)-6). x x
+*(10)- 1996 Long-Term Performance Unit Award for Execu-
6 tive and Group Level Employees Payable in 1999
under the Unicom Corporation Long-Term Incentive
Plan (File Nos. 1-11375 and 1-1839, Form 10-K
for the year ended December 31, 1995, Exhibit
(10)-9). x x
+*(10)-7 1996 Variable Compensation Award for Management
Employees under the Unicom Corporation Long-Term
Incentive Plan (File Nos. 1-11375 and 1-1839,
Form 10-K for the year ended December 31, 1995,
Exhibit (10)-10). x x
+*(10)-8 1996 Award to Mr. O'Connor, Mr. Mullin and Mr.
Skinner under the Unicom Corporation Long-Term
Incentive Plan (File Nos. 1-11375 and 1-1839,
Form 10-K for the year ended December 31, 1995,
Exhibit (10)-11). x x
+ (10)-9 Unicom Corporation General Provisions Regarding
1996 Stock Option Awards Granted under the
Unicom Corporation Long-Term Incentive Plan. x x
+ (10)- Unicom Corporation General Provisions Regarding
10 1996B Stock Option Awards Granted under the
Unicom Corporation Long-Term Incentive Plan. x x
+ (10)- 1997 Long-Term Performance Unit Award for Execu-
11 tive and Group Level Employees Payable in 2000
under the Unicom Corporation Long-Term Incentive
Plan. x x
+ (10)- 1997 Annual Incentive Award for Managment Employ-
12 ees under the Unicom Corporation Long-Term In-
centive Plan. x x
+ (10)- 1997 Award to Mr. O'Connor, Mr. Mullin and Mr.
13 Skinner under the Unicom Corporation Long-Term
Incentive Plan. x x
+*(10)- Unicom Corporation Deferred Compensation Unit
14 Plan, as amended (File Nos. 1-11375 and 1-1839,
Form 10-K for the year ended December 31, 1995,
Exhibit (10)-12). x x
+*(10)- Deferred Compensation Plan (included in Article
15 Five of Exhibit (3)-2 above). x
+*(10)- Management Incentive Compensation Plan, effective
16 January 1, 1989 (File No. 1-1839, Form 10-K for
the year ended December 31, 1988, Exhibit (10)-
4). x
+*(10)- Amendments to Management Incentive Compensation
17 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
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
------- ------------------------------------------------- ------ -----
<C> <S> <C> <C>
+*(10)- Amendment to Management Incentive Compensation
18 Plan, dated March 21, 1991 (File No. 1-1839,
Form 10-K for the year ended December 31, 1991,
Exhibit (10)-6). x
+ (10)- Retirement Plan for Directors, effective Septem-
19 ber 1, 1994, as amended through March 12, 1997. x
+ (10)- Retirement Plan for Directors, effective January
20 1, 1987, as amended through March 12, 1997. x
+*(10)- Unicom Corporation 1996 Directors' Fee Plan (File
21 No. 1-11375, Unicom Proxy Statement dated April
8, 1996, Appendix A). x x
+*(10)- Executive Group Life Insurance Plan (File No. 1-
22 1839, Form 10-K for the year ended December 31,
1980, Exhibit (10)-3). x
+*(10)- Amendment to the Executive Group Life Insurance
23 Plan (File No. 1-1839, Form 10-K for the year
ended December 31, 1981, Exhibit (10)-4). x
+*(10)- Amendment to the Executive Group Life Insurance
24 Plan dated December 12, 1986 (File No. 1-1839,
Form 10-K for the year ended December 31, 1986,
Exhibit (10)-6). x
+*(10)- Amendment of Executive Group Life Insurance Plan
25 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)- Commonwealth Edison Company Supplemental Manage-
26 ment Retirement Plan (File No. 1-1839, Form 10-K
for the year ended December 31, 1985, Exhibit
(10)-6). x
+*(10)- Amendment of Executive Group Life Insurance Plan
27 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)- Letter Agreement dated December 16, 1992 between
28 Com-
monwealth 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)- Amendment dated May 31, 1995 to Letter Agreement
29 dated December 16, 1992 between Commonwealth Ed-
ison Company and Samuel K. Skinner (File No.
1-1839, Form 10-K for the year ended
December 31, 1995, Exhibit (10)-27). x
+ (10)- Amendments dated December 11, 1996 and March 24,
30 1997 to Letter Agreement dated December 16, 1992
between Commonwealth Edison Company and Samuel
K. Skinner. x
+*(10)- Letter Agreement dated November 14, 1995 between
31 Commonwealth Edison Company and Leo F. Mullin
(File No. 1-1839, Form 10-K for the year ended
December 31, 1995, Exhibit (10)-28). x
+ (10)- Amendment dated March 24, 1997 to Letter Agree-
32 ment dated November 14, 1995 between Common-
wealth Edison Company and Leo F. Mullin. x
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED
------- ------------------------------------------------- ------ -----
<C> <S> <C> <C>
+*(10)- Commonwealth Edison Company Excess Benefit Sav-
33 ings Plan (File No. 1-1839, Form 10-Q for the
quarter ended June 30, 1994, Exhibit (10)-2). x
+*(10)- Amendment No. 1 to Commonwealth Edison Company
34 Excess Benefit Savings Plan dated May 24, 1995
(File No. 1-1839, Form 10-K for the year ended
December 31, 1995, Exhibit (10)-30). x
+*(10)- Unicom Corporation Stock Bonus Deferral Plan
35 (File Nos. 1-11375 and 1-1839, Form 10-K for the
year ended December 31, 1995, Exhibit (10)-31). x 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 Compa-
ny. 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 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 31, 1997. x
(99)-2 Commonwealth Edison Company's Current Report on
Form 8-K dated January 31, 1997. 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.
7
<PAGE>
Exhibit (3)-3
Unicom Corporation
Form 10-K File No. 1-11375
Unicom Corporation
By-Laws
Effective January 28, 1994
As Amended Through
January 29, 1997
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
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............................................... 11
ARTICLE VI. Indemnification........................................ 15
ARTICLE VII. Miscellaneous.......................................... 17
ARTICLE VIII. Alteration, Amendment or Repeal of By-Laws............. 17
</TABLE>
<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.
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<PAGE>
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.
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
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<PAGE>
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 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.
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<PAGE>
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
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.
-4-
<PAGE>
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
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.
-5-
<PAGE>
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
-6-
<PAGE>
a quorum. Any directors so elected shall serve until the next annual meeting of
shareholders.
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 Secre-
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<PAGE>
tary 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.
SECTION 7. At the first meeting of the Board of Directors following
the annual meeting of shareholders each year, the Board shall elect a Lead
Director. The Lead Director shall be elected from among the Outside Directors of
the Company. For purposes hereof, "Outside Directors" shall be those who are not
and never have been employees of the Company or any of its direct or indirect
subsidiaries. The duties of the Lead Director shall be to convene and chair
meetings of the Outside Directors and to assume other responsibilities which the
Outside Directors might designate from time to time. The Lead Director will
consult with other Outside Directors as to appropriate items for discussion at
each such meeting.
ARTICLE IV.
COMMITTEES OF THE BOARD OF DIRECTORS
SECTION 1. There shall be an Executive Committee of the Board
consisting of six 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 Execu-
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<PAGE>
tive 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 keep minutes of the proceedings at its meetings.
SECTION 3. There shall be a Corporate Governance and Compensation
Committee of the Board consisting of those Directors who are not employees
or former employees 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 Corporate Governance and Compensation Committee. The
Directors serving as members of the Committee shall serve for one year and
until their respective successors, willing to serve, shall have been
elected. The Corporate Governance and Compensation Committee shall (i)
oversee corporate governance policies, practices and procedures of the
Company and make such recommendations as it may deem appropriate to the
Board; and (ii) oversee general compensation policy of the Company, and
establish and administer compensation programs applicable to the principal
-9-
<PAGE>
officers of the Company, including but not necessarily limited to the
establishment of base salaries and the administration of awards under the
Unicom Corporation Deferred Compensation Unit Plan and the Unicom
Corporation Long-Term Incentive Plan. The Committee shall have such power
as it deems necessary for the performance of its duties. Vacancies in the
membership of the Committee shall be filled by the Board of Directors. The
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
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<PAGE>
Nominating Committee shall keep minutes of the proceedings at its 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
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<PAGE>
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. Unless otherwise limited by the Board of Directors and
subject to the limitations set forth in the next sentence, each committee
of the Board of Directors consisting of two or more Directors may exercise
the authority of the Board. Notwithstanding any other provision of the By-
Laws, no committee of the Board of Directors shall: (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
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<PAGE>
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.
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.
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<PAGE>
SECTION 3. If, at any time, it is brought to the attention of any
Director that the Chairman has or may become absent or disabled and may
thereby be unable to perform the duties of Chairman for some period of
time, the Lead Director shall, as promptly as practicable upon his own
initiative, or after notice from another Director, convene a meeting (in
person or by telephone conference call) of the Outside Directors (who for
purposes hereof shall consist of all Directors who are not and have never
been employees of the Company or any of its direct or indirect
subsidiaries) who shall decide whether the Chairman has become absent or
disabled. Upon such determination, the Outside Directors shall designate an
Acting Chairman, who may be the Lead Director or any other Director of the
Company, and who shall exercise the power and duties of the Chairman until
the Outside Directors shall have determined that the Chairman can resume
his duties as Chairman or until a new Chairman has been elected by the
Board of Directors. The Acting Chairman, however, shall have no authority
to make changes in the persons holding any office at the executive payroll
level of the Company or to make changes in any such person's duties or
responsibilities, or compensation or benefits, without prior approval of
the Board of Directors. For purposes of this Section, any action of the
Outside Directors shall be by majority vote of those present at a meeting
of such Directors, provided that a majority of such Directors shall
constitute a quorum for such a meeting.
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
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<PAGE>
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
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
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<PAGE>
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 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.
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<PAGE>
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.
SECTION 10. At least once each year, the Chairman shall report (which
may be oral) to the Outside Directors (who for purposes hereof shall
consist of all Directors who are not and never have been employees of the
Company or any of its direct or indirect subsidiaries) on the status of a
plan for succession to the office of 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 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.
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<PAGE>
(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
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Company would have the power to indemnify such person against such
liability under the laws of the State of Illinois.
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.
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<PAGE>
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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<PAGE>
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
January 29, 1997
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
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.................................... 9
ARTICLE VI. Miscellaneous............................... 12
ARTICLE VII. Alteration, Amendment or Repeal of By-Laws.. 13
</TABLE>
<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
<PAGE>
2
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 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.
<PAGE>
3
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.
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
<PAGE>
4
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.
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
<PAGE>
5
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 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.
SECTION 5. At the first meeting of the Board of Directors following
the annual meeting of shareholders each year, the Board shall elect a Lead
Director. The Lead Director shall be elected from among the Outside Directors
of the Company. For purposes hereof, "Outside Directors" shall be those who are
not and never have been employees of the Company or any of its direct or
indirect
<PAGE>
6
subsidiaries. The duties of the Lead Director shall be to convene and chair
meetings of the Outside Directors and to assume other responsibilities which the
Outside Directors might designate from time to time. The Lead Director will
consult with other Outside Directors as to appropriate items for discussion at
each such meeting.
ARTICLE IV.
COMMITTEES OF THE BOARD OF DIRECTORS.
SECTION 1. There shall be an Executive Committee of the Board
consisting of six 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
<PAGE>
7
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 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 Corporate Governance and Compensation
Committee of the Board consisting of those Directors who are not employees or
former employees 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 Corporate Governance and Compensation Committee. The Directors serving
as members of the Committee shall serve for one year and until their respective
successors, willing to serve, shall have been elected. The Corporate Governance
and Compensation Committee shall (i) oversee corporate governance policies,
practices and procedures of the Company and make such recommendations as it may
deem appropriate to the Board; and (ii) oversee general compensation policy of
the Company, and establish and administer compensation programs applicable to
the principal officers of the Company, including but not necessarily limited to
the establishment of base salaries and the administration of awards under the
Commonwealth Edison Company Deferred Compensation Plan and any other
Commonwealth Edison Company compensation plan. The Committee shall have such
power as it deems necessary for the performance of its duties. Vacancies in the
membership of the Committee shall be filled by the Board of Directors. The
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.
<PAGE>
8
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.
SECTION 6. There shall be a Nuclear Operations Committee of the Board
consisting of at least one but not 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
<PAGE>
9
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 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. Unless otherwise limited by the Board of Directors and
subject to the limitations set forth in the next sentence, each committee of the
Board of Directors consisting of two or more Directors may exercise the
authority of the Board. 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
<PAGE>
10
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. 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,
<PAGE>
11
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. If, at any time, it is brought to the attention of any
Director that the Chairman has or may become absent or disabled and may thereby
be unable to perform the duties of Chairman for some period of time, the Lead
Director shall, as promptly as practicable upon his own initiative, or after
notice from another Director, convene a meeting (in person or by telephone
conference call) of the Outside Directors (who for purposes hereof shall consist
of all Directors who are not and have never been employees of the Company or any
of its direct or indirect subsidiaries) who shall decide whether the Chairman
has become absent or disabled. Upon such determination the Outside Directors
shall designate an Acting Chairman, who may be the Lead Director or any other
Director of the Company, and who shall exercise the power and duties of the
Chairman until the Outside Directors shall have determined that the Chairman can
resume his duties as Chairman or until a new Chairman has been elected by the
Board of Directors. The Acting Chairman, however, shall have no authority to
make changes in the persons holding any office at the executive payroll level of
the Company or to make changes in any such person's duties or responsibilities,
or compensation or benefits, without prior approval of the Board of Directors.
For purposes of this Section, any action of the Outside Directors shall be by
majority vote of those present at a meeting of such Directors, provided that a
majority of such Directors shall constitute a quorum for such a meeting.
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.
<PAGE>
12
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 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,
<PAGE>
13
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 approvalof 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.
Section 10. At least once each year, the Chairman shall report (which
may be oral) to the Outside Directors (who for purposes hereof shall consist of
all Directors who are not and never have been
<PAGE>
14
employees of the Company or any of its direct subsidiaries) on the status of a
plan for succession to the office of 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.
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,
<PAGE>
15
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
________________________________________________________________________________
SUPPLEMENTAL INDENTURE
Dated June 1, 1996
COMMONWEALTH EDISON COMPANY
to
HARRIS TRUST AND SAVINGS BANK
and
D.G. DONOVAN
Trustees Under Mortgage Dated July 1, 1923,
and Certain
Indentures Supplemental Thereto
Providing for Issuance of
FIRST MORTGAGE BONDS, POLLUTION CONTROL SERIES 1996A AND 1996B
Due December 1, 2006
________________________________________________________________________________
<PAGE>
THIS SUPPLEMENTAL INDENTURE, dated June 1, 1996, 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, HARRIS TRUST AND SAVINGS BANK, a state bank organized and existing under
the laws of the State of Illinois, and D.G. DONOVAN, of Chicago, 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
3, 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, April 15, 1985, April 15,
1986, May 1, 1986, January 12, 1987, 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,
January 15, 1994 and December 1, 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, as it may be amended, supplemented or otherwise modified in accordance
with its terms from time to time, being hereinafter called the "Mortgage"),
W I T N E S S E T H:
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 Bonds, Pollution Control Series 1996A"
(hereinafter called the "bonds of Series 1996A") and "First Mortgage Bonds,
Pollution Control Series 1996B" (hereinafter called the "bonds of Series 1996B")
and the terms and provisions to be contained in the bonds of Series 1996A and
Series 1996B or to be otherwise applicable thereto to be as set forth in this
Supplemental Indenture; and
WHEREAS, the bonds of Series 1996A and the Trustee's
certificate to be endorsed thereon shall be substantially in the form of Exhibit
A hereto, and the bonds of Series 1996B and the Trustee's certificate to be
endorsed thereon shall be substantially in the form of Exhibit B hereto; and
WHEREAS, the Company is legally empowered and has been duly
authorized by the necessary corporate action and by order of the Illinois
Commerce Commission to make, execute and deliver this Supplemental Indenture,
and to create, as additional series of bonds of
<PAGE>
the Company, the bonds of Series 1996A and the bonds of Series 1996B, 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 1996A and the bonds of Series
1996B, 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 consideration, the receipt of which is hereby acknowledged, the parties
hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.01. Terms of the Mortgage. The terms used in this
Supplemental Indenture which are defined in the Mortgage, unless otherwise
specified herein, are used herein with the same meanings as in the Mortgage.
SECTION 1.02. Definitions of New Terms. The following terms
shall have the following meanings in this Supplemental Indenture:
"IDFA" shall mean the Illinois Development Finance Authority, a
political subdivision and body politic and corporate duly organized and
validly existing under and by virtue of the laws of the state of
Illinois.
"IDFA Bonds" shall mean the Series 1996A IDFA Bonds and the
Series 1996B IDFA Bonds.
"IDFA Indenture" mean the Series 1996A IDFA Indenture or the
Series 1996B IDFA Indenture.
"Series 1996A IDFA Bonds" shall mean those certain Pollution
Control Revenue Refunding Bonds (Commonwealth Edison Company Project)
Series 1996A issued in the original aggregate principal amount of
$110,000,000 under and pursuant to the terms of the Series 1996A IDFA
Indenture.
"Series 1996B IDFA Bonds" shall mean those certain Pollution
Control Revenue Refunding Bonds (Commonwealth Edison Company Project)
Series 1996B issued in the original aggregate principal amount of
$89,400,000 under and pursuant to the terms of the Series 1996B IDFA
Indenture.
- 2 -
<PAGE>
"Series 1996A IDFA Indenture" shall mean that certain Indenture
of Trust dated as of June 1, 1996, between IDFA, as issuer, and The
First National Bank of Chicago, as trustee.
"Series 1996B IDFA Indenture" shall mean that certain Indenture
of Trust dated as of June 1, 1996, between IDFA, as issuer, and The
First National Bank of Chicago, as trustee.
SECTION 1.03. Rules of Construction. All references to any
agreement refer to such agreement as modified, varied, or amended from time to
time by the parties thereto (including any permitted successors or assigns) in
accordance with its terms.
ARTICLE II
SECTION 2.01. Designation and Issuance of Bonds. (a) The
bonds of Series 1996A shall, as hereinbefore recited, be designated as the
Company's "First Mortgage Bonds, Pollution Control Series 1996A."
(b) The bonds of Series 1996B shall, as hereinbefore recited,
be designated as the Company's "First Mortgage Bonds, Pollution Control Series
1996B."
(c) Subject to the provisions of the Mortgage, the bonds of
Series 1996A and the bonds of Series 1996B shall be issuable without limitation
as to the aggregate principal amount thereof.
SECTION 2.02. Form, Date, Maturity Date, Interest Rate and
Interest Payment Dates of Bonds. (a) The definitive bonds of Series 1996A and
bonds of Series 1996B shall be in engraved, lithographed, printed or
type-written 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 respective forms included in Exhibit A and Exhibit B hereto. The bonds of
Series 1996A and bonds of Series 1996B shall be dated as provided in Section
3.01 of the Mortgage, as amended by Supplemental Indenture dated April 1, 1967.
All bonds of Series 1996A and bonds of Series 1996B shall mature on December 1,
2006.
(b) The bonds of Series 1996A shall bear interest on each day
that they are outstanding at a rate per annum which is equal to the
weighted-average interest rate borne on the Series 1996A IDFA Bonds outstanding
on such date, provided, however, such interest rate on the bonds of Series 1996A
shall not exceed 18% per annum. The bonds of Series 1996A shall bear interest
until the principal thereof shall be paid in full. Interest on the bonds of
Series 1996A shall be payable to the record holder thereof on the dates that
interest is payable on the Series 1996A IDFA Bonds.
- 3 -
<PAGE>
(c) The bonds of Series 1996B shall bear interest on each day
that they are outstanding at a rate per annum which is equal to the
weighted-average interest rate borne on the Series 1996B IDFA Bonds outstanding
on such date, provided, however, such interest rate on the bonds of Series 1996B
shall not exceed 18% per annum. The bonds of Series 1996B shall bear interest
until the principal thereof shall be paid in full. Interest on the bonds of
Series 1996B shall be payable to the record holder thereof on the dates that
interest is payable on the Series 1996B IDFA Bonds.
(d) The interest on the bonds of Series 1996A and the bonds of
Series 1996B 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 person in whose name
such bond is registered on such interest payment date.
SECTION 2.03. Bonds Issued as Collateral Security. (a) The
bonds of Series 1996A shall be issued, delivered, and pledged to, and registered
in the name of, the trustee under the Series 1996A IDFA Indenture in order to
secure and provide for, and as collateral security for, the due and punctual
payment of the principal, premium, if any, and interest due from time to time on
the Series 1996A IDFA Bonds.
(b) The bonds of Series 1996B shall be issued, delivered, and
pledged to, and registered in the name of, the trustee under the Series 1996B
IDFA Indenture in order to secure and provide for, and as collateral security
for, the due and punctual payment of the principal, premium, if any, and
interest due from time to time on the Series 1996B IDFA Bonds.
SECTION 2.04. Credit for Payments on IDFA Bonds. (a) The
Company shall receive a credit against its obligation to make any payment of
interest on the bonds of Series 1996A, whether on an interest payment date, at
maturity, upon redemption, upon acceleration or otherwise, in an amount equal to
the amount, if any, paid by or for the account of the Company in respect of any
corresponding payment of interest on the Series 1996A IDFA Bonds. So long as
all the bonds of Series 1996A are pledged as described in Section 2.03, the
obligation of the Company to make any payment with respect to the principal of
the bonds of Series 1996A shall be credited in full if, at the time that any
such payment of principal shall be due, there shall have been paid by or for the
account of the Company the then due principal of all Series 1996A IDFA Bonds
which are outstanding.
(b) The Company shall receive a credit against its obligation
to make any payment of interest on the bonds of Series 1996B, whether on an
interest payment date, at maturity, upon redemption, upon acceleration or
otherwise, in an amount equal to the amount, if any, paid by or for the account
of the Company in respect of any corresponding payment of interest on the Series
1996B IDFA Bonds. So long as all the bonds of Series 1996B are pledged as
described in Section 2.03, the obligation of the Company to make any payment
with respect to the principal of the bonds of Series 1996B shall be credited in
full if, at the time that any such payment of principal shall be due, there
shall have been paid by or for the account of the Company the then due principal
of all Series 1996B IDFA Bonds which are outstanding.
- 4 -
<PAGE>
(c) The Trustee may conclusively presume that the obligation
of the Company to pay the principal of, premium, if any, and interest on the
bonds of Series 1996A and the bonds of Series 1996B as the same shall become due
and payable has been credited in accordance with this Section 2.04 unless and
until it shall have received a written notice (including a telex, telegram,
telecopy or other form of written telecommunication) from the trustee under the
Series 1996A IDFA Indenture or the Series 1996B IDFA Indenture, as applicable,
stating that payment of the principal of, premium, if any, or interest on the
Series 1996A IDFA Bonds or the Series 1996B IDFA Bonds, as applicable, has
become due and payable and has not been fully paid and specifying the amount of
funds required to make such payment.
SECTION 2.05. Execution of Bonds. The bonds of Series 1996A
and the bonds of Series 1996B 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 1996A or bond of Series 1996B 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 2.06. Medium and Places of Payment of Principal of,
Premium, If Any, and Interest on Bonds; Transferability and Exchangeability. The
principal of, premium, if any, and the interest on the bonds of Series 1996A and
bonds of Series 1996B 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 such principal, premium, if any, and interest
shall be payable at the office or agency of the Company in the City of Chicago,
State of Illinois, and such bonds shall be transferable and exchangeable, 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 1996A or bond of Series 1996B for the transfer of such bond or
for the exchange thereof for bonds of the same series 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 2.07. Denominations and Numbering of Bonds. The bonds
of Series 1996A and bonds of Series 1996B shall be issued in the denomination of
$1,000 and in such multiples of $1,000 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 1996A or bond of Series
1996B to be conclusively evidenced by the execution thereof on behalf of the
Company. Bonds of Series 1996A and bonds of Series 1996B shall each be numbered
R-1 and consecutively upwards.
- 5 -
<PAGE>
SECTION 2.08. Temporary Bonds. Until definitive bonds of
Series 1996A or definitive bonds of Series 1996B 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 Series 1996A or of
Series 1996B, as the case may be.
SECTION 2.09. Optional Redemption of Bonds. Upon the notice
and in the manner provided in Section 8 of the Series 1996A IDFA Bonds and the
Series 1996B IDFA Bonds, the bonds of Series 1996A (with respect to the Series
1996A IDFA Bonds) and the bonds of Series 1996B (with respect to the 1996B IDFA
Bonds) may be redeemed, at the option of the Company, on and after the date
determined thereunder, in whole at any time or in part from time to time, at the
redemption prices (expressed as percentages of the principal amount of each bond
of Series 1996A and each bond of Series 1996B, as the case may be, or portion
thereof to be redeemed) set forth therein, plus accrued interest to the
redemption date.
SECTION 2.10. Extraordinary Optional Redemption of Bonds.
Upon the notice and in the manner provided in Section 8 of the Series 1996A IDFA
Bonds and the Series 1996B IDFA Bonds, the bonds of Series 1996A (with respect
to the Series 1996A IDFA Bonds) and the bonds of Series 1996B (with respect to
the Series 1996B IDFA Bonds) may be redeemed prior to maturity at the option of
the Company, in whole but not in part, at 100% of the principal amount thereof
plus accrued interest to the redemption date, at any time within 180 days after
the occurrence of any of the following:
(a) all or substantially all of the Project (as defined in the
related IDFA 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 IDFA 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 related to such IDFA Bonds or the bonds of Series 1996A or
the bonds of Series 1996B, as the case may be, becoming void or
unenforceable or impossible of performance in accordance with the
intent and purpose of the parties as expressed in such Loan Agreement
or the bonds of Series 1996A or the bonds of Series 1996B, as the case
may be.
- 6 -
<PAGE>
SECTION 2.11. Mandatory Redemption. Upon the notice and in
the manner provided in Section 8 of the Series 1996A IDFA Bonds and the Series
1996B IDFA Bonds, the bonds of Series 1996A (with respect to the Series 1996A
IDFA Bonds) and the bonds of Series 1996B (with respect to the Series 1996B IDFA
Bonds) shall be subject to mandatory redemption to the extent that the related
IDFA Bonds are so subject and such related IDFA Bonds have not been purchased by
the Company in lieu of redemption.
SECTION 2.12. Extraordinary Mandatory Redemption of Bonds.
Upon the notice and in the manner provided in Section 8 of the Series 1996A IDFA
Bonds and the Series 1996B IDFA Bonds, the bonds of Series 1996A or the bonds of
Series 1996B, as the case may be, 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 related to such IDFA Bonds or
the Tax Exemption Certificate and Agreement dated June 27, 1996, among the
Company, IDFA and The First National Bank of Chicago, the interest paid or to be
paid on the Series 1996A IDFA Bonds and/or the Series 1996B IDFA Bonds is or
will be 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 applicable IDFA Indenture) or a "related person" within the
meaning of Section 103(b)(13) of the Internal Revenue Code of 1954, as amended
(the "Code")). Any such determination shall not be considered final for this
purpose unless the Company has been given written notice of the commencement of
the proceedings resulting in such determination and has been afforded, subject
to the Company's agreement to pay all reasonable expenses of the proceedings and
to indemnify such IDFA Bond owners or former owners against all liabilities that
might result from it, the opportunity to control the defense of such proceedings
and either the Company does not agree within 30 days to pay such reasonable
expenses, to so indemnify and control the defense or the Company exhausts or
chooses not to exhaust available procedures to contest or obtain review of the
result of the proceedings. Any such redemption shall occur within 120 days from
the date that the Company receives written notice from an IDFA Bond owner or
former owner of such final determination. The bonds of Series 1996A and/or
Series 1996B shall be redeemed in whole upon any such final determination unless
the redemption of a portion of the outstanding Series 1996A IDFA Bonds and/or
the Series 1996B IDFA Bonds would have the result that interest payable on the
Series 1996A IDFA Bonds and/or Series 1996B IDFA Bonds remaining outstanding
after such redemption would not be includible in the gross income for federal
income tax purposes of any owner of such Series 1996A IDFA Bonds and/or Series
1996B IDFA 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 1996A and/or Series 1996B shall be redeemed in an
amount equal to the amount of Series 1996A IDFA Bonds and/or Series 1996B IDFA
Bonds required to be so redeemed. If any holder of Series 1996A IDFA Bonds
and/or the Series 1996B IDFA 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 Series 1996A IDFA Bonds and/or Series 1996B
IDFA Bonds fails to notify the Company of pendency of any such proceedings, the
bonds of Series 1996A and/or Series 1996B
- 7 -
<PAGE>
shall not, in the event of an adverse final determination, be subject to the
mandatory redemption provisions of this Section.
SECTION 2.13. Default Mandatory Redemption. (a) The bonds of
Series 1996A 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 trustee
under the Series 1996A IDFA Indenture stating that the principal of the Series
1996A IDFA Bonds has been declared to be immediately due and payable as a result
of an event of default under the Series 1996A IDFA Indenture.
(b) The bonds of Series 1996B 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 trustee under the Series 1996B IDFA Indenture stating
that the principal of the Series 1996B IDFA Bonds has been declared to be
immediately due and payable as a result of an event of default under the Series
1996B IDFA Indenture.
ARTICLE III
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 June 1, 1996, it
shall be effective only from and after the actual time of its execution and
delivery by the Company and the Trustee on the date indicated by their
respective acknowledgments hereto annexed.
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.
- 8 -
<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 Harris
Trust and Savings Bank, as Trustee under the Mortgage, has caused this
Supplemental Indenture to be executed in its name by one of its Assistant Vice
Presidents, and its seal to be hereunto affixed and attested by one of its
Assistant Secretaries, and D.G. Donovan, 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: John C. Bukovski
------------------------------------
John C. Bukovski
Vice President
[SEAL]
ATTEST:
David A. Scholz
- ----------------------------------
David A. Scholz
Secretary
HARRIS TRUST AND SAVINGS BANK
By: C.Potter
------------------------------------
C. Potter
Assistant Vice President
[SEAL]
ATTEST:
J. Bartolini
- ----------------------------------
J. Bartolini
Assistant Secretary
D. G. Donovan
----------------------------------------
D.G. Donovan (Seal)
<PAGE>
STATE OF ILLINOIS )
)
COUNTY OF COOK )
I, Mary L. Kwilos, a Notary Public in and for said County, in
the State aforesaid, DO HEREBY CERTIFY that John C. Bukovski, 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,
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 Vice President and 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 20th day of June,
A.D. 1996.
Mary L. Kwilos
----------------------------------------
Notary Public
{SEAL}
My Commission expires October 26, 1997 .
------------------------------
<PAGE>
STATE OF ILLINOIS )
)
COUNTY OF COOK )
I, Marianne Cody, a Notary Public in and for said County, in
the State aforesaid, DO HEREBY CERTIFY that C. Potter, Assistant Vice President
of Harris Trust and Savings Bank, an Illinois state bank, one of the parties
described in and which executed the foregoing instrument, and J. Bartolini ,
Assistant Secretary 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
Assistant Vice President and Assistant Secretary, respectively, and who are both
personally known to me to be an Assistant Vice President and an Assistant
Secretary, respectively, 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 Assistant Vice President and
Assistant Secretary, respectively, of said bank, and as the free and voluntary
act of said bank, for the uses and purposes therein set forth.
GIVEN under my hand and notarial seal this 20th day of June,
A.D. 1996.
Marianne Cody
----------------------------------------
Notary Public
{SEAL}
My Commission expires May 29, 1997.
<PAGE>
STATE OF ILLINOIS )
)
COUNTY OF COOK )
I, Marianne Cody, a Notary Public in and for said County, in
the State aforesaid, DO HEREBY CERTIFY that D.G. Donovan, 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 20th day of June,
A.D. 1996.
Marianne Cody
----------------------------------------
Notary Public
{SEAL}
My Commission expires May 29, 1997.
<PAGE>
EXHIBIT A
to
Supplemental Indenture
COMMONWEALTH EDISON COMPANY
First Mortgage Bond, Pollution Control Series 1996A
Due December 1, 2006
COMMONWEALTH EDISON COMPANY, an Illinois corporation
(hereinafter called the "Company"), for value received, hereby promises to pay
to __________________________, as trustee under that certain Indenture of Trust
dated as of June 1, 1996, between Illinois Development Finance Authority
("IDFA") and said trustee, or registered assigns, on the first day of December,
2006, the sum of __________ Dollars, and to pay interest on said sum from the
date hereof until said sum shall be paid, at a rate per annum on each day which
is equal to the weighted-average interest rate borne on the Series 1996A IDFA
Bonds outstanding on such date, until the principal thereof shall be paid in
full, subject to Section 2.04 of the Supplemental Indenture dated June 1, 1996
(the "Supplemental Indenture"), executed and delivered by the Company to the
Trustees (as hereinafter defined), which provides for certain credits towards
payment of principal of and interest on the bonds of this Series. Interest
shall accrue on the bonds of this Series from the date of issuance hereof, but
interest shall not become payable on the bonds of this Series unless and until
the Trustee receives the notice contemplated by Section 2.04(c) of the
Supplemental Indenture, whereupon the interest on the bonds of this Series shall
remain due and payable until such time as the Trustee receives a further written
notice (including a telex, telegram, telecopy or other form of written
telecommunication) from the trustee under the Series 1996A IDFA Indenture
stating that such payments need not continue. When interest is due and payable
as described above, interest on the bonds of this Series shall be payable at the
same time as interest on the Series 1996A IDFA Bonds and upon maturity,
redemption, or acceleration of the bonds of this Series, subject to Section 2.04
of the Supplemental Indenture. The interest on each bond of this Series so
payable on any interest payment date shall, subject to the exceptions provided
in Section 3.01 of the Mortgage (as hereinafter defined), as amended by a
supplemental indenture dated April 1, 1967, be paid to the person in whose name
such bond is registered on the date of such payment. The principal of, premium,
if any, and the interest on this bond shall be payable at the office or agency
of the Company in the City of Chicago, State of Illinois 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.
This bond is one of the bonds of the Company, issued and to be
issued in series from time to time under and in accordance with and,
irrespective of the time of issue, equally and ratably secured by the Mortgage
dated July 1, 1923, and indentures supplemental thereto, under which Harris
Trust and Savings Bank and D.G. Donovan (collectively, the "Trustees") are
<PAGE>
now the Trustees, and is one of the First Mortgage Bonds, Pollution Control
Series 1996A of the Company, the issuance of which is provided for by the
Supplemental Indenture, executed and delivered by the Company to such Trustees,
to which Mortgage and all indentures supplemental thereto reference is hereby
made for a description of the property mortgaged and pledged, the nature and
extent of the security, the rights of the holders and registered owners of said
bonds, of the Company and of the Trustees in respect of the security, and the
terms and conditions governing the issuance and security of said bonds. The
term "Mortgage", as hereinafter used, shall mean said Mortgage dated July 1,
1923, and all indentures supplemental thereto.
With the consent of the Company and to the extent permitted by
and as provided in the Mortgage, modifications or alterations of the Mortgage or
of any indenture supplemental thereto and of the rights and obligations of the
Company and of the holders and registered owners of the bonds may be made, and
compliance with any provision of the Mortgage or any such supplemental indenture
may be waived, by the affirmative vote of the holders and registered owners of
not less than eighty per centum (80%) in principal amount of the bonds then
outstanding under the Mortgage, and by the affirmative vote of the holders and
registered owners of not less than eighty per centum (80%) in principal amount
of the bonds of any series then outstanding under the Mortgage and affected by
such modification or alteration, in case one or more but less than all of the
series of bonds then outstanding under the Mortgage are so affected, but in any
case excluding bonds disqualified from voting by reason of the Company's
interest therein as provided in the Mortgage; subject, however, to the
condition, among other conditions stated in the Mortgage, that no such
modification or alteration shall be made which will permit the extension of the
time or times of payment of the principal of or the interest or the premium, if
any, on this bond, or the reduction in the principal amount hereof or in the
rate of interest or the amount of any premium hereon, or any other modification
in the terms of payment of such principal, interest or premium, which terms of
payment are unconditional, or, otherwise than as permitted by the Mortgage, the
creation of any lien ranking prior to or on a parity with the lien of the
Mortgage with respect to any of the mortgaged property, all as more fully
provided in the Mortgage.
The bonds of this Series are subject to redemption, as provided
in the Supplemental Indenture.
In case of certain completed defaults specified in the
Mortgage, the principal of this bond may be declared or may become due and
payable in the manner and with the effect provided in the Mortgage.
No recourse shall be had for the payment of the principal of or
the interest on this bond, or for any claim based hereon, or otherwise in
respect hereof or of the Mortgage, to or against any incorporator, stockholder,
officer or director, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or such successor
corporation, under any constitution or statute or rule of law, or by the
enforcement of any assessment or penalty, or otherwise, all such liability of
incorporators, stockholders, directors and officers being waived and released by
the registered owner hereof by the acceptance of this bond
- 2 -
<PAGE>
and being likewise waived and released by the terms of the Mortgage, all as more
fully provided therein.
This bond is transferable by the registered owner hereof, in
person or by duly authorized attorney, at the office or agency of the Company in
the City of Chicago, State of Illinois, upon surrender and cancellation of this
bond; and thereupon a new registered bond or bonds without coupons of the same
aggregate principal amount and series will, upon the payment of charges as
provided in the Mortgage, be issued to the transferee in exchange herefor.
Bonds of this Series are issuable only in registered form
without coupons and in the denominations of $1,000 each and any authorized
multiple thereof. As provided in the Mortgage, such bonds are exchangeable for
registered bonds of the same series as between authorized denominations. Any
such exchange may be made by the registered owner of any such bond or bonds upon
presentation thereof for that purpose at the office or agency of the Company in
the City of Chicago, State of Illinois.
This bond shall not be entitled to any security or benefit
under the Mortgage or be valid or become obligatory for any purpose unless and
until it shall have been authenticated by the execution by the corporate
Trustee, or its successor in trust under the Mortgage, of the certificate
endorsed hereon.
- 3 -
<PAGE>
IN WITNESS WHEREOF, Commonwealth Edison Company has caused this
bond to be executed in its name by its President or one of its Vice-Presidents,
and has caused its corporate seal to be hereto affixed, attested by its
Secretary or one of its Assistant Secretaries, as of the _____ day of
____________, 19___.
COMMONWEALTH EDISON COMPANY
[SEAL]
By: ______________________________
President
ATTEST:
__________________________
Secretary
(General Form of Trustee's Certificate)
This bond is one of the bonds of the series designated herein,
referred to and described in the within mentioned Supplemental Indenture dated
June 1, 1996.
HARRIS TRUST AND SAVINGS BANK
By: ______________________________
Authorized Officer
Illinois Commerce Commission Identification No. __________
- 4 -
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT - ......... Custodian .................
(Cust) (Minors)
under Uniform Gifts to Minors
Act .................................
(State)
Additional abbreviations may also be used though not in
the above list.
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s),
and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE [________________________]
_______________________________________________________________________________
(Please print or typewrite name and address including postal zip code of
assignee)
the within Bond and all rights thereunder, hereby irrevocably constituting and
appointing ____________________ attorney to transfer said Bond on the books of
the Company, with full power of substitution in the premises.
Dated: ____________
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within instrument in every particular, without
alteration or enlargement or any change whatever.
- 5 -
<PAGE>
EXHIBIT B
to
Supplemental Indenture
COMMONWEALTH EDISON COMPANY
First Mortgage Bond, Pollution Control Series 1996B
Due December 1, 2006
COMMONWEALTH EDISON COMPANY, an Illinois corporation
(hereinafter called the "Company"), for value received, hereby promises to pay
to __________________________, as trustee under that certain Indenture of Trust
dated as of June 1, 1996, between Illinois Development Finance Authority
("IDFA") and said trustee, or registered assigns, on the first day of December,
2006, the sum of __________ Dollars, and to pay interest on said sum from the
date hereof until said sum shall be paid, at a rate per annum on each day which
is equal to the weighted-average interest rate borne on the Series 1996B IDFA
Bonds outstanding on such date, until the principal thereof shall be paid in
full, subject to Section 2.04 of the Supplemental Indenture dated June 1, 1996
(the "Supplemental Indenture"), executed and delivered by the Company to the
Trustees (as hereinafter defined), which provides for certain credits towards
payment of principal of and interest on the bonds of this Series. Interest
shall accrue on the bonds of this Series from the date of issuance hereof, but
interest shall not become payable on the bonds of this Series unless and until
the Trustee receives the notice contemplated by Section 2.04(c) of the
Supplemental Indenture, whereupon the interest on the bonds of this Series shall
remain due and payable until such time as the Trustee receives a further written
notice (including a telex, telegram, telecopy or other form of written
telecommunication) from the trustee under the Series 1996B IDFA Indenture
stating that such payments need not continue. When interest is due and payable
as described above, interest on the bonds of this Series shall be payable at the
same time as interest on the Series 1996B IDFA Bonds and upon maturity,
redemption, or acceleration of the bonds of this Series, subject to Section 2.04
of the Supplemental Indenture. The interest on each bond of this Series so
payable on any interest payment date shall, subject to the exceptions provided
in Section 3.01 of the Mortgage (as hereinafter defined), as amended by a
supplemental indenture dated April 1, 1967, be paid to the person in whose name
such bond is registered on the date of such payment. The principal of, premium,
if any, and the interest on this bond shall be payable at the office or agency
of the Company in the City of Chicago, State of Illinois 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.
This bond is one of the bonds of the Company, issued and to be
issued in series from time to time under and in accordance with and,
irrespective of the time of issue, equally and ratably secured by the Mortgage
dated July 1, 1923, and indentures supplemental thereto, under which Harris
Trust and Savings Bank and D.G. Donovan (collectively, the "Trustees") are
<PAGE>
now the Trustees, and is one of the First Mortgage Bonds, Pollution Control
Series 1996B of the Company, the issuance of which is provided for by the
Supplemental Indenture, executed and delivered by the Company to such Trustees,
to which Mortgage and all indentures supplemental thereto reference is hereby
made for a description of the property mortgaged and pledged, the nature and
extent of the security, the rights of the holders and registered owners of said
bonds, of the Company and of the Trustees in respect of the security, and the
terms and conditions governing the issuance and security of said bonds. The
term "Mortgage", as hereinafter used, shall mean said Mortgage dated July 1,
1923, and all indentures supplemental thereto.
With the consent of the Company and to the extent permitted by
and as provided in the Mortgage, modifications or alterations of the Mortgage or
of any indenture supplemental thereto and of the rights and obligations of the
Company and of the holders and registered owners of the bonds may be made, and
compliance with any provision of the Mortgage or any such supplemental indenture
may be waived, by the affirmative vote of the holders and registered owners of
not less than eighty per centum (80%) in principal amount of the bonds then
outstanding under the Mortgage, and by the affirmative vote of the holders and
registered owners of not less than eighty per centum (80%) in principal amount
of the bonds of any series then outstanding under the Mortgage and affected by
such modification or alteration, in case one or more but less than all of the
series of bonds then outstanding under the Mortgage are so affected, but in any
case excluding bonds disqualified from voting by reason of the Company's
interest therein as provided in the Mortgage; subject, however, to the
condition, among other conditions stated in the Mortgage, that no such
modification or alteration shall be made which will permit the extension of the
time or times of payment of the principal of or the interest or the premium, if
any, on this bond, or the reduction in the principal amount hereof or in the
rate of interest or the amount of any premium hereon, or any other modification
in the terms of payment of such principal, interest or premium, which terms of
payment are unconditional, or, otherwise than as permitted by the Mortgage, the
creation of any lien ranking prior to or on a parity with the lien of the
Mortgage with respect to any of the mortgaged property, all as more fully
provided in the Mortgage.
The bonds of this Series are subject to redemption, as provided
in the Supplemental Indenture.
In case of certain completed defaults specified in the
Mortgage, the principal of this bond may be declared or may become due and
payable in the manner and with the effect provided in the Mortgage.
No recourse shall be had for the payment of the principal of or
the interest on this bond, or for any claim based hereon, or otherwise in
respect hereof or of the Mortgage, to or against any incorporator, stockholder,
officer or director, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or such successor
corporation, under any constitution or statute or rule of law, or by the
enforcement of any assessment or penalty, or otherwise, all such liability of
incorporators, stockholders, directors and officers being waived and released by
the registered owner hereof by the acceptance of this bond
- 2 -
<PAGE>
and being likewise waived and released by the terms of the Mortgage, all as more
fully provided therein.
This bond is transferable by the registered owner hereof, in
person or by duly authorized attorney, at the office or agency of the Company in
the City of Chicago, State of Illinois, upon surrender and cancellation of this
bond; and thereupon a new registered bond or bonds without coupons of the same
aggregate principal amount and series will, upon the payment of charges as
provided in the Mortgage, be issued to the transferee in exchange herefor.
Bonds of this Series are issuable only in registered form
without coupons and in the denominations of $1,000 each and any authorized
multiple thereof. As provided in the Mortgage, such bonds are exchangeable for
registered bonds of the same series as between authorized denominations. Any
such exchange may be made by the registered owner of any such bond or bonds upon
presentation thereof for that purpose at the office or agency of the Company in
the City of Chicago, State of Illinois.
This bond shall not be entitled to any security or benefit
under the Mortgage or be valid or become obligatory for any purpose unless and
until it shall have been authenticated by the execution by the corporate
Trustee, or its successor in trust under the Mortgage, of the certificate
endorsed hereon.
- 3 -
<PAGE>
IN WITNESS WHEREOF, Commonwealth Edison Company has caused this
bond to be executed in its name by its President or one of its Vice-Presidents,
and has caused its corporate seal to be hereto affixed, attested by its
Secretary or one of its Assistant Secretaries, as of the _____ day of
____________, 19___.
COMMONWEALTH EDISON COMPANY
[SEAL]
By: ______________________________
President
ATTEST:
__________________________
Secretary
(General Form of Trustee's Certificate)
This bond is one of the bonds of the series designated herein,
referred to and described in the within mentioned Supplemental Indenture dated
June 1, 1996.
HARRIS TRUST AND SAVINGS BANK
By: ______________________________
Authorized Officer
Illinois Commerce Commission Identification No. __________
- 4 -
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT - ............ Custodian ...................
(Cust) (Minors)
under Uniform Gifts to Minors
Act ......................................
(State)
Additional abbreviations may also be used though not in
the above list.
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s),
and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE [________________________]
_______________________________________________________________________________
(Please print or typewrite name and address including postal zip code of
assignee)
the within Bond and all rights thereunder, hereby irrevocably constituting and
appointing ____________________ attorney to transfer said Bond on the books of
the Company, with full power of substitution in the premises.
Dated: ____________
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within instrument in every particular, without
alteration or enlargement or any change whatever.
- 5 -
<PAGE>
Exhibit (4) - 30
Commonwealth Edison Company
Form 10-K File No. 1-1839
As of September 30, 1996
To each of the Banks party to the
Credit Agreement referred to below
Ladies and Gentlemen:
We refer to the $200 million Credit Agreement dated as of October 1, 1991, as
amended (the "Credit Agreement"), among the undersigned, the Banks (including
you) named therein and the other Lenders from time to time parties thereto, and
Citibank, N.A., as Agent. Capitalized terms used herein without definition
shall have the meanings ascribed thereto in the Credit Agreement.
We are writing to request that you extend the expiration date of your Commitment
under the Credit Agreement from September 30, 1996 until September 29, 1997. If
you agree to this extension, all terms and conditions of the credit Agreement
would continue in effect during the period of such extension, except for the
following amendments: (a) the date " September 29, 1997," would be inserted in
lieu of the date "September 30, 1996," in clause (i) of the definition of
"Termination Date" in section 1.01 of the Credit Agreement, (b) the rate of
".125% per annum" would be inserted in lieu of the rate of ".15% per annum" in
Section 2.04 (a) of the Credit Agreement, (0.125% is the rate per annum
currently in effect), (c) the terms "Banks" and "Lenders" shall mean each of
the banks or other lending institutions agreeing to extend the expiration date
of its Commitment under the Credit Agreement or, if not presently a party to the
Credit Agreement, agreeing to become a party thereto on or after September 30,
1996, and (d) no additional fees would be payable under Section 2.04 (b) of the
Credit Agreement in respect of such extension. Such extension would become
effective as of September 30, 1996.
On and after the effective date of the extension requested herein and the
related amendments referred to above, each reference in the Credit Agreement to
"this Agreement", "hereunder", "hereof", or words of like import referring to
the Credit Agreement, and each reference in the other Loan Documents to "the
Credit Agreement", "thereunder", "thereof", or words of like import referring to
the Credit Agreement, shall mean and be a reference to the Credit Agreement as
amended by this letter.
<PAGE>
Page 2
If you agree to extend the expiration of your Commitment and to the related
amendments provided above, please evidence such agreement by executing and
returning at least two counterparts of this letter to the Agent at its address
at 399 Park Avenue, 9th Floor, Zone 7, New York, New York 10043, Attention of
Alan Berenbaum, no later than September 16, 1996.
On September 30, 1996, (i) the Commitment of each Bank which fails to return
executed counterparts of this letter as provided above shall automatically
terminate as presently provided in the Credit Agreement, and (ii) all
outstanding Advances of such Bank, together with all accrued interest thereon
and other amounts payable under the Credit Agreement with respect thereto, shall
become due and payable.
Very truly yours,
COMMONWEALTH EDISON COMPANY
By: Dennis F. O'Brien
----------------------
Dennis F. O'Brien
Treasurer
Agreed as of the date
first above written:
___________________________
(Name of Bank)
By: Signed on Behalf of Each Party
------------------------------
Name:
Title:
<PAGE>
Exhibit (4)-31
Unicom Corporation
Form 10-K File No. 1-11375
EXECUTION COPY
===========================================================================
U.S. $200,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of November 15, 1996
Among
UNICOM ENTERPRISES INC.
as Borrower
THE BANKS NAMED HEREIN
as Banks
and
CITIBANK, N.A.
as Agent
===========================================================================
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
1.01. Certain Defined Terms....................................... 1
1.02. Computation of Time Periods................................. 16
1.03. Accounting Terms............................................ 17
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES
2.01. The Advances................................................ 17
2.02. Making the Advances......................................... 17
2.03. Computations of Outstandings................................ 19
2.04. Fees........................................................ 19
2.05. Reduction of the Commitments................................ 20
2.06. Repayment of Advances....................................... 20
2.07. Interest on Advances........................................ 20
2.08. Additional Interest on Eurodollar Advances.................. 21
2.09. Interest Rate Determination................................. 21
2.10. Conversion of Advances...................................... 23
2.11. Optional Prepayments of Advances............................ 23
2.12. Mandatory Prepayments....................................... 24
2.13. Increased Costs............................................. 25
2.14. Illegality.................................................. 26
2.15. Payments and Computations................................... 27
2.16. Taxes....................................................... 28
2.17. Sharing of Payments, Etc.................................... 30
2.18. Extension of Termination Date............................... 31
2.19. Advances Outstanding Under Existing Credit Agreement........ 31
ARTICLE III LETTERS OF CREDIT
3.01. LC Banks.................................................... 32
3.02. Letters of Credit........................................... 32
3.03. LC Bank Fees................................................ 33
3.04. Reimbursement to LC Banks................................... 33
3.05. Obligations Absolute........................................ 34
3.06. Liability of LC Banks and the Lenders....................... 35
ARTICLE IV CONDITIONS OF LENDING
4.01. Condition Precedent to Initial Extension of Credit.......... 36
4.02. Conditions Precedent to Each Extension of Credit............ 38
4.03. Conditions Precedent to Certain Extensions of Credit........ 38
-i-
<PAGE>
Section Page
- ------- ----
4.04. Reliance on Certificates.................................... 39
ARTICLE V REPRESENTATIONS AND WARRANTIES
5.01. Representations and Warranties of the Borrower.............. 39
ARTICLE VI COVENANTS OF THE BORROWER
6.01. Affirmative Covenants....................................... 42
6.02. Negative Covenants.......................................... 46
ARTICLE VII EVENTS OF DEFAULT
7.01. Events of Default........................................... 49
7.02. Remedies.................................................... 53
ARTICLE VIII THE AGENT
8.01. Authorization and Action.................................... 54
8.02. Agent's Reliance, Etc....................................... 54
8.03. Citibank and Affiliates..................................... 55
8.04. Lender Credit Decision...................................... 55
8.05. Indemnification............................................. 56
8.06. Successor Agent............................................. 56
ARTICLE IX MISCELLANEOUS
9.01. Amendments, Etc............................................. 57
9.02. Notices, Etc................................................ 57
9.03. No Waiver; Remedies......................................... 58
9.04. Costs, Expenses, Taxes and Indemnification.................. 58
9.05. Right of Set-Off............................................ 60
9.06. Binding Effect.............................................. 60
9.07. Assignments and Participations.............................. 60
9.08. WAIVER OF JURY TRIAL........................................ 64
9.09. Consent..................................................... 65
9.10. Governing Law............................................... 65
9.11. Relation of the Parties; No Beneficiary..................... 65
9.12. Execution in Counterparts................................... 65
9.13. Severability................................................ 66
9.14. Headings.................................................... 66
9.15. Entire Agreement............................................ 66
-ii-
<PAGE>
Section 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>
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of November 15, 1996
THIS AMENDED AND RESTATED 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 Citibank and the other Banks to provide a
credit facility on the terms and conditions set forth herein. The Banks have
so agreed on the terms and conditions set forth herein, and Citibank has
agreed to continue 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
<PAGE>
2
Period and made or Converted on the same day shall be 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.
<PAGE>
3
"ALTERNATE BASE RATE ADVANCE" means an Advance that bears interest as
provided in Section 2.07(a).
"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
<PAGE>
4
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.
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". All Advances of the same Type, having the same
Interest Period (in the case of
<PAGE>
5
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 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 orbelow
D&P A- or better BBB- or better BB+ or below
------------ -------------- ------------
Commitment 20.00 30.00 40.00
Fee (Basis Points Per Annum)
<PAGE>
6
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 monetary 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 Contingent Obligation is specifically limited to a
portion of any such
<PAGE>
7
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 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
<PAGE>
8
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 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.
<PAGE>
9
"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, 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)
<PAGE>
10
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 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>
11
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 November 15, 1996
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 Amended and Restated 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 Harris Trust
and Savings Bank and D. Donovan (as successors to Bank of America NT & SA and
M.J. Kruge, respectively) as trustees, dated 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
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12
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.
"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
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13
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 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
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14
(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).
"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.
<PAGE>
15
"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).
"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 20% 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)
<PAGE>
16
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 the earlier to occur of (i) the third
anniversary of the date hereof or such later date to which the Termination
Date 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.
"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.
<PAGE>
17
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
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 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,
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18
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, 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.
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19
(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 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
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.
(c) In addition to the fees provided for in subsections (a) and (b)
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 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
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20
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.
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 (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.
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21
SECTION 2.08. ADDITIONAL INTEREST ON EURODOLLAR ADVANCES. The Borrower
shall pay to the 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.
(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;
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22
(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 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.
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23
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.
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
<PAGE>
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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 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).
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, then the Borrower shall
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25
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).
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
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26
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 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(c), 2.08, 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
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27
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 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
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28
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
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").
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29
(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 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.
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(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, 2.16, 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 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 anniversary of the date of this Agreement, 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. 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.
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31
(c) If such request shall have been consented to by all the Lenders
(as determined after giving effect to the replacement of any Lender pursuant
to Section 9.07(g)), the Agent shall notify the Borrower in writing of such
consent, and such extension shall become effective upon the delivery by the
Borrower to the Agent and each Lender, on or prior to the then-effective
Termination Date, of (i) a certificate of a duly authorized officer of the
Borrower, dated such date, as to the accuracy, both before and after giving
effect to such proposed extension, of the representations and warranties set
forth in Section 5.01 and as to the absence, both before and after giving
effect to such proposed extension, of any Event of Default or any Unmatured
Default, (ii) certified copies of all corporate and governmental approvals, if
any, required to be obtained by the Borrower or the Parent in connection with
such extension and (iii) an opinion or opinions of counsel to the Borrower and
the Parent as to the matters set forth in paragraphs 1, 2, 3, 5, 6 and 8 of
Exhibit F after giving effect to such extension and such other matters as any
Lender, through the Agent, may reasonably request.
SECTION 2.19. ADVANCES OUTSTANDING UNDER EXISTING CREDIT AGREEMENT. The
Agent, the Lenders and the Borrowers each hereby acknowledges and agrees that
any and all "Advances" outstanding under the Credit Agreement dated as of
November 22, 1994 among the Borrower, the banks named therein and Citibank,
N.A., as agent, shall constitute and be deemed for all purposes an Advance
outstanding under this Agreement and the Notes.
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.
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32
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 then-scheduled Termination Date), (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 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.
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33
(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 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.
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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 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 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
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35
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. CONDITION 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 the condition precedent that 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;
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36
(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 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;
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(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.
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
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38
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 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
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39
the officers and other representatives of such Person thereafter authorized to
act on behalf of such Person.
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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(e) The balance sheets of the Borrower and its Subsidiaries as at
June 30, 1996, and the related statements of income, cash flows and retained
earnings of the Borrower and its Subsidiaries for the six-month period
(January 1, 1996 to June 30, 1996) 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 date and the results of the operations of the Borrower and its
Subsidiaries for the period ended on such date, all in accordance with GAAP
(except for the absence of notes thereto), and since June 30, 1996, 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.
(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
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41
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 (A) a "public utility holding company" within
the meaning of the Public Utility Holding Company Act of 1935, as amended, or
(B) 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.
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:
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42
(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 Andersen LLP 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 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 other 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
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43
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 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;
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44
(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
(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 date hereof, 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
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45
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 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 date hereof, 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 for 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) 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
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46
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 (without duplication) (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)(iii) 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 $750,000,000.
(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 loans or advances to or other investments in any other
Person to the extent that foreclosure upon any such equity investment or the
stock or assets of the Person to which any such loan or advance was made 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.
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(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 or any other equity interest in 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 on the capital stock of or any
other equity interest in any of the Borrower's Subsidiaries or any such
Subsidiary's assets to secure the payment and performance of Debt obligations
in connection with any project financing for such Subsidiary (provided that
the obligee of such obligations shall have no recourse to the Borrower to
satisfy such obligations, other than pursuant to any such Liens on the
Borrower's equity interests in its Subsidiaries), (iii) Liens created in
connection with the acquisition by Subsidiaries of assets and the continuation
of such Liens in connection with any refinancing of the Debt secured by such
Liens, provided such Liens are limited to the assets so acquired, (iv) Liens on
the assets and/or rights to receive income of any Person that exist at the
time such Person becomes a Subsidiary and the continuation of such Liens in
connection with any refinancing or restructuring of the obligations secured by
such Liens, (v) Liens created in connection with the incurrence by
Subsidiaries from time to time of an amount not to exceed $375,000,000 of Debt
at any one time outstanding and the continuation of such Liens in connection
with any refinancing of such Debt and (vi) Liens on the capital stock or other
equity interest evidencing an investment permitted under Section
6.02(c)(i)(B), provided such Liens are created in connection with the
financing of the business of such Person.
(f) MERGERS; SALE OF ASSETS; ETC. (i) 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, any assets of the Borrower and its
Subsidiaries (measured on a consolidated basis) (whether now owned or
hereafter acquired), unless (A) in the case of a merger involving the Borrower,
immediately after giving effect thereto, (1) no event shall occur and be
continuing that constitutes an Unmatured Default or an Event of Default, (2)
the Borrower is the surviving corporation, and (3) the Borrower and its
Subsidiaries shall not be liable with respect to any Debt or allow their
respective properties to be subject to any Lien which the Borrower or any such
Subsidiary could not become liable with respect to or allow its property to
become subject to under this Agreement on the date of such
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transaction, or (B) in the case of any disposition of assets or any
sale/leaseback transaction, immediately after giving effect thereto, no event
shall have occurred and be continuing that constitutes an Unmatured Default or
an Event of Default (including, without limitation, any Unmatured Default or
Event of Default that would result from a breach by the Parent of Section 7(i)
of the Guaranty).
(g) 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.
(h) REGULATION U. Use or permit any Letter of Credit or any proceeds
of any Advance to be used, whether 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.
(i) 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
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(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
(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; (i) 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; (ii) 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 (iii) 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
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50
$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
(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 Subsidiary for the purpose of effectuating any of the
foregoing; or
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51
(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 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
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52
(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 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
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53
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.
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
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54
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 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
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55
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 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 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
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56
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 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-
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57
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
One Court Square, 7th Floor, Zone 1, Long Island City, New York 11120,
Attention: Bank Loan Syndications (Telephone: 718-248-4505; Telecopier:
718-248-4844); 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 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
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58
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 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
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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 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 when
it shall have been executed by the Borrower and the Agent and when the Agent
shall have been notified in writing by each Bank that such Bank has executed
it 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.
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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, 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.
<PAGE>
61
(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 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
<PAGE>
62
Assignment has been completed and is in substantially the form of Exhibit C
hereto, (i) 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.
(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.
<PAGE>
63
(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), (1) in the case of the occurrence of any event
described in clause (iii), at any time thereafter, and (1) in the case of the
occurrence of any event described in clause (iv), at any time prior to the
then-scheduled Termination Date, 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 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,
<PAGE>
64
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, 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.
<PAGE>
65
SECTION 9.13. SEVERABILITY. Any provision of this Agreement or anyother
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 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>
66
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 Anita J. Brickell
----------------------------
Name: Anita J. Brickell
Title: Attorney-in-Fact
<PAGE>
SCHEDULE I
UNICOM ENTERPRISES INC.
Amended and Restated Credit Agreement, dated as of November 15, 1996,
among Unicom Enterprises Inc.,
the Banks listed therein and other Lenders from time to time parties thereto,
and Citibank, N.A., as Agent
Domestic Eurodollar
Name of Lender Lending Office Lending Office
- -------------- -------------- --------------
<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.
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 Amended and Restated Credit Agreement, dated as of
November 15, 1996 (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
ii
<PAGE>
amount not to exceed at any time outstanding the U.S. dollar amount first above
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:
iii
<PAGE>
ADVANCES, INTEREST PERIODS AND PAYMENTS OF PRINCIPAL
- -------------------------------------------------------------------
Interest Amount of
Period Principal Unpaid
Amount of (if 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 Amended and
Restated Credit Agreement, dated as of November 15, 1996 (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].
ii
<PAGE>
(iii) The aggregate principal amount of the Proposed Borrowing
is $____________.
[(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.
iii
<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 Amended and
Restated Credit Agreement, dated as of November 15, 1996 (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
<PAGE>
(iv) The Type of Advances to which such Advances are
proposed to be Converted is [Alternate Base Rate Advances] [Eurodollar
Rate Advances].
[(v) The Interest Period for each Advance made as part of
the Proposed Conversion is ____ month(s).]**
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:
- ------------------------------
**Delete for Base Rate Advances
v
<PAGE>
EXHIBIT C
FORM OF LENDER ASSIGNMENT
ASSIGNMENT AND ACCEPTANCE
Dated ___________, 19__
Reference is made to the Amended and Restated Credit Agreement, dated as
of November 15, 1996 (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
vi
<PAGE>
or any other instrument or document furnished pursuant thereto; (iii) makes no
representation 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].***
(4) Following the execution of this Assignment and Acceptance by the
Assignor, the Assignee and, if 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").
- ---------------------
*** If the Assignee is organized under the laws of a jurisdiction outside the
United States.
vii
<PAGE>
(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.
viii
<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*: _________, 19__
[NAME OF ASSIGNOR]
- -------------------
* This date should be no earlier than the date of acceptance by the Agent.
<PAGE>
[NAME OF ASSIGNEE]
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:
ii
<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 an Amended and Restated Credit
Agreement, dated as of November 15, 1996 (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:
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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
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.
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ARTICLE II
THE CREDIT AGREEMENT
SECTION 2.01. CREDIT AGREEMENT. a. The parties hereto acknowledge and
agree that this Agreement is an "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
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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.
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 then-scheduled 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
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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 such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
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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.
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
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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.
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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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:
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EXHIBIT E
FORM OF GUARANTY
AMENDED AND RESTATED GUARANTY, dated as of November 15, 1996, 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 an Amended and
Restated 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):
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"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, (iii) Consolidated Debt of the Guarantor and its Consolidated
Subsidiaries and (iv) without duplication, Subordinated Deferrable Securities
Obligations.
"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, excluding, however,
Subordinated Deferrable Securities Obligations.
"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 monetary 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 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
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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).
"SUBORDINATED DEFERRABLE SECURITIES OBLIGATIONS" means all obligations of
the Guarantor and its Subsidiaries in respect of "ComEd- Obligated Mandatorily
Redeemable Preferred Securities of Subsidiary Trust", as set forth from time
to time in the consolidated balance sheets of the Guarantor and its
Consolidated Subsidiaries delivered pursuant to Section 7(a) hereof.
"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 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.
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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, the Notes or any other Loan Document, 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 or impairment 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 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
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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 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
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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) 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
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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, 1995, and the consolidated balance sheet of the Guarantor and its
Consolidated Subsidiaries as at June 30, 1996 and the related consolidated
statements of income, retained earnings and cash flows for the six-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 June 30, 1996, 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 six months
ended June 30, 1996, 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 December 31, 1995, 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
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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 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
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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 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 Andersen LLP 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 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
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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 again'st
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 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
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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
(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.
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(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.
(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.
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(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.
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 or any other equity interest in 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; (iv) other
Liens permitted by Section 6.02(e) of the Credit Agreement; (v) Liens on the
capital stock of or any other equity interest in any of the Guarantor's
Subsidiaries or any such Subsidiary's assets to secure the payment and
performance of Debt obligations in connection with any project financing for
such Subsidiary (provided that the obligee of such obligations shall have no
recourse to the Guarantor to satisfy such obligations, other than pursuant to
any such Liens on the Guarantor's equity interests in its Subsidiaries), (vi)
Liens created in connection with the acquisition by Subsidiaries of assets and
the continuation of such Liens in connection with any refinancing of the Debt
secured
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by such Liens, provided such Liens are limited to the assets so acquired; and
(vii) Liens on the assets and/or rights to receive income of any Person that
exist at the time such Person becomes a Subsidiary and the continuation of such
Liens in connection with any refinancing or restructuring of the obligations
secured by such Liens; 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 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 (without duplication) (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 $750,000,000.
(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
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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) 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 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.
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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.
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
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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 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
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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 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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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
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EXHIBIT F
FORM OF OPINION OF COUNSEL
FOR THE BORROWER AND THE PARENT
[Date of Initial Extension of Credit]
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(x) of the
Amended and Restated Credit Agreement, dated as of November 15, 1996 (the
"CREDIT AGREEMENT"), among Unicom Enterprises Inc., an Illinois corporation
(the "BORROWER"), the Lenders named therein and from time to time party
thereto and Citibank, N.A., as Agent for said Lenders. Unless otherwise
defined herein, 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;
SIGNATURE PAGE TO THE GUARANTY
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(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 , 1996, 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 ___, 1996, 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
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
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<PAGE>
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 (a) 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, (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
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<PAGE>
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 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
SIGNATURE PAGE TO THE GUARANTY
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<PAGE>
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
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 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 opinions set forth in paragraph 7 above,
such lawyers and the lawyers in this firm who currently supervise litigation
and
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<PAGE>
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, except as set forth below, 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). We assume no obligation to update or supplement the
opinions or statements expressed herein to reflect any facts or circumstances
which may hereafter come to our attention with respect to such opinions or
statements, including any changes in applicable law which may hereafter occur.
We are aware that King & Spalding will reply upon this opinion in
rendering their opinion furnished pursuant to Section 4.01(xi) of the Credit
Agreement and we hereby authorize such reliance.
Very truly yours,
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xxxv
<PAGE>
November 15, 1996
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:
This opinion is furnished to you pursuant to Section 4.01(xi) of the
Amended and Restated Credit Agreement dated as of November 15, 1996 (the
"CREDIT AGREEMENT") among Unicom Enterprises Inc. (the "BORROWER") the Banks
parties thereto and the other Lenders from time to time parties thereto and
Citibank, N.A., as Agent. Unless otherwise defined herein, terms defined in
the Credit Agreement are used herein as therein defined.
We have acted as special New York counsel to the Agent in connection with
the preparation, execution and delivery of the Credit Agreement.
In that connection, we have examined the following documents:
(a) counterparts of the Credit Agreement, executed by each of
the parties thereto,
(b) the Notes of the Borrower payable to the order of each
Bank, executed by the Borrower,
(c) counterparts of the Guaranty, executed by the Parent, and
(d) the other documents furnished to the Agent pursuant to
Section 4.01 of the Credit Agreement, including, without limitation,
the opinion of counsel (the "OPINION") delivered pursuant to Section
4.01(x) of the Credit Agreement.
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<PAGE>
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 Credit Agreement and the other
Loan Documents. We have relied, as to factual matters, on the documents we
have examined.
To the extent that our opinions expressed below involve conclusions as to
matters governed by law other than the law of the State of New York, we have
relied upon the Opinion and have assumed without independent investigation the
correctness of the matters set forth therein, our opinions expressed below
being subject to the assumptions, qualifications and limitations set forth in
the Opinion.
Based upon and subject to the foregoing, and subject to the
qualifications set forth below, we are of the following opinion:
1. The Credit Agreement is, and the Notes, upon delivery for value
received, will be, the legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms.
2. The Guaranty is the legal, valid and binding obligation of the
Parent, enforceable against the Parent in accordance with its terms.
Our opinion is subject to the following qualifications:
(a) The enforceability of the obligations of the Borrower under
the Credit Agreement and the Notes and of the Parent under the Guaranty is
subject to the effect of any applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar law affecting creditors'
rights generally.
(b) The enforceability of the obligations of the Borrower under the
Credit Agreement and the Notes and of the Parent under the Guaranty is subject
to the effect of general principles of equity, including (without limitation)
concepts of materiality, reasonableness, good faith and fair dealing
(regardless of whether considered in a proceeding in equity or at law). Such
principles of equity are of general application, and, in applying such
principles, a court, among other things, might not allow a contracting party
to exercise remedies in respect of a default deemed immaterial, or might
decline to order an obligor to perform covenants.
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<PAGE>
(c) We note further that, in addition to the application of equitable
principles described above, courts have imposed an obligation on contracting
parties to act reasonably and in good faith in the exercise of their
contractual rights and remedies, and may also apply public policy
considerations in limiting the right of parties seeking to obtain
indemnification under circumstances involving securities laws or where the
conduct of such parties is determined to have constituted negligence.
(d) We express no opinion herein as to (i) Section 9.05 of the Credit
Agreement, (ii) Section 12 of the Guaranty, (iii) the enforceability of
provisions purporting to grant to a party conclusive rights of determination,
(iv) the availability of specific performance or other equitable remedies, (v)
the enforceability of rights to indemnity under federal or state securities
laws or (vi) the enforceability of waivers by parties of their respective
rights and remedies under law.
(e) Our opinions expressed above are limited to the law of the State
of New York, and we do not express any opinion herein concerning any other
law. Without limiting the generality of the foregoing, we express no opinion
as to the effect of the law of any jurisdiction other than the State of New
York wherein any Lender may be located or wherein enforcement of the Credit
Agreement or the Notes may be sought that limits the rates of interest legally
chargeable or collectible.
The foregoing opinion is solely for your benefit and may not be relied
upon by any other Person other than any Person that may become a Lender under
the Credit Agreement after the date hereof.
Very truly yours,
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xxxviii
<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 Amended and Restated Credit Agreement,
dated as of November 15, 1996 (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
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<PAGE>
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 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 perf
ormance.
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 (i) 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.
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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.
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<PAGE>
Exhibit (4)-34
Commonwealth Edison Company
Form 10-K File No. 1-1839
COMMONWEALTH EDISON COMPANY,
Issuer
AND
WILMINGTON TRUST COMPANY,
Trustee
INDENTURE
Dated as of September 1, 1995
Subordinated Debt Securities
<PAGE>
ARTICLE I
DEFINITIONS . . . . . . . . . . . 1
SECTION 1.01. Definitions of Terms . . . . . . . . . . . . . . . . 1
ARTICLE II
ISSUE, DESCRIPTION, TERMS, EXECUTION,
REGISTRATION AND EXCHANGE OF DEBT SECURITIES . . . 7
SECTION 2.01. Designation and Terms of Debt Securities . . . . . . 7
SECTION 2.02. Form of Debt Securities and Trustee's Certificate . 9
SECTION 2.03. Denominations; Provisions for Payment . . . . . . . 9
SECTION 2.04. Execution and Authentication . . . . . . . . . . . . 11
SECTION 2.05. Registration of Transfer and Exchange . . . . . . . 12
SECTION 2.06. Temporary Securities . . . . . . . . . . . . . . . . 13
SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Debt
Securities . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.08. Cancellation . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.09. Benefits of Indenture . . . . . . . . . . . . . . . 15
SECTION 2.10. Authenticating Agent . . . . . . . . . . . . . . . . 15
SECTION 2.11. Global Securities . . . . . . . . . . . . . . . . . 16
ARTICLE III
REDEMPTION OF DEBT SECURITIES AND SINKING FUND PROVISIONS . . . 17
SECTION 3.01. Redemption . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.02. Notice of Redemption . . . . . . . . . . . . . . . . 17
SECTION 3.03. Payment Upon Redemption . . . . . . . . . . . . . . 19
SECTION 3.04. Sinkinq Fund . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.05. Satisfaction of Sinking Fund Payments with Debt
Securities . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.06. Redemption of Debt Securities for Sinkinq Fund . . . 20
ARTICLE IV
COVENANTS OF THE COMPANY . . . . . . . . . . . 21
SECTION 4.01. Payment of Principal, Premium and Interest . . . . . 21
SECTION 4.02. Maintenance of Office or Agency . . . . . . . . . . 21
SECTION 4.03. Paying Agents . . . . . . . . . . . . . . . . . . . 21
SECTION 4.04. Appointment to Fill Vacancy in Office of Trustee . . 22
SECTION 4.05. Compliance with Consolidation Provisions . . . . . . 22
SECTION 4.06. Limitation on Dividends; Transactions with
Affiliates . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.07. Covenants as to ComEd Trust . . . . . . . . . . . . 23
SECTION 4.08. Corporate Existence . . . . . . . . . . . . . . . . 24
ARTICLE V
SECURITYHOLDERS, LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE . . . . . . . . . 24
-i-
<PAGE>
SECTION 5.01. Company to Furnish Trustee Names and Addresses of
Securityholders . . . . . . . . . . . . . . . . . . 24
SECTION 5.02. Preservation Of Information; Communications With
Securityholders . . . . . . . . . . . . . . . . . . 24
SECTION 5.03. Reports By the Company . . . . . . . . . . . . . . . 24
SECTION 5.04. Reports by the Trustee . . . . . . . . . . . . . . . 25
ARTICLE VI
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT . . . . . . . . . . . . . 26
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . 26
SECTION 6.02. Collection of Indebtedness and Suits for
Enforcement by Trustee . . . . . . . . . . . . . . . 28
SECTION 6.03. Application of Moneys Collected . . . . . . . . . . 30
SECTION 6.04. Limitation on Suits . . . . . . . . . . . . . . . . 30
SECTION 6.05. Rights and Remedies Cumulative; Delay or Omission
Not Waiver . . . . . . . . . . . . . . . . . . . . . 31
SECTION 6.06. Control by Securityholders . . . . . . . . . . . . . 31
SECTION 6.07. Undertaking to Pay Costs . . . . . . . . . . . . . . 32
SECTION 6.08. Acknowledgement Regarding Preferred Securities
Holders . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VII
CONCERNING THE TRUSTEE . . . . . . . . . . . 33
SECTION 7.01. Certain Duties and Responsibilities of Trustee . . . 33
SECTION 7.02. Certain Rights of Trustee . . . . . . . . . . . . . 34
SECTION 7.03. Trustee Not Responsible for Recitals or Issuance of
Debt Securities . . . . . . . . . . . . . . . . . . 36
SECTION 7.04. May Hold Debt Securities . . . . . . . . . . . . . . 36
SECTION 7.05. Moneys Held in Trust . . . . . . . . . . . . . . . . 36
SECTION 7.06. Compensation and Reimbursement . . . . . . . . . . . 36
SECTION 7.07. Reliance on Officers' Certificate . . . . . . . . . 37
SECTION 7.08. Qualification; Conflicting Interests . . . . . . . . 37
SECTION 7.09. Corporate Trustee Required; Eligibility . . . . . . 37
SECTION 7.10. Resignation and Removal; Appointment of Successor . 38
SECTION 7.11. Acceptance of Appointment By Successor . . . . . . . 39
SECTION 7.12. Merger, Conversion, Consolidation or Succession to
Business . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 7.13. Preferential Collection of Claims Against the
Company . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VIII
CONCERNING THE SECURITYHOLDERS . . . . . . . . . 41
SECTION 8.01. Evidence of Action by Securityholders . . . . . . . 41
SECTION 8.02. Proof of Execution by Securityholders . . . . . . . 42
SECTION 8.03. Who May be Deemed Owners . . . . . . . . . . . . . . 42
SECTION 8.04. Certain Debt Securities Owned by Company
Disregarded . . . . . . . . . . . . . . . . . . . . 43
SECTION 8.05. Actions Binding on Future Securityholders . . . . . 43
-ii-
<PAGE>
ARTICLE IX
SUPPLEMENTAL INDENTURES . . . . . . . . . . . . 44
SECTION 9.01. Supplemental Indentures Without the Consent of
Securityholders . . . . . . . . . . . . . . . . . . 44
SECTION 9.02. Supplemental Indentures With Consent of
Securityholders . . . . . . . . . . . . . . . . . . 45
SECTION 9.03. Effect of Supplemental Indentures . . . . . . . . . 45
SECTION 9.04. Debt Securities Affected by Supplemental
Indentures . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.05. Execution of Supplemental Indentures . . . . . . . . 46
ARTICLE X
SUCCESSOR CORPORATION . . . . . . . . . . . . 46
SECTION 10.01. Company May Consolidate, Etc. . . . . . . . . . . . 46
SECTION 10.02. Successor Corporation Substituted . . . . . . . . . 47
SECTION 10.03. Evidence of Consolidation, Etc. to Trustee . . . . 47
ARTICLE XI
SATISFACTION AND DISCHARGE . . . . . . . . . . 48
SECTION 11.01. Satisfaction and Discharge of Indenture . . . . . . 48
SECTION 11.02. Discharge of Obligations . . . . . . . . . . . . . 49
SECTION 11.03. Deposited Moneys to be Held in Trust . . . . . . . 49
SECTION 11.04. Payment of Moneys Held by Paying Agents . . . . . . 49
SECTION 11.05. Repayment to Company . . . . . . . . . . . . . . . 50
ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS . . . . . . . . . . . . . . 50
SECTION 12.01. No Recourse . . . . . . . . . . . . . . . . . . . . 50
ARTICLE XIII
MISCELLANEOUS PROVISIONS . . . . . . . . . . . 51
SECTION 13.01. Effect on Successors and Assigns . . . . . . . . . 51
SECTION 13.02. Actions by Successor . . . . . . . . . . . . . . . 51
SECTION 13.03. Surrender of Company Powers . . . . . . . . . . . . 51
SECTION 13.04. Notices . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 13.05. Governing Law . . . . . . . . . . . . . . . . . . . 51
SECTION 13.06. Treatment of the Debt Securities as Debt . . . . . 51
SECTION 13.07. Compliance Certificates and Opinions . . . . . . . 52
SECTION 13.08. Payments on Business Days . . . . . . . . . . . . . 52
SECTION 13.09. Conflict with Trust Indenture Act . . . . . . . . . 52
SECTION 13.10. Counterparts . . . . . . . . . . . . . . . . . . . 52
SECTION 13.11. Separability . . . . . . . . . . . . . . . . . . . 52
SECTION 13.12. Assignment . . . . . . . . . . . . . . . . . . . . 53
SECTION 13.13. Acknowledgment of Rights . . . . . . . . . . . . . 53
ARTICLE XIV
SUBORDINATION OF DEBT SECURITIES . . . . . . . . . 53
SECTION 14.01. Subordination Terms . . . . . . . . . . . . . . . . 53
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CROSS-REFERENCE TABLE*
Section of
Trust Indenture Act Section of
of 1939, as amended Indenture
- ------------------- ----------
310(a) 7.09
310(b) 7.08
7.10
310(c) Inapplicable
311(a) 7.13(a)
311(b) 7.13(b)
311(c) Inapplicable
312(a) 5.01
5.02(a)
312(b) 5.02(b)
312(c) 5.02(c)
313(a) 5.04(a)
313(b) 5.04(b)
313(c) 5.04(a)
5.04(b)
313(d) 5.04(c)
314(a) 5.03
314(b) Inapplicable
314(c) 13.06
314(d) Inapplicable
314(e) 13.06
314(f) Inapplicable
315(a) 7.01(a)
7.02
315(b) 6.07
315(c) 7.01
315(d) 7.01(b)
7.01(c)
315(e) 6.07
316(a) 6.06
8.04
316(b) 6.04
316(c) 8.01
317(a) 6.02
317(b) 4.03
318(a) 13.08
* This Cross-Reference Table does not constitute part of the Indenture and
shall not have any bearing on the interpretation of Any of its terms or
provisions.
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THIS INDENTURE, dated as of September 1, 1995, between COMMONWEALTH
EDISON COMPANY, an Illinois corporation (the "Company"), WILMINGTON TRUST
COMPANY, a Delaware banking corporation, not in its individual capacity but
solely as trustee (the "Trustee"):
W I T N E S S E T H:
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the execution and delivery of this Indenture to provide for the
issuance of unsecured subordinated debt securities (hereinafter referred to as
the "Debt Securities"), in an unlimited aggregate principal amount to be issued
from time to time in one or more series as in this Indenture provided, as
registered Debt Securities without coupons, to be authenticated by the
certificate of the Trustee;
WHEREAS, to provide the terms and conditions upon which the Debt
Securities are to be authenticated, issued and delivered, the Company has duly
authorized the execution of this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid
agreement of the Company, in accordance with its terms, have been done;
NOW, THEREFORE, in consideration of the premises and the purchase of
the Debt Securities by the holders thereof, it is mutually covenanted and agreed
as follows for the equal and ratable benefit of the holders of Debt Securities:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions of Terms. The terms defined in this
Section (except as in this Indenture otherwise expressly provided or unless the
context otherwise requires) for all purposes of this Indenture and of any
indenture supplemental hereto shall have the respective meanings specified in
this Section and shall include the plural as well as the singular. All other
terms used in this Indenture that are defined in the Trust Indenture Act of
1939, as amended, or that are by reference in such Act defined in the Securities
Act of 1933, as amended (except as herein otherwise expressly provided or unless
the context otherwise requires), shall have the meanings assigned to such terms
in said Trust Indenture Act and in said Securities Act as in force at the date
of the execution of this instrument.
"Affiliate" means, with respect to a specified Person, (a) any
Person directly or indirectly owning, controlling or holding with power to
vote 10% or more of the outstanding voting securities or other ownership
interests of the specified Person, (b) any Person 10% or more of whose
outstanding voting securities or other ownership interests are directly or
indirectly owned, controlled or held with power to
<PAGE>
vote by the specified Person, (c) any Person directly or indirectly
controlling, controlled by or under common control with the specified
Person, (d) a partnership in which the specified Person is a general
partner, (e) any officer or director of the specified Person and (f) if
the specified Person is an individual, any entity of which the specified
Person is an officer, director or general partner.
"Authenticating Agent" means an authenticating agent with respect to
all or any of the series of Debt Securities appointed with respect to all
or such series of the Debt Securities by the Trustee pursuant to Section
2.10.
"Bankruptcy Law" means Title 11, United States Code, or any similar
federal or state law for the relief of debtors.
"Board of Directors" means the board of directors of the Company, or
any duly authorized committee of such board or any officer of the Company
duly authorized by the board of directors of the Company or a duly
authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on
the date of such certification; provided that any Board Resolution that is
adopted by an officer of the Company shall be accompanied by a copy of a
resolution of either the board of directors of the Company or a duly
authorized committee of that board, certified as aforesaid, authorizing
such officer to take such action.
"Business Day" means, with respect to any series of Debt Securities,
any day other than a day on which federal or state banking institutions in
Wilmington, Delaware or the Borough of Manhattan, The City of New York,
are authorized or obligated by law, executive order or regulation to
close.
"Certificate" means a certificate signed by the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of the Company. The Certificate need not comply with
the provisions of Section 13.07.
"ComEd Trust" means a Delaware business trust formed by the Company
for the purpose of purchasing Debt Securities of the Company.
"Common Securities" means undivided beneficial interests in the
assets of a ComEd Trust which rank pari passu with Preferred Securities
issued by such trust; provided, however, that upon the occurrence of an
Event of Default, the rights of holders of Common Securities to payment in
respect of
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distributions and payments upon liquidation, redemption and maturity are
subordinated to the rights of holders of Preferred Securities.
"Common Securities Guarantee" means any guarantee that the Company
may enter into with a ComEd Trust or other Persons that operate directly
or indirectly for the benefit of holders of Common Securities of such
trust.
"Company" means Commonwealth Edison Company, a corporation duly
organized and existing under the laws of the State of Illinois, and,
subject to the provisions of Article X, shall also include its successors
and assigns.
"Corporate Trust Office" means the office of the Trustee at which,
at any particular time, its corporate trust business shall be principally
administered, which office at the date hereof is located at Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
Corporate Trust Administration.
"Custodian" means any receiver, trustee, assignee, liquidator, or
similar official under any Bankruptcy Law.
"Declaration" means, in respect of a ComEd Trust, the amended and
restated declaration of trust of such ComEd Trust or any other governing
instrument of such Trust.
"Debt Securities" means the Debt Securities authenticated and
delivered under this Indenture.
"Default" means any event, act or condition that with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulted Interest" has the meaning specified in Section 2.03.
"Depositary" means, with respect to Debt Securities of any series
for which the Company shall determine that such Debt Securities will be
issued as a Global Security, The Depository Trust Company, New York, New
York, another clearing agency, or any successor registered as a clearing
agency under the Exchange Act or other applicable statute or regulation,
which, in each case, shall be designated by the Company pursuant to either
Section 2.01 or 2.11.
"Event of Default" means, with respect to Debt Securities of a
particular series, any event specified in Section 6.01, continued for the
period of time, if any, therein designated.
"Exchange Act" means the Securities Exchange Act of 1934.
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"Global Security" means, with respect to any series of Securities, a
Debt Security executed by the Company and delivered by the Trustee to the
Depositary or pursuant to the Depositary's instruction, all in accordance
with the Indenture, which shall be registered in the name of the
Depositary or its nominee.
"Governmental Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its
full faith and credit is pledged or (ii) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of
the United States of America, the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America that, in either case, are not callable or redeemable at the option
of the issuer thereof, and shall also include a depositary receipt issued
by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as
amended) as custodian with respect to any such Governmental Obligation or
a specific payment of principal of or interest on any such Governmental
Obligation held by such custodian for the account of the holder of such
depositary receipt; provided, however, that (except as required by law)
such custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount received
by the custodian in respect of the Governmental Obligation or the specific
payment of principal of or interest on the Governmental Obligation
evidenced by such depositary receipt.
"herein", "hereof" and "hereunder", and other words of similar
import, refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Indenture" means this instrument as originally executed or as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into in accordance with the terms hereof.
"Interest Payment Date", when used with respect to any installment
of interest on a Debt Security of a particular series, means the date
specified in such Debt Security or in a Board Resolution or in an
indenture supplemental hereto with respect to such series as the fixed
date on which an installment of interest with respect to Debt Securities
of that series is due and payable.
"Officers' Certificate" means a certificate signed by the President
or a Vice President and by the Treasurer or an Assistant Treasurer or the
Controller or an Assistant Controller or the Secretary or an Assistant
Secretary of the Company that is delivered to the Trustee in accordance
with the terms hereof. Each such certificate shall include the
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statements provided for in Section 13.07, if and to the extent required by
the provisions thereof.
"Opinion of Counsel" means an opinion in writing of legal counsel,
who may be an employee of or counsel for the Company, that is delivered to
the Trustee in accordance with the terms hereof. Each such opinion shall
include the statements provided for in Section 13.07, if and to the extent
required by the provisions thereof.
"Outstanding", when used with reference to Debt Securities of any
series, means, subject to the provisions of Section 8.04, as of any
particular time, all Debt Securities of that series theretofore
authenticated and delivered by the Trustee under this Indenture, except
(a) Debt Securities theretofore canceled by the Trustee or any paying
agent, or delivered to the Trustee or any paying agent for cancellation or
that have previously been canceled; (b) Debt Securities or portions
thereof for the payment or redemption of which moneys or Governmental
Obligations in the necessary amount shall have been deposited in trust
with the Trustee or with any paying agent (other than the Company) or
shall have been set aside and segregated in trust by the Company (if the
Company shall act as its own paying agent); provided, however, that if
such Debt Securities or portions of such Debt Securities are to be
redeemed prior to the maturity thereof, notice of such redemption shall
have been given as in Article III provided, or provision satisfactory to
the Trustee shall have been made for giving such notice, (c) Debt
Securities in lieu of or in substitution for which other Debt Securities
shall have been authenticated and delivered pursuant to the terms of
Section 2.07; and (d) Debt Securities, except to the extent provided in
Sections 15.02 and 15.03, with respect to which the Company has effected
defeasance and/or covenant defeasance as provided in Article XV.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, joint-stock company, unincorporated
organization or government or any agency or political subdivision thereof.
"Predecessor Security" of any particular Debt Security means every
previous Debt Security evidencing all or a portion of the same debt and
guarantee as that evidenced by such particular Debt Security; and, for the
purposes of this definition, any Debt Security authenticated and delivered
under Section 2.07 in lieu of a lost, destroyed or stolen Debt Security
shall be deemed to evidence the same debt as the lost, destroyed or stolen
Debt Security.
"Preferred Securities" means undivided beneficial interests in the
assets of a ComEd Trust which rank pari passu with Common Securities
issued by such trust; provided,
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however, that upon the occurrence of an Event of Default, the rights of
holders of Common Securities to payment in respect of distributions and
payments upon liquidation, redemption and otherwise are subordinated to
the rights of holders of Preferred Securities.
"Preferred Securities Guarantee" means any guarantee that the
Company may enter into with a ComEd Trust or other Persons that operate
directly or indirectly for the benefit of holders of Preferred Securities
of such trust.
"Property Trustee" means the entity performing the functions of the
Property Trustee of a ComEd Trust under the applicable Declaration of such
ComEd Trust.
"Responsible Officer," when used with respect to the Trustee, means
the Chairman of the Board of Directors, the President, any Vice President,
the Secretary, the Treasurer, any trust officer, any corporate trust
officer or any other officer or assistant officer of the Trustee
customarily performing functions similar to those performed by the Persons
who at the time shall be such officers, respectively, or to whom any
corporate trust matter is referred because of his or her knowledge of and
familiarity with the particular subject.
"Securityholder", "holder of Debt Securities", "registered holder",
or other similar term, means the Person or Persons in whose name or names
a particular Debt Security shall be registered on the books of the Company
kept for that purpose in accordance with the terms of this Indenture.
"Security Register" and "Security Registrar" have the respective
meanings set forth in Section 2.05.
"Subsidiary" means, with respect to any Person, (i) any corporation
at least a majority of whose outstanding Voting Stock shall at the time be
owned, directly or indirectly, by such Person or by one or more of its
Subsidiaries or by such Person and one or more of its Subsidiaries, (ii)
any general partnership, joint venture or similar entity, at least a
majority of whose outstanding partnership or similar interests shall at
the time be owned by such Person, or by one or more of its Subsidiaries,
or by such Person and one or more of its Subsidiaries and (iii) any
limited partnership of which such Person or any of its Subsidiaries is a
general partner.
"Trustee" means Wilmington Trust Company, not in its individual
capacity, and, subject to the provisions of Article VII, shall also
include its successors and assigns, and, if at any time there is more than
one Person acting in such capacity hereunder, "Trustee" shall mean each
such Person. The term "Trustee," as used with respect to a particular
series of Debt
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<PAGE>
Securities, shall mean the trustee with respect to that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939, subject
to the provisions of Sections 9.01, 9.02 and 10.01, as in effect at the
date of execution of this instrument.
"Trust Securities" means Common Securities and Preferred Securities.
"Voting Stock", as applied to stock of any Person, means shares,
interests, participations or other equivalents in the equity interest
(however designated) in such Person having ordinary voting power for the
election of a majority of the directors (or the equivalent) of such
Person, other than shares, interests, participations or other equivalents
having such power only by reason of the occurrence of a contingency.
ARTICLE II
ISSUE, DESCRIPTION, TERMS, EXECUTION,
REGISTRATION AND EXCHANGE OF DEBT SECURITIES
SECTION 2.01. Designation and Terms of Debt Securities. The
aggregate principal amount of Debt Securities that may be authenticated and
delivered under this Indenture is unlimited. The Debt Securities may be issued
in one or more series up to the aggregate principal amount of Debt Securities of
that series from time to time authorized by or pursuant to a Board Resolution of
the Company or, pursuant to one or more indentures supplemental hereto. Prior to
the initial issuance of Debt Securities of any series, there shall be
established in or pursuant to a Board Resolution of the Company, and set forth
in an Officers' Certificate of the Company, or established in one or more
indentures supplemental hereto:
(1) the title of the series of Debt Security (which shall
distinguish the Debt Securities of that series from all other series of
Debt Securities);
(2) any limit upon the aggregate principal amount of the Debt
Securities of that series that may be authenticated and delivered under
this Indenture (except for Debt Securities authenticated and delivered
upon registration of transfer of, or in exchange for, or in lieu of, other
Debt Securities of that series);
(3) the date or dates on which the principal of the Debt Securities
of that series is payable;
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<PAGE>
(4) the rate or rates at which the Debt Securities of that series
shall bear interest or the manner of calculation of such rate or rates, if
any;
(5) the date or dates from which such interest shall accrue, the
Interest Payment Dates on which such interest will be payable or the
manner of determination of such Interest Payment Dates and the record date
for the determination of holders to whom interest is payable on any such
Interest Payment Dates;
(6) the right, if any, to extend the interest payment periods and
the duration of such extension;
(7) the period or periods within which, the price or prices at
which, and the terms and conditions upon which, Debt Securities of that
series may be redeemed, in whole or in part, at the option of the Company;
(8) the obligation, if any, of the Company to redeem or purchase
Debt Securities of that series pursuant to any sinking fund or analogous
provisions (including payments made in cash in participation of future
sinking fund obligations) or at the option of a holder thereof and the
period or periods within which, the price or prices at which, and the
terms and conditions upon which, Debt Securities of that series shall be
redeemed or purchased, in whole or in part, pursuant to such obligation;
(9) the subordination terms of the Debt Securities of that series;
(10) the form of the Debt Securities of that series, including the
form of the Certificate of Authentication for such series;
(11) if other than denominations of twenty-five U.S. dollars ($25)
or any integral multiple thereof, the denominations in which the Debt
Securities of that series shall be issuable;
(12) whether and under what circumstances the Company will pay
Additional Amounts as contemplated by Section 4.08 on the Debt Securities
of the series to any Holder who is not a United States person (including
any modification to the definition of such term) in respect of any tax,
assessment or governmental charge and, if so, whether the Company will
have the option to redeem such Debt Securities rather than pay such
Additional Amounts (and the terms of any such option);
(13) any and all other terms with respect to such series (which
terms shall not be inconsistent with the terms of this Indenture),
including any terms which may be required by or
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<PAGE>
advisable under United States laws or regulations or advisable in
connection with the marketing of Debt Securities of that series; and
(14) whether the Debt Securities are issuable as a Global Security
and, in such case, the identity of the Depositary for such series.
All Debt Securities of any one series shall be substantially
identical except as to denomination and except as may otherwise be provided in
or pursuant to any such Board Resolution or in any indentures supplemental
hereto.
If any of the terms of a series are established by action taken
pursuant to a Board Resolution of the Company, a copy of an appropriate record
of such action shall be certified by the Secretary or an Assistant Secretary of
the Company and delivered to the Trustee at or prior to the delivery of the
Officers' Certificate of the Company setting forth the terms of such series.
SECTION 2.02. Form of Debt Securities and Trustee's Certificate.
The Debt Securities of any series and the Trustee's certificate of
authentication to be borne by such Debt Securities shall be substantially of the
tenor and purport as set forth in one or more indentures supplemental hereto or
as provided in a Board Resolution of the Company and as set forth in an
Officers' Certificate of the Company, and may have such letters, numbers or
other marks of identification or designation and such legends or endorsements
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Indenture, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which Debt
Securities of that series may be listed, or to conform to usage.
SECTION 2.03. Denominations; Provisions for Payment. The Debt
Securities shall be issuable as registered Debt Securities and in the
denominations of twenty-five U.S. dollars ($25) or any integral multiple
thereof, subject to Section 2.01(11). The Debt Securities of a particular series
shall bear interest payable on the dates and at the rate specified with respect
to that series. The principal of and the interest on the Debt Securities of any
series, as well as any premium thereon in case of redemption thereof prior to
maturity, shall be payable in the coin or currency of the United States of
America that at the time is legal tender for public and private debt, at the
office or agency of the Company maintained for that purpose in the Borough of
Manhattan, the City and State of New York. Each Debt Security shall be dated
the date of its authentication. Interest on the Debt Securities shall be
computed on the basis of a 360-day year composed of twelve 30-day months.
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The interest installment on any Debt Security that is payable, and
is punctually paid or duly provided for, on any Interest Payment Date for Debt
Securities of that series shall be paid to the Person in whose name said Debt
Security (or one or more Predecessor Debt Securities) is registered at the close
of business on the regular record date for such interest installment. In the
event that any Debt Security of a particular series or portion thereof is called
for redemption and the redemption date is subsequent to a regular record date
with respect to any Interest Payment Date and prior to such Interest Payment
Date, interest on such Debt Security will be paid upon presentation and
surrender of such Debt Security as provided in Section 3.03.
Any interest on any Debt Security that is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date for Debt
Securities of that series (herein called "Defaulted Interest") shall forthwith
cease to be payable to the registered holder on the relevant regular record date
by virtue of having been such holder; and such Defaulted Interest shall be paid
by the Company, at its election, as provided in clause (1) or clause (2) below:
(1) The Company may make payment of any Defaulted Interest on Debt
Securities to the Persons in whose names such Debt Securities (or their
respective Predecessor Debt Securities) are registered at the close of
business on a special record date for the payment of such Defaulted
Interest, which shall be fixed in the following manner: the Company shall
notify the Trustee in writing of the amount of Defaulted Interest proposed
to be paid on each such Debt Security and the date of the proposed
payment, and at the same time the Company shall deposit with the Trustee
an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory
to the Trustee for such deposit prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a special record date for the payment of
such Defaulted Interest which shall not be more than 15 nor less than 10
days prior to the date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the proposed payment.
The Trustee shall promptly notify the Company of such special record date
and, in the name and at the expense of the Company, shall cause notice of
the proposed payment of such Defaulted Interest and the special record
date therefor to be mailed, first class postage prepaid, to each
Securityholder at his or her address as it appears in the Security
Register (as hereinafter defined), not less than 10 days prior to such
special record date. Notice of the proposed payment of such Defaulted
Interest and the special record date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to
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the Persons in whose names such Debt Securities (or their respective
Predecessor Debt Securities) are registered on such special record date
and shall be no longer payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest on any
Debt Securities in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Debt Securities may
be listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustees of the proposed payment
pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
Unless otherwise set forth in a Board Resolution of the Company or
one or more indentures supplemental hereto establishing the terms of any series
of Debt Securities pursuant to Section 2.01 hereof, the term "regular record
date" as used in this Section with respect to a series of Debt Securities with
respect to any Interest Payment Date for such series shall mean either the
fifteenth day of the month immediately preceding the month in which an Interest
Payment Date established for such series pursuant to Section 2.01 hereof shall
occur, if such Interest Payment Date is the first day of a month, or the last
day of the month immediately preceding the month in which an Interest Payment
Date established for such series pursuant to Section 2.01 hereof shall occur, if
such Interest Payment Date is the fifteenth day of a month, whether or not such
date is a Business Day.
Subject to the foregoing provisions of this Section, each Debt
Security of a series delivered under this Indenture upon transfer of or in
exchange for or in lieu of any other Debt Security of such series shall carry
the rights to interest accrued and unpaid, and to accrue, that were carried by
such other Debt Security.
SECTION 2.04. Execution and Authentication. The Debt Securities
shall be signed on behalf of the Company by its President or one of its Vice
Presidents, and attested by its Secretary or one of its Assistant Secretaries.
Signatures may be in the form of a manual or facsimile signature. The Company
may use the facsimile signature of any Person who shall have been a President or
Vice President thereof, or of any Person who shall have been a Secretary or
Assistant Secretary thereof, notwithstanding the fact that at the time the Debt
Securities shall be authenticated and delivered or disposed of such Person shall
have ceased to be the President or a Vice President, or the Secretary or an
Assistant Secretary, of the Company. The seal, if any, of the Company may be in
the form of a facsimile of such seal and may be impressed, affixed, imprinted or
otherwise reproduced on the Debt Securities. The Debt Securities may contain
such notations, legends or endorsements required by law, stock exchange
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rule or usage. Each Debt Security shall be dated the date of its authentication
by the Trustee.
A Debt Security shall not be valid until authenticated manually by
an authorized signatory of the Trustee, or by an Authenticating Agent. Such
signature shall be conclusive evidence that the Debt Security so authenticated
has been duly authenticated and delivered hereunder and that the holder is
entitled to the benefits of this Indenture.
At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Debt Securities of any series
executed by the Company to the Trustee for authentication, together with a
written order of the Company for the authentication and delivery of such Debt
Securities, signed by its President or any Vice President and its Treasurer or
any Assistant Treasurer, and the Trustee in accordance with such written order
shall authenticate and deliver such Debt Securities.
In authenticating such Debt Securities and accepting the additional
responsibilities under this Indenture in relation to such Debt Securities, the
Trustee shall be entitled to receive, and (subject to Section 7.01) shall be
fully protected in relying upon, an Opinion of Counsel stating that the form and
terms thereof have been established in conformity with the provisions of this
Indenture.
The Trustee shall not be required to authenticate such Securities if
the issue of such Debt Securities pursuant to this Indenture will affect the
Trustee's own rights, duties or immunities under the Debt Securities and this
Indenture or otherwise in a manner that is not reasonable acceptable to the
Trustee.
SECTION 2.05. Registration of Transfer and Exchange. (a) Debt
Securities of any series may be exchanged upon presentation thereof at the
office or agency of the Company designated for such purpose in the Borough of
Manhattan, the City and State of New York, for other Debt Securities of such
series of authorized denominations, and for a like aggregate principal amount,
upon payment of a sum sufficient to cover any tax or other governmental charge
in relation thereto, all as provided in this Section. In respect of any Debt
Securities so surrendered for exchange, the Company shall execute, the Trustee
shall authenticate and such office or agency shall deliver in exchange therefor
the Debt Security or Debt Securities of the same series that the Securityholder
making the exchange shall be entitled to receive, bearing numbers not
contemporaneously outstanding.
(b) The Company shall keep, or cause to be kept, at its office or
agency designated for such purpose in the Borough of Manhattan, the City and
State of New York, or such other location designated by the Company a register
or registers (herein referred
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to as the "Security Register") in which, subject to such reasonable regulations
as it may prescribe, the Company shall register the Debt Securities and the
transfers of Debt Securities as in this Article provided and which at all
reasonable times shall be open for inspection by the Trustee. The registrar for
the purpose of registering Securities and transfer of Securities as herein
provided shall be appointed as authorized by Board Resolution (the "Security
Registrar").
Upon surrender for transfer of any Debt Security at the office or
agency of the Company designated for such purpose in the Borough of Manhattan,
the City and State of New York, the Company shall execute, the Trustee shall
authenticate and such office or agency shall deliver in the name of the
transferee or transferees a new Debt Security or Debt Securities of the same
series as the Debt Security presented for a like aggregate principal amount.
All Debt Securities presented or surrendered for exchange or
registration of transfer, as provided in this Section, shall be accompanied (if
so required by the Company or the Security Registrar) by a written instrument or
instruments of transfer, in form satisfactory to the Company or the Security
Registrar, duly executed by the registered holder or by such holder's duly
authorized attorney in writing.
(c) No service charge shall be made for any exchange or
registration of transfer of Debt Securities, or issue of new Debt Securities in
case of partial redemption of any series, but the Company may require payment of
a sum sufficient to cover any tax or other governmental charge in relation
thereto, other than exchanges pursuant to Section 2.06, Section 3.03(b) and
Section 9.04 not involving any transfer.
(d) The Company shall not be required (i) to issue, exchange or
register the transfer of any Debt Securities during a period beginning at the
opening of business 15 days before the day of the mailing of a notice of
redemption of less than all the Outstanding Debt Securities of the same series
and ending at the close of business on the day of such mailing, nor (ii) to
register the transfer of or exchange any Debt Securities of any series or
portions thereof called for redemption. The provisions of this Section 2.05
are, with respect to any Global Security, subject to Section 2.11 hereof.
SECTION 2.06. Temporary Securities. Pending the preparation of
definitive Debt Securities of any series, the Company may execute, and the
Trustee shall authenticate and deliver, temporary Debt Securities (printed,
lithographed or typewritten) of any authorized denomination. Such temporary
Debt Securities shall be substantially in the form of the definitive Debt
Securities in lieu of which they are issued, but with such omissions, insertions
and variations as may be appropriate for temporary Debt Securities, all as may
be determined by the Company.
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Every temporary Debt Security of any series shall be executed by the Company and
be authenticated by the Trustee upon the same conditions and in substantially
the same manner, and with like effect, as the definitive Debt Securities of such
series. Without unnecessary delay the Company will execute and will furnish
definitive Debt Securities of such series and thereupon any or all temporary
Debt Securities of such series may be surrendered in exchange therefor (without
charge to the holders), at the office or agency of the Company designated for
the purpose in the Borough of Manhattan, the City and State of New York, and the
Trustee shall authenticate and such office or agency shall deliver in exchange
for such temporary Debt Securities an equal aggregate principal amount of
definitive Debt Securities of such series, unless the Company advises the
Trustee to the effect that definitive Debt Securities need not be executed and
furnished until further notice from the Company. Until so exchanged, the
temporary Debt Securities of such series shall be entitled to the same benefits
under this Indenture as definitive Debt Securities of such series authenticated
and delivered hereunder.
SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Debt Securities.
In case any temporary or definitive Debt Security shall become mutilated or be
destroyed, lost or stolen, the Company (subject to the next succeeding sentence)
shall execute, and upon the Company's request the Trustee (subject as aforesaid)
shall authenticate and deliver, a new Debt Security of the same series, bearing
a number not contemporaneously outstanding, in exchange and substitution for the
mutilated Debt Security, or in lieu of and in substitution for the Debt Security
so destroyed, lost or stolen. In every case the applicant for a substituted
Debt Security shall furnish to the Company and the Trustee such security or
indemnity as may be required by them to save each of them harmless, and, in
every case of destruction, loss or theft, the applicant shall also furnish to
the Company and the Trustee evidence to their satisfaction of the destruction,
loss or theft of the applicant's Debt Security and of the ownership thereof. The
Trustee may authenticate any such substituted Debt Security and deliver the same
upon the written request or authorization of any officer of the Company. Upon
the issuance of any substituted Debt Security, the Company may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Trustee) connected therewith. In case any Debt Security
that has matured or is about to mature shall become mutilated or be destroyed,
lost or stolen, the Company may, instead of issuing a substitute Debt Security,
pay or authorize the payment of the same (without surrender thereof except in
the case of a mutilated Debt Security) if the applicant for such payment shall
furnish to the Company and the Trustee such security or indemnity as they may
require to save them harmless, and, in case of destruction, loss or theft,
evidence to the satisfaction of the Company and the Trustee of the destruction,
loss or theft of such Debt Security and of the ownership thereof.
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Every replacement Debt Security issued pursuant to the provisions of
this Section shall constitute an additional contractual obligation of the
Company, whether or not the mutilated, destroyed, lost or stolen Debt Security
shall be found at any time, or be enforceable by anyone, and shall be entitled
to all the benefits of this Indenture equally and proportionately with any and
all other Debt Securities of the same series duly issued hereunder. All Debt
Securities shall be held and owned upon the express condition that the foregoing
provisions are exclusive with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Debt Securities, and shall preclude (to the
extent lawful) any and all other rights or remedies, notwithstanding any law or
statute existing or hereafter enacted to the contrary with respect to the
replacement or payment of negotiable instruments or other securities without
their surrender.
SECTION 2.08. Cancellation. All Debt Securities surrendered for
the purpose of payment, redemption, exchange or registration of transfer shall,
if surrendered to the Company or any paying agent, be delivered to the Trustee
for cancellation, or, if surrendered to the Trustee, shall be cancelled by it,
and no Debt Securities shall be issued in lieu thereof except as expressly
required or permitted by any of the provisions of this Indenture. On request of
the Company at the time of such surrender, the Trustee shall deliver to the
Company canceled Debt Securities held by the Trustee. In the absence of such
request the Trustee may dispose of canceled Debt Securities in accordance with
its standard procedures and deliver a certificate of disposition to the Company.
If the Company shall otherwise acquire any of the Debt Securities, however, such
acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Debt Securities unless and until the same are
delivered to the Trustee for cancellation.
SECTION 2.09. Benefits of Indenture. Nothing in this Indenture or
in the Debt Securities, express or implied, shall give or be construed to give
to any Person, other than the parties hereto and the holders of the Debt
Securities (and, with respect to the provisions of Article XIV, the holders of
Senior Indebtedness) any legal or equitable right, remedy or claim under or in
respect of this Indenture, or under any covenant, condition or provision herein
contained; all such covenants, conditions and provisions being for the sole
benefit of the parties hereto and of the holders of the Debt Securities (and,
with respect to the provisions of Article XIV, the holders of Senior
Indebtedness).
SECTION 2.10. Authenticating Agent. So long as any of the Debt
Securities of any series remain Outstanding, there may be an Authenticating
Agent for any or all such series of Debt Securities which the Trustee shall have
the right to appoint. Said Authenticating Agent shall be authorized to act on
behalf of the Trustee to authenticate Debt Securities of such series issued upon
exchange, transfer or partial redemption thereof, and Debt
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Securities so authenticated shall be entitled to the benefits of this Indenture
and shall be valid and obligatory for all purposes as if authenticated by the
Trustee hereunder. All references in this Indenture to the authentication of
Debt Securities by the Trustee shall be deemed to include authentication by an
Authenticating Agent for such series. Each Authenticating Agent shall be
acceptable to the Company and shall be a corporation that has a combined capital
and surplus, as most recently reported or determined by it, sufficient under the
laws of any jurisdiction under which it is organized or in which it is doing
business to conduct a trust business, and that is otherwise authorized under
such laws to conduct such business and is subject to supervision or examination
by federal or state authorities. If at any time any Authenticating Agent shall
cease to be eligible in accordance with these provisions, it shall resign
immediately.
Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time (and upon request by the Company shall) terminate the agency of any
Authenticating Agent by giving written notice of termination to such
Authenticating Agent and to the Company. Upon resignation, termination or
cessation of eligibility of any Authenticating Agent, the Trustee may appoint an
eligible successor Authenticating Agent acceptable to the Company. Any
successor Authenticating Agent, upon acceptance of its appointment hereunder,
shall become vested with all the rights, powers and duties of its predecessor
hereunder as if originally named as an Authenticating Agent pursuant hereto.
SECTION 2.11. Global Securities. (a) If the Company shall
establish pursuant to Section 2.01 that the Debt Securities of a particular
series are to be issued as a Global Security or Securities, then the Company
shall execute and the Trustee shall, in accordance with Section 2.04,
authenticate and deliver, a Global Security that (i) shall represent, and shall
be denominated in an amount equal to the aggregate principal amount of, all of
the Outstanding Debt Securities of such series, (ii) shall be registered in the
name of the Depositary or its nominee, (iii) shall be delivered by the Trustee
to the Depositary or pursuant to the Depositary's instruction and (iv) shall
bear a legend substantially to the following effect: "Except as otherwise
provided in Section 2.11 of the Indenture, this Debt Security may be
transferred, in whole but not in part, only to another nominee of the Depositary
or to a successor Depositary or to a nominee of such successor Depositary."
(b) Notwithstanding the provisions of Section 2.05, the Global
Security or Securities of a series may be transferred, in whole but not in part
and in the manner provided in Section 2.05, only to another nominee of the
Depositary for such series, or to a successor Depositary for such series
selected or approved by the Company or to a nominee of such successor
Depositary.
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(c) If at any time the Depositary for a series of the Debt
Securities notifies the Company that it is unwilling or unable to continue as
Depositary for such series or if at any time the Depositary for such series
shall no longer be registered or in good standing under the Exchange Act, or
other applicable statute or regulation, at a time when the Depositary is
required to be so registered to act as such Depositary and a successor
Depositary for such series is not appointed by the Company within 90 days after
the Company receives such notice or becomes aware of such condition, as the case
may be, this Section 2.11 shall no longer be applicable to the Debt Securities
of such series and the Company will execute, and subject to Section 2.05, the
Trustee will authenticate and deliver the Debt Securities of such series in
definitive registered form without coupons, in authorized denominations, and in
an aggregate principal amount equal to the principal amount of the Global
Security or Securities of such series in exchange for such Global Security or
Securities. In addition, the Company may at any time determine that the Debt
Securities of any series shall no longer be represented by a Global Security or
Securities and that the provisions of this Section 2.11 shall no longer apply to
the Debt Securities of such series. In such event, the Company will execute and
subject to Section 2.05, the Trustee, upon receipt of an Officers' Certificate
evidencing such determination by the Company, will authenticate and deliver the
Debt Securities of such series in definitive registered form without coupons, in
authorized denominations, and in an aggregate principal amount equal to the
principal amount of the Global Security or Securities of such series in exchange
for such Global Security or Securities. Upon the exchange of the Global
Security or Securities for such Debt Securities in definitive registered form
without coupons, in authorized denominations, the Global Security or Securities
shall be canceled by the Trustee. Such Debt Securities in definitive registered
form issued in exchange for the Global Security or Securities pursuant to this
Section 2.11(c) shall be registered in such names and in such authorized
denominations as the Depositary, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee. The Trustee
shall deliver such Debt Securities to the Depositary for delivery to the Persons
in whose names such Debt Securities are so registered.
ARTICLE III
REDEMPTION OF DEBT SECURITIES AND SINKING FUND PROVISIONS
SECTION 3.01. Redemption. The Company may redeem the Debt
Securities of any series issued hereunder on and after the dates and in
accordance with the terms established for such series pursuant to Section 2.01
hereof.
SECTION 3.02. Notice of Redemption. (a) In case the Company shall
desire to exercise such right to redeem all or, as the case may be, a portion of
the Debt Securities of any series in
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accordance with the right reserved so to do, the Company shall, or shall cause
the Trustee to, give notice of such redemption to holders of the Debt Securities
of such series to be redeemed by mailing, first class postage prepaid, a notice
of such redemption not less than 30 days and not more than 90 days before the
date fixed for redemption of that series to such holders at their last addresses
as they shall appear upon the Security Register unless a shorter period is
specified in the Debt Securities to be redeemed. Any notice that is mailed in
the manner herein provided shall be conclusively presumed to have been duly
given, whether or not the registered holder receives the notice. In any case,
failure duly to give such notice to the holder of any Debt Security of any
series designated for redemption in whole or in part, or any defect in the
notice, shall not affect the validity of the proceedings for the redemption of
any other Debt Securities of such series or any other series. In the case of
any redemption of Debt Securities prior to the expiration of any restriction on
such redemption provided in the terms of such Debt Securities or elsewhere in
this Indenture, the Company shall furnish the Trustee with an Officers'
Certificate evidencing compliance with any such restriction.
Each such notice of redemption shall specify the date fixed for
redemption and the redemption price at which Debt Securities of that series are
to be redeemed, and shall state that payment of the redemption price of such
Debt Securities to be redeemed will be made at the office or agency of the
Company in the Borough of Manhattan, the City and State of New York, upon
presentation and surrender of such Debt Securities, that interest accrued to the
date fixed for redemption will be paid as specified in said notice, that from
and after said date interest will cease to accrue and that the redemption is for
a sinking fund, if such is the case. If less than all the Debt Securities of a
series are to be redeemed, the notice to the holders of Debt Securities of that
series to be redeemed in whole or in part shall specify the particular Debt
Securities to be so redeemed. In case any Debt Security is to be redeemed in
part only, the notice that relates to such Debt Security shall state the portion
of the principal amount thereof to be redeemed, and shall state that on and
after the redemption date, upon surrender of such Debt Security, a new Debt
Security or Debt Securities of such series in principal amount equal to the
unredeemed portion thereof will be issued.
(b) If less than all the Debt Securities of a series are to be
redeemed, the Company shall give the Trustee at least 45 days' notice in advance
of the date fixed for redemption as to the aggregate principal amount of Debt
Securities of the series to be redeemed, and thereupon the Trustee shall select,
by lot or in such other manner as it shall deem appropriate and fair in its
discretion and that may provide for the selection of a portion or portions
(equal to twenty-five U.S. dollars ($25) or any integral multiple thereof) of
the principal amount of such Debt Securities of a denomination larger than $25,
the Debt Securities to be redeemed and shall thereafter promptly notify the
Company in
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writing of the numbers of the Debt Securities to be redeemed, in whole or in
part.
The Company may, if and whenever it shall so elect, by delivery of
instructions signed on its behalf by its President or any Vice President,
instruct the Trustee or any paying agent to call all or any part of the Debt
Securities of a particular series for redemption and to give notice of
redemption in the manner set forth in this Section, such notice to be in the
name of the Company or its own name as the Trustee or such paying agent may deem
advisable. In any case in which notice of redemption is to be given by the
Trustee or any such paying agent, the Company shall deliver or cause to be
delivered to, or permit to remain with, the Trustee or such paying agent, as the
case may be, such Security Register, transfer books or other records, or
suitable copies or extracts therefrom, sufficient to enable the Trustee or such
paying agent to give any notice by mail that may be required under the
provisions of this Section.
SECTION 3.03. Payment Upon Redemption. (a) If the giving of
notice of redemption shall have been completed as above provided, the Debt
Securities or portions of Debt Securities of the series to be redeemed specified
in such notice shall become due and payable on the date and at the place stated
in such notice at the applicable redemption price, together with interest
accrued to the date fixed for redemption and interest on such Debt Securities or
portions of Debt Securities shall cease to accrue on and after the date fixed
for redemption, unless the Company shall default in the payment of such
redemption price and accrued interest with respect to any such Debt Security or
portion thereof. On presentation and surrender of such Debt Securities on or
after the date fixed for redemption at the place of payment specified in the
notice, said Debt Securities shall be paid and redeemed at the applicable
redemption price for such series, together with interest accrued thereon to the
date fixed for redemption (but if the date fixed for redemption is an interest
payment date, the interest installment payable on such date shall be payable to
the registered holder at the close of business on the applicable record date
pursuant to Section 2.03).
(b) Upon presentation of any Debt Security of such series that is
to be redeemed in part only, the Company shall execute and the Trustee shall
authenticate and the office or agency where the Debt Security is presented shall
deliver to the holder thereof, at the expense of the Company, a new Debt
Security or Debt Securities of the same series, of authorized denominations in
principal amount equal to the unredeemed portion of the Debt Security so
presented.
SECTION 3.04. Sinkinq Fund. The provisions of Sections 3.04, 3.05
and 3.06 shall be applicable to any sinking fund for the retirement of Debt
Securities of a series, except as otherwise
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specified as contemplated by Section 2.01 for Debt Securities of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Debt Securities of any series is herein referred to as a "mandatory
sinking fund payment," and any payment in excess of such minimum amount provided
for by the terms of Debt Securities of any series is herein referred to as an
"optional sinking fund payment". If provided for by the terms of Debt
Securities of any series, the cash amount of any sinking fund payment may be
subject to reduction as provided in Section 3.05. Each sinking fund payment
shall be applied to the redemption of Debt Securities of any series as provided
for by the terms of Debt Securities of such series.
SECTION 3.05. Satisfaction of Sinking Fund Payments with Debt
Securities. The Company (i) may deliver Outstanding Debt Securities of a series
(other than any Debt Securities previously called for redemption) and (ii) may
apply as a credit Debt Securities of a series that have been redeemed either at
the election of the Company pursuant to the terms of such Debt Securities or
through the application of permitted optional sinking fund payments pursuant to
the terms of such Debt Securities, in each case in satisfaction of all or any
part of any sinking fund payment with respect to the Debt Securities of such
series required to be made pursuant to the terms of such Debt Securities as
provided for by the terms of such series, provided that such Debt Securities
have not been previously so credited. Such Debt Securities shall be received
and credited for such purpose by the Trustee at the redemption price specified
in such Debt Securities for redemption through operation of the sinking fund and
the amount of such sinking fund payment shall be reduced accordingly.
SECTION 3.06. Redemption of Debt Securities for Sinkinq Fund. Not
less than 45 days prior to each sinking fund payment date for any series of Debt
Securities, the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing sinking fund payment for that series
pursuant to the terms of the series, the portion thereof, if any, that is to be
satisfied by delivering and crediting Debt Securities of that series pursuant to
Section 3.05 and the basis for such credit and will, together with such
Officers' Certificate, deliver to the Trustee any Debt Securities to be so
delivered. Not less than 30 days before each such sinking fund payment date,
the Trustee shall select the Debt Securities to be redeemed upon such sinking
fund payment date in the manner specified in Section 3.02 and cause notice of
the redemption thereof to be given in the name of and at the expense of the
Company in the manner provided in Section 3.02. Such notice having been duly
given, the redemption of such Debt Securities shall be made upon the terms and
in the manner stated in Section 3.03.
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ARTICLE IV
COVENANTS OF THE COMPANY
SECTION 4.01. Payment of Principal, Premium and Interest. The
Company will duly and punctually pay or cause to be paid the principal of (and
premium, if any) and interest on the Debt Securities of that series at the time
and place and in the manner provided herein and established with respect to such
Debt Securities.
SECTION 4.02. Maintenance of Office or Agency. So long as any
series of the Debt Securities remain Outstanding, the Company agrees to maintain
an office or agency in the Borough of Manhattan, the City and State of New York,
with respect to each such series and at such other location or locations as may
be designated as provided in this Section 4.02, where (i) Debt Securities of
that series may be presented for payment, (ii) Debt Securities of that series
may be presented as hereinabove authorized for registration of transfer and
exchange, and (iii) notices and demands to or upon the Company in respect of the
Debt Securities of that series and this Indenture may be given or served, such
designation to continue with respect to such office or agency until the Company
shall, by written notice signed by its President or a Vice President and
delivered to the trustee, designate some other office or agency for such
purposes or any of them. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, notices and demands may be made or served
at the Corporate Trust Office of the Trustee, and the Company hereby appoints
the Trustee as its agent to receive all such presentations, notices and demands.
SECTION 4.03. Paying Agents. (a) If the Company shall appoint one
or more paying agents for all or any series of the Debt Securities, other than
the Trustee, the Company will cause each such paying agent to execute and
deliver to the Trustee an instrument in which such agent shall agree with the
Trustee, subject to the provisions of this Section:
(1) that it will hold all sums held by it as such agent for the
payment of the principal of (and premium, if any) or interest on the Debt
Securities of that series (whether such sums have been paid to it by the
Company or by any other obligor of such Debt Securities) in trust for the
benefit of the Persons entitled thereto;
(2) that it will give the Trustee notice of any failure by the
Company to make any payment of the principal of (and premium, if any) or
interest on the Debt Securities of that series when the same shall be due
and payable;
(3) that it will, at any time during the continuance of any failure
referred to in the preceding paragraph (a)(2)
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above, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such paying agent; and
(4) that it will perform all other duties of paying agent as set
forth in this Indenture.
(b) If the Company shall act as its own paying agent with respect
to any series of the Debt Securities, it will on or before each due date of the
principal of (and premium, if any) or interest on Debt Securities of that
series, set aside, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay such principal (and premium, if any) or
interest so becoming due on Debt Securities of that series until such sums shall
be paid to such Persons or otherwise disposed of as herein provided and will
promptly notify the Trustee of such action, or any failure by it to take such
action. Whenever the Company shall have one or more paying agents for any
series of Debt Securities, it will, prior to each due date of the principal of
(and premium, if any) or interest on any Debt Securities of that series, deposit
with the paying agent a sum sufficient to pay the principal (and premium, if
any) or interest so becoming due, such sum to be held in trust for the benefit
of the Persons entitled to such principal, premium or interest, and (unless such
paying agent is the Trustee) the Company will promptly notify the Trustee of
this action or failure so to act.
(c) Notwithstanding anything in this Section to the contrary, (i)
the agreement to hold sums in trust as provided in this Section is subject to
the provisions of Section 11.05, and (ii) the Company may at any time, for the
purpose of obtaining the satisfaction and discharge of this Indenture or for any
other purpose, pay, or direct any paying agent to pay, to the Trustee all sums
held in trust by the Company or such paying agent, such sums to be held by the
Trustee upon the same terms and conditions as those upon which such sums were
held by the Company or such paying agent; and, upon such payment by any paying
agent to the Trustee, such paying agent shall be released from all further
liability with respect to such money.
SECTION 4.04. Appointment to Fill Vacancy in Office of Trustee. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 7.10, a Trustee, so that there
shall at all times be a Trustee hereunder.
SECTION 4.05. Compliance with Consolidation Provisions. The
Company will not, while any of the Debt Securities remain Outstanding,
consolidate with, or merge into, or merge into itself, or sell or convey all or
substantially all of its property to any other company unless the provisions of
Article X hereof are complied with.
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SECTION 4.06. Limitation on Dividends; Transactions with
Affiliates. (a) If Debt Securities are issued to a ComEd Trust or a trustee of
such trust in connection with the issuance of Trust Securities by such ComEd
Trust and (i) there shall have occurred any event that would constitute an Event
of Default or (ii) the Company shall be in default with respect to its payment
or any obligations under the Preferred Securities Guarantee or Common Securities
Guarantee relating to such Trust Securities, then (x) the Company shall not
declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase or make a liquidation payment with respect to, any of its
capital stock, (y) the Company shall not make any payment of interest, principal
or premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees) issued by the Company which rank pari passu with or
junior to such Debt Securities and (z) the Company shall not make guarantee
payments with respect to the foregoing (other than pursuant to the Preferred
Securities Guarantee).
(b) If Debt Securities are issued to a ComEd Trust or a trustee of
such trust in connection with the issuance of Trust Securities by such ComEd
Trust and the Company shall have given notice of its election to defer payments
of interest on such Debt Securities by extending the interest payment period as
provided in any indenture supplemental hereto and such period, or any extension
thereof, shall be continuing, then (i) the Company shall not declare or pay any
dividend, or make any distributions with respect to, or redeem, purchase or make
a liquidation payment with respect to, any of its capital stock, (ii) the
Company shall not make any payment of interest, principal or premium, if any, on
or repay, repurchase or redeem any debt securities (including guarantees) issued
by the Company which rank pari passu with or junior to such Debt Securities and
(iii) the Company shall not make any guarantee payments with respect to the
foregoing (other than pursuant to the Preferred Securities Guarantee).
SECTION 4.07. Covenants as to ComEd Trust. In the event Debt
Securities are issued and sold to a ComEd Trust in connection with the issuance
of Trust Securities by such trust, for so long as such Trust Securities remain
outstanding, the Company will (i) maintain 100% direct or indirect ownership of
the Common Securities of such trust; provided, however, that any permitted
successor of the Company under the Indenture may succeed to the Company's
ownership of the Common Securities, (ii) not cause, as sponsor of such trust, or
permit, as holder of Common Securities of such trust, the dissolution,
winding-up or termination of such trust, except in connection with a
distribution of Debt Securities as provided in the Declaration and in connection
with certain mergers, consolidations or amalgamations permitted by the
Declaration and (iii) use its reasonable efforts to cause such trust (a) to
remain a business trust, except in connection with a distribution of Debt
Securities, the redemption of all of the Trust Securities of such ComEd Trust or
certain mergers, consolidations or amalgamations,
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each as permitted by the Declaration of such ComEd Trust, and (b) to otherwise
continue to be classified for United States federal income tax purposes as a
grantor trust.
SECTION 4.08. Corporate Existence. The Company will, subject to
the provisions of Article X, at all times maintain its corporate existence and
right to carry on business and will duly procure all renewals and extensions
thereof, and, to the extent necessary or desirable in the operation of its
business, will use its best efforts to maintain, preserve and renew all of its
rights, powers, privileges and franchises.
ARTICLE V
SECURITYHOLDERS, LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
SECTION 5.01. Company to Furnish Trustee Names and Addresses of
Securityholders. The Company will furnish or cause to be furnished to the
Trustee (a) on a quarterly basis on each regular record date (as defined in
Section 2.03) a list, in such form as the Trustee may reasonably require, of the
names and addresses of the holders of each series of Debt Securities as of such
regular record date, provided that the Company shall not be obligated to furnish
or cause to furnish such list at any time that the list shall not differ in any
respect from the most recent list furnished to the Trustee by the Company and
(b) at such other times as the Trustee may request in writing within 30 days
after the receipt by the Company of any such request, a list of similar form and
content as of a date not more than 15 days prior to the time such list is
furnished; provided, however, that in either case, no such list need be
furnished for any series for which the Trustee shall be the Security Registrar.
SECTION 5.02. Preservation Of Information; Communications With
Securityholders. (a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of the
holders of Debt Securities contained in the most recent list furnished to it as
provided in Section 5.01 and as to the names and addresses of holders of Debt
Securities received by the Trustee in its capacity as Security Registrar (if
acting in such capacity).
(b) The Trustee may destroy any list furnished to it as provided in
Section 5.01 upon receipt of a new list so furnished.
(c) Securityholders may communicate as provided in Section 312(b)
of the Trust Indenture Act with other Securityholders with respect to their
rights under this Indenture or under the Debt Securities.
SECTION 5.03. Reports By the Company. (a) The Company covenants
and agrees to file with the Trustee, within 15 days after the Company is
required to file the same with the Commission,
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copies of the annual reports and of the information, documents and other reports
(or copies of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) that the Company may be
required to file with the Commission pursuant to Section 13 or Section 15(d) of
the Exchange Act; or, if the Company is not required to file information,
documents or reports pursuant to either of such sections, then to file with the
Trustee and the Commission, in accordance with the rules and regulations
prescribed from time to time by the Commission, such of the supplementary and
periodic information, documents and reports that may be required pursuant to
Section 13 of the Exchange Act, in respect of a security listed and registered
on a national securities exchange as may be prescribed from time to time in such
rules and regulations.
(b) The Company covenants and agrees to file with the Trustee and
the Commission, in accordance with the rules and regulations prescribed from to
time by the Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants provided
for in this Indenture as may be required from time to time by such rules and
regulations.
(c) The Company covenants and agrees to transmit by mail, first
class postage prepaid, or reputable overnight delivery service that provides for
evidence of receipt, to the Securityholders, as their names and addresses appear
upon the Security Register, within 30 days after the filing thereof with the
Trustee, such summaries of any information, documents and reports required to be
filed by the Company pursuant to subsections (a) and (b) of this Section as may
be required by rules and regulations prescribed from time to time by the
Commission.
SECTION 5.04. Reports by the Trustee. (a) On or before July 15 in
each year in which any of the Debt Securities are Outstanding, the Trustee shall
transmit by mail, first class postage prepaid, to the Securityholders, as their
names and addresses appear upon the Security Register, a brief report dated as
of the preceding May 15, if and to the extent required under Section 313(a) of
the Trust Indenture Act.
(b) The Trustee shall comply with Sections 313(b) and 313(c) of the
Trust Indenture Act.
(c) A copy of each such report shall, at the time of such
transmission to Securityholders, be filed by the Trustee with the Company, with
each stock exchange upon which any Debt Securities are listed (if so listed) and
also with the Commission. The Company agrees to notify the Trustee when any
Debt Securities become listed on any stock exchange.
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ARTICLE VI
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT
SECTION 6.01. Events of Default. (a) Whenever used herein with
respect to Debt Securities of a particular series, "Event of Default" means any
one or more of the following events that has occurred and is continuing:
(1) the Company defaults in the payment of any installment of
interest upon any of the Debt Securities of that series, as and when the
same shall become due and payable, and continuance of such default for a
period of 30 days; provided, however, that a valid extension of an
interest payment period by the Company in accordance with the terms of any
indenture supplemental hereto, shall not constitute a default in the
payment of interest for this purpose;
(2) the Company defaults in the payment of the principal of (or
premium, if any, on) any of the Debt Securities of that series as and when
the same shall become due and payable whether at maturity, upon
redemption, by declaration or otherwise, or in any payment required by any
sinking or analogous fund established with respect to that series;
provided, however, that a valid extension of the maturity of such Debt
Securities in accordance with the terms of any indenture supplemental
hereto shall not constitute a default in the payment of principal or
premium, if any;
(3) the Company fails to observe or perform any other of its
covenants or agreements with respect to that series contained in this
Indenture or otherwise established with respect to that series of Debt
Securities pursuant to Section 2.01 hereof (other than a covenant or
agreement that has been expressly included in this Indenture solely for
the benefit of one or more series of Debt Securities other than such
series) for a period of 90 days after the date on which written notice of
such failure, requiring the same to be remedied and stating that such
notice is a "Notice of Default" hereunder, shall have been given to the
Company by the Trustee, by registered or certified mail, or to the Company
and the Trustee by the holders of at least 25% in principal amount of the
Debt Securities of that series at the time Outstanding;
(4) the Company pursuant to or within the meaning of any Bankruptcy
Law (i) commences a voluntary case, (ii) consents to the entry of an order
for relief against it in an involuntary case, (iii) consents to the
appointment of a Custodian of it or for all or substantially all of its
property or (iv) makes a general assignment for the benefit of its
creditors;
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(5) a court of competent jurisdiction enters an order under any
Bankruptcy Law that (i) is for relief against the Company in an
involuntary case, (ii) appoints a Custodian of the Company for all or
substantially all of its property, or (iii) orders the liquidation of the
Company, and the order or decree remains unstayed and in effect for 90
days; or
(6) in the event Debt Securities are issued and sold to a ComEd
Trust or other trust of the Company in connection with the issuance of
Trust Securities by such trust, such trust shall have voluntarily or
involuntarily dissolved, wound-up its business or otherwise terminated its
existence except in connection with (i) the distribution of Debt
Securities to holders of Trust Securities in liquidation of their
interests in such trust, (ii) the redemption of all outstanding Trust
Securities of such trust, and (iii) mergers, consolidations or
amalgamations, each as permitted by the Declaration of such trust.
(b) If an Event of Default described in clauses 1, 2, 3 or 6 of
this Section 6.01 with respect to Debt Securities of any series at the time
outstanding occurs and is continuing, unless the principal of all the Debt
Securities of that series shall have already become due and payable, either the
Trustee or the holders of not less than 25% in aggregate principal amount of the
Debt Securities of that series then Outstanding hereunder, by notice in writing
to the Company (and to the Trustee, if given by such Securityholders), may
declare the principal of all the Debt Securities of that series to be due and
payable immediately, and upon any such declaration the same shall become and
shall be immediately due and payable, notwithstanding anything contained in this
Indenture or in the Debt Securities of that series or established with respect
to that series pursuant to Section 2.01 to the contrary. If an Event of Default
specified in clause (4) or (5) of this Section 6.01 occurs or is continuing,
then the principal amount of all the Debt Securities shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Securityholder.
(c) At any time after the principal of the Securities of that
series shall have been so declared due and payable, and before any judgment or
decree for the payment of the moneys due shall have been obtained or entered as
hereinafter provided, the holders of a majority in aggregate principal amount of
the Securities of that series then Outstanding hereunder, by written notice to
the Company and the Trustee, may rescind and annul such declaration and its
consequences if: (i) the Company has paid or deposited with the Trustee a sum
sufficient to pay all matured installments of interest upon all the Securities
of that series and the principal of (and premium, if any, on) any and all
Securities of that series that shall have become due otherwise than by
acceleration (with interest upon such principal and premium, if any, and, to the
extent that such payment is enforceable under applicable law, upon
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overdue installments of interest, at the rate per annum expressed in the
Securities of that series to the date of such payment or deposit) and the amount
payable to the Trustee under Section 7.06, and (ii) any and all Events of
Default under the Indenture with respect to such series, other than the
nonpayment of principal on Securities of that series that shall not have become
due by their terms, shall have been remedied or waived as provided in Section
6.06.
No such rescission and annulment shall extend to or shall affect any
subsequent default or impair any right consequent thereon.
(d) In case the Trustee shall have proceeded to enforce any right
with respect to Securities of that series under this Indenture and such
proceedings shall have been discontinued or abandoned because of such rescission
or annulment or for any other reason or shall have been determined adversely to
the Trustee, then and in every such case the Company and the Trustee shall be
restored respectively to their former positions and rights hereunder, and all
rights, remedies and powers of the Company and the Trustee shall continue as
though no such proceedings had been taken.
SECTION 6.02. Collection of Indebtedness and Suits for Enforcement
by Trustee. (a) The Company covenants that (1) in case it shall default in the
payment of any installment of interest on any of the Securities of a series, or
any payment required by any sinking or analogous fund established with respect
to that series as and when the same shall have become due and payable, and such
default shall have continued for a period of 90 days, or (2) in case it shall
default in the payment of the principal of (or premium, if any, on) any of the
Securities of a series when the same shall have become due and payable, whether
upon maturity of the Securities of a series or upon redemption or upon
declaration or otherwise, then, upon demand of the Trustee, the Company will pay
to the Trustee, for the benefit of the holders of the Securities of that series,
the whole amount that then shall have become due and payable on all such
Securities for principal (and premium, if any) or interest, or both, as the case
may be, with interest upon the overdue principal (and premium, if any) and (to
the extent that payment of such interest is enforceable under applicable law
and, if the Securities are held by a ComEd Trust, without duplication of any
other amounts paid by such trust in respect thereof) upon overdue installments
of interest at the rate per annum expressed in the Securities of that series;
and, in addition thereto, such further amount as shall be sufficient to cover
the costs and expenses of collection and the amount payable to the Trustee under
Section 7.06.
(b) If the Company shall fail to pay such amounts forthwith upon
such demand, the Trustee, in its own name and as trustee of an express trust,
shall be entitled and empowered to
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institute any action or proceedings at law or in equity for the collection of
the sums so due and unpaid, and may prosecute any such action or proceeding to
judgment or final decree, and may enforce any such judgment or final decree
against the Company or other obligor upon the Securities of that series and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or other obligor upon the Securities of
that series, wherever situated.
(c) In case of any receivership, insolvency, liquidation,
bankruptcy, reorganization, readjustment, arrangement, composition or judicial
proceedings affecting the Company or its creditors or property, the Trustee
shall have power to intervene in such proceedings and take any action therein
that may be permitted by the court and shall (except as may be otherwise
provided by law) be entitled to file such proofs of claim and other papers and
documents as may be necessary or advisable in order to have the claims of the
Trustee and of the holders of Securities of such series allowed for the entire
amount due and payable by the Company under the Indenture at the date of
institution of such proceedings and for any additional amount that may become
due and payable by the Company after such date, and to collect and receive any
moneys or other property payable or deliverable on any such claim, and to
distribute the same after the deduction of the amount payable to the Trustee
under Section 7.06; and any receiver, assignee or trustee in bankruptcy or
reorganization is hereby authorized by each of the holders of Securities of such
series to make such payments to the Trustee, and, in the event that the Trustee
shall consent to the making of such payments directly to such Securityholders,
to pay to the Trustee any amount due it under Section 7.06.
(d) All rights of action and of asserting claims under this
Indenture, or under any of the terms established with respect to Securities of
that series, may be enforced by the Trustee without the possession of any of
such Securities, or the production thereof at any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for payment to the Trustee of any
amounts due under Section 7.06, be for the ratable benefit of the holders of the
Securities of such series.
In case of an Event of Default hereunder, the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in the Indenture or in aid of the exercise
of any power granted in this Indenture, or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law.
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Nothing contained herein shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Securities of that series or the rights of any holder thereof or to authorize
the Trustee to vote in respect of the claim of any Securityholder in any such
proceeding.
SECTION 6.03. Application of Moneys Collected. Any moneys
collected by the Trustee pursuant to this Article with respect to a particular
series of Securities shall be applied in the following order, at the date or
dates fixed by the Trustee and, in case of the distribution of such moneys on
account of principal (or premium, if any) or interest, upon presentation of the
Securities of that series, and notation thereon of the payment, if only
partially paid, and upon surrender thereof if fully paid:
FIRST: To the payment of costs and expenses of collection and of
all amounts payable to the Trustee under Section 7.06;
SECOND: To the payment of all Senior Indebtedness of the Company if
and to the extent required by Article XIV; and
THIRD: To the payment of the amounts then due and unpaid upon
Securities of such series for principal (and premium, if any) and
interest, in respect of which or for the benefit of which such money has
been collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for principal
(and premium, if any) and interest, respectively.
SECTION 6.04. Limitation on Suits. No holder of any Security of
any series shall have any right by virtue or by availing of any provision of
this Indenture to institute any suit, action or proceeding in equity or at law
upon or under or with respect to this Indenture or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless (i) such holder
previously shall have given to the Trustee written notice of an Event of Default
and of the continuance thereof with respect to the Securities of such series
specifying such Event of Default, as hereinbefore provided; (ii) the holders of
not less than 25% in aggregate principal amount of the Securities of such series
then Outstanding shall have made written request upon the Trustee to institute
such action, suit or proceeding in its own name as trustee hereunder; (iii) such
holder or holders shall have offered to the Trustee such reasonable indemnity as
it may require against the costs, expenses and liabilities to be incurred
therein or thereby; and (iv) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity, shall have failed to institute any such
action, suit or proceeding; and (v) during such 60 day period, the holders of a
majority in principal amount of the
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Securities of that series do not give the Trustee a direction inconsistent with
the request.
Notwithstanding anything contained herein to the contrary, any other
provisions of this Indenture, the right of any holder of any Security to receive
payment of the principal of (and premium, if any) and interest on such Security,
as therein provided, on or after the respective due dates expressed in such
Security (or in the case of redemption, on the redemption date), or to institute
suit for the enforcement of any such payment on or after such respective dates
or redemption date, shall not be impaired or affected without the consent of
such holder, and by accepting a Security hereunder it is expressly understood,
intended and covenanted by the taker and holder of every Security of such series
with every other such taker and holder and the Trustee, that no one or more
holders of Securities of such series shall have any right in any manner
whatsoever by virtue or by availing of any provision of this Indenture to
affect, disturb or prejudice the rights of the holders of any other of such
Securities, or to obtain or seek to obtain priority over or preference to any
other such holder, or to enforce any right under this Indenture, except in the
manner herein provided and for the equal, ratable and common benefit of all
holders of Securities of series. For the protection and enforcement of the
provisions of this Section, each and every Securityholder and the Trustee shall
be entitled to such relief as can be given either at law or in equity.
SECTION 6.05. Rights and Remedies Cumulative; Delay or Omission Not
Waiver. (a) Except as otherwise provided in Section 2.07, all powers and
remedies given by this Article to the Trustee or to the Securityholders shall,
to the extent permitted by law, be deemed cumulative and not exclusive of any
other powers and remedies available to the Trustee or the holders of the
Securities, by judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this Indenture or
otherwise established with respect to such Securities.
(b) No delay or omission of the Trustee or of any holder of any of
the Securities to exercise any right or power accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right or power, or
shall be construed to be a waiver of any such default or an acquiescence
therein; and, subject to the provisions of Section 6.04, every power and remedy
given by this Article or by law to the Trustee or the Securityholders may be
exercised from time to time, and as often as shall be deemed expedient, by the
Trustee or by the Securityholders.
SECTION 6.06. Control by Securityholders. The holders of a
majority in aggregate principal amount of the Securities of any series at the
time Outstanding, determined in accordance with Section 8.04, shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the
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Trustee, or exercising any trust or power conferred on the Trustee with respect
to such series; provided, however, that such direction shall not be in conflict
with any rule of law or with this Indenture or be unduly prejudicial to the
rights of holders of Securities of any other series at the time Outstanding
determined in accordance with Section 8.04. Subject to the provisions of Section
7.01, the Trustee shall have the right to decline to follow any such direction
if the Trustee in good faith shall, by a Responsible Officer or Officers of the
Trustee, determine that the proceeding so directed would involve the Trustee in
personal liability. The holders of a majority in aggregate principal amount of
the Securities of any series at the time Outstanding affected thereby,
determined in accordance with Section 8.04, may on behalf of the holders of all
of the Securities of such series waive any past default in the performance of
any of the covenants contained herein or established pursuant to Section 2.01
with respect to such series and its consequences, except (i) a default in the
payment of the principal of, or premium, if any, or interest on, any of the
Securities of that series as and when the same shall become due by the terms of
such Securities otherwise than by acceleration (unless such default has been
cured and a sum sufficient to pay all matured installments of interest and
principal and any premium has been deposited with the Trustee (in accordance
with Section 6.01(c)) or (ii) a default in the covenants contained in Section
4.06(b). Upon any such waiver, the default covered thereby shall deemed to be
cured for all purposes of this Indenture and the Company, the Trustee and the
holders of the Securities of such series shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend to
any subsequent or other default or impair any right consequent thereon.
SECTION 6.07. Undertaking to Pay Costs. All parties to this
Indenture agree, and each holder of any Securities by such holder's acceptance
thereof shall be deemed to have agreed, that any court may in its discretion
require, in any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken or omitted by
it as Trustee, the filing by any party litigant in such suit of an undertaking
to pay the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Securityholder, or group of Securityholders, holding more than
10% in aggregate principal amount of the Outstanding Securities of any series,
or to any suit instituted by any Securityholder for the enforcement of the
payment of the principal of (or premium, if any) or interest on any Security of
such series, on or after the respective due dates expressed in such Security or
established pursuant to this Indenture.
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SECTION 6.08. Acknowledgement Regarding Preferred Securities
Holders. The Company acknowledges that, with respect to any Debt Securities
held by a ComEd Trust or a trustee of such ComEd Trust, if the Property Trustee
of such ComEd Trust fails to enforce its rights under this Indenture as the
holder of the series of Debt Securitites held as the assets of such ComEd Trust,
then holders of Preferred Securities of such ComEd Trust may institute legal
proceedings directly against the Company to enforce such rights under this
Indenture without first instituting any legal proceedings against such Property
Trustee or any other person or entity.
ARTICLE VII
CONCERNING THE TRUSTEE
SECTION 7.01. Certain Duties and Responsibilities of Trustee. (a)
The Trustee, prior to the occurrence of an Event of Default with respect to the
Debt Securities of a series and after the curing of all Events of Default with
respect to the Debt Securities of that series that may have occurred, shall
undertake to perform with respect to the Debt Securities of such series such
duties and only such duties as are specifically set forth in this Indenture, and
no implied covenants shall be read into this Indenture against the Trustee. In
case an Event of Default with respect to the Securities of a series has occurred
(that has not been cured or waived), the Trustee shall exercise with respect to
Debt Securities of that series such of the rights and powers vested in it by
this Indenture, and use the same degree of care and skill in their exercise, as
a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(b) No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(1) prior to the occurrence of an Event of Default with respect to the
Debt Securities of a series and after the curing or waiving of all such Events
of Default with respect to that series that may have occurred:
(i) the duties and obligations of the Trustee shall with respect to
the Debt Securities of such series be determined solely by the express
provisions of this Indenture, and the Trustee shall not be liable with
respect to the Debt Securities of such series except for the performance
of such duties and obligations as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on the part of the Trustee, the
Trustee may with respect to the Debt Securities
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of such series conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon any certificates
or opinions furnished to the Trustee and conforming to the requirements of
this Indenture; but in the case of any such certificates or opinions that
by any provision hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirement of this
Indenture;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer or Responsible Officers of the Trustee,
unless it shall be proved that the Trustee, was negligent in ascertaining the
pertinent facts;
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the holders of not less than a majority in principal amount of the
Debt Securities of any series at the time Outstanding relating to the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee under this
Indenture with respect to the Debt Securities of that series; and
(4) None of the provisions contained in this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if there is reasonable ground for believing that
the repayment of such funds or liability is not reasonably assured to it under
the terms of this Indenture or adequate indemnity against such risk is not
reasonably assured to it.
SECTION 7.02. Certain Rights of Trustee. Except as otherwise
provided in Section 7.01:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, security or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) Any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by a Board Resolution or an
instrument signed in the name of the Company by the President, or any Vice
President and by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer thereof (unless other evidence in respect thereof is
specifically prescribed herein);
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(c) The Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken or suffered or omitted hereunder
in good faith and in reliance thereon;
(d) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders, pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby; nothing contained herein shall,
however, relieve the Trustee of the obligation, upon the occurrence of an Event
of Default with respect to a series of the Debt Securities (that has not been
cured or waived) to exercise with respect to Debt Securities of that series such
of the rights and powers vested in it by this Indenture, and to use the same
degree of care and skill in their exercise, as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs;
(e) The Trustee shall not be liable for any action taken or omitted
to be taken by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture;
(f) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
security, or other papers or documents, unless requested in writing so to do by
the holders of not less than a majority in principal amount of the Outstanding
Debt Securities of the particular series affected thereby (determined as
provided in Section 8.04); provided, however, that if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities likely to
be incurred by it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded to it by
the terms of this Indenture, the Trustee may require reasonable indemnity
against such costs, expenses or liabilities as a condition to so proceeding. The
reasonable expense of every such examination shall be paid by the Company or, if
paid by the Trustee, shall be repaid by the Company upon demand;
(g) The Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder;
(h) Whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action
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hereunder, the Trustee (unless other evidence be herein specifically prescribed)
may, in the absence of bad faith on its part, rely upon an Officers'
Certificate; and
(i) The Trustee shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
SECTION 7.03. Trustee Not Responsible for Recitals or Issuance of
Debt Securities. (a) The recitals contained herein and in the Debt Securities
shall be taken as the statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same.
(b) The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Debt Securities.
(c) The Trustee shall not be accountable for the use or application
by the Company of any of the Debt Securities or of the proceeds of such Debt
Securities, or for the use or application of any moneys paid over by the Trustee
in accordance with any provision of this Indenture or established pursuant to
Section 2.01, or for the use or application of any moneys received by any paying
agent other than the Trustee.
SECTION 7.04. May Hold Debt Securities. The Trustee or any paying
agent or Security Registrar, in its individual or any other capacity, may become
the owner or pledgee of Debt Securities with the same rights it would have if it
were not Trustee, paying agent or Security Registrar.
SECTION 7.05. Moneys Held in Trust. Subject to the provisions of
Section 11.05, all moneys received by the Trustee shall, until used or applied
as herein provided, be held in trust for the purposes for which they were
received, but need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
moneys received by it hereunder except such as it may agree with the Company to
pay thereon.
SECTION 7.06. Compensation and Reimbursement. (a) The Company
covenants and agrees to pay to the Trustee, and the Trustee shall be entitled
to, such reasonable compensation (which shall not be limited by any provision of
law in regard to the compensation of a trustee of an express trust), as the
Company and the Trustee may from time to time agree in writing, for all services
rendered by it in the execution of the trusts hereby created and in the exercise
and performance of any of the powers and duties hereunder of the Trustee, and,
except as otherwise expressly provided herein, the
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Company will pay or reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all Persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or bad faith. The Company also
covenants to indemnify the Trustee (and its officers, agents, directors and
employees) for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on the part of the Trustee and arising
out of or in connection with the acceptance or administration of this trust,
including the costs and expenses of defending itself against any claim of
liability in the premises.
(b) The obligations of the Company under this Section to compensate
and indemnify the Trustee and to pay or reimburse the Trustee for expenses,
disbursements and advances shall constitute additional indebtedness hereunder
and shall survive the satisfaction and discharge of this Indenture. Such
additional indebtedness shall be secured by a lien prior to that of the Debt
Securities upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the benefit of the holders of particular Debt
Securities.
SECTION 7.07. Reliance on Officers' Certificate. Except as
otherwise provided in Section 7.01, whenever in the administration of the
provisions of this Indenture the Trustee shall deem it necessary or desirable
that a matter be proved or established prior to taking or suffering or omitting
to take any action hereunder, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may, in the absence of negligence or
bad faith on the part of the Trustee, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Trustee and such
certificate, in the absence of negligence or bad faith on the part of the
Trustee, shall be full warrant to the Trustee for any action taken, suffered or
omitted to be taken by it under the provisions of this Indenture upon the faith
thereof.
SECTION 7.08. Qualification; Conflicting Interests. If the Trustee
has or shall acquire any "conflicting interest" within the meaning of Section
310(b) of the Trust Indenture Act, the Trustee and the Company shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 7.09. Corporate Trustee Required; Eligibility. There shall
at all times be a Trustee with respect to the Debt Securities issued hereunder
which shall at all times be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or other Person permitted to act as
trustee by the Commission, authorized under
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such laws to exercise corporate trust powers, having a combined capital and
surplus of at least fifty million U.S. dollars ($50,000,000), and subject to
supervision or examination by Federal, State, Territorial or District of
Columbia authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. The
Company may not, nor may any Person directly or indirectly controlling,
controlled by, or under common control with the Company, serve as Trustee. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect specified in Section 7.10.
SECTION 7.10. Resignation and Removal; Appointment of Successor.
(a) The Trustee or any successor hereafter appointed, may at any time resign
with respect to the Debt Securities of one or more series by giving written
notice thereof to the Company and the Guarantor and by transmitting notice of
resignation by mail, first class postage prepaid, to the Securityholders of such
series, as their names and addresses appear upon the Security Register. Upon
receiving such notice of resignation, the Company shall promptly appoint a
successor trustee with respect to Debt Securities of such series by written
instrument, in duplicate, executed by order of the Board of Directors, one copy
of which instrument shall be delivered to the resigning Trustee and one copy to
the successor trustee. If no successor trustee shall have been so appointed and
have accepted appointment within 30 days after the mailing of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee with respect to Debt
Securities of such series, or any Securityholder of that series who has been a
bona fide holder of a Debt Security or Debt Securities for at least six months
may, subject to the provisions of Section 6.08, on behalf of himself and all
others similarly situated, petition any such court for the appointment of a
successor trustee. Such court may thereupon after such notice, if any, as it
may deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any one of the following shall occur:
(1) the Trustee shall fail to comply with the provisions of
subsection (a) of Section 7.08 after written request therefor by the
Company or by any Securityholder who has been a bona fide holder of a Debt
Security or Debt Securities for at least six months; or
(2) the Trustee shall cease to be eligible in accordance with the
provisions of Section 7.09 and shall fail to resign
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after written request therefor by the Company or by any such
Securityholder; or
(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or commence a voluntary bankruptcy
proceeding, or a receiver of the Trustee or of its property shall be
appointed or consented to, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then, in any such case, the
Company may remove the Trustee with respect to all Debt Securities and
appoint a successor trustee by written instrument, in duplicate, executed
by order of the Board of Directors, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee,
or, subject to the provisions of Section 6.08, unless the Trustee's duty
to resign is stayed as provided herein, any Securityholder who has been a
bona fide holder of a Debt Security or Debt Securities for at least six
months may, on behalf of that holder and all others similarly situated,
petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor trustee. Such court may
thereupon after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the
Debt Securities of any series at the time Outstanding may at any time remove the
Trustee with respect to such series by so notifying the Trustee and the Company
and may appoint a successor Trustee for such series with the consent of the
Company.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee with respect to the Debt Securities of a series pursuant to
any of the provisions of this Section shall become effective upon acceptance of
appointment by the successor trustee as provided in Section 7.11.
(e) Any successor trustee appointed pursuant to this Section may be
appointed with respect to the Debt Securities of one or more series or all of
such series, and at any time there shall be only one Trustee with respect to the
Debt Securities of any particular series.
SECTION 7.11. Acceptance of Appointment By Successor. (a) In case
of the appointment hereunder of a successor trustee with respect to all Debt
Securities, every such successor trustee so appointed shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring
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Trustee; but, on the request of the Company or the successor trustee, such
retiring Trustee shall, upon payment of its charges, execute and deliver an
instrument transferring to such successor trustee all the rights, powers, and
trusts of the retiring Trustee and shall duly assign, transfer and deliver to
such successor trustee all property and money held by such retiring Trustee
hereunder.
(b) In case of the appointment hereunder of a successor trustee
with respect to the Debt Securities of one or more (but not all) series, the
Company, the retiring Trustee and each successor trustee with respect to the
Debt Securities of one or more series shall execute and deliver an indenture
supplemental hereto wherein each successor trustee shall accept such appointment
and which (1) shall contain such provisions as shall be necessary or desirable
to transfer and confirm to, and to vest in, each successor trustee all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Debt Securities of that or those series to which the appointment of such
successor trustee relates, (2) shall contain such provisions as shall be deemed
necessary or desirable to confirm that all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Debt Securities of that or those
series as to which the retiring Trustee is not retiring shall continue to be
vested in the retiring Trustee, and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust, that each such Trustee
shall be trustee of a trust or trusts hereunder separate and apart from any
trust or trusts hereunder administered by any other such Trustee and that no
Trustee shall be responsible for any act or failure to act on the part of any
other Trustee hereunder; and upon the execution and delivery of such
supplemental indenture the resignation or removal of the retiring Trustee shall
become effective to the extent provided therein, such retiring Trustee shall
with respect to the Debt Securities of that or those series to which the
appointment of such successor trustee relates have no further responsibility for
the exercise of rights and powers or for the performance of the duties and
obligations vested in the Trustee under this Indenture, and each such successor
trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee with respect
to the Debt Securities of that or those series to which the appointment of such
successor trustee relates; but, on request of the Company or any successor
trustee, such retiring Trustee shall duly assign, transfer and deliver to such
successor trustee, to the extent contemplated by such supplemental indenture,
the property and money held by such retiring Trustee hereunder with respect to
the Debt Securities of that or those series to which the appointment of such
successor trustee relates.
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(c) Upon request of any such successor trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor trustee all such rights,, powers and trusts
referred to in paragraph (a) or (b) of this Section, as the case may be.
(d) No successor trustee shall accept its appointment unless at the
time of such acceptance such successor trustee shall be qualified and eligible
under this Article.
(e) Upon acceptance of appointment by a successor trustee as
provided in this Section, the Company shall transmit notice of the succession of
such trustee hereunder by mail, first class postage prepaid, to the
Securityholders, as their names and addresses appear upon the Security Register.
If the Company fails to transmit such notice within ten days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be transmitted at the expense of the Company.
SECTION 7.12. Merger, Conversion, Consolidation or Succession to
Business. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to the corporate trust business of the Trustee, shall be
the successor of the Trustee hereunder, provided that such corporation shall be
qualified under the provisions of Section 7.08 and eligible under the provisions
of Section 7.09, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding. In case any Debt Securities shall have been authenticated, but
not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Debt Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Debt
Securities.
SECTION 7.13. Preferential Collection of Claims Against the
Company. The Trustee shall comply with Section 311(a) of the Trust Indenture
Act, excluding any creditor relationship described in Section 311(b) of the
Trust Indenture Act. A Trustee who has resigned or been removed shall be
subject to Section 311(a) of the Trust Indenture Act to the extent included
therein.
ARTICLE VIII
CONCERNING THE SECURITYHOLDERS
SECTION 8.01. Evidence of Action by Securityholders. Whenever in
this Indenture it is provided that the holders of a majority or specified
percentage in aggregate principal amount of the Debt Securities of a particular
series may take any action
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(including the making of any demand or request, the giving of any notice,
consent or waiver or the taking of any other action), the fact that at the time
of taking any such action the holders of such majority or specified percentage
of that series have joined therein may be evidenced by any instrument or any
number of instruments of similar tenor executed by such holders of Debt
Securities of that series in Person or by agent or proxy appointed in writing.
If the Company shall solicit from the Securityholders of any series
any request, demand, authorization, direction, notice, consent, waiver or other
action, the Company may, at its option, as evidenced by an Officers'
Certificate, fix in advance a record date for such series for the determination
of Securityholders (entitled to give such request, demand, authorization,
direction, notice, consent, waiver or other action, but the Company shall have
no obligation to do so. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other action may be given
before or after the record date, but only the Securityholders of record at the
close of business on the record date shall be deemed to be Securityholders for
the purposes of determining whether Securityholders of the requisite proportion
of Outstanding Debt Securities of that series have authorized or agreed or
consented to such request, demand, authorization, direction, notice, consent,
waiver or other action, and for that purpose the Outstanding Debt Securities of
that series shall be computed as of the record date; provided, however, that no
such authorization, agreement or consent by such Securityholders on the record
date shall be deemed effective unless it shall become effective pursuant to the
provisions of this Indenture not later than six months after the record date.
SECTION 8.02. Proof of Execution by Securityholders. Subject to
the provisions of Section 7.01, proof of the execution of any instrument by a
Securityholder (such proof will not require notarization) or his agent or proxy
and proof of the holding by any Person of any of the Debt Securities shall be
sufficient if made in the following manner:
(a) The fact and date of the execution by any such Person of any
instrument may be proved in any reasonable manner acceptable to the
Trustee.
(b) The ownership of Debt Securities shall be proved by the Debt
Security Register of such Debt Securities or by a certificate of the Debt
Security Registrar thereof.
(c) The Trustee may require such additional proof of any matter
referred to in this Section as it shall deem necessary.
SECTION 8.03. Who May be Deemed Owners. Prior to the due
presentment for registration of transfer of any Debt Security, the Company, the
Trustee, any paying agent and any Debt Security Registrar may deem and treat the
Person in whose name such Debt
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Security shall be registered upon the books of the Company as the absolute owner
of such Debt Security (whether or not such Debt Security shall be overdue and
notwithstanding any notice of ownership or writing thereon made by anyone other
than the Debt Security Registrar) for the purpose of receiving payment of or on
account of the principal of, premium, if any, and (subject to Section 2.03)
interest on such Debt Security and for all other purposes; and neither the
Company nor Guarantor nor the Trustee nor any paying agent nor any Debt Security
Registrar shall be affected by any notice to the contrary.
SECTION 8.04. Certain Debt Securities Owned by Company
Disregarded. In determining whether the holders of the requisite aggregate
principal amount of Debt Securities of a particular series have concurred in any
direction, consent or waiver under this Indenture, the Debt Securities of that
series that are owned by the Company or any other obligor on the Debt Securities
of that series or by any Person directly or indirectly controlling or controlled
by or under common control with the Company or any other obligor on the Debt
Securities of that series shall be disregarded and deemed not to be outstanding
for the purpose of any such determination, except that for the purpose of
determining whether the Trustee shall be protected in relying on any such
direction, consent or waiver, only Debt Securities of such series that the
Trustee actually knows are so owned shall be so disregarded. The Debt
Securities so owned that have been pledged in good faith may be regarded as
outstanding for the purposes of this Section, if the pledgee shall establish to
the satisfaction of the Trustee the pledgee's right so to act with respect to
such Debt Securities and that the pledgee is not a Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or the Guarantor or any such other obligor. In case of a dispute as to
such right, any decision by the Trustee taken upon the advice of counsel shall
be full protection to the Trustee.
SECTION 8.05. Actions Binding on Future Securityholders. At any
time prior to (but not after) the evidencing to the Trustee, as provided in
Section 8.01, of the taking of any action by the holders of a majority or
specified percentage in aggregate principal amount of the Debt Securities of a
particular series in connection with such action, any holder of a Debt Security
of that series that is shown by the evidence to be included in the Debt
Securities the holders of which have consented to such action may, by filing
written notice with the Trustee, and upon proof of holding as provided in
Section 8.02, revoke such action so far as concerns such Debt Security. Except
as aforesaid, any such action taken by the holder of any Debt Security shall be
conclusive and binding upon such holder and upon all future holders and owners
of such Debt Security, and of any Debt Security issued in exchange therefor, on
registration of transfer thereof or in place thereof, irrespective of whether or
not any notation in regard thereto is made upon such Debt Security. Any action
taken by the holders of a majority or specified percentage in aggregate
principal amount of
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the Debt Securities of a particular series in connection with such action shall
be conclusively binding upon the Company, the Trustee and the holders of all the
Debt Securities of that series.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures Without the Consent of
Securityholders. In addition to any supplemental indenture otherwise authorized
by this Indenture, the Company and the Guarantor and the Trustee may from time
to time and at any time enter into an indenture or indentures supplemental
hereto (which shall conform to the provisions of the Trust Indenture Act as then
in effect), without the consent of the Securityholders, for one or more of the
following purposes:
(a) to cure any ambiguity, defect or inconsistency herein or in the
Debt Securities of any series;
(b) to comply with Article X;
(c) to provide for uncertificated Debt Securities in addition to or
in place of certificated Debt Securities;
(d) to add to the covenants of the Company for the benefit of the
holders of all or any series of Debt Securities (and if such covenants are
to be for the benefit of less than all series of Debt Securities, stating
that such covenants are expressly being included solely for the benefit of
such series) or to surrender any right or power herein conferred upon the
Company;
(e) to add to, delete from, or revise the conditions, limitations
and restrictions on the authorized amount, terms or purposes of issue,
authentication and delivery of Debt Securities, as herein set forth;
(f) to make any change that does not adversely affect the rights of
any Securityholder in any material respect; or
(g) to provide for the issuance of and establish the form and terms
and conditions of the Debt Securities of any series as provided in Section
2.01, to establish the form of any certifications required to be furnished
pursuant to the terms of this Indenture or any series of Debt Securities,
or to add to the rights of the holders of any series of Debt Securities.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter
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into any such supplemental indenture that affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this
Section may be executed by the Company and the Trustee without the consent of
the holders of any of the Debt Securities at the time Outstanding
notwithstanding any of the provisions of Section 9.02.
SECTION 9.02. Supplemental Indentures With Consent of
Securityholders. With the consent (evidenced as provided in Section 8.01) of
the holders of not less than a majority in aggregate principal amount of the
Debt Securities of each series affected by such supplemental indenture or
indentures at the time Outstanding, the Company, when authorized by a Board
Resolution, and the Trustee may from time to time and at any time enter into an
indenture or indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act as then in effect) for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of any supplemental indenture or of modifying in
any manner not covered by Section 9.01 the rights of the holders of the Debt
Securities of such series under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the holders of each Debt
Security then Outstanding and affected thereby, (i) extend the fixed maturity of
any Debt Securities of any series, or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon, or reduce any
premium payable upon the redemption thereof, without the consent of the holder
of each Debt Security so affected or (ii) reduce the aforesaid percentage of
Debt Securities, the holders of which are required to consent to any such
supplemental indenture.
It shall not be necessary for the consent of the Securityholders of
any series affected thereby under this Section to approve the particular form of
any proposed supplemental indenture, but it shall be sufficient if such consent
shall approve the substance thereof.
SECTION 9.03. Effect of Supplemental Indentures. Upon the
execution of any supplemental indenture pursuant to the provisions of this
Article or of Section 10.01, this Indenture shall, with respect to such series,
be and be deemed to be modified and amended in accordance therewith and the
respective rights, limitations of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Company and the holders of Debt
Securities of the series affected thereby shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
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SECTION 9.04. Debt Securities Affected by Supplemental Indentures.
Debt Securities of any series, affected by a supplemental indenture,
authenticated and delivered after the execution of such supplemental indenture
pursuant to the provisions of this Article or of Section 10.01, may bear a
notation in form approved by the Company, provided such form meets the
requirements of any exchange upon which such series may be listed, as to any
matter provided for in such supplemental indenture. If the Company shall so
determine, new Debt Securities of that series so modified as to conform, in the
opinion of the Board of Directors of the Company, to any modification of this
Indenture contained in any such supplemental indenture may be prepared by the
Company, authenticated by the Trustee and delivered in exchange for the Debt
Securities of that series then outstanding.
SECTION 9.05. Execution of Supplemental Indentures. Upon the
request of the Company, accompanied by a Board Resolution authorizing the
execution of any such supplemental indenture, and upon the filing with the
Trustee of evidence of the consent of Securityholders required to consent
thereto as aforesaid, the Trustee shall join with the Company in the execution
of such supplemental indenture unless such supplemental indenture affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise, in
which case the Trustee may in its discretion but shall not be obligated to enter
into such supplemental indenture. The Trustee, subject to the provisions of
Section 7.01, may receive an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant to this Article is authorized or
permitted by, and conforms to, the terms of this Article and that it is proper
for the Trustee under the provisions of this Article to join in the execution
thereof.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall transmit by mail, first class postage prepaid, a notice, setting forth in
general terms the substance of such supplemental indenture, to the
Securityholders of all series affected thereby as their names and addresses
appear upon the Debt Security Register. Any failure of the Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
ARTICLE X
SUCCESSOR CORPORATION
SECTION 10.01. Company May Consolidate, Etc. Nothing contained in
this Indenture or in any of the Debt Securities shall prevent any consolidation
or merger of the Company with or into any other corporation or corporations
(whether or not affiliated with the Company), or successive consolidations or
mergers in which the Company or its successor or successors shall be a party or
parties,
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or shall prevent any sale, conveyance, transfer or other disposition of the
property of the Company or its successor or successors as an entirety, or
substantially as an entirety, to any other corporation (whether or not
affiliated with the Company or the Guarantor, as the case may be, or its
successor or successors) authorized to acquire and operate the same; provided,
however, the Company hereby covenants and agrees that, upon any such
consolidation, merger, sale, conveyance, transfer or other disposition, the due
and punctual payment of the principal of (premium, if any) and interest on all
of the Debt Securities of all series in accordance with the terms of each
series, according to their tenor and the due and punctual performance and
observance of all the covenants and conditions of this Indenture with respect to
each series or established with respect to such series pursuant to Section 2.01
to be kept or performed by the Company, shall be expressly assumed, by
supplemental indenture (which shall conform to the provisions of the Trust
Indenture Act, as then in effect) satisfactory in form to the Trustee executed
and delivered to the Trustee by the entity formed by such consolidation, or into
which the Company shall have been merged, or by the entity which shall have
acquired such property.
SECTION 10.02. Successor Corporation Substituted. (a) In case of
any such consolidation, merger, sale, conveyance, transfer or other disposition
and upon the assumption by the successor corporation, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the Trustee,
of the due and punctual payment of the principal of, premium, if any, and
interest on all of the Debt Securities of all series Outstanding and the due and
punctual performance of all of the covenants and conditions of this Indenture or
established with respect to each series of the Debt Securities pursuant to
Section 2.01 to be performed by the Company, with respect to each series, such
successor corporation shall succeed to and be substituted for the Company, with
the same effect as if it had been named as the Company herein.
(b) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition, such changes in phraseology and form (but not in
substance) may be made in the Debt Securities thereafter to be issued as may be
appropriate.
(c) Nothing contained in this Indenture or in any of the Debt
Securities shall prevent the Company from merging into itself or acquiring by
purchase or otherwise all or any part of the property of any other Person
(whether or not affiliated with the Company).
SECTION 10.03. Evidence of Consolidation, Etc. to Trustee. The
Trustee, subject to the provisions of Section 7.01, may receive an Opinion of
Counsel as conclusive evidence that any such consolidation, merger, sale,
conveyance, transfer or other
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disposition, and any such assumption, comply with the provisions of this
Article.
ARTICLE XI
SATISFACTION AND DISCHARGE
SECTION 11.01. Satisfaction and Discharge of Indenture. If at any
time: (a) the Company shall have delivered to the Trustee for cancellation all
Debt Securities of a series theretofore authenticated (other than any Debt
Securities that shall have been destroyed, lost or stolen and that shall have
been replaced or paid as provided in Section 2.07) and Debt Securities for whose
payment money or Governmental Obligations have theretofore been deposited in
trust or segregated and held in trust by the Company or the Guarantor (and
thereupon repaid to the Company or discharged from such trust, as provided in
Section 11.05); or (b) all such Debt Securities of a particular series not
theretofore delivered to the Trustee for cancellation shall have become due and
payable, or are by their terms to become due and payable within one year or are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption, and the Company shall
deposit or cause to be deposited with the Trustee as trust funds the entire
amount in moneys or Governmental Obligations or a combination thereof,
sufficient in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, to pay at maturity or upon redemption all Debt Securities of that
series not theretofore delivered to the Trustee for cancellation, including
principal (and premium, if any) and interest due or to become due to such date
of maturity or date fixed for redemption, as the case may be, and if the Company
shall also pay or cause to be paid all other sums payable hereunder with respect
to such series by the Company; then if the Company has delivered to the Trustee
an Opinion of Counsel based on the fact that (x) the Company has received from,
or there has been published by, the Internal Revenue Service a ruling or (y)
since the date hereof, there has been a change in the applicable United States
federal income tax law, in either case to the effect that, and such opinion
shall confirm that, the holders of the Debt Securities of such series will not
recognize income, gain or loss for United States federal income tax purposes as
a result of such deposit, defeasance and discharge and will be subject to United
States federal income tax on the same amount and in the same manner and at the
same times, as would have been the case if such deposit, defeasance and
discharge had not occurred, this Indenture shall thereupon cease to be of
further effect with respect to such series except for the provisions of Sections
2.03, 2.05, 2.07, 4.01, 4.02, 4.03 and 7.10, that shall survive until the date
of maturity or redemption date, as the case may be, and Sections 7.06 and 11.05,
that shall survive to such date and thereafter, and the Trustee, on demand of
the Company and at the cost and expense of the Company
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<PAGE>
shall execute proper instruments acknowledging satisfaction of and discharging
this Indenture with respect to such series.
SECTION 11.02. Discharge of Obligations. If at any time all Debt
Securities of a particular series not heretofore delivered to the Trustee for
cancellation or that have not become due and payable as described in Section
11.01 shall have been paid by the Company by depositing irrevocably with the
Trustee as trust funds moneys or an amount of Governmental Obligations
sufficient to pay at maturity or upon redemption all such Debt Securities of
that series not theretofore delivered to the Trustee for cancellation, including
principal (and premium, if any) and interest due or to become due to such date
of maturity or date fixed for redemption, as the case may be, and if the Company
shall also pay or cause to be paid all other sums payable hereunder by the
Company with respect to such series, then after the date such moneys or
Governmental Obligations, as the case may be, are deposited with the Trustee
then, if the Company has delivered to the Trustee an Opinion of Counsel based on
the fact that (x) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling or (y) since the date hereof, there has
been a change in the applicable United States federal income tax law, in either
case to the effect that, and such opinion shall confirm that, the holders of the
Debt Securities of such series will not recognize income, gain or loss for
United States federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to United States federal income tax
on the same amount and in the same manner and at the same times, as would have
been the case if such deposit, defeasance and discharge had not occurred, the
obligations of the Company, under this Indenture with respect to such series
shall cease to be of further effect except for the provisions of Sections 2.03,
2.05, 2.07, 4.01, 4.02, 4.03, 7.06, 7.10 and 11.05 hereof that shall survive
until such Debt Securities shall mature and be paid. Thereafter, Sections 7.06
and 11.05 shall survive.
SECTION 11.03. Deposited Moneys to be Held in Trust. All moneys or
Governmental Obligations deposited with the Trustee pursuant to Section 11.02
shall be held in trust and shall be available for payment as due, either
directly or through any paying agent (including the Company acting as its own
paying agent), to the holders of the particular series of Debt Securities for
the payment or redemption of which such moneys or Governmental Obligations have
been deposited with the Trustee.
SECTION 11.04. Payment of Moneys Held by Paying Agents. In
connection with the satisfaction and discharge of this Indenture, all moneys or
Governmental Obligations then held by any paying agent under the provisions of
this Indenture shall, upon demand of the Company, be paid to the Trustee and
thereupon such paying agent shall be released from all further liability with
respect to such moneys or Governmental Obligations.
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<PAGE>
SECTION 11.05. Repayment to Company. Any moneys or Governmental
Obligations deposited with any paying agent or the Trustee, or then held by the
Company, in trust for payment of principal of or premium or interest on the Debt
Securities of a particular series that are not applied but remain unclaimed by
the holders of such Debt Securities for at least two years after the date upon
which the principal of (and premium, if any) or interest on such Debt Securities
shall have respectively become due and payable, shall be repaid to the Company
on May 31 of each year or (if then held by the Company) shall be discharged from
such trust; and thereupon the paying agent and the Trustee shall be released
from all further liability with respect to such moneys or Governmental
Obligations, and the holder of any of the Debt Securities entitled to receive
such payment shall thereafter, as an unsecured general creditor, look only to
the Company for the payment thereof.
ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS
SECTION 12.01. No Recourse. No recourse under or upon any
obligation, covenant or agreement of this Indenture, or of any Debt Security, or
for any claim based thereon or otherwise in respect thereof, shall be had
against any incorporator, stockholder, officer or director, past, present or
future as such, of the Company or of any predecessor or successor corporation,
either directly or through the Company or any such predecessor or successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that this Indenture and the obligations issued hereunder are solely
corporate obligations, and that no such personal liability whatever shall attach
to, or is or shall be incurred by, the incorporators, stockholders, officers or
directors as such, of the Company or of any predecessor or successor
corporation, or any of them, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations, covenants or agreements
contained in this Indenture or in any of the Debt Securities or implied
therefrom; and that any and all such personal liability of every name and
nature, either at common law or in equity or by constitution or statute, of, and
any and all such rights and claims against, every such incorporator,
stockholder, officer or director as such, because of the creation of the
indebtedness hereby authorized, or under or by reason of the obligations,
covenants or agreements contained in this Indenture or in any of the Debt
Securities or implied therefrom, are hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issuance of such Debt Securities.
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<PAGE>
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.01. Effect on Successors and Assigns. All the
covenants, stipulations, promises and agreements in this Indenture contained by
or on behalf of the Company shall bind successors and assigns, whether so
expressed or not.
SECTION 13.02. Actions by Successor. Any act or proceeding by any
provision of this Indenture authorized or required to be done or performed by
any board, committee or officer of the Company or the Guarantor shall and may be
done and performed with like force and effect by the corresponding board,
committee or officer of any corporation that shall at the time be the lawful
successor of the Company.
SECTION 13.03. Surrender of Company Powers. The Company by
instrument in writing executed by authority of 2/3 (two-thirds) of its Board of
Directors and delivered to the Trustee may surrender any of the powers reserved
to the Company, and thereupon such power so surrendered shall terminate both as
to the Company and as to any successor corporation.
SECTION 13.04. Notices. Except as otherwise expressly provided
herein, any notice or demand that by any provision of this Indenture is required
or permitted to be given or served by the Trustee or by the holders of Debt
Securities to or on the Company may be given or served by being deposited first
class postage prepaid in a post-office letterbox addressed (until another
address is filed in writing by the Company with the Trustee), as follows:
Commonwealth Edison Company, 10 South Dearborn Street--37th Floor, Chicago,
Illinois 60690-0767, Attention: Treasurer. Any notice, election, request or
demand by the Company or any Securityholder to or upon the Trustee shall be
deemed to have been sufficiently given or made, for all purposes, if given or
made in writing at the Corporate Trust Office of the Trustee.
SECTION 13.05. Governing Law. This Indenture and each Debt
Security shall be deemed to be a contract made under the internal laws of the
State of New York, and for all purposes shall be construed in accordance with
the laws of said State.
SECTION 13.06. Treatment of the Debt Securities as Debt. It is
intended that the Debt Securities will be treated as indebtedness and not as
equity for federal income tax purposes. The provisions of this Indenture shall
be interpreted to further this intention.
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<PAGE>
SECTION 13.07. Compliance Certificates and Opinions. (a) Upon any
application or demand by the Company to the Trustee to take any action under any
of the provisions of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent provided for in this
Indenture relating to the proposed action have been complied with and an Opinion
of Counsel stating that in the opinion of such counsel all such conditions
precedent have been complied with, except that in the case of any such
application or demand as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to such
particular application or demand, no additional certificate or opinion need be
furnished.
(b) Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
in this Indenture shall include (1) a statement that the Person making such
certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are
based; (3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with.
SECTION 13.08. Payments on Business Days. Except as provided
pursuant to Section 2.01 pursuant to a Board Resolution, and as set forth in an
Officers' Certificate, or established in one or more indentures supplemental to
this Indenture, in any case where the date of maturity of interest or principal
of any Debt Security or the date of redemption of any Debt Security shall not be
a Business Day, then payment of interest or principal (and premium, if any) may
be made on the next succeeding Business Day with the same force and effect as if
made on the nominal date of maturity or redemption, and no interest shall accrue
for the period after such nominal date.
SECTION 13.09. Conflict with Trust Indenture Act. If and to the
extent that any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture
Act, such imposed duties shall control.
SECTION 13.10. Counterparts. This Indenture may be executed in any
number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
SECTION 13.11. Separability. In case any one or more of the
provisions contained in this Indenture or in the Debt
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<PAGE>
Securities of any series shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Indenture or of such Debt
Securities, but this Indenture and such Debt Securities shall be construed as if
such invalid or illegal or unenforceable provision had never been contained
herein or therein.
SECTION 13.12. Assignment. The Company will have the right at all
times to assign any of its respective rights or obligations under this Indenture
to a direct or indirect wholly-owned Subsidiary of the Company, provided that,
in the event of any such assignment, the Company will remain liable for all such
obligations. Subject to the foregoing, the Indenture is binding upon and inures
to the benefit of the parties thereto and their respective successors and
assigns. This Indenture may not otherwise be assigned by the parties thereto.
SECTION 13.13. Acknowledgment of Rights. The Company acknowledges
that, with respect to any Debt Securities held by a ComEd Trust or a trustee of
such trust, if the Property Trustee of such Trust fails to enforce its rights
under this Indenture as the holder of the series of Debt Securities held as the
assets of such ComEd Trust, any holder of Preferred Securities may, after a
period of 30 days has elapsed from such holder's written request to such
Property Trustee to enforce such rights, institute legal proceedings directly
against the Company to enforce such Property Trustee's rights under this
Indenture without first instituting any legal proceedings against such Property
Trustee or any other person or entity.
ARTICLE XIV
SUBORDINATION OF DEBT SECURITIES
SECTION 14.01. Subordination Terms. The payment by the Company of
the principal of, premium, if any, and interest on any series of Debt Securities
issued hereunder shall be subordinated to the extent set forth in an indenture
supplemental hereto relating to such Debt Securities.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
COMMONWEALTH EDISON COMPANY
By: John C. Bukovski
------------------------------------
John C. Bukovski
Vice President
Attest:
By: David A. Scholz
-----------------------------
David A. Scholz
Secretary
WILMINGTON TRUST COMPANY,
Not in its individual capacity but solely
as Trustee
By: W. Chris Sponenberg
------------------------------------
Name: W. Chris Sponenberg
Title: Financial Services Officer
Attest:
By: Patricia A. Evans
-----------------------------
Name:Patricia A. Evans
Title: Financial Services Officer
<PAGE>
STATE OF ILLINOIS)
COUNTY OF COOK ) SS
On the 25th day of September, 1995, before me personally came John C. Bukovski
to me known, who, being by me duly sworn, did depose and say that he is a Vice
President of COMMONWEALTH EDISON COMPANY, one of the corporations described in
and which executed the above instrument; that he knows the corporate seal of
said corporation; that the seal affixed to the said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
NOTARY PUBLIC
Lupe Luna
------------------
[seal] Commission expires: November 9, 1997
STATE OF DELAWARE )
COUNTY OF New Castle ) SS
On the 22nd day of September, 1995, before me personally came W. Chris
Sponenberg to me known, who, being by me duly sworn, did depose and say that he
is a Financial Services Officer of WILMINGTON TRUST COMPANY, one of the
corporations described in and which executed the above instrument; that he knows
the corporate seal of said corporation; that the seal affixed to the said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation, and that he signed his name thereto by
like authority.
NOTARY PUBLIC
Kathleen A. Pedelini
-------------------------
[seal] Commission expires: October 31, 1998
<PAGE>
Exhibit (4)-35
Commonwealth Edison Company
Form 10-K File No. 1-1839
FIRST SUPPLEMENTAL INDENTURE
Dated as of September 19, 1995
Between
COMMONWEALTH EDISON COMPANY
and
WILMINGTON TRUST COMPANY
<PAGE>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . 2
Section 1.1. Definition of Terms . . . . . . . . . . . . . . . . . 2
Section 1.2. Interpretation . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
GENERAL TERMS AND CONDITIONS OF
THE NOTES . . . . . . . . . . . . . . . 3
Section 2.1. Designation and Principal Amount . . . . . . . . . . 3
Section 2.2. Maturity . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.3. Form and Payment . . . . . . . . . . . . . . . . . . 4
Section 2.4. Global Note . . . . . . . . . . . . . . . . . . . . . 4
Section 2.5. Interest . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
REDEMPTION OF THE NOTES . . . . . . . . . . . . 6
Section 3.1. Special Event Redemption . . . . . . . . . . . . . . 6
Section 3.2. Optional Redemption by Company . . . . . . . . . . . 6
Section 3.3. No Sinking Fund . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD . . . . . . . . 7
Section 4.1. Extension of Interest Payment Period . . . . . . . . 7
Section 4.2. Notice of Extension . . . . . . . . . . . . . . . . . 8
ARTICLE V
EXPENSES . . . . . . . . . . . . . . . 8
Section 5.1. Payment of Expenses . . . . . . . . . . . . . . . . . 8
ARTICLE VI
SUBORDINATION . . . . . . . . . . . . . . 9
Section 6.1. Agreement to Subordinate . . . . . . . . . . . . . . 9
Section 6.2. Default on Senior Indebtedness . . . . . . . . . . . 9
Section 6.3. Liquidation; Dissolution; Bankruptcy . . . . . . . . 10
Section 6.4. Subrogation . . . . . . . . . . . . . . . . . . . . . 11
Section 6.5. Trustee to Effectuate Subordination . . . . . . . . . 12
Section 6.6. Notice by the Company . . . . . . . . . . . . . . . . 12
Section 6.7. Rights of the Trustee; Holders of Senior
Indebtedness . . . . . . . . . . . . . . . . . . . . 13
Section 6.8. Subordination May Not Be Impaired . . . . . . . . . . 14
ARTICLE VII
COVENANT TO LIST ON EXCHANGE . . . . . . . . . . 14
Section 7.1. Listing on Exchange . . . . . . . . . . . . . . . . . 14
ARTICLE VIII
FORM OF NOTE . . . . . . . . . . . . . . 15
Section 8.1. Form of Note . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IX
ORIGINAL ISSUE OF NOTES . . . . . . . . . . . . 21
Section 9.1. Original Issue of Notes . . . . . . . . . . . . . . . 21
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<PAGE>
ARTICLE X
MISCELLANEOUS . . . . . . . . . . . . . . 22
Section 11.1. Ratification of Indenture . . . . . . . . . . . . . 22
Section 11.2. Trustee Not Responsible for Recitals . . . . . . . . 22
Section 11.3. Governing Law . . . . . . . . . . . . . . . . . . . 22
Section 11.4. Separability . . . . . . . . . . . . . . . . . . . . 22
Section 11.5. Counterparts . . . . . . . . . . . . . . . . . . . . 22
-ii-
<PAGE>
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of September 19, 1995
(the "First Supplemental Indenture"), between Commonwealth Edison Company, an
Illinois corporation (the "Company"), and Wilmington Trust Company, not in its
individual capacity but solely as trustee (the "Trustee") under the Indenture
dated as of September 1, 1995 between the Company and the Trustee (the
"Indenture").
W I T N E S S E T H:
WHEREAS, the Company executed and delivered the Indenture to the
Trustee to provide for the future issuance of the Company's unsecured subordi-
nated debt securities, to be issued from time to time in one or more series as
might be determined by the Company under the Indenture, in an unlimited
aggregate principal amount which may be authenticated and delivered as provided
in the Indenture; and
WHEREAS, pursuant to the terms of the Indenture, the Company desires
to provide for the establishment of a new series of its Debt Securities to be
known as its 8.48% Subordinated Deferrable Interest Notes due September 30, 2035
(the "Notes"), the form and substance of such Notes and the terms, provisions
and conditions thereof to be set forth as provided in the Indenture and this
First Supplemental Indenture; and
WHEREAS, ComEd Financing I, a Delaware statutory business trust (the
"Trust"), has offered to the public $200 million aggregate stated liquidation
amount of its Trust Originated Preferred Securities (the "Preferred Securities")
and has offered to the Company $6.19 million aggregate stated liquidation amount
of its Trust Originated Common Securities (the "Common Securities"), such
Preferred Securities and Common Securities representing undivided beneficial
interests in the assets of the Trust, and proposes to invest the proceeds from
such offering in $206,190,000 aggregate principal amount of the Notes; and
WHEREAS, the Company has requested the Trustee to execute and
deliver this First Supplemental Indenture, and all requirements necessary to
make this First Supplemental Indenture a valid instrument, in accordance with
its terms, and to make the Notes, when executed by the Company and authenticated
and delivered by the Trustee, the valid obligations of the Company, have been
performed, and the execution and delivery of this First Supplemental Indenture
has been duly authorized in all respects;
NOW, THEREFORE, in consideration of the purchase and acceptance of
the Notes by the holders thereof, and for the purpose of setting forth, as
provided in the Indenture, the form and substance of the Notes and the terms,
provisions and conditions
<PAGE>
thereof, the Company covenants and agrees with the Trustee as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definition of Terms. Unless the context otherwise
requires, (a) a term defined in the Indenture has the same meaning when used in
this First Supplemental Indenture, (b) a term defined anywhere in this First
Supplemental Indenture has the same meaning throughout and (c) the following
terms have the meanings given to them in the Declaration: (i) Clearing Agency;
(ii) Delaware Trustee; (iii) Dissolution Tax Opinion; (iv) No Recognition
Opinion; (v) Preferred Security Certificate; (vi) Property Trustee; (vii) Pro
Rata; (viii) Regular Trustees; (ix) Special Event; and (x) Tax Event.
In addition, the following terms have the following respective
meanings:
"Declaration" means the Amended and Restated Declaration of Trust of
ComEd Financing I, a Delaware business trust, dated as of September 19,
1995.
"Dissolution Event" means that, as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in
accordance with the Declaration and the Notes held by the Property Trustee
are to be distributed to the holders of the Trust Securities issued by the
Trust Pro Rata in accordance with the Declaration.
"Maturity Date" means the date on which the Notes mature and on
which the principal shall be due and payable together with all accrued and
unpaid interest thereon including Compounded Interest and Additional
Interest, if any.
"Senior Indebtedness" means (i) any payment in respect of (A)
indebtedness of the Company for money borrowed and (B) indebtedness
evidenced by securities, debentures, bonds, notes or other similar
instruments issued by the Company including, without limitation,
indebtedness evidenced by securities issued pursuant to the provisions of
the Mortgage dated July 1, 1923, as supplemented by Supplemental Indenture
dated August 1, 1944 and subsequent supplemental indentures, between the
Company, as mortgagor, and Bank of America Illinois and Robert Donahue, as
trustees; the Indenture dated as of September 1, 1987, as supplemented and
amended, between the Company and Citibank, N.A., as trustee; the
Indentures dated April 1, 1949, October 1, 1949, October 1, 1950, October
1, 1954, January 1, 1958, January 1, 1959 and December 1, 1961, between
the Company and Harris Trust and Savings Bank, as successor trustee to The
First National Bank of Chicago; and
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<PAGE>
the Indenture dated February 15, 1973, as supplemented, between the
Company and LaSalle National Bank, as successor trustee to The First
National Bank of Chicago; (ii) all capital lease obligations of the
Company; (iii) all obligations of the Company issued or assumed as the
deferred purchase price of property, all conditional sale obligations of
the Company and all obligations of such obligor under any title retention
agreement (but excluding trade accounts payable arising in the ordinary
course of business); (iv) all obligations of the Company for reimbursement
on any letter of credit, banker's acceptance, security purchase facility
or similar credit transaction; (v) all obligations of the type referred to
in clauses (i) through (iv) of other persons for the payment of which the
Company is responsible or liable as obligor, guarantor or otherwise; and
(vi) all obligations of the type referred to in clauses (i) through (v) of
other persons secured by any lien on any property or asset of the Company
(whether or not such obligation is assumed by such obligor), except for
(1) any such indebtedness that is by its terms subordinated to or pari
passu with the Notes, as the case may be, including all other debt
securities and guarantees in respect of those debt securities, issued to
any other trusts, partnerships or any other entity affiliated with the
Company which is a financing vehicle of the Company ("Financing Entity")
in connection with an issuance of preferred securities by such Financing
Entity or other securities which rank pari passu with, or junior to, the
Preferred Securities, and (2) any indebtedness between or among the
Company and its Affiliates.
Section 1.2. Interpretation. Each definition in this First
Supplemental Indenture includes the singular and the plural, and references to
the neuter gender include the masculine and feminine where appropriate. Terms
which relate to accounting matters shall be interpreted in accordance with
generally accepted accounting principles in effect from time to time. References
to any statute mean such statute as amended at the time and include any
successor legislation. The word "or" is not exclusive, and the words "herein,"
"hereof" and "hereunder" refer to this First Supplemental Indenture as a whole.
The headings to the Articles and Sections are for convenience of reference and
shall not affect the meaning or interpretation of this First Supplemental
Indenture. References to Articles and Sections mean the Articles and Sections
of this First Supplemental Indenture.
ARTICLE II
GENERAL TERMS AND CONDITIONS OF
THE NOTES
Section 2.1. Designation and Principal Amount. There is hereby
authorized a series of Debt Securities designated the "8.48% Subordinated
Deferrable Interest Notes due September 30, 2035,"
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<PAGE>
limited in aggregate principal amount to $206,190,000, which amount shall be as
set forth in any written order of the Company for the authentication and
delivery of Notes pursuant to Section 2.04 of the Indenture.
Section 2.2. Maturity. The Maturity Date will be September 30,
2035.
Section 2.3. Form and Payment. Except as provided in Section 2.4,
the Notes shall be issued in fully registered certificated form without interest
coupons. Principal and interest on the Notes issued in certificated form will
be payable, the transfer of such Notes will be registrable and such Notes will
be exchangeable for Notes bearing identical terms and provisions at the office
or agency of the Trustee in Wilmington, Delaware, provided, however, that
payment of interest may be made at the option of the Company by check mailed to
the registered holder at such address as shall appear in the Security Register.
Notwithstanding the foregoing, so long as the registered holder of any Notes is
the Property Trustee, the payment of the principal of and interest (including
Compounded Interest and Additional Interest, if any) on such Notes held by the
Property Trustee will be made at such place and to such account as may be
designated by the Property Trustee.
Section 2.4. Global Note. In connection with a Dissolution Event:
(a) the Notes in certificated form may be presented to the Trustee
by the Property Trustee in exchange for a Global Security in an aggregate
principal amount equal to the aggregate principal amount of the Notes so
presented, to be registered in the name of the Depositary, or its nominee,
and delivered by the Trustee to the Depositary for crediting to the
accounts of its participants pursuant to the instructions of the Regular
Trustees. The Company, upon any such presentation, shall execute a Global
Security in such aggregate principal amount and deliver the same to the
Trustee for authentication and delivery in accordance with the Indenture
and this First Supplemental Indenture. Payments on the Notes issued as a
Global security will be made to the Depositary; and
(b) if any Preferred Securities are held in non book-entry
certificated form, the Notes in certificated form may be presented to the
Trustee by the Property Trustee and any Preferred Security Certificate
which represents Preferred Securities other than Preferred Securities held
by the Clearing Agency or its nominee ("Non Book-Entry Preferred
Securities") will be deemed to represent beneficial interests in Notes
presented to the Trustee by the Property Trustee having an aggregate
principal amount equal to the aggregate stated liquidation amount of the
Non Book-Entry Preferred
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<PAGE>
Securities until such Preferred Security Certificates are presented to the
Security Registrar for transfer or reissuance at which time such Preferred
Security Certificates will be cancelled and a Note, registered in the name
of the holder of the Preferred Security Certificate or the transferee of
the holder of such Preferred Security Certificate, as the case may be,
with an aggregate principal amount equal to the aggregate stated
liquidation amount of the Preferred Security Certificate cancelled, will
be executed by the Company and delivered to the Trustee for authentication
and delivery in accordance with the Indenture and this First Supplemental
Indenture. On issue of such Notes, Notes with an equivalent aggregate
principal amount that were presented by the Property Trustee to the
Trustee will be deemed to have been cancelled.
Section 2.5. Interest. (a) Each Note will bear interest at the
rate of 8.48% per annum (the "Coupon Rate") from the original date of issuance
until the principal thereof becomes due and payable, and on any overdue
principal and (to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest at the Coupon Rate,
compounded quarterly, payable (subject to the provisions of Article IV)
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year (each, an "Interest Payment Date"), commencing on September 30, 1995, to
the Person in whose name such Note or any predecessor Note is registered, at the
close of business on the regular record date for such interest installment,
which shall be the close of business on the Business Day next preceding that
Interest Payment Date. If pursuant to the provisions of Section 2.11(c) of the
Indenture the Notes are no longer represented by a Global Security, the Company
may select a regular record date for such interest installment which shall be
any date at least fifteen days before an Interest Payment Date.
(b) The amount of interest payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months. In the event that any
date on which interest is payable on the Notes is not a Business Day, then
payment of interest payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect of
any such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date. The
amount of interest payable for any period shorter than a full quarterly period
for which interest is computed, will be computed on the basis of the actual
number of days elapsed in such a 90-day quarter.
(c) If at any time while the Property Trustee is the holder of any
Notes, the Trust or the Property Trustee is required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in any
case,
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the Company will pay as additional interest ("Additional Interest") on the Notes
held by the Property Trustee, such additional amounts as shall be required so
that the net amounts received and retained by the Trust and the Property Trustee
after paying such taxes, duties, assessments or other governmental charges will
be equal to the amounts the Trust and the Property Trustee would have received
had no such taxes, duties, assessments or other government charges been imposed.
ARTICLE III
REDEMPTION OF THE NOTES
Section 3.1. Special Event Redemption. If a Tax Event has occurred
and is continuing and:
(a) the Company has received a Redemption Tax Opinion; or
(b) after receiving a Dissolution Tax Opinion, the Regular Trustees
shall have been informed by tax counsel rendering the Dissolution Tax
Opinion that a No Recognition Opinion cannot be delivered to the Trust,
then, notwithstanding Section 3.2(a) but subject to Section 3.2(b), the Company
shall have the right upon not less than 30 days' nor more than 60 days' notice
to the registered holders of the Notes to redeem the Notes, in whole or in part,
for cash within 90 days following the occurrence of such Tax Event (the "90 Day
Period") at a redemption price equal to 100% of the principal amount to be
redeemed plus any accrued and unpaid interest thereon to the date of such
redemption (the "Special Redemption Price"), provided that, if at the time there
is available to the Company the opportunity to eliminate, within the 90 Day
Period, the Tax Event by taking some ministerial action ("Ministerial Action"),
such as filing a form or making an election, or pursuing some other similar
reasonable measure that has no adverse effect on the Company, the Trust or the
Holders of the Trust Securities issued by the Trust, the Company shall pursue
such Ministerial Action in lieu of redemption; and provided further, that the
Company shall have no right to redeem the Notes while the Trust is pursuing any
Ministerial Action pursuant to its obligations under the Declaration. The
Special Redemption Price shall be paid prior to 12:00 noon, New York time, on
the date of such redemption or at such earlier time as the Company determines
and specifies in the notice of redemption, provided the Company shall deposit
with the Trustee an amount sufficient to pay the Special Redemption Price by
11:00 a.m. on the date such Special Redemption Price is to be paid.
Section 3.2. Optional Redemption by Company. (a) Subject to the
provisions of Article III of the Indenture and to Section 3.2(b), the Company
shall have the right to redeem the Notes, in whole or in part, from time to
time, on or after
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September 30, 2000, at a redemption price equal to 100% of the principal amount
to be redeemed plus any accrued and unpaid interest thereon to the date of such
redemption (the "Optional Redemption Price"). Any redemption pursuant to this
paragraph will be made upon not less than 30 days' nor more than 60 days' notice
to the registered holder of the Notes, at the Optional Redemption Price. If the
Notes are only partially redeemed pursuant to this Section 3.2, the Notes will
be redeemed pro rata or by lot or by any other method utilized by the Trustee;
provided, that if at the time of redemption, the Notes are registered as a
Global Security, the Depositary shall determine by lot the principal amount of
such Notes held by each Noteholder to be redeemed. The Optional Redemption
Price shall be paid prior to 12:00 noon, New York time, on the date of such
redemption or at such earlier time as the Company determines and specifies in
the notice of redemption, provided the Company shall deposit with the Trustee an
amount sufficient to pay the Optional Redemption Price by 11:00 a.m. on the date
such Optional Redemption Price is to be paid.
(b) If a partial redemption of the Notes would result in the
delisting of the Preferred Securities issued by the Trust from any national
securities exchange or other organization on which the Preferred Securities are
then listed, the Company shall not be permitted to effect such partial
redemption and may only redeem the Notes in whole.
Section 3.3. No Sinking Fund. The Notes are not entitled to the
benefit of any sinking fund.
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
Section 4.1. Extension of Interest Payment Period. The Company
shall have the right, at any time and from time to time during the term of the
Notes, to extend the interest payment period of such Notes for up to twenty (20)
consecutive quarters (the "Extended Interest Payment Period"). To the extent
permitted by applicable law, interest, the payment of which has been deferred
because of the extension of the interest payment period pursuant to this Section
4.1, will bear interest compounded quarterly at the Coupon Rate for each quarter
of the Extended Interest Payment Period ("Compounded Interest"). At the end of
the Extended Interest Payment Period, the Company shall pay all interest accrued
and unpaid on the Notes, including any Compounded Interest and Additional
Interest ("Deferred Interest") which shall be payable to the holders of the
Notes in whose names the Notes are registered in the Security Register on the
first record date after the end of the Extended Interest Payment Period. Before
the termination of any Extended Interest Payment Period, the Company may further
extend such period, provided that such period together with all such further
extensions thereof shall not exceed twenty (20) consecutive quarters or extend
beyond the maturity of the Notes. Upon the
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termination of any Extended Interest Payment Period and upon the payment of all
Deferred Interest then due, the Company may select a new Extended Interest
Payment Period, subject to the foregoing requirements. No interest shall be due
and payable during an Extended Interest Payment Period, except at the end
thereof.
Section 4.2. Notice of Extension. (a) If the Property Trustee is
the only registered holder of the Notes at the time the Company selects an
Extended Interest Payment Period, the Company shall give written notice to both
the Regular Trustees and the Property Trustee of its selection of such Extended
Interest Payment Period one Business Day before the earlier of (i) the next
succeeding date on which Distributions on the Trust Securities issued by the
Trust are payable, or (ii) the date the Trust is required to give notice of the
record or payment date for such Distributions to the New York Stock Exchange or
other applicable self-regulatory organization or to holders of the Preferred
Securities issued by the Trust, but in any event at least one Business Day
before such record date.
(b) If the Property Trustee is not the only holder of the Notes at
the time the Company selects an Extended Interest Payment Period, the Company
shall give the holders of the Notes and the Trustee written notice of its
selection of such Extended Interest Payment Period ten (10) Business Days before
the earlier of (i) the next succeeding Interest Payment Date, or (ii) the date
the Company is required to give notice of the record or payment date of such
interest payment to the New York Stock Exchange or other applicable
self-regulatory organization or to holders of the Notes, but in any event at
least two Business Days before such record date.
(c) The quarter in which any notice is given pursuant to paragraphs
(a) or (b) of this Section 4.2 shall be counted as one of the twenty quarters
permitted in the maximum Extended Interest Payment Period permitted under
Section 4.1.
ARTICLE V
EXPENSES
Section 5.1. Payment of Expenses. In connection with the offering,
sale and issuance of the Notes to the Property Trustee in connection with the
sale of the Trust Securities by the Trust, the Company shall:
(a) pay all costs and expenses relating to the offering, sale and
issuance of the Notes, including commissions to the underwriters payable
pursuant to the Underwriting Agreement and the Pricing Agreement and
compensation of the Trustee under the Indenture in accordance with the
provisions of Section 7.06 of the Indenture;
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(b) pay all costs and expenses of the Trust (including, but not
limited to, costs and expenses relating to the organization of the Trust,
the offering, sale and issuance of the Trust Securities (including
commissions to the underwriters in connection therewith), the fees and
expenses of the Property Trustee and the Delaware Trustee, the costs and
expenses relating to the operation of the Trust, including without
limitation, costs and expenses of accountants, attorneys, statistical or
bookkeeping services, expenses for printing and engraving and computing or
accounting equipment, paying agent(s), registrar(s), transfer agent(s),
duplicating, travel and telephone and other telecommunications expenses
and costs and expenses incurred in connection with the acquisition,
financing, and disposition of Trust assets); and
(c) pay any and all taxes (other than United States withholding
taxes attributable to the Trust or its assets) and all liabilities, costs
and expenses with respect to such taxes of the Trust.
ARTICLE VI
SUBORDINATION
Section 6.1. Agreement to Subordinate. The Company covenants and
agrees, and each holder of Notes issued hereunder by such holder's acceptance
thereof likewise covenants and agrees, that all Notes shall be issued subject to
the provisions of this Article VI; and each holder of a Note, whether upon
original issue or upon transfer or assignment thereof, accepts and agrees to be
bound by such provisions.
The payment by the Company of the principal of, premium, if any, and
interest on all Notes issued hereunder shall, to the extent and in the manner
hereinafter set forth, be subordinated and subject in right of payment to the
prior payment in full of all Senior Indebtedness of the Company, whether
outstanding at the date of this First Supplemental Indenture or thereafter
incurred.
No provision of this Article VI shall prevent the occurrence of any
default or Event of Default hereunder.
Section 6.2. Default on Senior Indebtedness. In the event and
during the continuation of any default by the Company in the payment of
principal, premium, interest or any other payment due on any Senior Indebtedness
of the Company, or in the event that the maturity of any Senior Indebtedness of
the Company has been accelerated because of a default, then, in either case, no
payment shall be made by the Company with respect to the principal (including
redemption and sinking fund payments) of, or premium, if any, or interest on the
Notes.
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In the event that, notwithstanding the foregoing, any payment shall
be received by the Trustee or any holder when such payment is prohibited by the
preceding paragraph of this Section 6.2, such payment shall be held in trust for
the benefit of, and shall be paid over or delivered to, the holders of Senior
Indebtedness or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Indebtedness may have
been issued, as their respective interests may appear, but only to the extent
that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Trustee within 90 days of such payment
of the amounts then due and owing on the Senior Indebtedness and only the
amounts specified in such notice to the Trustee shall be paid to the holders of
Senior Indebtedness.
Section 6.3. Liquidation; Dissolution; Bankruptcy. Upon any
payment by the Company, or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to creditors upon any
dissolution or winding-up or liquidation or reorganization of the Company,
whether voluntary or involuntary or in bankruptcy, insolvency, receivership or
other proceedings, all amounts due upon all Senior Indebtedness of the Company
shall first be paid in full, or payment thereof provided for in money in
accordance with its terms, before any payment is made by the Company on account
of the principal (and premium, if any) or interest on the Notes; and upon any
such dissolution or winding-up or liquidation or reorganization, any payment by
the Company, or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the holders of the Notes or
the Trustee would be entitled to receive from the Company, except for the
provisions of this Article VI, shall be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, or by the holders of the Notes or by the Trustee under
this Indenture if received by them or it, directly to the holders of Senior
Indebtedness of the Company (pro rata to such holders on the basis of the
respective amounts of Senior Indebtedness held by such holders, as calculated by
the Company) or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing such
Senior Indebtedness may have been issued, as their respective interests may
appear, to the extent necessary to pay such Senior Indebtedness in full, in
money or money's worth, after giving effect to any concurrent payment or
distribution to or for the holders of such Senior Indebtedness, before any
payment or distribution is made to the holders of Notes or to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee or the holders of the Notes before all Senior Indebtedness of the
Company is paid in full, or provision is made for such payment in money in
accordance
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with its terms, such payment or distribution shall be held in trust for the
benefit of and shall be paid over or delivered to the holders of such Senior
Indebtedness or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing such
Senior Indebtedness may have been issued, as their respective interests may
appear, as calculated by the Company, for application to the payment of all
Senior Indebtedness of the Company remaining unpaid to the extent necessary to
pay such Senior Indebtedness in full in money in accordance with its terms,
after giving effect to any concurrent payment or distribution to or for the
benefit of the holders of such Senior Indebtedness.
For purposes of this Article VI, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article VI with respect
to the Notes to the payment of all Senior Indebtedness of the Company that may
at the time be outstanding, provided that (i) such Senior Indebtedness is
assumed by the new corporation, if any, resulting from any such reorganization
or readjustment, and (ii) the rights of the holders of such Senior Indebtedness
are not, without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided for in Article X of the Indenture shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section 6.3 if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article X
of the Indenture. Nothing in Section 6.2 or in this Section 6.3 shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 7.06 of the
Indenture.
Section 6.4. Subrogation. Subject to the payment in full of all
Senior Indebtedness of the Company, the rights of the holders of the Notes shall
be subrogated to the rights of the holders of such Senior Indebtedness to
receive payments or distributions of cash, property or securities of the Company
applicable to such Senior Indebtedness until the principal of (and premium, if
any) and interest on the Notes shall be paid in full; and, for the purposes of
such subrogation, no payments or distributions to the holders for such Senior
Indebtedness of any cash, property or securities to which the holders of the
Notes or the Trustee would be entitled except for the provisions of this Article
VI, and no payment over pursuant to the provisions of this Article VI, to or for
the benefit of the holders of such Senior Indebtedness by holders of the Notes
or the Trustee, shall, as
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between the Company, its creditors other than holders of Senior Indebtedness of
the Company, and the holders of the Notes be deemed to be a payment by the
Company to or on account of such Senior Indebtedness. It is understood that the
provisions of this Article VI are and are intended solely for the purposes of
defining the relative rights of the holders of the Notes, on the one hand, and
the holders of such Senior Indebtedness on the other hand.
Nothing contained in this Article VI or elsewhere in this Indenture
or in the Notes is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Indebtedness of the Company, and the
holders of the Notes, the obligation of the Company which is absolute and
unconditional, to pay to the holders of the Notes the principal of (and premium,
if any) and interest on the Notes as and when the same shall become due and
payable in accordance with their terms, or is intended to or shall affect the
relative rights of the holders of the Notes and creditors of the Company, other
than the holders of Senior Indebtedness of the Company, nor shall anything
herein or therein prevent the Trustee or the holder of any Note from exercising
all remedies otherwise permitted by applicable law upon default under the
Indenture, subject to the rights, if any, under this Article VI of the holders
of such Senior Indebtedness in respect of cash, property or securities of the
Company, received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred
to in this Article VI, the Trustee, subject to the provisions of Section 7.01 of
the Indenture, and the holders of the Notes, shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which such
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidation trustee,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the holders of the Notes, for the purposes of ascertaining the
Persons entitled to participate in such distribution, the holders of Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article VI.
Section 6.5. Trustee to Effectuate Subordination. Each holder of
a Note by such holder's acceptance thereof authorizes and directs the Trustee on
such holder's behalf to take such action as may be necessary or appropriate to
effectuate the subordination provided in this Article VI and appoints the
Trustee such holder's attorney-in-fact for any and all such purposes.
Section 6.6. Notice by the Company. The Company shall give prompt
written notice to a Responsible Officer of the Trustee of any fact known to the
Company that would prohibit the making of any payment of monies to or by the
Trustee in respect of the Notes
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pursuant to the provisions of this Article VI. Notwithstanding the provisions
of this Article VI or any other provision of the Indenture and this First
Supplemental Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment of monies
to or by the Trustee in respect of the Notes pursuant to the provisions of this
Article VI unless and until a Responsible Officer of the Trustee shall have
received written notice thereof at the Principal Office of the Trustee from the
Company or a holder or holders of Senior Indebtedness or from any trustee
therefor; and before the receipt of any such written notice, the Trustee,
subject to the provisions of Section 7.01 of the Indenture, shall be entitled in
all respects to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this Section 6.6 at
least two Business Days prior to the date upon which by the terms hereof any
money may become payable for any purpose (including, without limitation, the
payment of the principal of (or premium, if any) or interest on any Note), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to apply the same to the
pur- poses for which they were received, and shall not be affected by any notice
to the contrary that may be received by it within two Business Days prior to
such date.
The Trustee, subject to the provisions of Section 7.01 of the
Indenture, shall be entitled to rely on the delivery to it of a written notice
by a Person representing himself to be a holder of Senior Indebtedness of the
Company (or a trustee on behalf of such holder) to establish that such notice
has been given by a holder of such Senior indebtedness or a trustee on behalf of
any such holder or holders. In the event that the Trustee determines in good
faith that further evidence is required with respect to the right of any Person
as a holder of such Senior Indebtedness to participate in any payment or
distribution pursuant to this Article VI, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of such Senior Indebtedness held by such Person, the extent to which such Person
is entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article VI, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
Section 6.7. Rights of the Trustee; Holders of Senior Indebtedness.
The Trustee in its individual capacity shall be entitled to all the rights set
forth in this Article VI in respect of any Senior Indebtedness at any time held
by it, to the same extent as any other holder of Senior Indebtedness, and
nothing in this Indenture shall deprive the Trustee of any of its rights as such
holder.
With respect to the holders of Senior Indebtedness of the Company,
the Trustee undertakes to perform or to observe only such
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of its covenants and obligations as are specifically set forth in this Article
VI, and no implied covenants or obligations with respect to the holders of such
Senior Indebtedness shall be read into this Indenture against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of such
Senior Indebtedness and, subject to the provisions of Section 7.01 of the
Indenture, the Trustee shall not be liable to any holder of such Senior
Indebtedness if it shall pay over or deliver to holders of Notes, the Company or
any other Person money or assets to which any holder of such Senior Indebtedness
shall be entitled by virtue of this Article VI or otherwise.
Section 6.8. Subordination May Not Be Impaired. No right of any
present or future holder of any Senior Indebtedness of the Company to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance by
the Company with the terms, provisions and covenants of the Indenture,
regardless of any knowledge thereof that any such holder may have or otherwise
be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness of the Company may, at any time
and from time to time, without the consent of or notice to the Trustee or the
holders of the Notes, without incurring responsibility to the holders of the
Notes and without impairing or releasing the subordination provided in this
Article VI or the obligations hereunder of the holders of the Notes to the
holders of such Senior Indebtedness, do any one or more the following: (i)
change the manner, place or terms of payment or extend the time of payment of,
or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in
any manner such Senior Indebtedness or any instrument evidencing the same or any
agreement under which such Senior Indebtedness is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing such Senior Indebtedness; (iii) release any Person liable in
any manner for the collection of such Senior Indebtedness; and (iv) exercise or
refrain from exercising any rights against the Company and any other Person.
ARTICLE VII
COVENANT TO LIST ON EXCHANGE
Section 7.1. Listing on Exchange. If the Notes are to be issued as
a Global Security in connection with the distribution of the Notes to the
holders of the Preferred Securities issued by the Trust upon a Dissolution
Event, the Company will use its best efforts to list such Notes on the New York
Stock Exchange or on such other exchange as the Preferred Securities are then
listed.
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ARTICLE VIII
FORM OF NOTE
Section 8.1. Form of Note. The Notes and the Trustee's Certificate
of Authentication to be endorsed thereon are to be substantially in the
following forms:
(FORM OF FACE OF NOTE)
[IF THE NOTE IS TO BE A GLOBAL SECURITY, INSERT: This Note is a
Global Security within the meaning of the Indenture hereinafter referred to and
is registered in the name of a Depository or a nominee of a Depository. This
Note is exchangeable for Notes registered in the name of a person other than the
Depository or its nominee only in the limited circumstances described in the
Indenture, and no transfer of this Note (other than a transfer of this Note as a
whole by the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository) may be
registered except in limited circumstances.
Unless this Note is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York, New York) to the issuer or
its agent for registration of transfer, exchange or payment, and any Note issued
is registered in the name of Cede & Co. or such other name as requested by an
authorized representative of The Depository Trust Company and any payment hereon
is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co.,
has an interest herein.]
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No. $
CUSIP No.
COMMONWEALTH EDISON COMPANY
8.48% SUBORDINATED DEFERRABLE INTEREST NOTE
DUE SEPTEMBER 30, 2035
COMMONWEALTH EDISON COMPANY, an Illinois corporation (the "Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to _______ or
registered assigns, the principal sum of ____________ Dollars on September 30,
2035, and to pay interest on said principal sum from September 26, 1995 or from
the most recent interest payment date (each such date, an "Interest Payment
Date") to which interest has been paid or duly provided for, quarterly (subject
to deferral as set forth herein) in arrears on March 31, June 30, September 30
and December 31 of each year commencing, September 30, 1995, at the rate of
8.48% per annum until the principal hereof shall have become due and payable,
and on any overdue principal and premium, if any, and (without duplication and
to the extent that payment of such interest is enforceable under applicable law)
on any overdue installment of interest compounded quarterly at the same rate per
annum. The amount of interest payable on any Interest Payment Date shall be
computed on the basis of a 360-day year of twelve 30-day months. In the event
that any date on which interest is payable on this Note is not a Business Day,
then payment of interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date. The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the person in whose name this Note (or one or more Predecessor
Securities, as defined in said Indenture) is registered at the close of business
on the regular record date for such interest installment [which shall be the
close of business on the Business Day next preceding such Interest Payment
Date.] [IF PURSUANT TO THE PROVISIONS OF Section 2.11(C) OF THE INDENTURE THE
NOTES ARE NO LONGER REPRESENTED BY A GLOBAL SECURITY -- which shall be the close
of business on the ________ day preceding such Interest Payment Date.] Any such
interest installment not punctually paid or duly provided for shall forthwith
cease to be payable to the registered holders on such regular record date, and
may be paid to the person in whose name this Note (or one or more Predecessor
Securities) is registered at the close of business on a special record date to
be fixed by the Trustee for the payment of such defaulted interest,
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notice whereof shall be given to the registered holders of this series of Notes
not less than ten (10) days prior to such special record date, or may be paid at
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in the
Indenture. The principal of (and premium, if any) and the interest on this Note
shall be payable at the office or agency of the Trustee maintained for that
purpose in Wilmington, Delaware, in any coin or currency of the United States of
America which at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at the
option of the Company by check mailed to the registered holder at such address
as shall appear in the Security Register. Notwithstanding the foregoing, so
long as the Holder of this Note is the Property Trustee, the payment of the
principal of (and premium, if any) and interest on this Note will be made at
such place and to such account as may be designated by the Property Trustee.
The indebtedness evidenced by this Note is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness, and this Note is issued subject to
the provisions of the Indenture with respect thereto. Each Holder of this Note,
by accepting the same, (a) agrees to and shall be bound by such provisions,
(b) authorizes and directs the Trustee on his behalf to take such action as may
be necessary or appropriate to acknowledge or effectuate the subordination so
provided and (c) appoints the Trustee his attorney-in-fact for any and all such
purposes. Each Holder hereof, by his acceptance hereof, hereby waives all
notice of the acceptance of the subordination provisions contained herein and in
the Indenture by each holder of Senior Indebtedness, whether now outstanding or
hereafter incurred, and waives reliance by each such Holder upon said
provisions.
This Note shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.
Unless the Certificate of Authentication hereon has been executed by
the Trustee referred to on the reverse side hereof, this Note shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
The provisions of this Note are continued on the reverse side hereof
and such continued provisions shall for all purposes have the same effect as
though fully set forth at this place.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
Dated
COMMONWEALTH EDISON COMPANY
By
[Title]
Attest:
By
Secretary
(FORM OF CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is one of the Notes of the series of Notes described in the within-
mentioned Indenture.
WILMINGTON TRUST COMPANY, _____________________
Not in Its Individual as Authentication Agent
Capacity But Solely
as Trustee
By By
Authorized Signatory Authorized Signatory
(FORM OF REVERSE OF NOTE)
This Note is one of a duly authorized series of Notes of the Company
(herein sometimes referred to as the "Notes"), specified in the Indenture, all
issued or to be issued in one or more series under and pursuant to an Indenture
dated as of September 1, 1995, duly executed and delivered between the Company
and Wilmington Trust Company, not in its individual capacity but solely as
trustee (the "Trustee"), as supplemented by the First Supplemental Indenture
dated as of September 19, 1995 between the Company and the Trustee (the
Indenture as so supplemented, the "Indenture"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Trustee, the Company and the holders of the Notes. By the terms of the
Indenture, the Notes are issuable in
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<PAGE>
series which may vary as to amount, date of maturity, rate of interest and in
other respects as in the Indenture provided. This series of Notes is limited in
aggregate principal amount as specified in said First Supplemental Indenture.
Because of the occurrence and continuation of a Tax Event, in
certain circumstances this Note will become due and payable at the principal
amount together with any interest accrued thereon (the "Redemption Price"). The
Redemption Price shall be paid prior to 12:00 noon, New York time, on the date
of such redemption or at such earlier time as the Company determines. The
Company shall have the right to redeem this Note at the option of the Company,
without premium or penalty, in whole or in part at any time on or after
September 30, 2000 (an "Optional Redemption"), at a redemption price equal to
100% of the principal amount plus any accrued but unpaid interest to the date of
such redemption (the "Optional Redemption Price"). Any optional redemption
pursuant to this paragraph will be made upon not less than 30 days' nor more
than 60 days' notice, at the Optional Redemption Price. If the Notes are only
partially redeemed by the Company pursuant to an Optional Redemption, the Notes
will be redeemed pro rata or by lot or by any other method utilized by the
Trustee; provided that if at the time of redemption, the Notes are registered as
a Global Security, the Depositary shall determine by lot the principal amount of
such Notes held by each Noteholder to be redeemed.
In the event of redemption of this Note in part only, a new Note or
Notes of this series for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Notes may be declared,
and upon such declaration shall become, due and payable, in the manner, with the
effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Notes of each series affected at the time
outstanding, as defined in the Indenture, to execute supplemental indentures for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of any supplemental indenture or of
modifying in any manner the rights of the Holders of the Notes; provided,
however, that no such supplemental indenture shall (i) extend the fixed maturity
of any Notes of any series, or reduce the principal amount thereof, or reduce
the rate or extend the time of payment of interest thereon, or reduce any
premium payable upon the redemption thereof, without the consent of the Holder
of each Note so affected or (ii) reduce the aforesaid percentage of Notes, the
Holders of which are required to consent to any such supplemental indenture,
without the consent of the
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<PAGE>
Holders of each Note then outstanding and affected thereby. The Indenture also
contains provisions permitting the Holders of a majority in aggregate principal
amount of the Notes of any series at the time outstanding affected thereby, on
behalf of all of the Holders of the Notes of such series, to waive any past
default in the performance of any of the covenants contained in the Indenture,
or established pursuant to the Indenture with respect to such series, and its
consequences, except a default in the payment of the principal of or premium, if
any, or interest on any of the Notes of such series. Any such consent or waiver
by the registered Holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Note and of any Note issued in exchange herefor or in
place hereof (whether by registration of transfer or otherwise), irrespective of
whether or not any notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and premium, if any, and
interest on this Note at the time and place and at the rate and in the money
herein prescribed.
The Company shall have the right at any time during the term of the
Notes, from time to time to extend the interest payment period of such Notes for
up to twenty (20) consecutive quarters (an "Extended Interest Payment Period"),
at the end of which period the Company shall pay all interest then accrued and
unpaid (together with interest thereon at the rate specified for the Notes to
the extent that payment of such interest is enforceable under applicable law).
Before the termination of any such Extended Interest Payment Period, the Company
may further extend such Extended Interest Payment Period, provided that such
Extended Interest Payment Period together with all such further extensions
thereof shall not exceed twenty (20) consecutive quarters or extend beyond the
maturity of the Notes. At the termination of any such Extended Interest Payment
Period and upon the payment of all accrued and unpaid interest and any
additional amounts then due, the Company may select a new Extended Interest
Payment Period.
As provided in the Indenture and subject to certain limitations
therein set forth, this Note is transferable by the registered holder hereof on
the Security Register of the Company, upon surrender of this Note for
registration of transfer at the office or agency of the Trustee in Wilmington,
Delaware accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company or the Trustee duly executed by the registered
holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of authorized denominations and for the same aggregate principal
amount and series will be issued to the designated transferee or transferees. No
service charge will be made for any such transfer, but the
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<PAGE>
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this Note,
the Company, the Trustee, any paying agent and any Security Registrar may deem
and treat the registered holder hereof as the absolute owner hereof (whether or
not this Note shall be overdue and notwithstanding any notice of ownership or
writing hereon made by anyone other than the Security Registrar) for the purpose
of receiving payment of or on account of the principal hereof and premium, if
any, and interest due hereon and for all other purposes, and neither the Company
nor the Trustee nor any paying agent nor any Security Registrar shall be
affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Note, or for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Indenture, against any incorporator,
stockholder, officer or director, past, present or future, as such, of the
Company or of any predecessor or successor corporation, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of the consideration for the issuance hereof, expressly waived and
released.
[The Notes of this series are issuable only in registered form
without coupons in denominations of $25 and any integral multiple thereof.]
[This Global Security is exchangeable for Notes in definitive form only under
certain limited circumstances set forth in the Indenture. Notes of this series
so issued are issuable only in registered form without coupons in denominations
of $25 and any integral multiple thereof.] As provided in the Indenture and
subject to certain limitations [herein and] therein set forth, Notes of this
series [so issued] are exchangeable for a like aggregate principal amount of
Notes of this series of a different authorized denomination, as requested by the
Holder surrendering the same.
All terms used in this Note which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
ARTICLE IX
ORIGINAL ISSUE OF NOTES
Section 9.1. Original Issue of Notes. Notes in the aggregate
principal amount of $206,190,000 may, upon execution of this First Supplemental
Indenture, be executed by the Company and delivered to the Trustee for
authentication, and the Trustee shall thereupon authenticate and deliver said
Notes to or upon the written order of the Company, signed by its Chairman, its
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<PAGE>
President, or any Vice President and its Treasurer or an Assistant Treasurer,
without any further action by the Company.
ARTICLE X
MISCELLANEOUS
Section 11.1. Ratification of Indenture. The Indenture, as
supplemented by this First Supplemental Indenture, is in all respects ratified
and confirmed, and this First Supplemental Indenture shall be deemed part of the
Indenture in the manner and to the extent herein and therein provided.
Section 11.2. Trustee Not Responsible for Recitals. The recitals
herein contained are made by the Company and not by the Trustee, and the Trustee
assumes no responsibility for the correctness thereof. The Trustee makes no
representation as to the validity or sufficiency of this First Supplemental
Indenture.
Section 11.3. Governing Law. This First Supplemental Indenture and
each Note shall be deemed to be a contract made under the internal laws of the
State of New York, and for all purposes shall be construed in accordance with
the laws of said State.
Section 11.4. Separability. In case any one or more of the
provisions contained in this First Supplemental Indenture or in the Notes shall
for any reason be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provisions of this First Supplemental Indenture or of the Notes, but this First
Supplemental Indenture and the Notes shall be construed as if such invalid or
illegal or unenforceable provision had never been contained herein or therein.
Section 11.5. Counterparts. This First Supplemental Indenture may
be executed in any number of counterparts each of which shall be an original;
but such counterparts shall together constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, on the date or dates indicated in the
acknowledgements and as of the day and year first above written.
COMMONWEALTH EDISON COMPANY
By: John C. Bukovski
--------------------------
Vice President
[Corporate Seal]
Attest:
David A Scholz
-----------------------
Secretary
WILMINGTON TRUST COMPANY,
Not in Its Individual Capacity But
Solely as Trustee
By: W. Chris Sponenberg
--------------------------
Title: Financial Services
Officer
[Corporate Seal]
Attest: Patricia A. Evans
-----------------------
Title: Financial Services Officer
<PAGE>
STATE OF ILLINOIS )
COUNTY OF COOK ) ss:
On the 25th day of September, 1995, before me personally came John
C. Bukovski, to me known, who, being by me duly sworn, did depose and say that
he is a Vice President of COMMONWEALTH EDISON COMPANY, one of the corporations
described in and which executed the above instrument; that he knows the
corporate seal of said corporation; that the seal affixed to the said instrument
is such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
NOTARY PUBLIC
Lupe Luna
--------------------
[seal] Commission expires
November 9, 1997
STATE OF DELAWARE )
COUNTY OF New Castle):
On the 22nd day of September, 1995, before me personally came W.
Chris Sponenberg, to me known, who, being by me duly sworn, did depose and say
that he is the Financial Service Officer of WILMINGTON TRUST COMPANY, one of the
corporations described in and which executed the above instrument; that he knows
the corporate seal of said corporation; that the seal affixed to the said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation, and that he signed his name thereto by
like authority.
NOTARY PUBLIC
Kathleen A. Pedelini
--------------------
[seal] Commission expires
October 31, 1998
<PAGE>
Exhibit (4)-36
Commonwealth Edison Company
Form 10-K File No. 1-1839
SECOND SUPPLEMENTAL INDENTURE
Dated as of January 24, 1997
Between
COMMONWEALTH EDISON COMPANY
and
WILMINGTON TRUST COMPANY
<PAGE>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1. Definition of Terms . . . . . . . . . . . . . . . . 2
Section 1.2. Interpretation . . . . . . . . . . . . . . . . . . . 4
ARTICLE II GENERAL TERMS AND CONDITIONS OFTHE DEBENTURES . . . . . . . . 5
Section 2.1. Designation and Principal Amount . . . . . . . . . . 5
Section 2.2. Maturity . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.3. Form and Payment . . . . . . . . . . . . . . . . . . 5
Section 2.4. Global Debenture . . . . . . . . . . . . . . . . . . 5
Section 2.5. Interest . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III REDEMPTION OF THE DEBENTURES . . . . . . . . . . . . . . . . 6
Section 3.1. Tax Event Redemption . . . . . . . . . . . . . . . . 6
Section 3.2. Optional Redemption by Company . . . . . . . . . . . 7
Section 3.3. No Sinking Fund . . . . . . . . . . . . . . . . . . 8
ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD . . . . . . . . . . . . 8
Section 4.1. Extension of Interest Payment Period . . . . . . . . 8
Section 4.2. Notice of Extension . . . . . . . . . . . . . . . . 8
ARTICLE V EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.1. Payment of Expenses . . . . . . . . . . . . . . . . 9
ARTICLE VI SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 6.1. Agreement to Subordinate . . . . . . . . . . . . . . 9
Section 6.2. Default on Senior Indebtedness . . . . . . . . . . . 10
Section 6.3. Liquidation; Dissolution; Bankruptcy . . . . . . . . 10
Section 6.4. Subrogation . . . . . . . . . . . . . . . . . . . . 11
Section 6.5. Trustee to Effectuate Subordination . . . . . . . . 12
Section 6.6. Notice by the Company . . . . . . . . . . . . . . . 12
Section 6.7. Rights of the Trustee; Holders of Senior Indebtedness 13
Section 6.8. Subordination May Not Be Impaired . . . . . . . . . 13
ARTICLE VII FORM OF DEBENTURE . . . . . . . . . . . . . . . . . . . . . 14
Section 7.1. Form of Debenture . . . . . . . . . . . . . . . . . 14
ARTICLE VIII ORIGINAL ISSUE OF DEBENTURES; EXCHANGE . . . . . . . . . . 20
Section 8.1. Original Issue of Debentures . . . . . . . . . . . . 20
Section 8.2 Exchange of Debentures for Series B Debentures . . . 21
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9.1. Ratification of Indenture . . . . . . . . . . . . . 21
Section 9.2. Trustee Not Responsible for Recitals . . . . . . . . 22
Section 9.3. Governing Law . . . . . . . . . . . . . . . . . . . 22
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<PAGE>
Section 9.4. Separability . . . . . . . . . . . . . . . . . . . . 22
Section 9.5. Counterparts . . . . . . . . . . . . . . . . . . . . 22
-ii-
<PAGE>
THIS SECOND SUPPLEMENTAL INDENTURE, dated as of January 24, 1997
(the "SECOND SUPPLEMENTAL INDENTURE"), between Commonwealth Edison Company, an
Illinois corporation (the "COMPANY"), and Wilmington Trust Company, not in its
individual capacity but solely as trustee (the "TRUSTEE") under the Indenture
dated as of September 1, 1995 between the Company and the Trustee (the
"INDENTURE") as supplemented by the First Supplemental Indenture dated as of
September 19, 1995 between the Company and the Trustee (the "FIRST
SUPPLEMENTAL INDENTURE").
W I T N E S S E T H:
WHEREAS, the Company executed and delivered the Indenture to the
Trustee to provide, among other things, for the future issuance of the
Company's unsecured subordinated debt securities, to be issued from time to
time in one or more series as might be determined by the Company under the
Indenture, in an unlimited aggregate principal amount which may be
authenticated and delivered as provided in the Indenture; and
WHEREAS, pursuant to the terms of the Indenture, the Company desires
to provide for the establishment of a new series of its debt securities to be
known as its 8.50% Subordinated Deferrable Interest Debentures due January
15, 2027 (the "DEBENTURES"), the form and substance of such Debentures and the
terms, provisions and conditions thereof to be set forth as provided in the
Indenture and this Second Supplemental Indenture; and
WHEREAS, ComEd Financing II, a Delaware statutory business trust
(the "TRUST"), has offered to the public $150,000,000 aggregate liquidation
amount of its 8.50 % Series A Capital Securities (Liquidation Amount $1,000
per Capital Security) (the "CAPITAL SECURITIES") and has offered to the
Company $4,640,000 aggregate stated liquidation amount of its 8.50% Common
Securities (Liquidation Amount $1,000 per Common Security) (the "COMMON
SECURITIES"), such Capital Securities and Common Securities representing
undivided beneficial interests in the assets of the Trust, and proposes to
invest the proceeds from such offering in $154,640,000 aggregate principal
amount of the Debentures; and
WHEREAS, the Company has requested the Trustee to execute and
deliver this Second Supplemental Indenture, and all requirements necessary to
make this Second Supplemental Indenture a valid instrument, in accordance with
its terms, and to make the Debentures, when executed by the Company and
authenticated and delivered by the Trustee, the valid obligations of the
Company, have been performed, and the execution and delivery of this Second
Supplemental Indenture has been duly authorized in all respects;
NOW, THEREFORE, in consideration of the purchase and acceptance of
the Debentures by the holders thereof, and for the purpose of setting forth,
as provided in the Indenture, the form and substance of the Debentures and the
terms, provisions and conditions thereof, the Company covenants and agrees
with the Trustee as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1. Definition of Terms. Unless the context otherwise
requires, (a) a term defined in the Indenture has the same meaning when used
in this Second Supplemental Indenture, (b) a term defined anywhere in this
Second Supplemental Indenture has the same meaning throughout and (c) the
following terms have the meanings given to them in the Declaration: (i)
Administrative Trustee; (ii) Capital Security Certificate; (iii) Clearing
Agency; (iv) Delaware Trustee; (v) Exchange Offer; (vi) No Recognition
Opinion; (vii) Property Trustee; (viii) Pro Rata; (ix) Series B Debentures;
(x) Sponsor; and (xi) Tax Event.
In addition, the following terms have the following respective
meanings:
"ADJUSTED TREASURY RATE" means, with respect to any redemption
date, the rate per annum equal to (i) the yield, under the heading which
represents the average for the immediately prior week, appearing in the most
recently published statistical release designated "H.15 (519)" or any
successor publication which is published weekly by the Federal Reserve Board
and which establishes yields on actively traded United States Treasury
securities adjusted to constant maturity under the caption "Treasury Constant
Maturities," for the maturity corresponding to the Initial Optional Prepayment
Date (if no maturity is within three months before or after the Initial
Optional Prepayment Date, yields for the two published maturities most closely
corresponding to the Initial Optional Prepayment Date shall be determined and
the Adjusted Treasury Rate shall be interpolated or extrapolated from such
yields on a straight-line basis, rounding to the nearest month) or (ii) if
such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed
as a percentage of its principal amount) equal to the Comparable Treasury
Price for such redemption date, in each case calculated on the third Business
Day preceding the redemption date, plus in each case (a) 1.25 % if such
redemption date occurs on or prior to January 15, 1998, and (b) 0.50% in all
other cases.
"COMPARABLE TREASURY ISSUE" means the United States Treasury
security selected by the Quotation Agent as having a maturity date
corresponding to the Initial Optional Prepayment Date that would be utilized,
at the time of selection and in accordance with customary financial practice,
in pricing new issues of corporate debt securities with a maturity date
corresponding to the Initial Optional Prepayment Date. If no United States
Treasury security has a maturity date which is within three months before or
after the Initial Optional Prepayment Date, the two most closely corresponding
United States Treasury securities shall be used as the Comparable Treasure
Issue, and the calculation of the Adjusted Treasury Rate pursuant to clause
(ii) of the definition thereof shall be interpolated or extrapolated on a
straight line basis, rounding to the nearest month.
"COMPARABLE TREASURY PRICE" means, with respect any redemption date,
(i) the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each
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<PAGE>
case as a percentage of its principal amount) on the third Business Day
preceding such redemption date, as set forth in the daily statistical
release (or any successor release) published by the Federal Reserve Bank
of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor
release) is not published or does not contain such prices on such
Business Day, (a) the average of three Reference Treasury Dealer
Quotations for such redemption date, after excluding the highest and
lowest of such Reference Treasury Dealer Quotations, or (b) if the
Trustee obtains fewer than three such Reference Treasury Dealer
Quotations, the average of all such quotations.
"DECLARATION" means the Amended and Restated Declaration of Trust of
ComEd Financing II, a Delaware statutory business trust, dated as of January
24, 1997.
"DISSOLUTION EVENT" means that, as a result of the occurrence and
continuation of a Tax Event, the Trust is to be dissolved in accordance with
the Declaration and the Debentures held by the Property Trustee are to be
distributed to the holders of the Trust Securities issued by the Trust Pro
Rata in accordance with the Declaration.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System.
"INITIAL OPTIONAL PREPAYMENT DATE" means January 15, 2007.
"GUARANTEES" means the guarantees by the Company of the payment of
distributions of moneys held by the Trust and payments on liquidation of the
Trust.
"INITIAL PURCHASERS" means the entities so identified in the
Purchase Agreement.
"MATURITY DATE" means the date on which the Debentures mature and on
which the principal shall be due and payable together with all accrued and
unpaid interest thereon including Compounded Interest and Additional Interest,
if any.
"QUOTATION AGENT" means the Reference Treasury Dealer appointed by
the Trustee after consultation with the Company.
"REFERENCE TREASURY DEALER" means: (i) Merrill Lynch Government
Securities, Inc. and its successors; provided, however, that if the foregoing
shall cease to be a primary U.S. Government securities dealer in New York City
(a "PRIMARY TREASURY DEALER"), the Company shall substitute therefor another
Primary Treasury Dealer; and (ii) any other Primary Treasury Dealer selected
by the Trustee after consultation with the Company.
"REFERENCE TREASURY DEALER QUOTATION" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined
by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference
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<PAGE>
Treasury Dealer at 5:00 p.m., New York City time, on the third Business
Day preceding such redemption date.
"SENIOR INDEBTEDNESS" means (i) any payment in respect of (A)
indebtedness of the Company for money borrowed and (B) indebtedness evidenced
by securities, debentures, bonds, notes or other similar instruments issued by
the Company including, without limitation, indebtedness evidenced by
securities issued pursuant to the provisions of the Mortgage dated July 1,
1923, as supplemented by Supplemental Indenture dated August 1, 1944 and
subsequent supplemental indentures, between the Company, as mortgagor, and
Harris Trust and Savings Bank and D.G. Donovan, as trustees; the Indenture
dated as of September 1, 1987, as supplemented and amended, between the
Company and Citibank, N.A., as trustee; the Indentures dated April 1, 1949,
October 1, 1949, October 1, 1950, October 1, 1954, January 1, 1958, January 1,
1959 and December 1, 1961, between the Company and Amalgamated Bank, as
successor trustee to The First National Bank of Chicago; and the Indenture
dated February 15, 1973, as supplemented, between the Company and LaSalle
National Bank, as successor trustee to The First National Bank of Chicago;
(ii) all capital lease obligations of the Company; (iii) all obligations of
the Company issued or assumed as the deferred purchase price of property, all
conditional sale obligations of the Company and all obligations of such
obligor under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business); (iv) all obligations of
the Company for reimbursement on any letter of credit, banker's acceptance,
security purchase facility or similar credit transaction; (v) all obligations
of the type referred to in clauses (i) through (iv) of other persons for the
payment of which the Company is responsible or liable as obligor, guarantor or
otherwise; and (vi) all obligations of the type referred to in clauses (i)
through (v) of other persons secured by any lien on any property or asset of
the Company (whether or not such obligation is assumed by such obligor),
except for (1) any such indebtedness that is by its terms subordinated to or
pari passu with the Debentures, as the case may be, including all other debt
securities and guarantees in respect of those debt securities, issued to any
other trusts, partnerships or any other entity affiliated with the Company
which is a financing vehicle of the Company ("Financing Entity") in connection
with an issuance of preferred securities by such Financing Entity or other
securities which rank pari passu with, or junior to, the Capital Securities,
and (2) any indebtedness between or among the Company and its Affiliates.
Section 1.2. Interpretation. Each definition in this Second
Supplemental Indenture includes the singular and the plural, and references to
the neuter gender include the masculine and feminine where appropriate. Terms
which relate to accounting matters shall be interpreted in accordance with
generally accepted accounting principles in effect from time to time.
References to any statute mean such statute as amended at the time and include
any successor legislation. The word "or" is not exclusive, and the words
"herein," "hereof" and "hereunder" refer to this Second Supplemental Indenture
as a whole. The headings to the Articles and Sections are for convenience of
reference and shall not affect the meaning or interpretation of this Second
Supplemental Indenture. References to Articles and Sections mean the Articles
and Sections of this Second Supplemental Indenture.
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ARTICLE II
GENERAL TERMS AND CONDITIONS OF
THE DEBENTURES
Section 2.1. Designation and Principal Amount. There is hereby
authorized a series of Debt Securities designated the "8.50 % Series A
Subordinated Deferrable Interest Debentures due January 15, 2027," limited in
aggregate principal amount to $154,640,000, which amount shall be as set forth
in any written order of the Company for the authentication and delivery of
Debentures pursuant to Section 2.04 of the Indenture.
Section 2.2. Maturity. The Maturity Date will be January 15,
2027.
Section 2.3. Form and Payment. Except as provided in Section 2.4,
the Debentures shall be issued in fully registered certificated form without
interest coupons. Principal and interest on the Debentures issued in
certificated form will be payable, the transfer of such Debentures will be
registrable and such Debentures will be exchangeable for Debentures bearing
identical terms and provisions at the office or agency of the Trustee in
Wilmington, Delaware, provided, however, that payment of interest may be made
at the option of the Company by check mailed to the registered holder at such
address as shall appear in the Security Register. Notwithstanding the
foregoing, so long as the registered holder of any Debentures is the Property
Trustee, the payment of the principal of, premium (if any) and interest
(including Compounded Interest and Additional Interest, if any) on such
Debentures held by the Property Trustee will be made at such place and to such
account as may be designated by the Property Trustee.
Section 2.4. Global Debenture. In the event that the Sponsor gives
notice of its election to liquidate the Trust pursuant to Section 8.1(a)(iii)
of the Declaration:
(a) the Debentures in certificated form may be presented
to the Trustee by the Property Trustee in exchange for a Global
Security in an aggregate principal amount equal to the aggregate
principal amount of the Debentures so presented, to be
registered in the name of the Depositary, or its nominee, and
delivered by the Trustee to the Depositary for crediting to the
accounts of its participants pursuant to the instructions of the
Administrative Trustees. The Company, upon any such
presentation, shall execute a Global Security in such aggregate
principal amount and deliver the same to the Trustee for
authentication and delivery in accordance with the Indenture and
this Second Supplemental Indenture; and any payments on the
Debentures issued as a Global Security will be made to the
Depositary; and
(b) if any Capital Securities are held in non book-entry
certificated form, the Debentures in certificated form may be
presented to the Trustee by the Property Trustee and any Capital
Security Certificate which represents Capital Securities other
than Capital Securities held by the Clearing Agency or its
nominee ("NON BOOK-ENTRY CAPITAL SECURITIES") will be deemed to
represent beneficial interests in Debentures presented to the
Trustee by the Property Trustee having an aggregate principal
amount equal to the aggregate stated liquidation amount of the
Non Book-Entry Capital Securities until such
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Capital Security Certificates are presented to the Security
Registrar for transfer or reissuance at which time such Capital
Security Certificates will be canceled and a Debenture,
registered in the name of the holder of such Capital Security
Certificate or the transferee of the holder of such Capital
Security Certificate, as the case may be, with an aggregate
principal amount equal to the aggregate stated liquidation
amount of the Capital Security Certificate canceled, will be
executed by the Company and delivered to the Trustee for
authentication and delivery in accordance with the Indenture and
this Second Supplemental Indenture. On issue of such
Debentures, Debentures with an equivalent aggregate principal
amount that were presented by the Property Trustee to the
Trustee will be deemed to have been cancelled.
Section 2.5. Interest. (a) Each Debenture will bear interest at
the rate of 8.50% per annum (the "COUPON RATE") from the original date of
issuance until the principal thereof becomes due and payable, and on any
overdue principal and (to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest at
the Coupon Rate, compounded semi-annually, payable (subject to the provisions
of Article IV) semi-annually in arrears on July 15 and January 15 of each year
(each, an "INTEREST PAYMENT DATE"), commencing on July 15, 1997, to the Person
in whose name such Debenture or any predecessor Debenture is registered, at
the close of business on the first day of July and January, respectively.
(b) The amount of interest payable for any period will be computed
on the basis of a 360-day year consisting of twelve 30-day months. In the
event that any date on which interest is payable on the Debentures is not a
Business Day, then payment of interest payable on such date will be made on
the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay). The amount of interest payable
for any period shorter than a full calendar month for which interest is
computed, will be computed on the basis of the actual number of days elapsed
in such month.
(c) If at any time while the Property Trustee is the holder of any
Debentures, the Trust or the Property Trustee is required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States, or any other taxing
authority, then, in any case, the Company will pay as additional interest
("ADDITIONAL INTEREST") on the Debentures held by the Property Trustee, such
additional amounts as shall be required so that the net amounts received and
retained by the Trust and the Property Trustee after paying such taxes,
duties, assessments or other governmental charges will be equal to the amounts
the Trust and the Property Trustee would have received had no such taxes,
duties, assessments or other government charges been imposed.
ARTICLE III
REDEMPTION OF THE DEBENTURES
Section 3.1. Tax Event Redemption. If a Tax Event has occurred and
is continuing, then, notwithstanding Section 3.2, the Company shall have the
right, upon not less than 30 days' nor more than 60 days' notice to the
registered holders of the Debentures, to redeem the Debentures, in whole (but
not in part), for cash at any time prior to January 15, 2007
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and within 90 days of the occurrence of such Tax Event (the "90 DAY
PERIOD") at a redemption price (the "TAX EVENT REDEMPTION PRICE") equal
to the greater for (i) 100% of the principal amount of such Debentures
or (ii) the sum, as determined by a Quotation Agent, of the present
values of the principal amount and premium payable as part of the
redemption price with respect to an optional redemption of such
Debentures on January 15, 2007, together with scheduled payments of
interest on the Debentures accruing from the redemption date to and
including January 15, 2007, in each case discounted to the redemption
date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate, plus, in each case,
accrued interest thereon to the date of such redemption. The Tax Event
Redemption Price shall be paid prior to 12:00 noon, New York time, on
the date of such redemption or at such earlier time as the Company
determines and specifies in the notice of redemption, provided the
Company shall deposit with the Trustee an amount sufficient to pay the
Tax Event Redemption Price by 11:00 a.m. on the date such Tax Event
Redemption Price is to be paid.
Section 3.2. Optional Redemption by Company. Subject to the
provisions of Article III of the Indenture, except as otherwise specified in
this Second Supplemental Indenture, the Company shall have the right to redeem
the Debentures, in whole or in part, from time to time, on or after January
15, 2007, at a redemption price (the "OPTIONAL REDEMPTION PRICE") equal to the
percentage of the principal amount of the Debentures specified below, plus, in
each case, accrued and unpaid interest thereon to the date of such redemption
if redeemed during the 12-month period beginning January 15 of the years
indicated below:
YEAR PERCENTAGE
---- ----------
2007 104.250%
2008 103.825
2009 103.400
2010 102.975
2011 102.550
2012 102.125
2013 101.700
2014 101.275
2015 101.850
2016 100.425
2017 and thereafter 100.000
Any redemption pursuant to this Section 3.2 will be made upon not less than 30
days' nor more than 60 days' notice to the registered holder of the
Debentures, at the Optional Redemption Price. If the Debentures are only
partially redeemed pursuant to this Section 3.2, the Debentures will be
redeemed pro rata or by lot or by any other method utilized by the Trustee;
provided, that if at the time of redemption, the Debentures are registered as
a Global Security, the Depositary shall determine by lot the principal amount
of such Debentures held by each Debenture holder to be redeemed. The Optional
Redemption Price shall be paid prior to 12:00 noon, New York time, on the date
of such redemption or at such earlier time as the Company determines and
specifies in the notice of redemption, provided the Company shall deposit with
the Trustee an amount
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sufficient to pay the Optional Redemption Price by 11:00 a.m. on the
date such Optional Redemption Price is to be paid. Section 3.3. No
Sinking Fund. The Debentures are not entitled to the benefit of any
sinking fund.
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
Section 4.1. Extension of Interest Payment Period. So long as no
Event of Default has occurred and is continuing, the Company shall have the
right, at any time and from time to time during the term of the Debentures, to
extend the interest payment period of such Debentures for up to ten (10)
consecutive semi-annual periods (the "EXTENDED INTEREST PAYMENT PERIOD"). To
the extent permitted by applicable law, interest, the payment of which has
been deferred because of the extension of the interest payment period pursuant
to this Section 4.1, will bear interest compounded semi-annually at the Coupon
Rate for each semi-annual period of the Extended Interest Payment Period
("COMPOUNDED INTEREST"). At the end of the Extended Interest Payment Period,
the Company shall pay all interest accrued and unpaid on the Debentures,
including any Compounded Interest and Additional Interest ("DEFERRED
INTEREST") which shall be payable to the holders of the Debentures in whose
names the Debentures are registered in the Security Register on the record
date immediately preceding the end of the Extended Interest Payment Period.
Before the termination of any Extended Interest Payment Period, the Company
may further extend such period, provided that such period together with all
such further extensions thereof shall not exceed ten (10) consecutive
semi-annual periods or extend beyond the Maturity Date of the Debentures.
Upon the termination of any Extended Interest Payment Period and upon the
payment of all Deferred Interest then due, the Company may select a new
Extended Interest Payment Period, subject to the foregoing requirements. No
interest shall be due and payable during an Extended Interest Payment Period,
except at the end thereof, but the Company may pay at any time all or any
portion of the interest accrued during an Extended Interest Payment Period.
Section 4.2. Notice of Extension. (a) If the Property Trustee is
the only registered holder of the Debentures at the time the Company selects
an Extended Interest Payment Period, the Company shall give written notice to
the Administrative Trustees, the Property Trustee and the Trustee of its
selection of such Extended Interest Payment Period on the earlier of (i) ten
days prior to the next succeeding date on which Distributions on the Trust
Securities issued by the Trust are payable, or (ii) the date the Trust or the
Administrative Trustees are required to give notice of the record or payment
date for such Distributions to the New York Stock Exchange or other applicable
self-regulatory organization or to holders of the Capital Securities issued by
the Trust, but in any event at least ten days before such record date.
(b) If the Property Trustee is not the only holder of the
Debentures at the time the Company selects an Extended Interest Payment
Period, the Company shall give the holders of the Debentures and the Trustee
written notice of its selection of such Extended Interest Payment Period ten
days before the earlier of (i) the next succeeding Interest Payment Date, or
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(ii) the date the Company is required to give notice of the record or payment
date of such interest payment to the New York Stock Exchange or other
applicable self-regulatory organization or to holders of the Debentures, but
in any event at least ten days before such record date.
(c) The period in which any notice is given pursuant to paragraphs
(a) or (b) of this Section 4.2 shall be counted as one of the 10 semi-annual
periods permitted in the maximum Extended Interest Payment Period permitted
under Section 4.1.
ARTICLE V
EXPENSES
Section 5.1. Payment of Expenses. In connection with the offering,
sale and issuance of the Debentures to the Property Trustee in connection with
the sale of the Trust Securities by the Trust, the Company shall:
(a) pay all costs and expenses relating to the offering,
sale and issuance of the Debentures, including compensation to
the Initial Purchasers payable pursuant to the Purchase
Agreement and compensation of the Trustee under the Indenture in
accordance with the provisions of Section 7.06 of the Indenture;
(b) pay all costs and expenses of the Trust (including,
but not limited to, costs and expenses relating to the
organization of the Trust, the offering, sale and issuance of
the Trust Securities (including compensation to the Initial
Purchasers in connection therewith), the fees and expenses of
the Property Trustee and the Delaware Trustee, the costs and
expenses relating to the operation of the Trust, including
without limitation, costs and expenses of accountants,
attorneys, statistical or bookkeeping services, expenses for
printing and engraving and computing or accounting equipment,
paying agent(s), registrar(s), transfer agent(s), duplicating,
travel and telephone and other telecommunications expenses and
costs and expenses incurred in connection with the acquisition,
financing, and disposition of Trust assets); and
(c) pay any and all taxes (other than United States
withholding taxes attributable to the Trust or its assets) and
all liabilities, costs and expenses with respect to such taxes
of the Trust.
ARTICLE VI
SUBORDINATION
Section 6.1. Agreement to Subordinate. The Company covenants and
agrees, and each holder of Debentures issued hereunder by such holder's
acceptance thereof likewise covenants and agrees, that all Debentures shall be
issued subject to the provisions of this Article VI; and each holder of a
Debenture, whether upon original issue or upon transfer or assignment thereof,
accepts and agrees to be bound by such provisions.
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The payment by the Company of the principal of, premium, if any, and
interest on all Debentures issued hereunder shall, to the extent and in the
manner hereinafter set forth, be subordinated and subject in right of payment
to the prior payment in full of all Senior Indebtedness of the Company,
whether outstanding at the date of this Second Supplemental Indenture or
thereafter incurred.
No provision of this Article VI shall prevent the occurrence of any
default or Event of Default hereunder.
Section 6.2. Default on Senior Indebtedness. In the event and
during the continuation of any default by the Company in the payment of
principal, premium, interest or any other payment due on any Senior
Indebtedness of the Company, or in the event that the maturity of any Senior
Indebtedness of the Company has been accelerated because of a default, then,
in either case, no payment shall be made by the Company with respect to the
principal (including redemption payments, if any) of premium, if any, or
interest on the Debentures.
In the event that, notwithstanding the foregoing, any payment shall
be received by the Trustee or any holder when such payment is prohibited by
the preceding paragraph of this Section 6.2, such payment shall be held in
trust for the benefit of, and shall be paid over or delivered to, the holders
of Senior Indebtedness or their respective representatives, or to the trustee
or trustees under any indenture pursuant to which any of such Senior
Indebtedness may have been issued, as their respective interests may appear,
but only to the extent that the holders of the Senior Indebtedness (or their
representative or representatives or a trustee) notify the Trustee within 90
days of such payment of the amounts then due and owing on the Senior
Indebtedness and only the amounts specified in such notice to the Trustee
shall be paid to the holders of Senior Indebtedness.
Section 6.3. Liquidation; Dissolution; Bankruptcy. Upon any
payment by the Company, or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, to creditors upon any
dissolution or winding-up or liquidation or reorganization of the Company,
whether voluntary or involuntary or in bankruptcy, insolvency, receivership or
other proceedings, all amounts due upon all Senior Indebtedness of the Company
shall first be paid in full, or payment thereof provided for in money in
accordance with its terms, before any payment is made by the Company on
account of the principal (and premium, if any) or interest on the Debentures;
and upon any such dissolution or winding-up or liquidation or reorganization,
any payment by the Company, or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to which the
holders of the Debentures or the Trustee would be entitled to receive from the
Company, except for the provisions of this Article VI, shall be paid by the
Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent
or other Person making such payment or distribution, or by the holders of the
Debentures or by the Trustee under this Indenture if received by them or it,
directly to the holders of Senior Indebtedness of the Company (pro rata to
such holders on the basis of the respective amounts of Senior Indebtedness
held by such holders, as calculated by the Company) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Indebtedness may have been
issued, as their respective interests may appear, to the extent necessary to
pay such Senior Indebtedness in full,
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in money or money's worth, after giving effect to any concurrent payment
or distribution to or for the holders of such Senior Indebtedness,
before any payment or distribution is made to the holders of Debentures
or to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, prohibited by the foregoing, shall be received
by the Trustee or the holders of the Debentures before all Senior Indebtedness
of the Company is paid in full, or provision is made for such payment in money
in accordance with its terms, such payment or distribution shall be held in
trust for the benefit of and shall be paid over or delivered to the holders of
such Senior Indebtedness or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing such Senior Indebtedness may have been issued, as their respective
interests may appear, as calculated by the Company, for application to the
payment of all Senior Indebtedness of the Company remaining unpaid to the
extent necessary to pay such Senior Indebtedness in full in money in
accordance with its terms, after giving effect to any concurrent payment or
distribution to or for the benefit of the holders of such Senior Indebtedness.
For purposes of this Article VI, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this
Article VI with respect to the Debentures to the payment of all Senior
Indebtedness of the Company that may at the time be outstanding, provided that
(i) such Senior Indebtedness is assumed by the new corporation, if any,
resulting from any such reorganization or readjustment, and (ii) the rights of
the holders of such Senior Indebtedness are not, without the consent of such
holders, altered by such reorganization or readjustment. The consolidation of
the Company with, or the merger of the Company into, another corporation or
the liquidation or dissolution of the Company following the conveyance or
transfer of its property as an entirety, or substantially as an entirety, to
another corporation upon the terms and conditions provided for in Article X of
the Indenture shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section 6.3 if such other corporation
shall, as a part of such consolidation, merger, conveyance or transfer, comply
with the conditions stated in Article X of the Indenture. Nothing in Section
6.2 or in this Section 6.3 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.06 of the Indenture.
Section 6.4. Subrogation. Subject to the payment in full of all
Senior Indebtedness of the Company, the rights of the holders of the
Debentures shall be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments or distributions of cash, property or
securities of the Company applicable to such Senior Indebtedness until the
principal of (and premium, if any) and interest on the Debentures shall be
paid in full; and, for the purposes of such subrogation, no payments or
distributions to the holders for such Senior Indebtedness of any cash,
property or securities to which the holders of the Debentures or the Trustee
would be entitled except for the provisions of this Article VI, and no payment
over pursuant to the provisions of this Article VI, to or for the benefit of
the holders of such Senior Indebtedness by holders of the Debentures or the
Trustee, shall, as between the Company, its
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creditors other than holders of Senior Indebtedness of the Company, and
the holders of the Debentures be deemed to be a payment by the Company
to or on account of such Senior Indebtedness. It is understood that the
provisions of this Article VI are and are intended solely for the
purposes of defining the relative rights of the holders of the
Debentures, on the one hand, and the holders of such Senior Indebtedness
on the other hand.
Nothing contained in this Article VI or elsewhere in this Indenture
or in the Debentures is intended to or shall impair, as between the Company,
its creditors other than the holders of Senior Indebtedness of the Company,
and the holders of the Debentures, the obligation of the Company which is
absolute and unconditional, to pay to the holders of the Debentures the
principal of (and premium, if any) and interest on the Debentures as and when
the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the holders of the
Debentures and creditors of the Company, other than the holders of Senior
Indebtedness of the Company, nor shall anything herein or therein prevent the
Trustee or the holder of any Debenture from exercising all remedies otherwise
permitted by applicable law upon default under the Indenture, subject to the
rights, if any, under this Article VI of the holders of such Senior
Indebtedness in respect of cash, property or securities of the Company,
received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred
to in this Article VI, the Trustee, subject to the provisions of Section 7.01
of the Indenture, and the holders of the Debentures, shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction in which
such dissolution, winding-up, liquidation or reorganization proceedings are
pending, or a certificate of the receiver, trustee in bankruptcy, liquidation
trustee, agent or other Person making such payment or distribution, delivered
to the Trustee or to the holders of the Debentures, for the purposes of
ascertaining the Persons entitled to participate in such distribution, the
holders of Senior Indebtedness and other indebtedness of the Company, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article VI.
Section 6.5. Trustee to Effectuate Subordination. Each holder of a
Debenture by such holder's acceptance thereof authorizes and directs the
Trustee on such holder's behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article VI and
appoints the Trustee such holder's attorney-in-fact for any and all such
purposes.
Section 6.6. Notice by the Company. The Company shall give prompt
written notice to a Responsible Officer of the Trustee of any fact known to
the Company that would prohibit the making of any payment of monies to or by
the Trustee in respect of the Debentures pursuant to the provisions of this
Article VI. Notwithstanding the provisions of this Article VI or any other
provision of the Indenture and this Second Supplemental Indenture, the Trustee
shall not be charged with knowledge of the existence of any facts that would
prohibit the making of any payment of monies to or by the Trustee in respect
of the Debentures pursuant to the provisions of this Article VI unless and
until a Responsible Officer of the Trustee shall have received written notice
thereof at the Principal Office of the Trustee from the Company or a holder or
holders of Senior Indebtedness or from any trustee therefor; and before the
receipt of any such written notice, the Trustee, subject to the provisions of
Section 7.01 of the Indenture,
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shall be entitled in all respects to assume that no such facts exist;
provided, however, that if the Trustee shall not have received the
notice provided for in this Section 6.6 at least two Business Days prior
to the date upon which by the terms hereof any money may become payable
for any purpose (including, without limitation, the payment of the
principal of (or premium, if any) or interest on any Debenture), then,
anything herein contained to the contrary notwithstanding, the Trustee
shall have full power and authority to receive such money and to apply
the same to the purposes for which they were received, and shall not be
affected by any notice to the contrary that may be received by it within
two Business Days prior to such date.
The Trustee, subject to the provisions of Section 7.01 of the
Indenture, shall be entitled to rely on the delivery to it of a written notice
by a Person representing himself to be a holder of Senior Indebtedness of the
Company (or a trustee on behalf of such holder) to establish that such notice
has been given by a holder of such Senior Indebtedness or a trustee on behalf
of any such holder or holders. In the event that the Trustee determines in
good faith that further evidence is required with respect to the right of any
Person as a holder of such Senior Indebtedness to participate in any payment
or distribution pursuant to this Article VI, the Trustee may request such
Person to furnish evidence to the reasonable satisfaction of the Trustee as to
the amount of such Senior Indebtedness held by such Person, the extent to
which such Person is entitled to participate in such payment or distribution
and any other facts pertinent to the rights of such Person under this Article
VI, and if such evidence is not furnished, the Trustee may defer any payment
to such Person pending judicial determination as to the right of such Person
to receive such payment.
Section 6.7. Rights of the Trustee; Holders of Senior
Indebtedness. The Trustee in its individual capacity shall be entitled to all
the rights set forth in this Article VI in respect of any Senior Indebtedness
at any time held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in the Indenture or this Second Supplemental
Indenture shall deprive the Trustee of any of its rights as such holder.
With respect to the holders of Senior Indebtedness of the Company,
the Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article VI, and no implied
covenants or obligations with respect to the holders of such Senior
Indebtedness shall be read into the Indenture or this Second Supplemental
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of such Senior Indebtedness and, subject to the
provisions of Section 7.01 of the Indenture, the Trustee shall not be liable
to any holder of such Senior Indebtedness if it shall pay over or deliver to
holders of Debentures, the Company or any other Person money or assets to
which any holder of such Senior Indebtedness shall be entitled by virtue of
this Article VI or otherwise.
Section 6.8. Subordination May Not Be Impaired. No right of any
present or future holder of any Senior Indebtedness of the Company to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance
by the Company with the terms, provisions and covenants of the Indenture,
regardless of any knowledge thereof that any such holder may have or otherwise
be charged with.
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Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness of the Company may, at any time
and from time to time, without the consent of or notice to the Trustee or the
holders of the Debentures, without incurring responsibility to the holders of
the Debentures and without impairing or releasing the subordination provided
in this Article VI or the obligations hereunder of the holders of the
Debentures to the holders of such Senior Indebtedness, do any one or more the
following: (i) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend
or supplement in any manner such Senior Indebtedness or any instrument
evidencing the same or any agreement under which such Senior Indebtedness is
outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii)
release any Person liable in any manner for the collection of such Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Company and any other Person.
ARTICLE VII
FORM OF DEBENTURE
Section 7.1. Form of Debenture. The Debentures and the Trustee's
Certificate of Authentication to be endorsed thereon are to be substantially
in the following forms:
(FORM OF FACE OF DEBENTURE)
[IF THE DEBENTURE IS TO BE A GLOBAL SECURITY, INSERT: This
Debenture is a Global Security within the meaning of the Indenture hereinafter
referred to and is registered in the name of a Depository or a nominee of a
Depository. This Debenture is exchangeable for Debentures registered in the
name of a person other than the Depository or its nominee only in the limited
circumstances described in the Indenture, and no transfer of this Debenture
(other than a transfer of this Debenture as a whole by the Depository to a
nominee of the Depository or by a nominee of the Depository to the Depository
or another nominee of the Depository) may be registered except in limited
circumstances.
Unless this Debenture is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) to the
issuer or its agent for registration of transfer, exchange or payment, and any
Debenture issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of The Depository Trust Company and
any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered
owner hereof, Cede & Co., has an interest herein.]
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No. $
CUSIP No.
COMMONWEALTH EDISON COMPANY
8.50% SERIES A SUBORDINATED DEFERRABLE INTEREST DEBENTURE
DUE JANUARY 15, 2027
COMMONWEALTH EDISON COMPANY, an Illinois corporation (the
"COMPANY", which term includes any successor corporation under the
Indenture hereinafter referred to), for value received, hereby promises
to pay to _______ or registered assigns, the principal sum of
____________ Dollars on January 15, 2027, and to pay interest on said
principal sum from January 24, 1997 or from the most recent interest
payment date (each such date, an "INTEREST PAYMENT DATE") to which
interest has been paid or duly provided for, semi-annually (subject to
deferral as set forth herein) in arrears on July 15 and January 15 of
each year commencing, July 15, 1997, at the rate of 8.50% per annum
until the principal hereof shall have become due and payable, and on any
overdue principal and premium, if any, and (without duplication and to
the extent that payment of such interest is enforceable under applicable
law) on any overdue installment of interest compounded semi-annually at
the same rate per annum. The amount of interest payable on any Interest
Payment Date shall be computed on the basis of a 360-day year consisting
of twelve 30-day months. In the event that any date on which interest
is payable on this Debenture is not a Business Day, then payment of
interest payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in
respect of any such delay). The interest installment so payable, and
punctually paid or duly provided for, on any Interest Payment Date will,
as provided in the Indenture, be paid to the person in whose name this
Debenture (or one or more Predecessor Securities, as defined in said
Indenture) is registered at the close of business on the first day of
the month in which such Interest Payment Date occurs. Any such interest
installment not punctually paid or duly provided for shall forthwith
cease to be payable to the registered holders on such regular record
date, and may be paid to the person in whose name this Debenture (or one
or more Predecessor Securities) is registered at the close of business
on a special record date to be fixed by the Trustee for the payment of
such defaulted interest, notice whereof shall be given to the registered
holders of this series of Debentures not less than ten (10) days prior
to such special record date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities
exchange on which the Debentures may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in the
Indenture. The principal of (and premium, if any) and the interest on
this Debenture shall be payable at the office or agency of the Trustee
maintained for that purpose in Wilmington, Delaware, in any coin or
currency of the United States of America which at the time of payment is
legal tender for payment of public and private debts; provided, however,
that payment of interest may be made at the option of the Company by
check mailed to the registered holder at such address as shall appear in
the Security Register. Notwithstanding the foregoing, so long as the
Holder of this Debenture is the Property Trustee, the payment of the
principal of (and premium, if any) and
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interest on this Debenture will be made at such place and to such
account as may be designated by the Property Trustee.
The indebtedness evidenced by this Debenture is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all Senior Indebtedness, and this Debenture is issued
subject to the provisions of the Indenture with respect thereto. Each Holder
of this Debenture, by accepting the same, (a) agrees to and shall be bound by
such provisions, (b) authorizes and directs the Trustee on his behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate
the subordination so provided and (c) appoints the Trustee his
attorney-in-fact for any and all such purposes. Each Holder hereof, by his
acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder
of Senior Indebtedness, whether now outstanding or hereafter incurred, and
waives reliance by each such Holder upon said provisions.
This Debenture shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any
purpose until the Certificate of Authentication hereon shall have been signed
by or on behalf of the Trustee.
The provisions of this Debenture are continued on the reverse side
hereof and such continued provisions shall for all purposes have the same
effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
Dated
COMMONWEALTH EDISON COMPANY
By
[Title]
Attest:
By
[Title]
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[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures of the series of Debentures described in
the within-mentioned Indenture.
WILMINGTON TRUST COMPANY, ______________________________
Not in Its Individual Capacity But as Authentication Agent
Solely as Trustee
By By
Authorized Signatory Authorized Signatory
(FORM OF REVERSE OF DEBENTURE)
This Debenture is one of a duly authorized series of Debt Securities
of the Company (herein sometimes referred to as the "DEBENTURES"), specified
in the Indenture, all issued or to be issued in one or more series under and
pursuant to an Indenture dated as of September 1, 1995, duly executed and
delivered between the Company and Wilmington Trust Company, not in its
individual capacity but solely as trustee (the "TRUSTEE"), as supplemented by
the First Supplemental Indenture dated as of September 19, 1995 between the
Company and the Trustee, and the Second Supplemental Indenture dated as of
January 24, 1997 between the Company and the Trustee (the Indenture as so
supplemented, the "INDENTURE"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the holders of the Debentures. By the terms of the
Indenture, the Debt Securities are issuable in series which may vary as to
amount, date of maturity, rate of interest and in other respects as in the
Indenture provided. This series of Debt Securities is limited in aggregate
principal amount as specified in said Second Supplemental Indenture.
If a Tax Event has occurred and is continuing, the Company shall
have the right to redeem this Debenture in whole (but not in part) at any time
prior to January 15, 2007 and within 90 days of the occurrence of such Tax
Event, at a redemption price (the "TAX EVENT REDEMPTION PRICE") equal to the
greater of (i) 100% of the principal amount of this Debenture or (ii) the sum,
as determined by a Quotation Agent, of the present values of the principal
amount and premium payable as part of the redemption price with respect to an
optional redemption of this Debenture on January 15, 2007, together with
scheduled payments of interest on this Debenture accruing from the redemption
date to and including January 15, 2007, in each case discounted to the
redemption date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate, plus, in each case,
accrued interest thereon to the date of such redemption. The Tax Event
Redemption Price shall be paid
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prior to 12:00 noon, New York time, on the date of such redemption or at
such earlier time as the Company determines and specifies in the notice
of redemption.
The Company shall have the right to redeem this Debenture, in whole
or in part, from time to time, at any time on or after January 15, 2007 (an
"OPTIONAL REDEMPTION"), at a redemption price (the "OPTIONAL REDEMPTION
PRICE") equal to the percentage of the principal amount of this Debenture
specified below, plus, in each case, accrued and unpaid interest thereon to
the date of such redemption if redeemed during the 12-month period beginning
January 15 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2007 104.250%
2008 103.825
2009 103.400
2010 102.975
2011 102.550
2012 102.125
2013 101.700
2014 101.275
2015 100.850
2016 100.425
2017 and thereafter 100.000
Any redemption pursuant to this paragraph will be made upon not less than 30
days' nor more than 60 days' notice, at the Optional Redemption Price. If the
Debentures are only partially redeemed by the Company pursuant to an Optional
Redemption, the Debentures will be redeemed pro rata or by lot or by any other
method utilized by the Trustee; provided that if at the time of redemption,
the Debentures are registered as a Global Security, the Depositary shall
determine by lot the principal amount of such Debentures held by each
Debenture holder to be redeemed.
In the event of redemption of this Debenture in part only, a new
Debenture or Debentures of this series for the unredeemed portion hereof will
be issued in the name of the holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the
Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debt Securities of each series affected at
the time outstanding, as defined in the Indenture, to execute supplemental
indentures for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or of modifying in any manner the rights of the Holders
of such Debt Securities; provided, however,
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that no such supplemental indenture shall (i) extend the fixed maturity
of this Debenture, or reduce the principal amount hereof, or reduce the
rate or extend the time of payment of interest hereon, or reduce any
premium payable upon the redemption hereof, without the consent of the
Holder hereof or (ii) reduce the aforesaid percentage of Debt
Securities, the Holders of which are required to consent to any such
supplemental indenture, without the consent of the Holders of each Debt
Security then outstanding and affected thereby. The Indenture also
contains provisions permitting the Holders of a majority in aggregate
principal amount of the Debt Securities of any series at the time
outstanding affected thereby, on behalf of all of the Holders of the
Debt Securities of such series, to waive any past default in the
performance of any of the covenants contained in the Indenture, or
established pursuant to the Indenture with respect to such series, and
its consequences, except a default in the payment of the principal of or
premium, if any, or interest on any of the Debt Securities of such
series. Any such consent or waiver by the registered Holder of this
Debenture (unless revoked as provided in the Indenture) shall be
conclusive and binding upon such Holder and upon all future Holders and
owners of this Debenture and of any Debenture issued in exchange
therefor or in place hereof (whether by registration of transfer or
otherwise), irrespective of whether or not any notation of such consent
or waiver is made upon this Debenture.
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Debenture at the time and place and at
the rate and in the money herein prescribed.
The Company shall have the right, at any time and from time to time
during the term of the Debentures, to extend the interest payment period of
the Debentures (including this Debenture) for up to ten (10) consecutive
semi-annual periods (an "EXTENDED INTEREST PAYMENT PERIOD"), at the end of
which period the Company shall pay all interest then accrued and unpaid
(together with interest thereon at the rate specified for the Debentures to
the extent that payment of such interest is enforceable under applicable
law). Before the termination of any such Extended Interest Payment Period,
the Company may further extend such Extended Interest Payment Period, provided
that such Extended Interest Payment Period together with all such further
extensions thereof shall not exceed ten (10) consecutive semi-annual periods
or extend beyond the Maturity Date of the Debentures. At the termination of
any such Extended Interest Payment Period and upon the payment of all Deferred
Interest then due, the Company may select a new Extended Interest Payment
Period, subject to the foregoing requirements.
As provided in the Indenture and subject to certain limitations
therein set forth, this Debenture is transferable by the registered holder
hereof on the Security Register of the Company, upon surrender of this
Debenture for registration of transfer at the office or agency of the Trustee
in Wilmington, Delaware accompanied by a written instrument or instruments of
transfer in form satisfactory to the Company or the Trustee duly executed by
the registered holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Debentures of authorized denominations and for the
same aggregate principal amount and series will be issued to the designated
transferee or transferees. No service charge will be made for any such
transfer, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in relation thereto.
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Prior to due presentment for registration of transfer of this
Debenture, the Company, the Trustee, any paying agent and any Security
Registrar may deem and treat the registered holder hereof as the absolute
owner hereof (whether or not this Debenture shall be overdue and notwithstanding
any notice of ownership or writing hereon made by anyone other than the
Security Registrar) for the purpose of receiving payment of or on account of
the principal hereof and premium, if any, and interest due hereon and for all
other purposes, and neither the Company nor the Trustee nor any paying agent
nor any Security Registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of,
premium (if any) or the interest on this Debenture, or for any claim based
hereon, or otherwise in respect hereof, or based on or in respect of the
Indenture, against any incorporator, stockholder, officer or director, past,
present or future, as such, of the Company or of any predecessor or successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issuance hereof, expressly waived and released.
[The Debentures of this series are issuable only in registered form
without coupons in denominations of $[1,000] and any integral multiple
thereof.] [This Global Security is exchangeable for Debentures in definitive
form only under certain limited circumstances set forth in the Indenture.
Debentures of this series so issued are issuable only in registered form
without coupons in denominations of $[1,000] and any integral multiple
thereof.] As provided in the Indenture and subject to certain limitations
[herein and] therein set forth, Debentures of this series [so issued] are
exchangeable for a like aggregate principal amount of Debentures of this
series of a different authorized denomination, as requested by the Holder
surrendering the same.
All terms used in this Debenture which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE
INDENTURE AND THE DEBENTURES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS
THEREOF.
ARTICLE VIII
ORIGINAL ISSUE OF DEBENTURES; EXCHANGE
Section 8.1. Original Issue of Debentures. Debentures in the
aggregate principal amount of $154,640,000 may, upon execution of this Second
Supplemental Indenture, be executed by the Company and delivered to the
Trustee for authentication, and the Trustee shall thereupon authenticate and
deliver said Debentures to or upon the written order of the Company, signed by
its Chairman, its President or any Vice President and its Treasurer or an
Assistant Treasurer, without any further action by the Company.
Section 8.2 Exchange of Debentures for Series B Debentures. The
Debentures may be exchanged for Series B Debentures pursuant to the terms of
the Exchange Offer. The Trustee shall make the exchange as follows:
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The Company shall present the Trustee with an Officers' Certificate
certifying the following:
(a) upon issuance of the Series B Debentures, the
transactions contemplated by the Exchange Offer have
been consummated; and
(b) the principal amount of Debentures properly tendered in
the Exchange Offer that are represented by a Global
Security and the principal amount of Debentures properly
tendered in the Exchange Offer that are represented by
definitive securities, the name of each holder of such
definitive securities, the principal amount properly
tendered in the Exchange Offer by each such holder and
the name and address to which definitive securities for
Series B Debentures shall be registered and sent for
each such holder.
The Trustee, upon receipt of (i) such Officers' Certificate, (ii) an
Opinion of Counsel (x) to the effect that the Series B Debentures have been
registered under Section 5 of the Securities Act and the Indenture has been
qualified under the Trust Indenture Act and (y) with respect to the matters
set forth in Section 3(o) of the Registration Rights Agreement and (iii) a
Company Order, shall authenticate (A) a Global Security for Series B
Debentures in aggregate principal amount equal to the aggregate principal
amount of Debentures represented by a Global Security indicated in such
Officers' Certificate as having been properly tendered and (B) definitive
securities representing Series B Debentures registered in the names of, and in
the principal amounts indicated in, such Officers' Certificate.
If the principal amount of the Global Security for the Series B
Debentures is less than the principal amount of the Global Security for the
Debentures, the Trustee shall make an endorsement on such Global Security for
Debentures indicating a reduction in the principal amount represented thereby.
The Trustee shall deliver such definitive securities for Series B
Debentures to the holders thereof as indicated in such Officers' Certificate.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Ratification of Indenture. The Indenture, as
supplemented by the First Supplemental Indenture and this Second Supplemental
Indenture, is in all respects ratified and confirmed, and this Second
Supplemental Indenture shall be deemed part of the Indenture in the manner and
to the extent herein and therein provided.
Section 9.2. Trustee Not Responsible for Recitals. The recitals
herein contained are made by the Company and not by the Trustee, and the
Trustee assumes no responsibility for the correctness thereof. The Trustee
makes no representation as to the validity or sufficiency of this Second
Supplemental Indenture.
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Section 9.3. Governing Law. This Second Supplemental Indenture and
each Debenture shall be deemed to be a contract made under the internal laws
of the State of New York, and for all purposes shall be construed in
accordance with the laws of said State.
Section 9.4. Separability. In case any one or more of the
provisions contained in this Second Supplemental Indenture or in the
Debentures shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Second Supplemental Indenture or
of the Debentures, but this Second Supplemental Indenture and the Debentures
shall be construed as if such invalid or illegal or unenforceable provision
had never been contained herein or therein.
Section 9.5. Counterparts. This Second Supplemental Indenture may
be executed in any number of counterparts each of which shall be an original;
but such counterparts shall together constitute but one and the same
instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed, and their respective corporate
seals to be hereunto affixed and attested, on the date or dates indicated in
the acknowledgments and as of the day and year first above written.
COMMONWEALTH EDISON COMPANY
By:
Vice President
[Corporate Seal]
Attest:
Secretary
WILMINGTON TRUST COMPANY,
Not in Its Individual Capacity
But Solely as Trustee
By:
Title:
[Corporate Seal]
Attest:
Title:
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STATE OF ILLINOIS )
COUNTY OF COOK ) ss:
On the 24th day of January, 1997, before me personally came John C.
Bukovski, to me known, who, being by me duly sworn, did depose and say that
he is a Vice President of COMMONWEALTH EDISON COMPANY, one of the corporations
described in and which executed the above instrument; that he knows the
corporate seal of said corporation; that the seal affixed to the said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation, and that he signed his name thereto by
like authority.
NOTARY PUBLIC
[seal] Commission expires
STATE OF DELAWARE )
COUNTY OF NEW CASTLE ):
On the ________ day of January, 1997, before me personally came W.
Chris Sponenberg, to me known, who, being by me duly sworn, did depose and say
that he is a Senior Financial Services Officer of WILMINGTON TRUST COMPANY,
one of the corporations described in and which executed the above instrument;
that he knows the corporate seal of said corporation; that the seal affixed to
the said instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that he signed
his name thereto by like authority.
NOTARY PUBLIC
[seal] Commission expires
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Exhibit (10)- 9
Unicom Corporation and Commonwealth Edison Company
Form 10-K File Nos.1-11375 and 1-1839
UNICOM CORPORATION
GENERAL PROVISIONS REGARDING 1996 STOCK OPTION AWARDS
GRANTED UNDER THE UNICOM CORPORATION LONG-TERM INCENTIVE PLAN
The purpose of these General Provisions Regarding 1996 Stock Option
Awards Granted Under the Unicom Corporation Long-Term Incentive Plan (the
"General Provisions") is to set forth certain provisions which shall be deemed a
part of, and to govern, options to purchase shares of the Common Stock, without
par value (the "Common Stock"), of Unicom Corporation, an Illinois corporation
(the "Company"), granted by the Company on July 18, 1996 under the provisions of
the Unicom Corporation Long-Term Incentive Plan (the "Plan").
1. Form of Stock Option Grant. Each such stock option ("Option")
shall be in writing (an "Option Agreement") and shall specify (i) the name of
the recipient of the Option (the "Optionee"), (ii) the number of shares of
Common Stock subject to such Option, and (iii) the terms applicable to the
exercise of such Option, including the exercise price, any restrictions
applicable to such exercise and the expiration date (the "Expiration Date") for
such exercise.
2. Time and Manner of Exercise.
2.1. Exercise of Option. (a) Except as otherwise provided herein,
an Option shall become exercisable as described under the caption "When
Exercisable" in the Option Agreement.
(b) If an Optionee's employment by the Company terminates by reason
of Retirement, death or Disability, then on the date of such Retirement, death
or Disability, such Optionee's Option shall, notwithstanding Section 2.1(a)
hereof, become exercisable as to all of the shares of Common Stock remaining
subject to such Option and may (1) in the cases of Retirement or Disability, be
exercised by such Optionee or his or her Legal Representative or Permitted
Transferees, as the case may be, until the Expiration Date or (2) in the case of
death, be exercised by such Optionee's Legal Representative or Permitted
Transferees, as the case may be, until 11:59 p.m. (Chicago time) on the third
anniversary of the date of death; provided, however, that in any case such
exercisability is conditioned upon such Optionee's or his or her Legal
Representative's or Permitted Transferees', as the case may be, continued
"acceptable conduct," as determined by the Committee in its sole discretion. For
purposes of the foregoing, "acceptable conduct"
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shall mean, without limitation, refraining from engaging in activities which (i)
are competitive to the business of the Company or its subsidiaries, (ii) promote
or assist competitors of the Company or its subsidiaries, or (iii) reflect
negatively on the Company, its subsidiaries or any of their directors, officers,
employees or agents.
(c) If an Optionee's employment by the Company terminates either
for cause or by voluntary action of such Optionee (other than Retirement), such
Optionee's Option shall expire on the effective date of such termination of
employment and shall not thereafter be exercisable.
(d) If an Optionee's employment by the Company terminates for any
reason other than Retirement, Disability, death or as specified in Section
2.1(c) hereof, such Optionee's Option shall be exercisable only to the extent it
is exercisable on the effective date of such termination of employment and may
thereafter be exercised by such Optionee or his or her Legal Representative
until and including the earlier to occur of (i) the date which is three months
after the effective date of such termination of employment and (ii) the
Expiration Date.
2.2. Method of Exercise. Subject to the limitations set forth in
the Option Agreement and these General Provisions, an Option may be exercised by
the Optionee:
(a) by giving written notice to the Company specifying the number of
whole shares of Common Stock to be purchased and accompanied by payment
therefor in full (or arrangement made for such payment to the Company's
satisfaction) (1) in cash, (2) by delivery of previously owned whole
shares of Common Stock (which such Optionee has held for at least six
months prior to the delivery of such shares or which such Optionee
purchased on the open market and for which such Optionee has good title,
free and clear of all liens and encumbrances) having an aggregate Fair
Market Value, determined as of the date of exercise, equal to the
aggregate purchase price payable pursuant to such Option by reason of such
exercise, (3) in cash by a broker-dealer acceptable to the Company to whom
such Optionee has submitted an irrevocable notice of exercise or (4) a
combination of (1) and (2), and
(b) by executing such documents as the Company may reasonably
request.
The Company shall have sole discretion to disapprove of an election pursuant to
any of subclauses (2) through (4) of clause (a) of this Section 2.2. Any
fraction of a share of Common Stock which would be required to pay such purchase
price shall be disregarded and the remaining amount due shall be paid in cash by
the Optionee. No certificate representing a share of Common Stock shall be
delivered until the full purchase price therefor has been paid.
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2.3. Termination of Option. (a) In no event may an Option be
exercised after it terminates as set forth in this Section 2.3. An Option shall
terminate, to the extent not exercised pursuant to Section 2.2 or earlier
terminated pursuant to Section 2.1, on the Expiration Date stated in the Option
Agreement.
(b) In the event that rights to purchase all or a portion of the
shares of Common Stock subject to an Option expire or are exercised, cancelled
or forfeited, the Optionee shall, upon the Company's request, promptly return
the related Option Agreement to the Company for full or partial cancellation, as
the case may be. Such cancellation shall be effective regardless of whether the
Optionee returns said Option Agreement. If the Optionee continues to have
rights to purchase shares of Common Stock under said Option Agreement, the
Company shall, within 10 days of the Optionee's delivery of said Option
Agreement to the Company, either (i) mark said Option Agreement to indicate the
extent to which said Option has expired or been exercised, cancelled or
forfeited or (ii) issue to the Optionee a substitute option agreement applicable
to such rights, which agreement shall otherwise be substantially similar to said
Option Agreement in form and substance.
3. Additional Terms and Conditions of Options.
3.1. Nontransferability of Options. Except as may otherwise be
permitted by the Plan or authorized in accordance with the terms of the Plan, an
Option may not be transferred by the Optionee other than by will or the laws of
descent and distribution or pursuant to beneficiary designation procedures
approved by the Company. Except to the extent permitted by the foregoing
sentence, during the Optionee's lifetime such Optionee's Option is exercisable
only by the Optionee or his or her Legal Representative. Except to the extent
permitted by the foregoing, an Option may not be sold, transferred, assigned,
pledged, hypothecated, encumbered or otherwise disposed of (whether by operation
of law or otherwise) or be subject to execution, attachment or similar process.
Upon any attempt so to sell, transfer, assign, pledge, hypothecate, encumber or
otherwise dispose of an Option, such Option and all rights thereunder shall
immediately become null and void.
3.2. Withholding Taxes. (a) As a condition precedent to the
delivery of shares of Common Stock upon exercise of an Option, the Optionee
shall, upon request by the Company, pay to the Company in addition to the
purchase price of the shares, such amount of cash as the Company may be
required, under all applicable federal, state, local or other laws or
regulations, to withhold and pay over as income or other withholding taxes (the
"Required Tax Payments") with respect to such exercise of such Option. If the
Optionee shall fail to advance the Required Tax Payments after request by the
Company, the Company may, in its discretion, deduct any Required Tax Payments
from any amount then or thereafter payable by the Company to the Optionee.
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(b) The Optionee may elect to satisfy his or her obligation to
advance the Required Tax Payments by any of the following means: (1) a cash
payment to the Company pursuant to Section 3.2(a), (2) delivery to the Company
of previously owned whole shares of Common Stock (which the Optionee has held
for at least six months prior to the delivery of such shares or which the
Optionee purchased on the open market and for which the Optionee has good title,
free and clear of all liens and encumbrances) having an aggregate Fair Market
Value, determined as of the date the obligation to withhold or pay taxes first
arises in connection with such Optionee's Option (the "Tax Date"), equal to the
Required Tax Payments, (3) authorizing the Company to withhold whole shares of
Common Stock which would otherwise be delivered to the Optionee upon exercise of
such Option having an aggregate Fair Market Value, determined as of the Tax
Date, equal to the Required Tax Payments, (4) a cash payment by a broker-dealer
acceptable to the Company to whom the Optionee has submitted an irrevocable
notice of exercise or (5) any combination of (1), (2) and (3). The Company
shall have sole discretion to disapprove of an election pursuant to any of
clauses (2) through (5). Shares of Common Stock to be delivered or withheld may
not have an aggregate Fair Market Value in excess of the minimum amount of the
Required Tax Payments. Any fraction of a share of Common Stock which would be
required to satisfy any such obligation shall be disregarded and the remaining
amount due shall be paid in cash by the Optionee. No certificate representing a
share of Common Stock shall be delivered until the Required Tax Payments have
been satisfied in full.
(c) Unless the Committee otherwise determines, if an Optionee is
subject to Section 16 of the Exchange Act, the following provisions shall apply
to such Optionee's election to deliver to the Company whole shares of Common
Stock or to authorize the Company to withhold whole shares of Common Stock
purchasable upon exercise of such Optionee's Option in payment of all or a
portion of such Optionee's tax liability in connection with such exercise:
(1) Such Optionee may deliver to the Company previously owned
whole shares of Common Stock in accordance with Section 3.2(b), if such
delivery is in connection with the delivery of shares of Common Stock in
payment of the exercise price of such Optionee's Option.
(2) Such Optionee may authorize the Company to withhold whole
shares of Common Stock purchasable upon exercise of such Optionee's Option
in accordance with Section 3.2(b); provided that the following provisions
shall apply to such election:
(i) such election may apply only to such Option or any or all
other options held by such Optionee, shall be filed with the
Secretary at least six months prior to the exercise date of such
Option and may not take effect
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during the six-month period beginning on the Grant Date (as
specified in the Option Agreement) of such Option (other than in the
event of such Optionee's death) or
(ii) such election (A) shall be subject to approval by the
Committee, (B) may not take effect during the six-month period
beginning on the Grant Date (as specified in the Option Agreement)
of such Option (other than in the event of such Optionee's death),
(C) must be filed with the Secretary during (or must be filed with
the Secretary in advance of, but take effect during) the ten
business day period beginning on the third business day following
the date of release of the Company's quarterly or annual summary
statements of sales and earnings and (D) the exercise of such Option
must occur during such ten business day period.
Unless the Committee otherwise determines, any election pursuant to clause
(i) may be revoked or changed only if such revocation or change is made at
least six months prior to the exercise of the Option. Any election made
pursuant to clause (ii) may be revoked or changed prior to the exercise of
the Option during the ten business day period.
3.3. Adjustment. The number and class of securities subject to an
Option and the purchase price per security shall be subject to adjustment as
provided in Section 4.2 of the Plan. If any such adjustment would result in a
fractional security being subject to such Option, the Company shall pay the
Optionee, in connection with the first exercise of such Option, in whole or in
part, occurring after such adjustment, an amount in cash determined by
multiplying (i) the fraction of such security (rounded to the nearest hundredth)
by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date
over (B) the exercise price per share of such Option. The decision of the
Committee regarding any such adjustment shall be final, binding and conclusive.
3.4. Compliance with Applicable Law. Each Option is subject to the
condition that if the listing, registration or qualification of the shares
subject to such Option 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 purchase
or delivery of shares hereunder, such Option may not be exercised, in whole or
in part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained, free of any conditions not acceptable to
the Company. The Company agrees to use reasonable efforts to effect or obtain
any such listing, registration, qualification, consent or approval.
3.5. Delivery of Certificates. Upon the exercise of an Option, in
whole or in part, the Company shall credit to a book-entry or other electronic
account maintained for the Optionee, or deliver or cause to be delivered one or
more certificates representing,
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the number of shares purchased against full payment therefor. The Company shall
pay all original issue or transfer taxes and all fees and expenses incident to
such delivery, except as otherwise provided in Section 3.2.
3.6. Rights as a Stockholder. An Optionee shall not be entitled to
any privileges of ownership with respect to shares of Common Stock subject to an
Option unless and until purchased and credited to an account maintained for such
Optionee or delivered to such Optionee upon the exercise of such Option, in
whole or in part, and such Optionee becomes a stockholder of record with respect
to such shares; and such Optionee shall not be considered a stockholder of the
Company with respect to any such shares not so purchased and credited or
delivered.
3.7. Company to Reserve Shares. The Company shall at all times
prior to the expiration or termination of an Option reserve and keep available,
either in its treasury or out of its authorized but unissued shares of Common
Stock, the full number of shares subject to such Option from time to time.
3.8. Agreement Subject to the Plan. Each Option Agreement, and the
Option thereby granted, are subject to the provisions of the Plan, including,
without limitation, Sections 5.1 and 13.2 of the Plan, and shall be interpreted
in accordance therewith.
4. Change in Control. (a) Notwithstanding any provision in the
Plan or any Option Agreement, in the event of a Change in Control, all
outstanding Options shall immediately become exercisable in full.
(b) "Change in Control" shall mean:
(1) the acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of Section 13(d)(3)
or 14(d)(2) of the Exchange Act, of beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act, of 20% or more
of either (i) the then outstanding shares of Common Stock (the
"Outstanding Company Common Stock") or (ii) the combined voting power of
the then outstanding securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting
Securities"); excluding, however, the following: (A) any acquisition
directly from the Company (excluding any acquisition resulting from the
exercise of an exercise, conversion or exchange privilege unless the
security being so exercised, converted or exchanged was acquired directly
from the Company), (B) any acquisition by the Company, (C) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or
(D) any acquisition by any
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corporation pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (3) of this Section 4(b); provided further,
that for purposes of clause (B), if any Person (other than the Company or
any employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company) shall become the
beneficial owner of 20% or more of the Outstanding Company Common Stock or
20% or more of the Outstanding Company Voting Securities by reason of an
acquisition by the Company, and such Person shall, after such acquisition
by the Company, become the beneficial owner of any additional shares of
the Outstanding Company Common Stock or any additional Outstanding Company
Voting Securities (other than pursuant to any dividend reinvestment plan
or arrangement maintained by the Company) and such beneficial ownership is
publicly announced, such additional beneficial ownership shall constitute
a Change in Control;
(2) individuals who, as of the date hereof, constitute the Board
of Directors (the "Incumbent Board") cease for any reason to constitute at
least a majority of such Board; provided that any individual who becomes a
director of the Company subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by the
vote of at least a majority of the directors then comprising the Incumbent
Board shall be deemed a member of the Incumbent Board; and provided
further, that any individual who was initially elected as a director of
the Company as a result of an actual or threatened election contest, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act, or any other actual or threatened solicitation of proxies or
consents by or on behalf of any Person other than the Board shall not be
deemed a member of the Incumbent Board;
(3) approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Company (a "Corporate
Transaction"); excluding, however, a Corporate Transaction pursuant to
which (i) all or substantially all of the individuals or entities who are
the beneficial owners, respectively, of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities immediately prior to
such Corporate Transaction will beneficially own, directly or indirectly,
more than 60% of, respectively, the outstanding shares of common stock,
and the combined voting power of the outstanding securities of such
corporation entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Corporate
Transaction (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially all of
the Company's assets either directly or indirectly) in substantially the
same proportions relative to each other as their ownership, immediately
prior to such Corporate Transaction, of the Outstanding
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Company Common Stock and the Outstanding Company Voting Securities, as the
case may be, (ii) no Person (other than: the Company; any employee
benefit plan (or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company; the corporation resulting from
such Corporate Transaction; and any Person which beneficially owned,
immediately prior to such Corporate Transaction, directly or indirectly,
20% or more of the Outstanding Company Common Stock or the Outstanding
Company Voting Securities, as the case may be) will beneficially own,
directly or indirectly, 20% or more of, respectively, the outstanding
shares of common stock of the corporation resulting from such Corporate
Transaction or the combined voting power of the outstanding securities of
such corporation entitled to vote generally in the election of directors
and (iii) individuals who were members of the Incumbent Board will
constitute at least a majority of the members of the board of directors of
the corporation resulting from such Corporate Transaction; or
(4) approval by the stockholders of the Company of a plan of
complete liquidation or dissolution of the Company.
5. Miscellaneous Provisions.
5.1. Meaning of Certain Terms. (a) As used herein, 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 of the Code.
References in these General Provisions to sections of the Code shall be deemed
to refer to any successor section of the Code or any successor internal revenue
law.
(b) As used herein, the terms defined elsewhere in these General
Provisions shall have the respective specified meanings and the following terms
shall have the following respective meanings:
"Committee" shall have the meaning specified in the Plan.
"Disability" shall have the meaning specified in any long-term
disability plan or arrangement maintained by the Company or, if no such
plan or arrangement is then in effect, as determined by the Committee.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" means the closing transaction price of a share
of Common Stock, as reported on the New York Stock Exchange Composite
Transactions on the date of exercise or, if there shall be no reported
transaction for such date, on the next preceding date for which a
transaction was reported.
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<PAGE>
"Legal Representative" shall include an executor, administrator,
legal representative, guardian or similar person.
"Permitted Transferee" shall include any transferee (i) pursuant to
a transfer permitted under Section 13.5 of the Plan and Section 3.1 of
these General Provisions or (ii) designated pursuant to beneficiary
designation procedures approved by the Company.
"Retirement" shall mean retirement from the employment of the
Company (as defined in Section 5.1(a) hereof) on or after attaining the
minimum age specified for early or normal retirement in any then effective
retirement policy of the Company, after a minimum of ten years employment
with the Company.
5.2. Successors. These General Provisions shall be binding upon
and inure to the benefit of any successor or successors of the Company and any
person or persons who shall, upon the death of an Optionee, acquire any rights
under such Optionee's Option Agreement in accordance with such Option Agreement,
these General Provisions or the Plan.
5.3. Notices. All notices, requests or other communications
provided for in an Option Agreement shall be made, if to the Company, to Unicom
Corporation, 10 South Dearborn Street - 37th Floor, P.O. Box A-3007, Chicago,
Illinois 60690-3007, Attention: Secretary, and if to the Optionee under such
Option Agreement, to the address for such Optionee set forth in the records of
the Company. All notices, requests or other communications provided for in an
Option Agreement shall be made in writing either (a) by personal delivery to the
party entitled thereto, (b) by facsimile transmission with confirmation of
receipt, (c) by mailing in the United States mails to the last known address of
the party entitled thereto or (d) by express courier service. The notice,
request or other communication shall be deemed to be received upon personal
delivery, upon confirmation of receipt of facsimile transmission or upon receipt
by the party entitled thereto if sent by United States mail or express courier
service; provided, however, that if a notice, request or other communication is
not received during regular business hours, it shall be deemed to be received on
the next succeeding business day of the Company.
5.4. Governing Law. Each Option Agreement (including these General
Provisions) and all determinations made and actions taken pursuant thereto, to
the extent not governed by the laws of the United States, shall be governed by
the laws of the State of Illinois and construed in accordance therewith without
giving effect to principles of conflicts of laws.
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Exhibit (10)-10
Unicom Corporation and Commonwealth Edison Company
Form 10-K File Nos. 1-11375 and 1-1839
UNICOM CORPORATION
GENERAL PROVISIONS REGARDING 1996B STOCK OPTION AWARDS
GRANTED UNDER THE UNICOM CORPORATION LONG-TERM INCENTIVE PLAN
The purpose of these General Provisions Regarding 1996B Stock
Option Awards Granted Under the Unicom Corporation Long-Term Incentive Plan (the
"General Provisions") is to set forth certain provisions which shall be deemed a
part of, and to govern, options to purchase shares of the Common Stock, without
par value (the "Common Stock"), of Unicom Corporation, an Illinois corporation
(the "Company"), granted by the Company on December 11, 1996 under the
provisions of the Unicom Corporation Long-Term Incentive Plan (the "Plan").
1. Form of Stock Option Grant. Each such stock option
("Option") shall be in writing (an "Option Agreement") and shall specify (i) the
name of the recipient of the Option (the "Optionee"), (ii) the number of shares
of Common Stock subject to such Option, and (iii) the terms applicable to the
exercise of such Option, including the exercise price, any restrictions
applicable to such exercise and the expiration date (the "Expiration Date") for
such exercise.
2. Time and Manner of Exercise.
2.1. Exercise of Option. (a) Except as otherwise provided
herein, an Option shall become exercisable as described under the caption "When
Exercisable" in the Option Agreement.
(b) If an Optionee's employment by the Company terminates by
reason of Retirement, death or Disability, then on the date of such Retirement,
death or Disability, such Optionee's Option shall, notwithstanding Section
2.1(a) hereof, become exercisable as to all of the shares of Common Stock
remaining subject to such Option and may (1) in the cases of Retirement or
Disability, be exercised by such Optionee or his or her Legal Representative or
Permitted Transferees, as the case may be, until the Expiration Date or (2) in
the case of death, be exercised by such Optionee's Legal Representative or
Permitted Transferees, as the case may be, until 11:59 p.m. (Chicago time) on
the third anniversary of the date of death; provided, however, that in any case
such exercisability is conditioned upon such Optionee's or his or her Legal
Representative's or Permitted Transferees', as the case may be, continued
"acceptable conduct," as determined by the Committee in its sole discretion. For
purposes of the foregoing,
<PAGE>
"acceptable conduct" shall mean, without limitation, refraining from engaging in
activities which (i) are competitive to the business of the Company or its
subsidiaries, (ii) promote or assist competitors of the Company or its
subsidiaries, or (iii) reflect negatively on the Company, its subsidiaries or
any of their directors, officers, employees or agents.
(c) If an Optionee's employment by the Company terminates
either for cause or by voluntary action of such Optionee (other than
Retirement), such Optionee's Option shall expire on the effective date of such
termination of employment and shall not thereafter be exercisable.
(d) If an Optionee's employment by the Company terminates for
any reason other than Retirement, Disability, death or as specified in Section
2.1(c) hereof, such Optionee's Option shall be exercisable only to the extent it
is exercisable on the effective date of such termination of employment and may
thereafter be exercised by such Optionee or his or her Legal Representative
until and including the earlier to occur of (i) the date which is three months
after the effective date of such termination of employment and (ii) the
Expiration Date.
2.2. Method of Exercise. Subject to the limitations set
forth in the Option Agreement and these General Provisions, an Option may be
exercised by the Optionee:
(a) by giving written notice to the Company specifying the
number of whole shares of Common Stock to be purchased and accompanied
by payment therefor in full (or arrangement made for such payment to
the Company's satisfaction) (1) in cash, (2) by delivery of previously
owned whole shares of Common Stock (which such Optionee has held for at
least six months prior to the delivery of such shares or which such
Optionee purchased on the open market and for which such Optionee has
good title, free and clear of all liens and encumbrances) having an
aggregate Fair Market Value, determined as of the date of exercise,
equal to the aggregate purchase price payable pursuant to such Option
by reason of such exercise, (3) in cash by a broker-dealer acceptable
to the Company to whom such Optionee has submitted an irrevocable
notice of exercise or (4) a combination of (1) and (2), and
(b) by executing such documents as the Company may reasonably
request.
The Company shall have sole discretion to disapprove of an election pursuant to
any of subclauses (2) through (4) of clause (a) of this Section 2.2. Any
fraction of a share of Common Stock which would be required to pay such purchase
price shall be disregarded and the remaining amount due shall be paid in cash by
the Optionee. No certificate representing a share of Common Stock shall be
delivered until the full purchase price therefor has been paid.
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2.3. Termination of Option. (a) In no event may an Option
be exercised after it terminates as set forth in this Section 2.3. An Option
shall terminate, to the extent not exercised pursuant to Section 2.2 or earlier
terminated pursuant to Section 2.1, on the Expiration Date stated in the Option
Agreement.
(b) In the event that rights to purchase all or a portion of
the shares of Common Stock subject to an Option expire or are exercised,
cancelled or forfeited, the Optionee shall, upon the Company's request, promptly
return the related Option Agreement to the Company for full or partial
cancellation, as the case may be. Such cancellation shall be effective
regardless of whether the Optionee returns said Option Agreement. If the
Optionee continues to have rights to purchase shares of Common Stock under said
Option Agreement, the Company shall, within 10 days of the Optionee's delivery
of said Option Agreement to the Company, either (i) mark said Option Agreement
to indicate the extent to which said Option has expired or been exercised,
cancelled or forfeited or (ii) issue to the Optionee a substitute option
agreement applicable to such rights, which agreement shall otherwise be
substantially similar to said Option Agreement in form and substance.
3. Additional Terms and Conditions of Options.
3.1. Nontransferability of Options. Except as may
otherwise be permitted by the Plan or authorized in accordance with the terms of
the Plan, an Option may not be transferred by the Optionee other than by will or
the laws of descent and distribution or pursuant to beneficiary designation
procedures approved by the Company. Except to the extent permitted by the
foregoing sentence, during the Optionee's lifetime such Optionee's Option is
exercisable only by the Optionee or his or her Legal Representative. Except to
the extent permitted by the foregoing, an Option may not be sold, transferred,
assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by
operation of law or otherwise) or be subject to execution, attachment or similar
process. Upon any attempt so to sell, transfer, assign, pledge, hypothecate,
encumber or otherwise dispose of an Option, such Option and all rights
thereunder shall immediately become null and void.
3.2. Withholding Taxes. (a) As a condition precedent to
the delivery of shares of Common Stock upon exercise of an Option, the Optionee
shall, upon request by the Company, pay to the Company in addition to the
purchase price of the shares, such amount of cash as the Company may be
required, under all applicable federal, state, local or other laws or
regulations, to withhold and pay over as income or other withholding taxes (the
"Required Tax Payments") with respect to such exercise of such Option. If the
Optionee shall fail to advance the Required Tax Payments after request by the
Company, the Company may, in its discretion, deduct any Required Tax Payments
from any amount then or thereafter payable by the Company to the Optionee.
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(b) The Optionee may elect to satisfy his or her obligation to
advance the Required Tax Payments by any of the following means: (1) a cash
payment to the Company pursuant to Section 3.2(a), (2) delivery to the Company
of previously owned whole shares of Common Stock (which the Optionee has held
for at least six months prior to the delivery of such shares or which the
Optionee purchased on the open market and for which the Optionee has good title,
free and clear of all liens and encumbrances) having an aggregate Fair Market
Value, determined as of the date the obligation to withhold or pay taxes first
arises in connection with such Optionee's Option (the "Tax Date"), equal to the
Required Tax Payments, (3) authorizing the Company to withhold whole shares of
Common Stock which would otherwise be delivered to the Optionee upon exercise of
such Option having an aggregate Fair Market Value, determined as of the Tax
Date, equal to the Required Tax Payments, (4) a cash payment by a broker-dealer
acceptable to the Company to whom the Optionee has submitted an irrevocable
notice of exercise or (5) any combination of (1), (2) and (3). The Company
shall have sole discretion to disapprove of an election pursuant to any of
clauses (2) through (5). Shares of Common Stock to be delivered or withheld may
not have an aggregate Fair Market Value in excess of the minimum amount of the
Required Tax Payments. Any fraction of a share of Common Stock which would be
required to satisfy any such obligation shall be disregarded and the remaining
amount due shall be paid in cash by the Optionee. No certificate representing a
share of Common Stock shall be delivered until the Required Tax Payments have
been satisfied in full.
(c) Unless the Committee otherwise determines, if an Optionee
is subject to Section 16 of the Exchange Act, the following provisions shall
apply to such Optionee's election to deliver to the Company whole shares of
Common Stock or to authorize the Company to withhold whole shares of Common
Stock purchasable upon exercise of such Optionee's Option in payment of all or a
portion of such Optionee's tax liability in connection with such exercise:
(1) Such Optionee may deliver to the Company previously
owned whole shares of Common Stock in accordance with Section 3.2(b),
if such delivery is in connection with the delivery of shares of Common
Stock in payment of the exercise price of such Optionee's Option.
(2) Such Optionee may authorize the Company to withhold
whole shares of Common Stock purchasable upon exercise of such
Optionee's Option in accordance with Section 3.2(b); provided that the
following provisions shall apply to such election:
(i) such election may apply only to such Option or
any or all other options held by such Optionee, shall be filed
with the Secretary at least six months prior to the exercise
date of such Option and may not take effect
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during the six-month period beginning on the Grant Date (as
specified in the Option Agreement) of such Option (other than
in the event of such Optionee's death) or
(ii) such election (A) shall be subject to approval by
the Committee, (B) may not take effect during the six-month
period beginning on the Grant Date (as specified in the Option
Agreement) of such Option (other than in the event of such
Optionee's death), (C) must be filed with the Secretary during
(or must be filed with the Secretary in advance of, but take
effect during) the ten business day period beginning on the
third business day following the date of release of the
Company's quarterly or annual summary statements of sales and
earnings and (D) the exercise of such Option must occur during
such ten business day period.
Unless the Committee otherwise determines, any election pursuant to
clause (i) may be revoked or changed only if such revocation or change
is made at least six months prior to the exercise of the Option. Any
election made pursuant to clause (ii) may be revoked or changed prior
to the exercise of the Option during the ten business day period.
3.3. Adjustment. The number and class of securities
subject to an Option and the purchase price per security shall be subject to
adjustment as provided in Section 4.2 of the Plan. If any such adjustment would
result in a fractional security being subject to such Option, the Company shall
pay the Optionee, in connection with the first exercise of such Option, in whole
or in part, occurring after such adjustment, an amount in cash determined by
multiplying (i) the fraction of such security (rounded to the nearest hundredth)
by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date
over (B) the exercise price per share of such Option. The decision of the
Committee regarding any such adjustment shall be final, binding and conclusive.
3.4. Compliance with Applicable Law. Each Option is
subject to the condition that if the listing, registration or qualification of
the shares subject to such Option 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
purchase or delivery of shares hereunder, such Option may not be exercised, in
whole or in part, unless such listing, registration, qualification, consent or
approval shall have been effected or obtained, free of any conditions not
acceptable to the Company. The Company agrees to use reasonable efforts to
effect or obtain any such listing, registration, qualification, consent or
approval.
3.5. Delivery of Certificates. Upon the exercise of an
Option, in whole or in part, the Company shall credit to a book-entry or other
electronic account maintained for the Optionee, or deliver or cause to be
delivered one or more certificates
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representing, the number of shares purchased against full payment therefor. The
Company shall pay all original issue or transfer taxes and all fees and expenses
incident to such delivery, except as otherwise provided in Section 3.2.
3.6. Rights as a Stockholder. An Optionee shall not be
entitled to any privileges of ownership with respect to shares of Common Stock
subject to an Option unless and until purchased and credited to an account
maintained for such Optionee or delivered to such Optionee upon the exercise of
such Option, in whole or in part, and such Optionee becomes a stockholder of
record with respect to such shares; and such Optionee shall not be considered a
stockholder of the Company with respect to any such shares not so purchased and
credited or delivered.
3.7. Company to Reserve Shares. The Company shall at all
times prior to the expiration or termination of an Option reserve and keep
available, either in its treasury or out of its authorized but unissued shares
of Common Stock, the full number of shares subject to such Option from time to
time.
3.8. Agreement Subject to the Plan. Each Option Agreement,
and the Option thereby granted, are subject to the provisions of the Plan,
including, without limitation, Sections 5.1 and 13.2 of the Plan, and shall be
interpreted in accordance therewith.
4. Change in Control. (a) Notwithstanding any provision
in the Plan or any Option Agreement, in the event of a Change in Control, all
outstanding Options shall immediately become exercisable in full.
(b) "Change in Control" shall mean:
(1) the acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act, of
20% or more of either (i) the then outstanding shares of Common Stock
(the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding securities of the Company entitled to
vote generally in the election of directors (the "Outstanding Company
Voting Securities"); excluding, however, the following: (A) any
acquisition directly from the Company (excluding any acquisition
resulting from the exercise of an exercise, conversion or exchange
privilege unless the security being so exercised, converted or
exchanged was acquired directly from the Company), (B) any acquisition
by the Company, (C) any acquisition by an employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (D) any acquisition by any
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<PAGE>
corporation pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (3) of this Section 4(b); provided
further, that for purposes of clause (B), if any Person (other than the
Company or any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company)
shall become the beneficial owner of 20% or more of the Outstanding
Company Common Stock or 20% or more of the Outstanding Company Voting
Securities by reason of an acquisition by the Company, and such Person
shall, after such acquisition by the Company, become the beneficial
owner of any additional shares of the Outstanding Company Common Stock
or any additional Outstanding Company Voting Securities (other than
pursuant to any dividend reinvestment plan or arrangement maintained by
the Company) and such beneficial ownership is publicly announced, such
additional beneficial ownership shall constitute a Change in Control;
(2) individuals who, as of the date hereof, constitute the
Board of Directors (the "Incumbent Board") cease for any reason to
constitute at least a majority of such Board; provided that any
individual who becomes a director of the Company subsequent to the date
hereof whose election, or nomination for election by the Company's
stockholders, was approved by the vote of at least a majority of the
directors then comprising the Incumbent Board shall be deemed a member
of the Incumbent Board; and provided further, that any individual who
was initially elected as a director of the Company as a result of an
actual or threatened election contest, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act, or any
other actual or threatened solicitation of proxies or consents by or on
behalf of any Person other than the Board shall not be deemed a member
of the Incumbent Board;
(3) approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Company (a "Corporate
Transaction"); excluding, however, a Corporate Transaction pursuant to
which (i) all or substantially all of the individuals or entities who
are the beneficial owners, respectively, of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities immediately
prior to such Corporate Transaction will beneficially own, directly or
indirectly, more than 60% of, respectively, the outstanding shares of
common stock, and the combined voting power of the outstanding
securities of such corporation entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Corporate Transaction (including, without limitation, a
corporation which as a result of such transaction owns the Company or
all or substantially all of the Company's assets either directly or
indirectly) in substantially the same proportions relative to each
other as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding
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<PAGE>
Company Common Stock and the Outstanding Company Voting Securities, as
the case may be, (ii) no Person (other than: the Company; any employee
benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company; the corporation resulting
from such Corporate Transaction; and any Person which beneficially
owned, immediately prior to such Corporate Transaction, directly or
indirectly, 20% or more of the Outstanding Company Common Stock or the
Outstanding Company Voting Securities, as the case may be) will
beneficially own, directly or indirectly, 20% or more of, respectively,
the outstanding shares of common stock of the corporation resulting
from such Corporate Transaction or the combined voting power of the
outstanding securities of such corporation entitled to vote generally
in the election of directors and (iii) individuals who were members of
the Incumbent Board will constitute at least a majority of the members
of the board of directors of the corporation resulting from such
Corporate Transaction; or
(4) approval by the stockholders of the Company of a plan
of complete liquidation or dissolution of the Company.
5. Miscellaneous Provisions.
5.1. Meaning of Certain Terms. (a) As used herein,
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
of the Code. References in these General Provisions to sections of the Code
shall be deemed to refer to any successor section of the Code or any successor
internal revenue law.
(b) As used herein, the terms defined elsewhere in these
General Provisions shall have the respective specified meanings and the
following terms shall have the following respective meanings:
"Committee" shall have the meaning specified in the Plan.
"Disability" shall have the meaning specified in any long-term
disability plan or arrangement maintained by the Company or, if no such
plan or arrangement is then in effect, as determined by the Committee.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" means the closing transaction price of a
share of Common Stock, as reported on the New York Stock Exchange
Composite Transactions on the date of exercise or, if there shall be no
reported transaction for such date, on the next preceding date for
which a transaction was reported.
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<PAGE>
"Legal Representative" shall include an executor,
administrator, legal representative, guardian or similar person.
"Permitted Transferee" shall include any transferee (i)
pursuant to a transfer permitted under Section 13.5 of the Plan and
Section 3.1 of these General Provisions or (ii) designated pursuant to
beneficiary designation procedures approved by the Company.
"Retirement" shall mean retirement from the employment of the
Company (as defined in Section 5.1(a) hereof) on or after attaining the
minimum age specified for early or normal retirement in any then
effective retirement policy of the Company, after a minimum of ten
years employment with the Company.
5.2. Successors. These General Provisions shall be binding
upon and inure to the benefit of any successor or successors of the Company and
any person or persons who shall, upon the death of an Optionee, acquire any
rights under such Optionee's Option Agreement in accordance with such Option
Agreement, these General Provisions or the Plan.
5.3. Notices. All notices, requests or other
communications provided for in an Option Agreement shall be made, if to the
Company, to Unicom Corporation, 10 South Dearborn Street - 37th Floor, P.O. Box
A-3007, Chicago, Illinois 60690-3007, Attention: Secretary, and if to the
Optionee under such Option Agreement, to the address for such Optionee set forth
in the records of the Company. All notices, requests or other communications
provided for in an Option Agreement shall be made in writing either (a) by
personal delivery to the party entitled thereto, (b) by facsimile transmission
with confirmation of receipt, (c) by mailing in the United States mails to the
last known address of the party entitled thereto or (d) by express courier
service. The notice, request or other communication shall be deemed to be
received upon personal delivery, upon confirmation of receipt of facsimile
transmission or upon receipt by the party entitled thereto if sent by United
States mail or express courier service; provided, however, that if a notice,
request or other communication is not received during regular business hours, it
shall be deemed to be received on the next succeeding business day of the
Company.
5.4. Governing Law. Each Option Agreement (including these
General Provisions) and all determinations made and actions taken pursuant
thereto, to the extent not governed by the laws of the United States, shall be
governed by the laws of the State of Illinois and construed in accordance
therewith without giving effect to principles of conflicts of laws.
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<PAGE>
Exhibit (10)-11
Unicom Corporation and Commonwealth Edison Company
Form 10-K File Nos. 1-11375 and 1-1839
UNICOM CORPORATION
1997 LONG-TERM PERFORMANCE UNIT AWARD
FOR EXECUTIVE AND GROUP LEVEL EMPLOYEES
PAYABLE IN 2000
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,
1997 (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. ("ComEd/Indiana"): (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 Vice Chairman of
ComEd, the President of ComEd, the Executive Vice 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. In addition, the Committee may, in
its sole and absolute discretion, allow employees of other Subsidiaries ("Other
Employees") of the Company to receive an Award hereunder. The term "Employee"
shall mean an Existing Employee, a New Employee or an Other Employee, as the
case may be.
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 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 for December 31, 1996:
Chairman: 50%
Vice Chairman: 40%
<PAGE>
President: 40%
Executive Vice President: 40%
Senior Vice Presidents: 35%
Officers, other than as listed above: 25%
Executives, other than as listed above: 20%
Group Level employees, other than as listed above: 15%
Other Employees: such percentage as shall be
established by the Committee for the particular Other Employee
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, 1997 and end on December 31, 1999.
4. Payment Amount. 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 Minimum Level. If the Company Rank is lower than the
25th percentile in the Ranking, then the Payment Amount shall be zero.
Between Minimum Level and Standard 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 Standard 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
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<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.
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, if the Employee elects under the Unicom Corporation
Stock Bonus Deferral Plan to defer more than 50% of the Payment Amount, the
amount so deferred shall be paid in shares of Common Stock; and provided
further, that shares that may become payable to an Employee hereunder shall not
be issued if the aggregate number of shares payable to such Employee does not
exceed twenty-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 to an Employee
hereunder shall be issued if the shares issuable to such Employee exceed
twenty-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).
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<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) termination as a result of the
sale of ComEd/Indiana's State Line generating plant located in Hammond, Indiana,
the sale of ComEd's Kincaid generating plant located in Kincaid, Illinois, or
ComEd's decision to have a third party provide the services provided by the
functional group that includes such Employee (in any such case, a "Permitted
Termination"), (ii) retirement under the pension plan of any of the Employers or
(iii) 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 Permitted Termination, 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 during the Performance Period that 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
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<PAGE>
the definition of Employee and the denominator of which is the number of days in
the Performance Period.
6.3. Reduction of Payment Amount in Certain Circumstances.
In the event that an Employee is on a voluntary leave of absence or long-term
disability during some or all of the Performance Period, the Payment Amount will
be reduced by multiplying it by a fraction, the numerator of which is the number
of days the Employee worked for an Employer (or Employers) during the
Performance and the denominator of which is 1,095.
6.4. 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.
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.
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<PAGE>
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.
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<PAGE>
Exhibit (10)-12
Unicom Corporation and Commonwealth Edison Company
Form 10-K File Nos. 1-11375 and 1-1839
UNICOM CORPORATION
1997 ANNUAL INCENTIVE AWARD FOR MANAGEMENT EMPLOYEES
UNDER THE UNICOM CORPORATION LONG-TERM INCENTIVE PLAN
Unicom Corporation, an Illinois corporation (the "Company"), hereby
grants to each Employee (as hereinafter defined), as of January 1, 1997 or, if
later, the date of the commencement of such Employee's employment with an
Employer (as hereinafter defined) (the later of such dates being referred to
herein as the "Grant Date"), in accordance with the provisions of the Unicom
Corporation Long-Term Incentive Plan (as in effect from time to time, the
"Plan"), an incentive 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.
1. Recipients of Awards. Subject in all respects to the
provisions hereof, recipients of Awards hereunder shall consist of:
(a) each employee of Commonwealth Edison Company ("ComEd") (other
than (i) the Chairman, the Vice Chairman and the President of ComEd and
(ii) temporary employees) and of Commonwealth Edison Company of Indiana,
Inc. ("ComEd/Indiana") who is on the management or executive payroll
during calendar year 1997, provided such employee is placed on such
payroll prior to December 1, 1997; and
(b) each employee of any other Subsidiary(1) as may be selected
from time to time by the Committee(2) to receive an Award hereunder.
Each such employee is referred to herein as an "Employee," and the term
"Employer" shall mean the employer of an Employee.
2. Award Amount. (a) The total amount payable (the "Total Award
Amount") in connection with an Award shall be determined by the following
formula:
Composite Individual
Total Employee's Payout Performance Performance
Award = Base X Opportunity X Payout X Payout
Amount Salary Percentage Percentage Percentage
- ---------------------------
(1) A "Subsidiary" is defined in the Plan as being 51% or more owned.
(2) "Committee" means the Corporate Governance and Compensation Committe of the
Board of Directors.
<PAGE>
"Employee's Base Salary" 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 1997 (or such earlier pay period during 1997
in which the Employee's employment terminates), 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 in the "Group" or
"Executive" categories of employment.
"Payout Opportunity Percentage" shall mean the percentage taken from the
following table based upon the Employee's grade level and level of achievement
of the goal in question:
<TABLE>
<CAPTION>
MINIMUM STANDARD MAXIMUM
GRADE LEVEL PAYOUT PAYOUT PAYOUT
PERCENTAGE PERCENTAGE PERCENTAGE
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rated -- Grade 1-11 1.5 7.5 15.0
Group -- Grade 12 3.0 15.0 30.0
Group -- Grade 13/14 4.0 20.0 40.0
Executive -- Grade 15/16 4.0 20.0 40.0
Executive -- Grade 17 5.0 25.0 50.0
Executive -- Grade 18/19 6.0 30.0 60.0
Executive -- Grade 20 8.0 40.0 80.0
</TABLE>
Interpolation, based upon the deviation from the "Standard Payout Percentage,"
shall be used in determining the applicable Payout Opportunity Percentage for
goal achievement between the "Minimum Payout Percentage" level and the "Maximum
Payout Percentage" level. With respect to any Employee referred to in Section
1(b), the Payout Opportunity Percentage shall mean such percentage(s) as may be
established by the Committee at the time of such Employee's selection by the
Committee to receive an Award hereunder.
"Composite Performance Payout Percentage" shall mean
(a) with respect to all Employees other than officers, the sum of
(i) the Employee's actual achievement relative to planned achievement of
the Corporate Goal (as hereinafter defined) multiplied by 33.4%, plus (ii)
the Employee's actual achievement relative to planned achievement of such
Employee's Business Unit Quantitative Goal (as hereinafter defined)
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<PAGE>
multiplied by 33.3%, plus (iii) the Employee's actual achievement relative
to planned achievement of such Employee's Business Unit Qualitative Goal
(as hereinafter defined) multiplied by 33.3%; provided, however, that if
the Employee's Business Unit has not established any Business Unit
Quantitative Goals, then clause (ii) shall be disregarded and the
Employee's actual achievement relative to planned achievement of such
Employee's Business Unit Qualitative Goal shall be multiplied by 66.6%
instead of 33.3%; and
(b) with respect to Employees who are Officers, the sum of (i) the
Employee's actual achievement relative to planned achievement of the
Corporate Goal (as hereinafter defined) multiplied by 50.0%, plus (ii) the
Employee's actual achievement relative to planned achievement of such
Employee's Business Unit Qualitative Goal (as hereinafter defined)
multiplied by 50.0%.
As used herein, the term "Corporate Goal" shall mean achievement by the Company
of "Unicom Incentive Plan Profit Margin" (as defined in Appendix A) of (i)
$1,290 million, to achieve the "Minimum" level of performance, (ii) $1,345
million, to achieve the "Standard" level of performance, and (iii) $1,530
million, to achieve the "Maximum" level of performance; and the terms "Business
Unit Quantitative Goal" and "Business Unit Qualitative Goal" shall mean the
quantitative and qualitative goals, respectively, specified for calendar year
1997 for the Business Unit (as defined in Section 6) in which the Employee is
employed. In the event that a Business Unit shall exceed its operations and
maintenance expenditures budget (after any exclusions described under "(a)
'operations and maintenance expenditures'" in Appendix A) or its capital
expenditure budget (after any exclusions described in Appendix B), the amount
determined under clauses (a)(ii) and (a)(iii) or clause (b)(ii), as the case may
be, of this definition may be reduced by up to 10%.
"Individual Performance Payout Percentage" shall mean (i) in the case of
an Employee who is rated as performing "Above Expectations," 120%, (ii) in the
case of an Employee who is rated as having "Achieved Expectations," 100%, and
(iii) in the case of an Employee who is rated as performing "Below
Expectations," 0%. With the prior written approval of the Compensation Planning
Department, a Business Unit may elect to use the funds otherwise generated by
the Individual Performance Payout Percentage for compensation purposes deemed
more suitable for that particular Business Unit.
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<PAGE>
The Total Award Amount as so determined for an Employee shall be subject to
adjustment as provided in Sections 4, 5 and 6 (as so adjusted, the "Adjusted
Total Award Amount").
(b) Subject to Section 8, the Adjusted Total Award Amount for an
Employee shall be paid (i) in the case of a Rated Employee, all in cash, and
(ii) in the cases of all other Employees, 75% in cash and 25% in shares of
Common Stock (the amount payable in shares of Common Stock being referred to
herein as the "Stock Payment Amount").
4. Reduction of Total Award Amount in Certain Instances. In the
event that:
(a) an Employee (i) is first placed on the management or executive
payroll on or after January 1, 1997 and prior to December 1, 1997, (ii) is
on a voluntary leave of absence or long-term disability during 1997, (iii)
retires under the pension plan of any of the Employers during 1997, or
(iv) dies during 1997, or
(b) an Employee's employment with the Employers is terminated
during 1997 as a result of (i) the sale of ComEd/Indiana's State Line
generating plant located in Hammond, Indiana, (ii) the sale of ComEd's
Kincaid generating plant located in Kincaid, Illinois, or (iii) ComEd's
decision to have a third party provide the services provided by the
functional group that includes such Employee,
the Total Award Amount will be reduced by multiplying it by a fraction, the
numerator of which is the number of days the Employee worked for an Employer (or
Employers) during 1997 and the denominator of which is 365. In addition, in the
event that an Employee is or becomes a participant during 1997 in, or is
eligible or becomes eligible to participate during 1997 in, The ComEd Pension
Fund Management Incentive Pay Plan, The ComEd Bulk Power Marketing Incentive
Plan or any other sales or group incentive plan that may hereafter be
established (such incentive plans are collectively referred to herein as the
"Other Incentive Plans"), then the Total Award Amount will be reduced by
multiplying it (after any adjustment required by the first sentence of this
Section 4) by a fraction, the numerator of which is the number of days during
which the Employee worked for an Employer (or Employers) during 1997 and 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 for an
Employer (or Employers) during 1997. Further, in the event that an Employee's
hourly or salary compensation is paid or reimbursed by the Mid-America
Interconnected Network ("MAIN") during 1997, then the Total Award Amount will be
reduced by multiplying it (after any adjustment required by the first sentence
of this Section 4) by a fraction, the numerator of which is the number of days
during 1997 in respect of which such Employee's hourly or salary compensation
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<PAGE>
was not paid or reimbursed by MAIN and the denominator of which is the number of
days the Employee worked for an Employer (or Employers) during 1997. For
purposes of the preceding sentences, the number of days an Employee worked for
an Employer (or Employers) in 1997 shall include, solely in the cases of an
Employee who retires under the pension plan of any of the Employers or who dies,
the full month in which such Employee retires or dies. For an Employee who is a
part-time Employee described in clause (a) or (b) 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 Total Award Amount for Part-Time Employees. For
an Employee who is a part-time Employee, the Total Award Amount will be reduced
by multiplying it by a fraction, the numerator of which is the number of hours
the Employee was scheduled to work for an Employer (or Employers) during 1997
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 1997, the Total
Award Amount will be determined on a prorated basis from each Business Unit. For
purposes of this Section, "Business Unit" means a business unit as defined by
the Employer's corporate accounting function.
7. Settlement of Awards. Payment of the Adjusted Total Award
Amount, if any, will be made to an Employee as soon as practicable after the
Company's audited financial results are available for calendar year 1997. The
number of shares of Common Stock payable as part of any Stock Payment Amount to
an Employee 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 to an Employee hereunder shall not be issued if the aggregate number of
shares payable to such Employee does not exceed twenty-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 to an Employee hereunder shall be awarded if the shares awarded
to such Employee exceed twenty-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 1997 (appropriately adjusted
for any stock-split, stock dividend or other similar event).
8. Termination of Employment. An Employee whose employment with
all Employers is terminated prior to December 31, 1997 for any reason other as
specified
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<PAGE>
in clauses (a)(iii), (a)(iv), (b)(i), (b)(ii) or (b)(iii) of Section 4 shall not
be entitled to any payment under the Plan.
9. 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.
10. Additional Terms and Conditions of Award.
10.1. 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 of the Adjusted Total Award
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.
10.2. 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
of the Adjusted Total Award 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.
10.3. 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.
10.4. Award Subject to the Plan. This Award is subject to the
provisions of the Plan, and shall be interpreted in accordance therewith.
6
<PAGE>
10.5. Employees Subject to Executive Short-Term Incentive Award.
Notwithstanding the foregoing provisions of this Award, the Adjusted Total Award
Amount payable to an Employee subject to the provisions of the Unicom
Corporation Executive Short-Term Incentive Award (the "Short-Term Incentive
Award") shall not exceed the limitation set forth for such Employee under the
provisions of the Short-Term Incentive Award.
7
<PAGE>
APPENDIX A
Unicom Incentive Plan Profit Margin
As used herein, the term "Unicom Incentive Plan Profit Margin" shall
mean (i) consolidated revenues of the Company and its subsidiaries for calendar
year 1997, after (1) deducting fuel adjustment clause collections and revenue
taxes and (2) excluding any revenue adjustments as a result of any Illinois
Commerce Commission ("ICC") proceedings, less (ii) the following consolidated
costs of the Company and its subsidiaries for calendar year 1997: operation and
maintenance expenditures, fuel and purchased power expenditures, depreciation
charges, property tax charges, and interest charges.
For purposes of the foregoing computation, the computation of:
(a) "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 any company-wide incentive
pay plan/arrangement generally applicable to bargaining unit
employees within ComEd and/or ComEd/Indiana,
(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) the effect of any unanticipated accounting
reclassifications or adjustments or inter-company cost allocation
adjustments that may be required by the Federal Energy Regulatory
Commission or the ICC,
(v) any effects resulting from any subsequent ICC or judicial
proceeding relating to any order entered by the ICC in any docket,
including, without limitation, Docket No. 94-0065,
(vi) any gain, loss or other charges (including, without
limitation, increases or decreases in related operations and
maintenance expenditures) associated with the retirement or
disposition of any facilities (including, without limitation,
ComEd/Indiana's State Line generating plant and ComEd's Kincaid
generating plant),
A-1
<PAGE>
(vii) any operations and maintenance expenditures associated
with the ownership and operation by (1) ComEd/Indiana of the State
Line generating plant after June 30, 1997 or (2) ComEd of the
Kincaid generating plant after June 30, 1997,
(viii) any signing bonus and one-time costs paid to members
of Local 15 of the International Brotherhood of Electrical Workers
in connection with the execution of their next collective bargaining
agreement with ComEd, and
(ix) any charges associated with necessary increases in (1)
pension provisions for the Service Annuity Systems of the Employers
which are determined after January 1, 1997 or (2) provisions for
post-retirement health care benefits of the Company or any of its
subsidiaries which are determined after January 1, 1997;
(b) "fuel and purchased power expenditures" shall exclude any
changes in fuel and purchased power expenditures (i) associated with the
retirement or disposition of any generating facilities (including, without
limitation, ComEd/Indiana's State Line generating plant and ComEd's
Kincaid generating plant) or (ii) due to the fact that ComEd/Indiana's
State Line generating plant and/or ComEd's Kincaid generating plant have
not been transferred or otherwise disposed of prior to July 1, 1997;
(c) "depreciation charges" shall exclude any additional charges
resulting from any change in the rate of depreciation allowed by
regulatory bodies with respect to plant, property or equipment during
1997; and
(d) "property tax charges" and "interest charges" shall exclude
increases or decreases due to the fact that ComEd/Indiana's State Line
generating plant and/or ComEd's Kincaid generating plant have not been
transferred or otherwise disposed of prior to July 1, 1997.
A-2
<PAGE>
APPENDIX B
Unicom Incentive Capital Expenditures
For purposes of any computation of capital expenditures under the
foregoing Award, the following shall be excluded:
(a) any capitalized charges associated with any company-wide
incentive pay plan or arrangement generally applicable to bargaining unit
employees within ComEd and/or ComEd/Indiana,
(b) any capital expenditures associated with the ownership and
operation by (1) ComEd/Indiana of the State Line generating plant after
June 30, 1997 or (2) ComEd of the Kincaid generating plant after June 30,
1997, and
(c) any capitalized signing bonus and one-time costs paid to
members of Local 15 of the International Brotherhood of Electrical Workers
in connection with the execution of their next collective bargaining
agreement with ComEd.
B-1
<PAGE>
Exhibit (10)-13
Unicom Corporation and Commonwealth Edison Company
Form 10-K File Nos. 1-11375 and 1-1839
1997 AWARD TO MR. O'CONNOR, MR. MULLIN 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, Leo F. Mullin and Samuel K. Skinner in accordance with the
provisions of the Unicom Corporation Long-Term Incentive Plan (as in effect from
time to time, the "Plan"), an incentive 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 amount payable (the "Award Payment Amount") in connection with an Award
shall be calculated according to the following formula:
Award UIPPM Strategic
Payment = Payout X 50% X Base + Payout X 50% X Base
Amount Percentage Salary Percentage Salary
"Base Salary" shall mean, for each of Mr. O'Connor, Mr. Mullin and Mr. Skinner,
his monthly scheduled rate of pay from ComEd as of January 1, 1997, multiplied
by 12, together with the 1997 income from his Deferred Compensation Units
(whether received from the Company or Commonwealth Edison Company ("ComEd")).
"UIPPM Payout Percentage" shall mean the percentage applicable to an amount of
Unicom Incentive Plan Profit Margin, as determined from the following table;
provided, that interpolation shall be used in determining the applicable
percentage for an amount of Unicom Incentive Plan Profit Margin between the
"Minimum" level and the "Maximum" level:
Level of Unicom Incentive UIPPM Payout
Award Plan Profit Margin Percentage
Minimum $1,290 million 10%
Standard 1,345 million 50
Maximum 1,530 million 100
"Unicom Incentive Plan Profit Margin" shall mean (i) consolidated revenues of
the Company and its subsidiaries for calendar year, after (1) deducting fuel
adjustment clause
<PAGE>
collections and revenue taxes and (2) excluding any revenue adjustments as a
result of any Illinois Commerce Commission ("ICC") proceedings, less (ii) the
following consolidated costs of the Company and its subsidiaries for calendar
year 1997: operation and maintenance expenditures, fuel and purchased power
expenditures, depreciation charges, property tax charges, and interest charges.
For purposes of the foregoing computation, the computation of:
(a) "operations and maintenance expenditures" shall exclude:
(i) charges associated with any early retirement program adopted by the Company
or any of its subsidiaries, or any severance payments made by the Company or any
of its subsidiaries,
(ii) any charges associated with any company-wide incentive pay
plan/arrangement generally applicable to bargaining unit employees within ComEd
and/or Commonwealth Edison Company of Indiana, Inc. ("ComEd/Indiana"),
(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 Company or any of its subsidiaries,
(iv) the effect of any unanticipated accounting reclassifications or
adjustments or inter-company cost allocation adjustments that may be required by
the Federal Energy Regulatory Commission or the ICC,
(v) any effects resulting from any subsequent ICC or judicial proceeding
relating to any order entered by the ICC in any docket, including, without
limitation, Docket No. 94-0065,
(vi) any gain, loss or other charges (including, without limitation, increases
or decreases in related operations and maintenance expenditures) associated with
the retirement or disposition of any facilities (including, without limitation,
ComEd/Indiana's State Line generating plant and ComEd's Kincaid generating
plant),
(vii) any operations and maintenance expenditures associated with the ownership
and operation by (1) ComEd/Indiana of the State Line generating plant after June
30, 1997 or (2) ComEd of the Kincaid generating plant after July 1, 1997,
(viii) any signing bonus and one-time costs paid to members of Local 15 of the
International Brotherhood of Electrical Workers in connection with the execution
of their next collective bargaining agreement with ComEd, and
2
<PAGE>
(ix) any charges associated with necessary increases in (1) pension provisions
for the Service Annuity Systems of ComEd or ComEd/Indiana which are determined
after January 1, 1997 or (2) provisions for post-retirement health care benefits
of the Company or any of its subsidiaries which are determined after January 1,
1997;
(b) "fuel and purchased power expenditures" shall exclude any changes in fuel
and purchased power expenditures (i) associated with the retirement or
disposition of any generating facilities (including, without limitation,
ComEd/Indiana's State Line generating plant and ComEd's Kincaid generating
plant) or (ii) due to the fact that ComEd/Indiana's State Line generating plant
and/or ComEd's Kincaid generating plant have not been transferred or otherwise
disposed of prior to June 30, 1997;
(c) "depreciation charges" shall exclude any additional charges resulting from
any change in the rate of depreciation allowed by regulatory bodies with respect
to plant, property or equipment during 1997; and
(d) "property tax charges" and "interest charges" shall exclude increases or
decreases due to the fact that ComEd/Indiana's State Line generating plant
and/or ComEd's Kincaid generating plant have not been transferred or otherwise
disposed of prior to July 1, 1997.
"Strategic Payout Percentage" shall mean the percentage applicable to a given
level of strategic goal accomplishment, as such accomplishment is determined by
the Committee, as set forth in the following table.
Strategic Payout
Level of Award Percentage
Minimum 10%
Standard 50
Maximum 100
The Award Payment Amount shall be paid 75% in cash and 25% in shares of Common
Stock.
The Awards are subject to the provisions of Sections 8 through 10.4 (inclusive)
of the 1997 Annual Incentive Award for Management Employees (including
employment requirements and timing of payments).
3
<PAGE>
Exhibit (10)-19
Unicom Corporation
Form 10-K File No. 1-11375
UNICOM CORPORATION
RETIREMENT PLAN FOR DIRECTORS
As Amended Through March 12, 1997
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.
<PAGE>
(c) ComEd Plan: The Commonwealth Edison Company Retirement Plan for
Directors, as it may be amended from time to time.
(d) ComEd Service: A Director's service as a member of the Board of
Directors of Commonwealth Edison Company.
(e) Concurrent Service: A Director's concurrent service on the Board
and as a member of the Board of Directors of Commonwealth Edison Company.
(f) Director: Any member of the Board on or after September 1, 1994
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.
(g) Eligible Director: A Director who meets the eligibility
requirements for retirement benefits set forth in Article III.
(h) Eligible Service: A Director's (1) Unicom Service for any period
after September 1, 1994, plus (2) ComEd Service, if any, for any period prior to
September 1, 1994, provided, however, that any period of Concurrent Service
shall be counted
-2-
<PAGE>
only once (and not double-counted as a period of Unicom Service and ComEd
Service) in determining Eligible Service.
(i) Plan: The Unicom Corporation Retirement Plan for Directors, as
it may be amended from time to time.
(j) Retainer: The amounts designated as annual retainer established
for members of the Board for their service as such prior to any reduction or
offset therefrom as a result of Commonwealth Edison Service, whether payable in
cash or shares of stock; provided, however, that the supplemental annual fee
adopted by the Board on May 22, 1996, to replace a previous annual grant of 300
shares of Unicom Corporation common stock under the Unicom Corporation Outside
Director Stock Award Plan shall not be deemed to be "Retainer" for purposes of
this Plan."
(k) Termination Date: The date on which an Eligible Director is no
longer a Director or a director of Commonwealth Edison Company.
(l) Unicom Service: A Director's service on the Board.
-3-
<PAGE>
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 Unicom Service while in good standing, provided
that such Director shall have completed at least five full years of Eligible
Service or at least three full years of Eligible Service if such Director's
Eligible 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 product of (a) the Retainer as in effect when such Eligible Director's
benefit payments commence, adjusted from time to time for any changes thereafter
in the Retainer multiplied by (b) a fraction, the numerator of which
-4-
<PAGE>
shall be the number of years of Unicom Service and the denominator of which
shall be the number of years of Eligible Service; provided, however, that in
computing Unicom Service, there shall be excluded one-half of the years of
Concurrent Service; and provided further, that in computing the number of years
of Unicom Service, Eligible Service and Concurrent Service for the purpose of
this Article IV, fractional years will be rounded up to the next higher whole
year. 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 Eligible Service. For the purpose of
determining the payment period, fractional years of Eligible Service will be
rounded up to the next higher whole
-5-
<PAGE>
year. Each installment of retirement benefit payments shall be equal to one-
fourth of the amount determined as provided in Article IV hereof.
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 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.
Notwithstanding the foregoing, by March 31, 1997 each Director may
irrevocably elect, in lieu of amounts otherwise payable pursuant to this Article
a lump sum amount, payable on the Eligible Director's Termination Date, or as
soon as
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<PAGE>
practicable thereafter, either (a) by delivery of the number of whole
shares of common stock of Unicom Corporation ("Unicom Stock") to be received
with cash in lieu of fractional shares, or (b) in cash.
The number of shares to be delivered pursuant to an election described
in clause (a) above shall be determined as follows: An equivalent number of
shares shall be calculated by using the lump sum present value on January 1,
1997 of the benefit otherwise payable pursuant to this Article divided by the
closing price of a share of Unicom Stock reported on the New York Stock Exchange
Composite Transactions on March 28, 1997, including for this purpose fractional
shares. The number of equivalent shares so determined shall be credited to an
account maintained by the Company on its books. As of each date (prior to the
Eligible Director's Termination Date) on which a cash dividend is paid on Unicom
Stock, each such account shall be credited with an additional number of
equivalent shares to be determined by assuming reinvestment of equivalent
dividends on shares then in the account.
-7-
<PAGE>
The cash amount to be paid pursuant to an election under clause (b)
above shall be the lump sum present value on January 1, 1997, of the benefit
otherwise payable pursuant to this Article, determined by crediting such amount
to an account maintained by the Company on its books, increased by amounts
representing interest, compounded quarterly, at a rate equal to the stated
interest rate on the then most recently issued straight debt obligation of
Commonwealth Edison Company with a maturity of at least 3 years, and computed to
the date of payment.
The lump sum present value of a benefit otherwise payable under the
Article as of January 1, 1997 shall be computed by the Company using the
discount rate then in use for purposes of determining the funding requirements
for the Commonwealth Edison Company Service Annuity System.
If a Director does not make the election at the time specified in the
fourth preceding paragraph, his or her benefits shall be paid in the manner
prescribed by the first two paragraphs of this Article.
-8-
<PAGE>
In the event of death before retirement of a Director who has elected
payment of a lump sum amount in lieu of quarterly benefit payments otherwise
payable hereunder, such Director's surviving spouse, if any, shall receive a
lump sum payment in accordance with such Director's election, if such surviving
spouse would have been entitled to Pre-Retirement Death Benefits under Article
VI of this Plan but for the Director's election to take a lump sum amount. Such
lump sum payment shall be the amount accrued in the Director's account on the
Company's books on the date of death and shall be payable to the surviving
spouse as soon as practicable thereafter. If such Director has no spouse or no
surviving spouse who would otherwise be entitled to Pre-Retirement Death
Benefits under Article VI, no lump sum payment shall be made.
In the event the Eligible Service of a Director, who has elected a
lump sum amount in lieu of quarterly benefit payments hereunder, is terminated
due to disability, a lump sum payment shall be made to the Director (or to such
other person as may be determined in accordance with Article X of this Plan if
the Director is under legal disability or is otherwise unable
-9-
<PAGE>
properly to manage his or her affairs), if such Director qualifies for
Disability Benefits under Article VII of this Plan. Such lump sum payment shall
be made as soon as practicable following the determination of disability in
accordance with Article VII.
VI. Pre-Retirement Death Benefits
(a) If the Eligible 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 Eligible 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 Eligible 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
-10-
<PAGE>
Eligible 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 determined as provided in Article IV hereof and (ii) the benefit shall be
paid for a period equal to the Director's years of Eligible Service at the
Director's date of death.
(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 Eligible 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
or she would have
-11-
<PAGE>
been if he or she 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 shall be created, nor shall any notes or securities be
issued with respect to any benefits under the Plan.
IX. Forfeiture of Benefits
As long as a former Director is receiving or is entitled to receive
benefits under the Plan, such former Director
-12-
<PAGE>
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.
-13-
<PAGE>
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 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.
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<PAGE>
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.
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.
-15-
<PAGE>
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 Unicom
Service.
This Plan shall be governed by the law of the State of Illinois.
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<PAGE>
Exhibit (10)-20
Commonwealth Edison Company
Form 10-K File No. 1-1839
COMMONWEALTH EDISON COMPANY
RETIREMENT PLAN FOR DIRECTORS
As Amended Through March 12, 1997
I. Purpose
-----------
The Commonwealth Edison Company Retirement Plan for Directors is
hereby established by Commonwealth Edison Company ("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) ComEd Service: A Director's service on the Board.
<PAGE>
(c) Company: Commonwealth Edison Company, a corporation organized and
existing under the laws of the State of Illinois, or its successor or
successors.
(d) Concurrent Service: A Director's concurrent service on the Board
and as a member of the Board of Directors of Unicom Corporation.
(e) Director: Any member of the Board on or after January 1, 1987 who
is an outside director and who never has been an officer or employee of the
Company or any of its subsidiaries.
(f) Eligible Director: A Director who meets the eligibility
requirements for retirement benefits set forth in Article III.
(g) Eligible Service: A Director's (1) ComEd Service for any period,
plus (2) Unicom Service, if any, for any period after September 1, 1994,
provided, however, that any period of Concurrent Service shall be counted only
once (and not double-counted as a period of ComEd Service and Unicom Service) in
determining Eligible Service.
(h) Plan: The Commonwealth Edison Company Retirement Plan for
Directors, as it may be amended from time to time.
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<PAGE>
(i) Retainer: The amounts designated as annual retainer established
for members of the Board for their service as such prior to any reduction or
offset therefrom as a result of Unicom Service, whether payable in cash or
shares of stock; provided, however, that the supplemental annual fee adopted by
the Board on May 22, 1996, to replace a previous annual grant of 300 shares of
Unicom Corporation common stock under the Unicom Corporation Outside Director
Stock Award Plan shall not be deemed to be "Retainer" for purposes of this
Plan."
(j) Termination Date: The date on which an Eligible Director is no
longer a Director or a director of Unicom Corporation.
(k) Unicom Plan: The Unicom Corporation Retirement Plan for Directors,
as it may be amended from time to time.
(l) Unicom Service: A Director's service as a member of the Board of
Directors of Unicom Corporation.
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
-3-
<PAGE>
ComEd Service while in good standing, provided that such Director shall have
completed at least five full years of Eligible Service or at least three full
years of Eligible Service if such Director's Eligible 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 product of (a) the Retainer as in effect when such Eligible Director's
benefit payments commence, adjusted from time to time for any changes thereafter
in the Retainer, multiplied by (b) a fraction, the numerator of which shall be
the number of years of ComEd Service and the denominator of which shall be the
number of years of Eligible Service; provided, however, that in computing ComEd
Service, there shall be excluded one-half of the years of Concurrent Service;
and provided further, that in computing the number of years of ComEd Service,
Eligible Service and Concurrent Service for the purpose of this Article IV,
fractional years will be rounded up to the next higher whole year. Such benefit
shall be paid as hereinafter provided.
-4-
<PAGE>
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 Eligible Service. For the purpose of
determining the payment period, fractional years of Eligible 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 determined as provided in
Article IV hereof.
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 any, using the same
payment schedule and amount as would have applied if the Eligible Director had
lived. If there is no
-5-
<PAGE>
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.
Notwithstanding the foregoing, by March 31, 1997 each Director may
irrevocably elect, in lieu of amounts otherwise payable pursuant to this Article
a lump sum amount, payable on the Eligible Director's Termination Date, or as
soon as practicable thereafter, either (a) by delivery of the number of whole
shares of common stock of Unicom Corporation ("Unicom Stock") to be received
with cash in lieu of fractional shares, or (b) in cash.
The number of shares to be delivered pursuant to an election described
in clause (a) above shall be determined as follows: An equivalent number of
shares shall be calculated by using the lump sum present value on January 1,
1997 of the benefit otherwise payable pursuant to this Article divided by the
closing price of a share of Unicom Stock reported on the New York Stock Exchange
Composite Transactions on March 28, 1997, including for this purpose fractional
shares. The number of equivalent shares so determined shall be credited to an
account maintained by the Company on its books. As of each date (prior
-6-
<PAGE>
to the Eligible Director's Termination Date) on which a cash dividend is paid on
Unicom Stock, each such account shall be credited with an additional number of
equivalent shares to be determined by assuming reinvestment of equivalent
dividends on shares then in the account.
The cash amount to be paid pursuant to an election under clause (b)
above shall be the lump sum present value on January 1, 1997, of the benefit
otherwise payable pursuant to this Article, determined by crediting such amount
to an account maintained by the Company on its books, increased by amounts
representing interest, compounded quarterly, at a rate equal to the stated
interest rate on the then most recently issued straight debt obligation of
Commonwealth Edison Company with a maturity of at least 3 years, and computed to
the date of payment.
The lump sum present value of a benefit otherwise payable under the
Article as of January 1, 1997 shall be computed by the Company using the
discount rate then in use for purposes of determining the funding requirements
for the Commonwealth Edison Company Service Annuity System.
If a Director does not make the election at the time specified in the
fourth preceding paragraph, his or her benefits
-7-
<PAGE>
shall be paid in the manner prescribed by the first two paragraphs of this
Article.
In the event of death before retirement of a Director who has elected
payment of a lump sum amount in lieu of quarterly benefit payments otherwise
payable hereunder, such Director's surviving spouse, if any, shall receive a
lump sum payment in accordance with such Director's election, if such surviving
spouse would have been entitled to Pre-Retirement Death Benefits under Article
VI of this Plan but for the Director's election to take a lump sum amount. Such
lump sum payment shall be in the amount accrued in the Director's account on the
Company's books on the date of death and shall be payable to the surviving
spouse as soon as practicable thereafter. If such Director has no spouse or no
surviving spouse who would otherwise be entitled to Pre-Retirement Death
Benefits under Article VI, no lump sum payment shall be made.
In the event the Eligible Service of a Director, who has elected a
lump sum amount in lieu of quarterly benefit payments hereunder, is terminated
due to disability, a lump sum payment shall be made to the Director (or to such
other person as may be determined in accordance with Article X of this Plan if
the Director is under legal disability or is otherwise unable
-8-
<PAGE>
properly to manage his or her affairs), if such Director qualifies for
Disability Benefits under Article VII of this Plan. Such lump sum payment shall
be made as soon as practicable following the determination of disability in
accordance with Article VII.
VI. Pre-Retirement Death Benefits
----------------------------------
(a) If the Eligible 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 Eligible 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 Eligible 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 Eligible Service on the day
prior to his or her death, except that (i) the amount of each installment of
such benefit shall be
-9-
<PAGE>
equal to one-fourth of the amount determined as provided in Article IV hereof
and (ii) the benefit shall be paid for a period equal to the Director's years of
Eligible Service at the Director's date of death.
(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 Eligible 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
or she would have been if he or she 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
-10-
<PAGE>
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 shall be created, nor shall any notes or securities be
issued with respect to any benefits under the Plan.
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
-11-
<PAGE>
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 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
-12-
<PAGE>
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 of 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.
-13-
<PAGE>
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.
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, incumber, 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
-14-
<PAGE>
under the Plan or who is entitled to receive benefits under the Plan on account
of a Director's prior termination of Eligible Service.
This Plan shall be governed by the law of the State of Illinois.
-15-
<PAGE>
Exhibit(10)-30
Commonwealth Edison Company
Form 10-K File No. 1-1839
[Commonwealth Edison/Unicom Letterhead]
December 11, 1996
Mr. Samuel K. Skinner
President
Commonwealth Edison Company
P.O. Box 767
Chicago, Illinois 60690-0767
Dear Sam:
The purpose of this letter is to confirm our agreement with respect to your
employment as President of Commonwealth Edison Company and Unicom Corporation.
We have agreed that you will be eligible for post-retirement coverage under the
Commonwealth Edison Employees' Medical Expense Plan, the Commonwealth Edison
Dental Expense Plan and the Commonwealth Edison Vision/Hearing Care Plan
(collectively, the "Plans"), provided you meet the requirements for such
coverage as set forth in the Plans at the time of your retirement. Solely for
the purpose of determining whether you meet these requirements, you will be
deemed to have completed 10 years of credited service under the Commonwealth
Edison Company Service Annuity System (the "SAS") even though you retire before
completing 10 years of such service. Your pension under the SAS will continue
to be computed based on your actual service.
We also have agreed that the word "death" will be stricken from the second
paragraph of paragraph 5 of the December 16, 1992 letter agreement.
All other terms of the December 16, 1992 letter agreement, as amended by letter
agreement dated May 31, 1995, remain unaffected by these changes.
If the above is consistent with the agreement reached in our discussion, please
countersign in the space provided below.
Sincerely,
James J. O'Connor
- ----------------------
James J. O'Connor
Chairman and Chief Executive Officer
Samuel K. Skinner
- ----------------------
Samuel K. Skinner
President
<PAGE>
[Commonwealth Edison/Unicom Letterhead]
March 24, 1997
Mr. Samuel K. Skinner
President
Commonwealth Edison Company
P.O. Box 767
Chicago, Illinois 60690-0767
Dear Sam:
The purpose of this letter is to confirm our agreement with respect to your
employment as President of Commonwealth Edison Company and Unicom Corporation.
We have agreed that the surviving spouse benefit provided in the last sentence
of paragraph 4 of the December 16, 1992 letter agreement will be payable to your
spouse in the event you die while in the employ of the Company, whether you die
before or after completing five years of service, and will be 50% of the amount
to which you would be entitled. Solely for the purpose of determining your
spouse's benefit in the event you die while in the employ of the Company before
completing five years of service, you will be deemed to have completed five
years of service on the day prior to your date of death.
All other terms of the December 16, 1992 letter agreement, as amended by letter
agreements dated May 31, 1995 and December 11, 1996, remain unaffected by this
change.
If the above is consistent with the agreement reached in our discussion, please
countersign in the space provided below.
Sincerely,
James J. O'Connor
- ----------------------
James J. O'Connor
Chairman and Chief Executive Officer
Samuel K. Skinner
- ----------------------
Samuel K. Skinner
President
<PAGE>
Exhibit (10)-32
Commonwealth Edison Company
Form 10-K File No. 1-1839
[Commonwealth Edison/Unicom Letterhead]
March 24, 1997
Mr. Leo F. Mullin
548 Maple Street
Winnetka, Illinois 60093
Dear Mr. Mullin:
The purpose of this letter is to confirm our agreement with respect to your
employment as Vice Chairman of Unicom Corporation and its subsidiary,
Commonwealth Edison Company (collectively, the "Company").
We have agreed that the surviving spouse benefit provided in the last sentence
of paragraph 9 of the November 14, 1995 letter agreement will be payable to your
spouse in the event you die while in the employ of the Company, whether you die
before or after completing five years of service, and will be 50% of the amount
to which you would be entitled. Solely for the purpose of determining your
spouse's benefit in the event you die while in the employ of the Company before
completing five years of service, you will be deemed to have completed five
years of service on the day prior to your date of death.
We also have agreed that the word "death" will be stricken from the first
sentence of paragraph 11 of the November 14, 1995 letter agreement.
All other terms of the November 14, 1995 letter agreement remain unaffected by
these changes.
If the above is consistent with the agreement reached in our discussion, please
countersign in the space provided below.
Sincerely,
James J. O'Connor
- ----------------------
James J. O'Connor
Chairman and Chief Executive Officer
Leo F. Mullin
- ---------------------
Leo F. Mullin
Vice Chairman
<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>
Line Twelve Months Ended
No. 1992 1993 1994 1995 1996
- --- ---- ---- ---- ---- ----
<C> <S> <C> <C> <C> <C> <C>
1 Net income before extraordinary item $ 513,981 $112,440 $ 423,946 $ 737,176 $ 743,368
---------- -------- ---------- ---------- ----------
2 Net provisions for income taxes and
3 investment tax credits charged to-
4 Operations $ 272,547 $ 66,406 $ 300,764 $ 503,519 $ 462,402
5 Other Income (6,549) (41,393) (23,062) (7,685) (7,385)
---------- -------- ---------- ---------- ----------
6 $ 265,998 $ 25,013 $ 277,702 $ 495,834 $ 455,017
---------- -------- ---------- ---------- ----------
7 Fixed Charges
8 Interest on debt $ 661,348 $651,639 $ 621,909 $ 589,217 $ 523,310
9 Estimated interest component of
10 nuclear fuel and other lease
11 payments, rentals and other interest 53,348 49,021 64,885 73,003 70,666
12 Amortization of debt discount,
13 premium and expense 20,178 20,966 22,804 22,738 21,151
14 Preferred securities dividend
15 requirements of subsidiary trust - - - 4,428 16,960
---------- -------- ---------- ---------- ----------
16 $ 734,874 $721,626 $ 709,598 $ 689,386 $ 632,087
---------- -------- ---------- ---------- ----------
17 Preferred and preference stock
18 dividend requirements -
19 Provisions for stock dividends $ 70,539 $ 66,052 $ 64,927 $ 69,961 $ 64,424
20 Taxes on income required to meet
21 provisions for stock dividends 44,646 43,596 42,854 45,945 42,150
---------- -------- ---------- ---------- ----------
22 $ 115,185 $109,648 $ 107,781 $ 115,906 $ 106,574
---------- -------- ---------- ---------- ----------
23 Fixed charges and preferred and
24 preference stock dividend requirements $ 850,059 $831,274 $ 817,379 $ 805,292 $ 738,661
---------- -------- ---------- ---------- ----------
25 Earned for fixed charges and preferred
26 and preference stock dividend
27 requirements $1,514,853 $859,079 $1,411,246 $1,922,396 $1,830,472
---------- -------- ---------- ---------- ----------
28 Ratios of earrings to fixed charges
29 (line 27 divided by line 16) $2.06 $1.19 $1.99 $2.79 $2.90
========== ======== ========== ========== ==========
30 Ratios of earnings to fixed charges and
31 preferred and preference stock
32 dividend requirements (line 27
33 divided by line 24) $1.78 $1.03 $1.73 $2.39 $2.48
========== ======== ========== ========== ==========
</TABLE>
<PAGE>
Exhibit (21)-1
Unicom Corporation
Form 10-K File No. 1-11375
Unicom Corporation
Subsidiaries of the Company
---------------------------
<TABLE>
<CAPTION>
State or
Jurisdiction
in Which
Name Incorporated
- ------------------------------------------------ ------------
<S> <C>
Commonwealth Edison Company Illinois
Commonwealth Edison Company of Indiana, Inc. Indiana
ComEd Financing I Delaware
ComEd Financing II Delaware
Commonwealth Research Corporation Illinois
Concomber, Ltd. Bermuda
Cotter Corporation New Mexico
Edison Development Company Delaware
Edison Development Canada Inc. Canada
Unicom Enterprises Inc. Illinois
Unicom Thermal Technologies Inc. Illinois
Unicom Thermal Technologies Boston Inc. Delaware
Unicom Thermal Technologies North America Inc. Delaware
Unicom Technology Development Inc. Illinois
Unicom Resources Inc. Illinois
</TABLE>
<PAGE>
Exhibit (21)-2
Commonwealth Edison Company
Form 10-K File No. 1-1839
Commonwealth Edison Company
Subsidiaries of the Company
---------------------------
<TABLE>
<CAPTION>
State or
Jurisdiction
in Which
Name Incorporated
- -------------------------------------------- ------------
<S> <C>
Commonwealth Edison Company of Indiana, Inc. Indiana
ComEd Financing I Delaware
ComEd Financing II Delaware
Commonwealth Research Corporation Illinois
Concomber, Ltd. Bermuda
Cotter Corporation New Mexico
Edison Development Company Delaware
Edison Development Canada Inc. Canada
</TABLE>
<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 31, 1997 on Unicom
Corporation and subsidiary companies' consolidated financial statements as of
and for the year ended December 31, 1996 (Report), included in Unicom
Corporation's Current Report on Form 8-K dated January 31, 1997, to the
inclusion in this Form 10-K of our report dated January 31, 1997, on the
supplemental schedule of Unicom Corporation as of and for the year ended
December 31, 1996, and to the incorporation of such reports into Unicom
Corporation's previously filed prospectuses 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), Form S-8
Registration Statement File No. 33-56991 (relating to Unicom Corporation's Long-
Term Incentive Plan), Form S-4 Registration Statement File No. 333-01003
(relating to the common stock of Unicom Corporation), Form S-8 Registration
Statement File No. 333-04749 (relating to Unicom Corporation's 1996 Directors'
Fee Plan) and Form S-8 Registration Statement File No.333-10613 (relating to
Commonwealth Edison Company's Employee Savings and Investment 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 years ended
December 31, 1996, 1995 and 1994 appearing in Exhibit 99 of Unicom Corporation's
Current Report on Form 8-K dated January 31, 1997.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 21, 1997
<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 31, 1997, on
Commonwealth Edison Company and subsidiary companies' consolidated financial
statements as of and for the year ended December 31, 1996 (Report), included in
Commonwealth Edison Company's Current Report on Form 8-K dated January 31, 1997,
to the inclusion in this Form 10-K of our report dated January 31, 1997, on the
supplemental schedule of Commonwealth Edison Company as of and for the year
ended December 31, 1996, and to the incorporation of such reports 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); (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); and (3) prospectus
dated September 19, 1995, constituting part of Amendment No. 1 to Form S-3
Registration Statement File No. 33-61343, as amended (relating to Company-
Obligated Mandatorily Redeemable Preferred Securities of ComEd Financing I). 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 years ended December 31, 1996, 1995 and 1994 appearing in Exhibit 99
of Unicom Corporation's Current Report on Form 8-K dated January 31, 1997.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 21, 1997
<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, LEO F.
MULLIN, 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, 1996, 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 12th day of March,
1997.
Jean Allard
---------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary L. Kwilos, 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 12th day of March, 1997.
Mary L. Kwilos
--------------------
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, LEO F.
MULLIN, 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, 1996, 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 12th day of March,
1997.
Edward A. Brennan
-----------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary L. Kwilos, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that EDWARD A. BRENNAN, 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 12th day of March, 1997.
Mary L. Kwilos
--------------------
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, LEO F.
MULLIN, 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, 1996, 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 12th day of March,
1997.
James W. Compton
----------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary L. Kwilos, 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 12th day of March, 1997.
Mary L. Kwilos
--------------------
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, LEO F.
MULLIN, 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, 1996, 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 12th day of March,
1997.
Bruce DeMars
---------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary L. Kwilos, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that BRUCE DEMARS, 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 12th day of March, 1997.
Mary L. Kwilos
--------------------
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, LEO F.
MULLIN, 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, 1996, 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 12th day of March,
1997.
Sue L. Gin
------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary L. Kwilos, 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 12th day of March, 1997.
Mary L. Kwilos
--------------------
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, LEO F.
MULLIN, 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, 1996, 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 12th day of March,
1997.
George E. Johnson
----------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary L. Kwilos, 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 12th day of March, 1997.
Mary L. Kwilos
--------------------
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, LEO F.
MULLIN, 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, 1996, 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 12th day of March,
1997.
Edward A. Mason
---------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary L. Kwilos, 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 12th day of March, 1997.
Mary L. Kwilos
-------------------
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,
1996, 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 12th day of March,
1997.
Leo F. Mullin
--------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary L. Kwilos, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that LEO F. MULLIN, 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 12th day of March, 1997.
Mary L. Kwilos
--------------------
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, 1996
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 12th day of March,
1997.
Samuel K. Skinner
------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary L. Kwilos, 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 12th day of March, 1997.
Mary L. Kwilos
--------------------
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, LEO
F. MULLIN, 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, 1996, 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 12th day of March,
1997.
Jean Allard
--------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary L. Kwilos, 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 12th day of March, 1997.
Mary L. Kwilos
------------------
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, LEO
F. MULLIN, 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, 1996, 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 12th day of March,
1997.
Edward A. Brennan
-----------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary L. Kwilos, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that EDWARD A. BRENNAN, 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 12th day of March, 1997.
Mary L. Kwilos
---------------------
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, LEO
F. MULLIN, 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, 1996, 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 12th day of March,
1997.
James W. Compton
-----------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary L. Kwilos, 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 12th day of March, 1997.
Mary L. Kwilos
--------------------
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, LEO
F. MULLIN, 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, 1996, 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 12th day of March,
1997.
Bruce DeMars
---------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary L. Kwilos, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that BRUCE DEMARS, 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 12th day of March, 1997.
Mary L. Kwilos
--------------------
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, LEO
F. MULLIN, 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, 1996, 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 12th day of March,
1997.
Sue L. Gin
------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary L. Kwilos, 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 12th day of March, 1997.
Mary L. Kwilos
------------------
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, LEO
F. MULLIN, 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, 1996, 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 12th day of March,
1997.
Donald P. Jacobs
-----------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary L. Kwilos, 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 12th day of March, 1997.
Mary L. Kwilos
--------------------
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, LEO
F. MULLIN, 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, 1996, 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 12th day of March,
1997.
George E. Johnson
-----------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary L. Kwilos, 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 12th day of March, 1997.
Mary L. Kwilos
--------------------
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, LEO
F. MULLIN, 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, 1996, 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 12th day of
March, 1997.
Edward A. Mason
-------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary L. Kwilos, 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 12th day of March, 1997.
Mary L. Kwilos
----------------------
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, 1996 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 12th day of March,
1997.
Leo F. Mullin
-------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary L. Kwilos, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that LEO F. MULLIN, 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 12th day of March, 1997.
Mary L. Kwilos
--------------------
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, 1996, 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 12th day of March,
1997.
Samuel K. Skinner
------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary L. Kwilos, 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 12th day of March, 1997.
Mary L. Kwilos
---------------------
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 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of
earliest event reported): January 31, 1997
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 5. Other Events
- ------- ------------------------------
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, 1996:
--Summary of Selected Consolidated Financial Data
--Price Range and Cash Dividends Paid Per Share of Common Stock
--1996 Consolidated Revenues and Sales
--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 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNICOM CORPORATION
(Registrant)
By: Roger F. Kovack
----------------------
Roger F. Kovack
Comptroller
Date: February 13, 1997
-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, 1996:
--Summary of Selected Consolidated Financial Data
--Price Range and Cash Dividends Paid Per Share of Common Stock
--1996 Consolidated Revenues and Sales
--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
----------
*Previously filed and incorporated by reference to Unicom Corporation's Form
8-K Current Report dated January 31, 1997.
<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 31, 1997 on Unicom Corporation and
subsidiary companies' consolidated financial statements as of and for the year
ended December 31, 1996, included as an Exhibit to this Form 8-K Current Report
of Unicom Corporation dated January 31, 1997, into Unicom Corporation's
previously filed prospectuses 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), Form S-8 Registration
Statement File No. 33-56991 (relating to Unicom Corporation's Long-Term
Incentive Plan), Form S-4 Registration Statement File No. 333-01003 (relating to
Common Stock of Unicom Corporation), Form S-8 Registration Statement File No.
333-04749 (relating to Unicom Corporation's 1996 Directors' Fee Plan) and Form
S-8 Registration Statement File No. 333-10613 (relating to Commonwealth Edison
Company's Employee Savings and Investment Plan). We also consent to the
application of our report 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 twelve months ended December 31, 1996, 1995 and 1994 appearing in Exhibit
99 of this Form 8-K.
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 13, 1997
<PAGE>
Exhibit 99
Unicom Corporation
Form 8-K File No. 1-11375
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
Certain portions of this document contain forward looking statements with
respect to the consequences of future events, including estimates of costs
associated with certain actions and outcomes. Unforeseen events or conditions
may require changes in the factors affecting such estimates and the projected
results thereof. Consequently, actual results could differ materially from the
estimates presented. See the last paragraph under the subheading "Liquidity
and Capital Resources--Construction Program" in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for additional
information regarding certain caveats affecting forward looking statements.
Forward looking information is contained in various sections of this report,
including, without limitation, (i) Note 1 of Notes to Financial Statements in
the third and fifth paragraphs under the subheading "Depreciation and
Decommissioning Costs" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the last paragraph under the
subheading "Regulation--Nuclear Matters," with respect to the estimated costs
of decommissioning nuclear generating stations, (ii) "Management's Discussion
and Analysis of Financial Condition and Results of Operations" under the
subheading "Liquidity and Capital Resources--Construction Program," regarding
ComEd's construction program budget, (iii) the fourth paragraph under the
subheading "Results of Operations--Operation and Maintenance Expenses" under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and (iv) the last paragraph in Note 21 of Notes to Financial
Statements, regarding cleanup costs associated with MGP and other remediation
sites.
INDEX
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Definitions.............................................................. 2
Summary of Selected Consolidated Financial Data.......................... 3
Price Range and Cash Dividends Paid Per Share of Common Stock............ 3
1996 Consolidated Revenues and Sales..................................... 3
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 4-16
Report of Independent Public Accountants................................. 17
Consolidated Financial Statements--
Statements of Consolidated Income for the years 1996, 1995 and 1994.... 18
Consolidated Balance Sheets--December 31, 1996 and 1995................ 19-20
Statements of Consolidated Capitalization--December 31, 1996 and 1995.. 21
Statements of Consolidated Retained Earnings for the years 1996, 1995
and 1994.............................................................. 22
Statements of Consolidated Cash Flows for the years 1996, 1995 and
1994.................................................................. 23
Notes to Financial Statements.......................................... 24-45
</TABLE>
1
<PAGE>
DEFINITIONS
The following terms are used in this document with the following meanings:
<TABLE>
<CAPTION>
TERM MEANING
- ----------------------- ------------------------------------------------------------------
<S> <C>
AFUDC Allowance for funds used during construction
AMT Alternative minimum tax
APB Accounting Principles Board
CERCLA Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended
CFC Chlorofluorocarbon
Clean Air Amendments Clean Air Act Amendments of 1990
ComEd Commonwealth Edison Company
Cotter Cotter Corporation, which is a wholly-owned subsidiary of ComEd.
DOE U.S. Department of Energy
ESPP Employee stock purchase plan
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
FERC Order FERC Open Access Order issued in April 1996
Fuel Matters Settlement A settlement effected in November 1993 relating to various ICC
fuel reconciliation proceedings involving ComEd.
ICC Illinois Commerce Commission
Indiana Company Commonwealth Edison Company of Indiana, Inc., which is a wholly-
owned subsidiary of ComEd.
ISO Independent System Operator
MGP Manufactured gas plant
NEIL Nuclear Electric Insurance Limited
NML Nuclear Mutual Limited
NRC Nuclear Regulatory Commission
Rate Matters Settlement A settlement effected in November 1993 relating to various rate
proceedings involving ComEd.
Rate Order ICC rate order issued in January 1995, as subsequently modified
Remand Order ICC rate order issued in January 1993, as subsequently modified
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
Trust ComEd Financing I, which is a wholly-owned subsidiary trust of
ComEd.
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>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(MILLIONS OF DOLLARS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C> <C>
Operating revenues............... $ 6,937 $ 6,910 $ 6,278 $ 5,260 $ 6,026
Net income....................... $ 666 $ 640(1) $ 355 $ 46(2) $ 443
Earnings per common share........ $ 3.09 $ 2.98(1) $ 1.66 $ 0.22(2) $ 2.08
Cash dividends declared per
common share.................... $ 1.60 $ 1.60 $ 1.60 $ 1.60 $ 2.30
Total assets (at end of year).... $23,388 $23,250 $23,121 $24,383 $20,993
Long-term obligations at end of
year excluding current portion:
Long-term debt, preference stock
and preferred securities
subject to mandatory redemption
requirements................... $ 6,487 $ 7,011 $ 7,745 $ 7,861 $ 7,913
Accrued spent nuclear fuel
disposal fee and related
interest....................... $ 657 $ 624 $ 590 $ 567 $ 549
Capital lease obligations....... $ 477 $ 376 $ 433 $ 323 $ 347
Other long-term obligations..... $ 1,989 $ 1,826 $ 1,754 $ 1,718 $ 666
</TABLE>
- --------
(1) Includes an extraordinary loss related to the early redemption of long-
term debt of $20 million or $0.09 per common share.
(2) Includes the cumulative effect of change in accounting for income taxes of
$10 million or $0.05 per common share.
PRICE RANGE* AND CASH DIVIDENDS PAID PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
1996 (BY QUARTERS) 1995 (BY QUARTERS)
--------------------------- ---------------------------
FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price range:
High.................. 28 1/2 28 1/8 29 35 3/8 33 7/8 30 1/2 27 3/4 26 1/8
Low................... 24 7/8 22 5/8 26 27 30 1/4 26 1/4 23 5/8 23 1/4
Cash dividends paid.... 40c 40c 40c 40c 40c 40c 40c 40c
</TABLE>
* As reported as NYSE Composite Transactions.
- --------
Unicom's common stock is traded on the New York, Chicago and Pacific stock
exchanges, with the ticker symbol UCM. At December 31, 1996, there were
approximately 161,000 holders of record of Unicom's common stock.
1996 CONSOLIDATED REVENUES AND SALES
<TABLE>
<CAPTION>
OPERATING INCREASE/ KILOWATTHOUR INCREASE/
REVENUES (DECREASE) SALES (DECREASE) INCREASE
(THOUSANDS) OVER 1995 (MILLIONS) OVER 1995 CUSTOMERS OVER 1995
----------- ---------- ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Residential............. $2,541,873 (3.0)% 22,310 (4.3)% 3,102,101 0.7%
Small commercial and
industrial............. 2,113,716 1.9 % 25,131 (0.7)% 289,803 0.3%
Large commercial and
industrial............. 1,445,708 1.4 % 23,896 0.5 % 1,550 0.7%
Public authorities...... 503,004 3.3 % 7,336 2.5 % 12,142 0.9%
Electric railroads...... 29,651 10.3 % 424 8.7 % 2 --
---------- ------ ---------
Ultimate consumers...... $6,633,952 -- 79,097 (1.1)% 3,405,598 0.7%
Sales for resale........ 235,041 12,178 44
Other revenues.......... 68,031 -- --
---------- ------ ---------
Total.................. $6,937,024 0.4 % 91,275 (0.1)% 3,405,642 0.7%
========== ====== =========
</TABLE>
3
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CHANGES IN THE ELECTRIC UTILITY INDUSTRY
Unicom and its predominant business, electric energy generation,
transmission and distribution, are in a period of fundamental change in the
manner in which customers obtain, and energy suppliers provide, energy
services. These changes are attributable to changes in technology, the
relaxation of regulatory barriers to utilities' respective service territories
as well as to efforts to change the manner in which electric utilities are
regulated. Federal law and regulations have been amended to provide for open
transmission system access, and various states are considering, or have
adopted, new regulatory structures to allow access by some or all customers to
energy suppliers in addition to the local utility.
ComEd and other energy suppliers, energy customers and other interested
parties have been active participants in the discussions related to the
economic and technical issues associated with reform. As a result of these
efforts, legislation was introduced in Illinois during January 1997 which is
intended to provide both electric service providers and their customers with
an orderly transition to a less regulated market for electric service. Under
the legislative proposal, utilities would be granted a period in which to
offer direct access experiments that would allow them and customers to gain
experience with the effects of such access, with a requirement to provide such
access starting in 2000. Such a requirement would be phased-in to customers
over several years, starting with larger load customers. The legislation would
provide utilities with an opportunity to recover costs, which might not
otherwise be recoverable, in charges for electric service in a less regulated
market through, among other things, cost savings and a transition charge for
customers who use alternate suppliers of electric power and energy. The
legislation would provide for a leveling of certain regulatory oversight and
tax provisions among electric service providers in Illinois and would also
allow certain restructurings of utility operations in order to facilitate
their response to a competitive environment. The legislation would also
provide for annual base rate decreases of 1.5 percent, starting in 2000 and
continuing through 2004. ComEd supports the proposed legislation and believes
there is support among a number of constituencies for its provisions. Other
legislative proposals have also been introduced for consideration, which
contain different provisions with respect to timing and cost recovery. The
Governor of Illinois has formed a three-person advisory committee to advise
with respect to electric utility deregulation issues. No assurance can be
given as to when any such legislation may be adopted or in what form it may be
adopted.
In response to changes in the industry, ComEd has implemented certain
customer initiatives designed to improve and strengthen customer relationships
and is undertaking an evaluation of its operations and assets, particularly
generating assets, with a view toward positioning itself for market and
industry changes. As discussed below, ComEd's actions to date have included a
five-year base rate cap, efforts to control expenditure growth through
personnel reductions, operational efficiencies and sales of generating plants.
Although ComEd's operating results and financial condition have historically
been affected by various rate proceedings, ComEd expects that these industry
changes, and ComEd's activities anticipating or responding to them, will
directly impact its operating results and financial condition over the next
several years.
Electric Utility Industry. The electric utility industry has historically
consisted of vertically integrated companies which combine generation,
transmission and distribution assets; serving customers within relatively
defined service territories; and operating under extensive regulation with
respect to rates, operations and other matters. Utilities operated under a
regulatory compact with the state, with a statutory obligation to serve all of
the electricity needs within their service territory in a nondiscriminatory
manner. Historically investment and operating decisions have been made based
upon the utilities' respective assessment of those current and projected needs
of its customers. In view of this obligation, regulation has focused on
investment and operating costs, and rates have been based on a recovery of
some or all of such prudently incurred costs plus a return on invested
capital. Such rate regulation, and the ability of utilities to recover
investment and other costs through rates, has provided the basis for recording
certain costs as regulatory assets. These assets represent
4
<PAGE>
costs which are allocated over future periods reflecting related regulatory
treatment, rather than expensed in the current period.
As noted previously, the United States electric utility industry is in a
process of fundamental change as state legislators and regulators re-examine
their approach to regulation and its objectives and consider a transition to a
competitive or market-based system of pricing for electric energy. Although
the process and approach have varied from state to state in terms of the
elements and timing of implementation, it is evident that the question is no
longer if, but rather how and when there will be a more competitive
electricity market. The Federal Energy Policy Act of 1992, among other things,
empowered FERC to introduce a greater level of competition into the wholesale
marketplace for electric energy. In April 1996, the FERC Order was issued
requiring utilities to file open access tariffs with regard to their
transmission systems. These tariffs set forth the terms, including prices,
under which other parties and the utility's wholesale marketing function may
use the utility's transmission system. ComEd has filed an open access tariff
with the FERC. The FERC Order requires the separation of the transmission
operations and wholesale marketing functions so as to ensure that unaffiliated
third parties have access to the same information as to system availability
and other requirements. The FERC Order further requires utilities to operate
an electronic bulletin board to make transmission price and access data
available to all potential users. A key feature of the FERC Order is that it
contemplates full recovery of a utility's costs "stranded" by competition.
These costs are "stranded" or "strandable" to the extent market-based rates
would be insufficient to allow for their full recovery. To recover stranded
costs, the utility must show that it had a reasonable expectation that it
would continue to serve the customer in question under its regulatory compact.
An important element of reform proposals under consideration is the ability
of other suppliers to provide energy in competition with a utility within its
service territory. This element generally has included consideration of some
future form of "retail wheeling," whereby a utility's transmission and
distribution system is made available to other energy suppliers for delivery
of their services to retail customers. In addition, some governmental
entities, such as cities, may elect to "municipalize" a utility's distribution
facilities through condemnation proceedings. Such municipalities would then be
able to purchase electric power on a wholesale basis and resell it to
customers over the newly acquired facilities. The FERC Order provides for the
recovery of a utility's investment stranded by municipalization. While
municipalization is possible under the present regulatory system, ComEd is not
required to grant alternative electric suppliers access to its distribution
system through any type of "retail wheeling."
Presumably, under such a modified regulatory structure, customers will base
energy purchase decisions on a combination of factors, including price,
reliability and service. In addition to the potential effects on revenues and
marketing and sales efforts, such changes can raise the question as to whether
an affected utility's rates are based on cost-based regulation, allowing
recovery of incurred costs, or are based on something else, i.e., the
marketplace. Under generally accepted accounting principles, the latter
determination would require the write off of regulatory assets and liabilities
and would require an examination as to the recoverability in revenues of other
incurred costs, with any portion determined to be unrecoverable being subject
to write off. Various approaches have been proposed to deal with such
strandable costs, from full recovery, as provided in the FERC Order, to no
recovery, as proposed by at least some of the participants in virtually all
legislative debates on regulatory reform proposals. For additional
information, see "Regulatory Assets and Liabilities" in Note 1 of Notes to
Financial Statements.
Retail wheeling and municipalization are significant issues for electric
utility companies, including ComEd, because of their potential to strand a
utility's costs. Without the development of a more fully competitive
marketplace, it is not possible to develop an estimate of strandable costs
with any degree of accuracy. Any calculation of potentially strandable costs
requires that a set of assumptions be made, including the timing of open
access (customer choice), the extent of open access allowed, potential market
prices over time, sales and load growth forecasts, operating performance over
time, allowed rates over time, cost structure over time, mitigation
opportunities and strandable cost
5
<PAGE>
recoveries. The calculation of strandable costs is extremely sensitive to the
assumptions made, and the resulting estimates are potentially misleading if
removed from the context in which they were calculated. At this point in time,
ComEd does not subscribe to a certain set of assumptions or a particular
estimate. The proposed legislation described above, which ComEd supports,
would provide utilities the opportunity to recover their stranded costs, if
any. However, ComEd believes the amount of its strandable costs could be
material without allowance for recovery of costs and investments it incurred
under its regulatory compact, including its duty to serve. Most reform
proposals anticipating increased competition include some form of stranded
cost recovery. ComEd is taking steps, such as cost-control measures, improving
generating station reliability and additional depreciation, to minimize its
potential stranded investment. See Note 2 of Notes to Financial Statements for
additional information.
ComEd. ComEd is responding, and is undertaking a significant planning effort
with respect to further responses, to the developments within the utility
industry. During the past several years, such efforts have focused on cost
reductions, including personnel reductions, efficiencies in purchasing and
inventory management, and an incentive compensation system keyed to cost
reduction and control. Notwithstanding these efforts, ComEd's costs remain
high in comparison to its neighboring utilities.
ComEd is examining its assets, particularly generating assets, with a view
toward rationalizing their investment and operating costs against their
ability to contribute to the revenues of ComEd under various market scenarios.
Such an assessment involves the consideration of numerous factors, including
revenue contribution, operating costs, impacts on ComEd's service obligations,
purchase commitments and remaining assets, and the impact of various options.
Such options include continued operation, indefinite suspension from
operation, sale to a third party and retirement. If ComEd retired a generating
plant, particularly a nuclear plant, without regulatory or legislative
provision for continued recovery of its investment, such retirement could have
a material impact on ComEd's and Unicom's financial position and results of
operations.
On April 17, 1996, ComEd announced that it had finalized agreements to sell
two of its coal-fired generating stations, representing approximately 1,600
megawatts of generating capacity. Under the agreements, State Line and Kincaid
stations would be sold for a total of $250 million, which approximates the
book value of the stations. The net proceeds, after income tax effects, would
be approximately $200 million, which would be used to retire or redeem
existing debt. Under the terms of the sales, ComEd would enter into exclusive
15-year purchased power agreements for the output of the plants. The
agreements are subject to regulatory approval, and proceedings have been
initiated to obtain those approvals. Numerous parties have intervened in the
proceedings, including various governmental and consumer groups and ComEd's
principal union. The union has also filed a lawsuit in state court alleging
that the labor provisions of the Kincaid agreement are violative of state law
and seeking to enjoin the ICC proceedings. ComEd had previously filed an
action in federal court seeking confirmation that the state law is preempted
by federal labor law, and ComEd believes that the union's allegations are
without merit. These actions have now been consolidated and are pending in
federal court. The State Line and Kincaid agreements give the purchasers the
right to terminate the agreements if a closing has not occurred prior to
December 31, 1996 for State Line and June 30, 1997 for Kincaid. Such closing
has not occurred as of January 31, 1997.
With respect to its transmission assets, ComEd is participating with
approximately 20 other electric utility companies in an effort to form an ISO
for the midwest United States. Under the structure currently contemplated, the
ISO would set standard transmission rates and facilitate compliance with the
FERC Order. In addition, while individual utility companies would continue to
own their transmission lines, the ISO would oversee regional planning to avoid
transmission constraints. Creation of the ISO will be subject to further
negotiations among the parties as well as federal and state regulatory
approval.
ComEd is also taking actions to strengthen its relationship with its
customers. On December 11, 1995, ComEd instituted a five-year base rate cap
for all of its customers. The base rate cap does not
6
<PAGE>
affect ComEd's fuel cost or nuclear decommissioning cost recovery provisions.
See Note 2 of Notes to Financial Statements for additional information about
ComEd's base rate cap and other initiatives intended to give customers more
choice and control over the services they seek and the price they pay.
LIQUIDITY AND CAPITAL RESOURCES
UTILITY OPERATIONS
Construction Program. ComEd and the Indiana Company have a construction
program for the year 1997, which consists principally of improvements to their
existing nuclear and other electric production, transmission and distribution
facilities. It does not include funds to add new generating capacity to
ComEd's system. The program, as currently approved by ComEd, calls for
electric plant and equipment expenditures of approximately $982 million
(excluding nuclear fuel expenditures of approximately $322 million). It is
estimated that such construction expenditures, with cost escalation computed
at 3.5% annually, will be as follows:
<TABLE>
<CAPTION>
1997
-----------
(MILLIONS
OF DOLLARS)
<S> <C>
Production....................................................... $420
Transmission and Distribution.................................... 421
General.......................................................... 141
----
Total......................................................... $982
====
</TABLE>
Such construction program includes the replacement of the steam generators
at ComEd's Braidwood Unit 1 and Byron Unit 1 nuclear generating units expected
to be placed in service prior to year-end 1998. The estimated replacement cost
is approximately $460 million, including approximately $80 million for the
cost of removal of the existing steam generators. Approximately $130 million
of this estimated cost is included in the construction expenditures shown
above. Approximately $140 million has been incurred through December 31, 1996.
In addition, ComEd has continued to monitor the degradation of the steam
generators at its Zion nuclear generating station. Recent studies indicate
that the degradation is continuing and that replacement may be required sooner
than 2005. No amount has been included in ComEd's construction budget for
replacement of these steam generators, since ComEd has not decided whether or
when to effect a replacement. Based upon its experience with the replacement
activities at Braidwood and Byron, and depending on the timing of any
replacement at Zion, ComEd believes such cost could be approximately $435
million if a decision to replace is made.
ComEd's forecasts of peak load indicate a need for additional resources to
meet demand, either through generating capacity, through equivalent purchased
power or through the development of additional demand-side management
resources, in 1998 and each year thereafter. However, it believes that
adequate resources, including cost-effective demand-side management resources,
non-utility generation resources and other utility power purchases, could be
obtained in sufficient quantities to meet such forecasted needs. If ComEd
instead were to build additional capacity to meet its needs, it would need to
make additional capital expenditures during 1997.
Purchase commitments for ComEd and the Indiana Company, principally related
to construction and nuclear fuel, approximated $1,018 million at December 31,
1996. In addition, ComEd's estimated commitments for the purchase of coal are
indicated in the following table.
<TABLE>
<CAPTION>
CONTRACT PERIOD COMMITMENT (1)
-------------- --------- --------------
<S> <C> <C>
Black Butte Coal Co................................ 1997-2000 $807
Decker Coal Co..................................... 1997-2014 $582
Big Horn Coal Co................................... 1998 $ 22
</TABLE>
--------
(1) In millions of dollars, excluding transportation costs. No estimate of
future cost escalation has been made.
7
<PAGE>
For additional information concerning these coal contracts and ComEd's fuel
supply, see "Results of Operations" below and Notes 1 and 21 of Notes to
Financial Statements.
The foregoing paragraphs in this "Construction Program" section include
forward-looking statements with respect to the future levels of capital
expenditures which are necessarily based upon assumptions regarding estimated
costs and availability of materials and services as well as contingencies.
Unforeseen events or conditions may require changes in the scope of work with
consequent changes in the timing and level of the projected expenditures. In
addition, changes in laws and regulations, or their interpretation and
enforcement, can affect the scope of certain projects, the manner in which
they are undertaken and the costs associated therewith. While ComEd gives
consideration to such factors in developing its budgets, such consideration
cannot predict the course of future events or anticipate the interaction of
multiple factors beyond management's control upon project timing and cost.
Consequently, actual results could differ materially from those described.
Capital Resources. ComEd forecasts 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. See Notes 7 and 9 of Notes to Financial Statements
for the summaries of the annual sinking fund requirements and scheduled
maturities for ComEd preference stock and long-term debt, respectively. The
forecast assumes the rate levels reflected in the Rate Order remain in effect.
See "Regulation," subcaption "Rate Matters" below for additional information.
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. 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. See Note 18 of Notes to Financial Statements for
more information concerning ComEd's nuclear fuel lease facility. ComEd has
approximately $906 million of unused bank lines of credit at December 31, 1996
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 the
credit ratings of ComEd's outstanding first mortgage bonds 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 10 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 1996, 1995 and 1994.
During 1996, ComEd sold and leased back approximately $317 million of
nuclear fuel through its existing nuclear fuel lease facility. In addition,
ComEd issued $199 million of pollution control obligations, the proceeds of
which were used to redeem an equivalent amount of other pollution control
obligations. In January 1997, ComEd issued $150 million principal amount of
7.375% Notes due January 15, 2004, $150 million principal amount of 7.625%
Notes due January 15, 2007 and $150 million principal amount of Company-
obligated preferred securities of subsidiary trust, the proceeds of which will
be used to discharge current maturities of long-term debt and to redeem on
March 11, 1997 $200 million principal amount of First Mortgage 9 1/2% Bonds,
Series 57, due May 1, 2016. See the Statements of Consolidated Cash Flows and
Note 4 of Notes to Financial Statements for information regarding common stock
activity.
As of January 31, 1997, ComEd has an effective "shelf" registration
statement with the SEC for the future sale of up to an additional $505 million
of debt securities and cumulative preference stock for general corporate
purposes of ComEd, including the discharge or refund of other outstanding
securities.
8
<PAGE>
ComEd's securities and other securities guaranteed by ComEd are currently
rated by three principal securities rating agencies 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- BBB-
Preference stock.................................. baa3 BBB- BBB-
ComEd-obligated mandatorily redeemable preferred
securities of the Trust.......................... baa3 BBB- BBB-
Commercial paper.................................. P-2 A-2 D-2
</TABLE>
In January 1997, Moody's changed the rating outlook on ComEd's securities
from "stable" to "negative" and Duff & Phelps added ComEd's securities to
"Rating Watch-Down." As of January 1997, Standard & Poor's rating outlook on
ComEd remained "stable."
Capital Structure. ComEd's ratio of long-term debt to total capitalization
has decreased to 46.1% at December 31, 1996 from 49.3% at December 31, 1995.
This decrease is related primarily to the retirement of long-term debt, the
increase in current maturities of long-term debt reclassified to current
liabilities and the increase in retained earnings.
UNREGULATED OPERATIONS
Unicom Enterprises is engaged, through its subsidiaries, in energy service
activities which are not subject to utility regulation by state or federal
agencies. Its principal subsidiary, Unicom Thermal, currently provides
district cooling services to office and other buildings in the city of Chicago
under a non-exclusive use agreement. District cooling involves, in essence,
the production of chilled water at a central location(s) and its circulation
to customers' buildings through a closed circuit of supply and return piping.
Such water is circulated through customers' premises primarily for air
conditioning. This process is used in lieu of self-generated cooling. As a
result of the Clean Air Amendments, the manufacture of CFCs has been
curtailed, commencing in January 1996, thereby creating an excellent marketing
opportunity for non-CFC based systems, such as Unicom Thermal's district
cooling. Unicom Thermal is involved in or considering district cooling
projects in other cities, including a project in Boston with Boston Edison
Technologies Group, Inc., a project in Windsor, Ontario, Canada with Ontario
Hydro and a project in Houston, Texas with Houston Light and Power Energy
Services Company.
Construction Program. Unicom has approved capital expenditures for 1997 of
approximately $56 million for Unicom Thermal, primarily representing the
construction costs of its district cooling facilities in Chicago and its share
of construction costs in Boston and Windsor. Unicom Thermal's first two
district cooling facilities in Chicago began serving customers in May 1995 and
July 1996, respectively. Its third district cooling facility in Chicago is
scheduled to be completed in 1997. As of December 31, 1996, Unicom Thermal's
purchase commitments, principally related to construction, were approximately
$42 million.
Capital Resources. Unicom expects to obtain funds to invest in its
unregulated subsidiaries principally from dividends received on its ComEd
common stock and from bank borrowings. The availability of ComEd's dividends
to Unicom is dependent on ComEd's financial performance and cash position.
Other forms of financing by ComEd to Unicom or the unregulated subsidiaries of
Unicom, such as loans or additional equity investments, none of which is
expected, would be subject to prior approval by the ICC.
Unicom Enterprises has a $200 million credit facility which will expire in
1999, of which $105 million was unused as of December 31, 1996. The credit
facility can be used by Unicom Enterprises to finance investments in
unregulated businesses and projects, including Unicom Thermal, and for
9
<PAGE>
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 are set at
the time of a borrowing and are based on either a prime interest rate or a
floating rate bank index plus a spread which varies with the credit rating of
ComEd's outstanding first mortgage bonds. See Note 10 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 Matters. On January 9, 1995, the ICC issued its Rate Order in the
proceedings relating to ComEd's February 1994 rate increase request. The Rate
Order provided, 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 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 for additional information related to the level of decommissioning
cost collections. The ICC also 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 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. As of December 31, 1996, electric operating revenues of approximately
$651 million (excluding revenue taxes) are subject to refund. Intervenors and
ComEd have filed appeals of the Rate Order with the Illinois Appellate Court,
and oral argument was heard on January 28, 1997. See Note 2 of Notes to
Financial Statements for additional information.
Nuclear Matters. Nuclear operations have been, and remain, an important
focus of ComEd--given the impact of such operations on overall operating and
maintenance expenditures and the ability of nuclear power plants to produce
electric energy at a relatively low marginal cost. ComEd operates a large
number of nuclear plants, ranging from the older Zion, Dresden and Quad Cities
stations to the more recently completed LaSalle, Byron and Braidwood stations,
and is intent upon safe, reliable and efficient operation. These plants were
constructed over a period of time in which technology, construction procedures
and regulatory initiatives and oversight have evolved, with the result that
older plants generally require greater attention and resources to meet
regulatory requirements and expectations as well as to maintain operational
reliability.
On January 29, 1997, the NRC determined that ComEd's Dresden nuclear
generating station should remain on the NRC's list of plants to be monitored
closely, where it has been since being placed on that list in 1992. The NRC
also determined that ComEd's LaSalle and Zion nuclear generating stations
should be added to that list. Although in each case the NRC recognized that
ComEd had undertaken significant management changes and had accomplished a
number of performance improvements, it expressed concern with specific issues
at each station and expressed a general concern with the sustainability of
improvements as the basis for its determination. The determination does not
prevent ComEd from operating the generating units; however, it does mean that
the NRC will devote additional resources to monitoring ComEd's operating
performance and that ComEd will need to work to demonstrate to the NRC the
sustainability of improvements which it believes it has undertaken and is
continuing to implement.
10
<PAGE>
The NRC also took the unusual additional step of requiring ComEd to submit
information to allow the NRC to determine what actions, if any, should be
taken to assure that ComEd can safely operate its six nuclear generating
stations while sustaining performance improvement at each site. The request
also requires ComEd to submit information regarding the criteria that it has
established, or plans to establish, to measure performance and to explain
ComEd's proposed actions if the criteria are not met. The request states the
NRC staff's concerns with the "cyclical safety performance of ComEd nuclear
stations," noting the presence on the list of plants to be monitored closely
of Dresden, LaSalle and Zion stations at various times during the past ten
years. It also noted concerns regarding "ComEd's ability to establish lasting
and effective programs that result in sustained performance improvement." The
request does acknowledge the management and organizational changes implemented
by ComEd, including the "additional focus placed on management and leadership,
accountability, the problem identification and corrective action processes,
material condition improvement, work control, and radiation protection." It
also acknowledges improvements seen at Dresden and Quad Cities stations; but
indicated at the same time performance declines were observed at both LaSalle
and Zion stations. The operational problems identified by the NRC are
consistent with weaknesses identified in recent station self-assessments
initiated by ComEd; and management has undertaken to develop and implement
programs designed to address these issues. Consequently, ComEd's management
believes that it can provide sufficient information to the NRC demonstrating
ComEd's ability to operate its nuclear generating stations while sustaining
performance improvements.
ComEd has devoted, and intends to continue to devote, significant resources
to the management and operations of its nuclear generating stations. Over the
past several years, it has increased and reinforced station management with
managers drawn from other utilities having experience with similar operational
and performance issues. It has also sought to identify, anticipate and address
operating and performance issues in a safe, cost-effective manner while
seeking to improve the availability and capacity factors of its nuclear
generating units. Such activities have included improvements in operating and
personnel procedures and repair and replacement of equipment and can result in
longer unit outages. In this regard, ComEd's management decided to continue
the present unit outages at its LaSalle station until the identified
performance issues have been appropriately addressed. ComEd presently expects
such outages to extend into the summer of 1997.
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 1994. In 1996, an intervenor
filed testimony in the fuel reconciliation proceeding for 1994 seeking a
refund of approximately $90 million relating to nuclear station performance.
ComEd estimates that it will expend approximately $15.5 billion, excluding
any contingency allowance, for decommissioning costs primarily during the
period from 2007 through 2032. Such costs, which are estimated to aggregate
$3.9 billion in current-year (1997) dollars, are expected to be funded by
external decommissioning trusts 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 as well as changes in the assumptions used in
making such estimates, including changes in technology, available alternatives
for the disposal of nuclear waste, and inflation. See Note 1 of Notes to
Financial Statements under "Depreciation and Decommissioning" for additional
information regarding decommissioning costs.
Environmental Matters. 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. See
Note 21 of Notes to Financial Statements for additional information regarding
certain effects of CERCLA on ComEd.
11
<PAGE>
RESULTS OF OPERATIONS
Unicom's earnings per common share were $3.09 in 1996, $2.98 in 1995 and
$1.66 in 1994. Substantially all of the results of operations for Unicom are
the results of operations for ComEd. The results of Unicom's unregulated
subsidiaries are not material to the results of Unicom and subsidiary
companies as a whole. As such, the following section discusses the results of
operations for ComEd alone.
Net Income. The 1996 results reflect, among other factors, a 1% decrease in
overall operation and maintenance expenses as compared to 1995 and the
positive effects of an income tax refund related to prior years (net income
effect of $26 million or $0.12 per common share) and a reduction in real
estate taxes (net income effect of $28 million or $0.13 per common share).
Approximately half of the reduction in real estate taxes is related to the
year 1995. The real estate tax reduction results primarily from ongoing
challenges by ComEd of the methodology used by local taxing authorities to
assess the value of ComEd's nuclear generating stations. The 1996 results also
reflect a 9% reduction in the total of interest expense on debt and dividend
requirements on preferred and preference stocks compared to 1995, largely due
to the early retirement of debt at the end of 1995. In September 1996, the ICC
approved ComEd's request to increase depreciation charges on its nuclear
generating units by $30 million for the year 1996, reducing net income by $20
million or $0.09 per common share.
The 1995 results reflect higher revenues, primarily as a result of higher
kilowatthour sales, and the higher rate levels, which became effective in
January 1995 under the Rate Order. The higher kilowatthour sales reflect the
unusually hot summer weather in 1995. The 1995 results were also affected by
higher operation and maintenance expenses, which reflect an after-tax charge
of $59 million or $0.27 per common share for a voluntary employee separation
offer to certain ComEd employees. ComEd also recorded an after-tax charge of
$20 million or $0.09 per common share related to the early redemption of $645
million of long-term debt.
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. The 1994 results also reflect ComEd's
increased kilowatthour sales to ultimate consumers as the result of an
improving economy and warmer weather. The effects of these items were
partially offset by higher operation and maintenance expenses, which include
an after-tax charge of $20 million or $0.09 per common share for additional
pension costs related to an early retirement offer made to certain employees
during 1994. ComEd also recorded a reduction in the carrying value of its
investments in uranium-related properties in 1994, which reduced net income by
$34 million or $0.16 per common share.
Operating Revenues. ComEd's electric operating revenues reflect revenues
from sales to ultimate consumers (including residential, commercial and
industrial customers within its service territory), revenues from sales for
resale (i.e., sales to wholesale customers, principally other electric
utilities), and revenues from collections under its fuel adjustment clause
(which is intended to recover ComEd's fuel cost for generating electric energy
and the energy portion of purchased power cost in relation to the amount
included in ComEd's base rates). Operating revenues are affected by
kilowatthour sales, rates and fuel adjustment clause recoveries. Kilowatthour
sales, in turn, are affected by weather, the level of economic activity within
ComEd's service area, and off-system or wholesale sales to other utilities.
Off-system sales opportunities are affected by a number of factors, including
nuclear generating availability and performance.
During 1996, electric operating revenues increased $25 million principally
reflecting increased sales for resale and increased energy cost recoveries
under ComEd's fuel adjustment clause, although kilowatthour sales to ultimate
consumers were down 1.1% from the prior year due to the cooler summer weather
compared to the exceptionally hot summer in 1995. Operating revenues
12
<PAGE>
increased $632 million in 1995, as compared to 1994, primarily due to an
increase of 4.6% in kilowatthour sales to ultimate consumers attributable to
the hot summer weather as well as a rate increase that became effective in
January 1995. Operating revenues increased $1,017 million in 1994, as compared
to 1993, principally reflecting the favorable comparison to the prior year in
which the refunds associated with the Rate Matters Settlement and the Fuel
Matters Settlement were deducted from revenues, but also reflecting a 2.8%
increase in kilowatthour sales to ultimate consumers as a result of warmer
summer weather, colder winter weather and improved economic activity within
ComEd's service territory. The 1994 revenues were also affected by a decline
in the amount of energy costs recovered under the fuel adjustment clause.
Kilowatthour sales including sales for resale decreased 0.1% in 1996,
increased 7.3% in 1995 and decreased 3.0% in 1994.
Fuel Costs. Changes in fuel expense for 1996, 1995 and 1994 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 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>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Cost of fuel consumed (per million Btu):
Nuclear........................................... $0.53 $0.52 $0.53
Coal.............................................. $2.41 $2.43 $2.31
Oil............................................... $3.41 $3.06 $2.89
Natural gas....................................... $2.75 $1.85 $2.27
Average all fuels................................. $1.17 $1.05 $1.08
Net generation of electric energy (millions of kilo-
watthours)......................................... 93,048 96,608 90,243
Fuel sources of kilowatthour generation:
Nuclear........................................... 67% 73% 71%
Coal.............................................. 30 24 25
Oil............................................... 1 -- 1
Natural gas....................................... 2 3 3
------ ------ ------
100% 100% 100%
====== ====== ======
</TABLE>
The decrease in nuclear generation as a percentage of total generation for
1996 compared to the prior years is primarily due to scheduled and non-
scheduled outages at certain of ComEd's nuclear generating stations.
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
uranium enrichment facilities owned and 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) to 2007. 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 as a result of its 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 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, 1996, ComEd had unrecovered fuel costs in the form of coal
reserves of approximately $364 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 and 21 of Notes to
Financial Statements.
13
<PAGE>
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>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Kilowatthours (millions)................................ 6,129 2,475 2,071
Cost per kilowatthour................................... 2.37c 2.60c 2.86c
</TABLE>
Deferred Under or Overrecovered Energy Costs--Net. Operating expenses for
the years 1996, 1995 and 1994 include 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. Operation and maintenance expenses
include the expenses associated with operating and maintaining ComEd's
generation, transmission and distribution assets as well as administrative
overhead and support. Given the variety of expense categories covered, there
are a number of factors which affect the level of such expenses within any
given year. Two major components of such expenses, however, are the costs
associated with operating and maintaining ComEd's fossil and nuclear
generating facilities. Generating station expenses are affected by the cost of
materials, regulatory requirements and expectations, the age of facilities as
well as cost control efforts.
During the three years presented in the financial statements, the aggregate
level of operation and maintenance expenses decreased 1% in 1996 and increased
4% during 1995 and 2% during 1994. All three years include increases in the
level of generating station expenses, as discussed below. The year to year
variations reflect, in substantial part, the impact in 1995 of an early
separation program offered to ComEd's employees, which resulted in a $97
million charge related to the offered incentives. Additional factors in each
year also affected the level of operation and maintenance expenses.
Operation and maintenance expenses associated with generating stations have
increased during the three year period as a result of activities associated
with the repair, replacement and improvement of generating facility equipment.
During 1996, 1995 and 1994, operation and maintenance expenses associated with
fossil generating stations increased $4 million, $3 million and $4 million,
respectively. In the same years, operation and maintenance expenses associated
with nuclear generating stations increased $88 million, $32 million and $9
million, respectively. During 1994, the increases were attributable to
scheduled maintenance and unplanned equipment repairs. In 1995, ComEd
increased the number and scope of maintenance activities associated with
generating stations. Such efforts are the result of station performance
evaluations performed to identify the sources and causes of unplanned
equipment repairs. The goal of such efforts is to design and implement cost
effective repairs and improvements to improve station availability. The
efforts begun in 1995 continued into 1996 and are expected to continue through
1998.
The increase in operation and maintenance expenses associated with nuclear
generating stations has been driven by ComEd's objective to improve station
availability as well as to meet regulatory requirements and expectations.
ComEd is actively embarked upon a program to improve the quality of nuclear
operations, including safety and efficiency, which is also expected to achieve
a longer term goal of improved availability and to be positioned to take
advantage of opportunities in the wholesale market for revenue generation.
During the three years presented in the financial statements, ComEd has
increased and reinforced station management with managers drawn from other
utilities having experience with similar operating issues. It has also sought
to identify, anticipate
14
<PAGE>
and address nuclear station operation and performance issues in a safe, cost-
effective manner while seeking to improve the availability and capacity
factors of its nuclear generating units. Such activities have included
improvements in operating and personnel procedures and repair and replacement
of equipment, and can result in longer unit outages. Such activities have
involved increased maintenance and repair expenses in recent years. ComEd
expects 1997 overall operation and maintenance expenses to increase by
approximately $150 million over 1996 expenses. Approximately $100 million of
this increase is related to nuclear operations and is intended to address
previously identified operational issues (including issues identified by the
NRC in connection with its determination regarding the plants to be monitored
closely) and to achieve a longer term benefit of improved capacity factors.
ComEd expects this increased level of expenses to continue through 1998.
Operation and maintenance expenses associated with transmission and
distribution facilities increased $11 million in 1996 and decreased $3 million
and $18 million in 1995 and 1994, respectively. The 1996 increase reflects
higher maintenance expenses. The decreases in 1995 and 1994 reflect cost
control efforts. Costs of customer-related activities, including customer
assistance, energy sales services and uncollectible accounts, increased $17
million and $10 million in 1996 and 1995, respectively.
Operation and maintenance expenses also include compensation and benefits
expenses. During the period from 1995 to 1996, ComEd undertook to reduce the
size of its workforce by offering incentives for employees to leave
voluntarily. Such incentives included both current payments and earlier
eligibility for post-retirement health care benefits, and resulted in 1995
provisions of $72 million for the payments and $25 million for the benefits
incentives and 1996 provisions of $8 million for payments and $4 million for
benefits incentives. ComEd also offered an early retirement program during
1994, which increased pension expense by approximately $34 million in that
year. During 1995 and 1996, charges related to post-retirement health care
benefits (after excluding the effects of the separation program) decreased $40
million and $12 million, respectively, primarily as a result of a plan
amendment effected in mid-1995 which required retired employee contributions
to the plan for the first time. Favorable experience also allowed the use of
lower health care cost trend rates, producing a lower charge for 1995 and
1996. During 1996, ComEd also recorded a reduction of $12 million in the
provision for pension costs in 1996 as compared to 1995. Finally, operation
and maintenance expenses reflect $38 million, $65 million and $50 million for
employee incentive compensation plan costs in 1996, 1995 and 1994,
respectively. The payments, which were made partly in cash and partly in
shares of Unicom common stock, were made under Unicom's Long-Term Incentive
Plan as the result of the achievement during the indicated years of specified
financial performance, cost containment and operating performance goals.
Operation and maintenance expenses in 1996, 1995 and 1994 include
approximately $19 million, $16 million and $20 million, respectively, for wage
increases. The effects of inflation have also increased operation and
maintenance expenses during the years and are also reflected in the increases
and decreases discussed herein.
Operation and maintenance expenses associated with certain administrative
and general costs decreased $11 million in 1995 and increased $12 million in
1994. The decrease in 1995 was due to a variety of reasons including a
decrease in expenses related to insurance, injuries and damages and the
provision for vacation pay liability. The increase in 1994 is primarily due to
increased provisions for injuries and damages and obsolete materials.
Depreciation. Depreciation expense increased in 1996, 1995 and 1994 as a
result of additions to plant in service and an increase in the nuclear
depreciation rate for 1996. In September 1996, the ICC approved ComEd's
additional depreciation initiative for 1996, which increased depreciation
expense by $30 million in 1996. ComEd also continues to consider the
possibility of additional
15
<PAGE>
depreciation options. See "Depreciation and Decommissioning" in Note 1 of
Notes to Financial Statements and Note 2 of Notes to Financial Statements for
additional information.
Interest on Debt. Changes in interest on long-term debt and notes payable
for the years 1996, 1995 and 1994 were due to changes in average interest
rates and in the amounts of long-term debt and notes payable outstanding.
Changes in interest on ComEd's long-term debt also reflected new issues of
debt, the retirement and early redemption of debt, and the retirement and
redemption of issues which were refinanced at generally lower rates of
interest. The average amounts of ComEd's long-term debt and notes payable
outstanding and average interest rates thereon were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Long-term debt outstanding:
Average amount (millions).......................... $6,644 $7,528 $7,934
Average interest rate.............................. 7.67% 7.78% 7.83%
Notes payable outstanding:
Average amount (millions).......................... $ 230 $ 51 $ 9
Average interest rate.............................. 5.79% 6.40% 6.48%
</TABLE>
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 is reviewing the
accounting for nuclear decommissioning costs and issued an exposure draft in
February 1996 requesting written comment. If current electric utility industry
accounting practices for such decommissioning costs are changed, annual
provisions for decommissioning could increase and the estimated cost for
decommissioning could be recorded as a liability rather than as accumulated
depreciation. Unicom does not believe that such changes, if required, would
have an adverse effect on the results of operations due to ComEd's ability to
recover decommissioning costs through rates.
Investments in Uranium-Related Properties. In 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 $34 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 capitalization
rates as discussed in Note 1 of Notes to Financial Statements. AFUDC does not
contribute to the current cash flow of Unicom or ComEd.
ComEd's ratios of earnings to fixed charges for the years 1996, 1995 and
1994 were 2.90, 2.79 and 1.99, respectively. ComEd's ratios of earnings to
fixed charges and preferred and preference stock dividend requirements for the
years 1996, 1995 and 1994 were 2.48, 2.39 and 1.73, 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.
16
<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, 1996 and 1995, and the related
statements of consolidated income, retained earnings and cash flows for each
of the three years in the period ended December 31, 1996. 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, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Chicago, Illinois
January 31, 1997
17
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME
The following Statements of Consolidated Income for the years 1996, 1995 and
1994 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, competition, taxes, environmental control, energy use, fuel supply,
cost of labor, fuel, purchased power and other matters, the nature and effect
of which cannot now be determined.
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
(THOUSANDS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Operating Revenues........................ $6,937,024 $6,910,045 $6,277,521
---------- ---------- ----------
Operating Expenses and Taxes:
Fuel.................................... $1,157,855 $1,087,109 $1,051,793
Purchased power......................... 145,299 64,378 59,123
Operation and maintenance............... 2,161,847 2,175,651 2,094,655
Depreciation............................ 953,701 898,034 887,466
Recovery of regulatory assets........... 15,272 15,272 15,453
Taxes (except income)................... 783,575 833,297 787,796
Income taxes............................ 489,545 526,518 326,744
Investment tax credits deferred--net.... (33,378) (28,710) (28,757)
---------- ---------- ----------
$5,673,716 $5,571,549 $5,194,273
---------- ---------- ----------
Operating Income.......................... $1,263,308 $1,338,496 $1,083,248
---------- ---------- ----------
Other Income and (Deductions):
Interest on long-term debt.............. $ (515,370) $ (587,583) $ (621,225)
Interest on notes payable............... (13,308) (3,280) (557)
Allowance for funds used during con-
struction--
Borrowed funds........................ 19,426 11,137 18,912
Equity funds.......................... 20,776 13,129 22,628
Income taxes applicable to nonoperating
activities............................. 7,812 5,085 27,074
Interest and other costs for 1993
Settlements........................... -- (61) (21,464)
Provision for dividends--
Preferred and preference stocks of
ComEd................................ (64,424) (69,961) (64,927)
ComEd-obligated mandatorily redeemable
preferred securities of subsidiary
trust................................ (16,960) (4,428) --
Miscellaneous--net...................... (35,160) (43,001) (88,755)
---------- ---------- ----------
$ (597,208) $ (678,963) $ (728,314)
---------- ---------- ----------
Net Income Before Extraordinary Item...... $ 666,100 $ 659,533 $ 354,934
Extraordinary Loss Related to Early
Redemption of Long-Term Debt, Less
Applicable Income Taxes.................. -- (20,022) --
---------- ---------- ----------
Net Income................................ $ 666,100 $ 639,511 $ 354,934
========== ========== ==========
Average Number of Common Shares Outstand-
ing...................................... 215,500 214,692 214,031
Earnings Per Common Share Before
Extraordinary Item ...................... $ 3.09 $ 3.07 $ 1.66
Extraordinary Loss Related to Early
Redemption of Long-Term Debt, Less
Applicable Income Taxes.................. -- (0.09) --
---------- ---------- ----------
Earnings Per Common Share................. $ 3.09 $ 2.98 $ 1.66
========== ========== ==========
Cash Dividends Declared Per Common Share.. $ 1.60 $ 1.60 $ 1.60
</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
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
ASSETS 1996 1995
------ ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Utility Plant:
Plant and equipment, at original cost (includes
construction work in progress of $1,034 million
and $1,105 million, respectively)................. $27,900,632 $27,052,778
Less--Accumulated provision for depreciation....... 11,479,991 10,565,093
----------- -----------
$16,420,641 $16,487,685
Nuclear fuel, at amortized cost.................... 805,623 734,667
----------- -----------
$17,226,264 $17,222,352
----------- -----------
Investments and Other Property:
Nuclear decommissioning funds...................... $ 1,456,360 $ 1,237,527
Subsidiary companies............................... 113,888 113,657
Other, at cost..................................... 146,302 99,149
----------- -----------
$ 1,716,550 $ 1,450,333
----------- -----------
Current Assets:
Cash............................................... $ 8,727 $ 3,575
Temporary cash investments......................... 51,821 47,801
Special deposits................................... 1,610 3,546
Receivables--
Customers........................................ 568,155 579,848
Taxes............................................ -- 82,988
Other............................................ 109,835 83,795
Provisions for uncollectible accounts............ (12,893) (11,828)
Coal and fuel oil, at average cost................. 140,362 129,176
Materials and supplies, at average cost............ 324,485 333,539
Deferred unrecovered energy costs.................. 104,651 46,028
Deferred income taxes related to current assets and
liabilities....................................... 120,185 107,991
Prepayments and other.............................. 35,872 45,178
----------- -----------
$ 1,452,810 $ 1,451,637
----------- -----------
Deferred Charges and Other Noncurrent Assets:
Regulatory assets.................................. $ 2,434,807 $ 2,467,386
Unrecovered energy costs........................... 444,009 588,152
Other.............................................. 113,530 70,308
----------- -----------
$ 2,992,346 $ 3,125,846
----------- -----------
$23,387,970 $23,250,168
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
19
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
CAPITALIZATION AND LIABILITIES 1996 1995
------------------------------ ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Capitalization (see accompanying statements):
Common stock equity.................................. $ 6,104,380 $ 5,769,637
Preferred and preference stocks of ComEd--
Without mandatory redemption requirements.......... 507,342 508,034
Subject to mandatory redemption requirements....... 217,901 261,475
ComEd-obligated mandatorily redeemable preferred
securities of subsidiary trust*..................... 200,000 200,000
Long-term debt....................................... 6,069,534 6,549,335
----------- -----------
$13,099,157 $13,288,481
----------- -----------
Current Liabilities:
Notes payable--
Commercial paper................................... $ 121,000 $ 261,000
Bank loans......................................... 7,750 7,150
Current portion of long-term debt, redeemable prefer-
ence stock and capitalized lease obligations of sub-
sidiary companies................................... 745,665 434,563
Accounts payable..................................... 469,815 609,224
Accrued interest..................................... 168,750 171,523
Accrued taxes........................................ 171,104 215,388
Dividends payable.................................... 101,850 102,497
Customer deposits.................................... 51,585 44,520
Other................................................ 98,567 93,841
----------- -----------
$ 1,936,086 $ 1,939,706
----------- -----------
Deferred Credits and Other Noncurrent Liabilities:
Deferred income taxes................................ $ 4,574,342 $ 4,507,349
Accumulated deferred investment tax credits.......... 655,662 689,041
Accrued spent nuclear fuel disposal fee and related
interest............................................ 657,449 624,191
Obligations under capital leases of subsidiary compa-
nies................................................ 476,668 375,524
Regulatory liabilities............................... 668,301 601,002
Other................................................ 1,320,305 1,224,874
----------- -----------
$ 8,352,727 $ 8,021,981
----------- -----------
Commitments and Contingent Liabilities (Note 21)
$23,387,970 $23,250,168
=========== ===========
</TABLE>
*As described in Note 8 of Notes to Financial Statements, the sole asset of
ComEd Financing I, a subsidiary trust of ComEd, is $206.2 million principal
amount of ComEd's 8.48% subordinated deferrable interest notes due
September 30, 2035.
The accompanying Notes to Financial Statements are an integral part of the
above statements.
20
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CAPITALIZATION
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1996 1995
----------- ------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Common Stock Equity:
Common stock, without par value--
Outstanding--215,954,625 shares and 215,255,998
shares, respectively (excludes $4 million as of
December 31, 1996 held by trustee for Unicom
Stock Bonus Deferral Plan)...................... $ 4,929,909 $ 4,916,438
Preference stock expense of ComEd................. (3,526) (3,694)
Retained earnings................................. 1,177,997 856,893
----------- -----------
$ 6,104,380 $ 5,769,637
----------- -----------
Preferred and Preference Stocks of ComEd--
Without Mandatory Redemption Requirements:
Preference stock, cumulative, without par
value--
Outstanding--13,499,549 shares................. $ 504,957 $ 504,957
$1.425 convertible preferred stock, cumulative,
without par value--
Outstanding--75,003 shares and 96,753 shares,
respectively.................................. 2,385 3,077
Prior preferred stock, cumulative, $100 par
value per share-- No shares outstanding........ -- --
----------- -----------
$ 507,342 $ 508,034
----------- -----------
Subject to Mandatory Redemption Requirements:
Preference stock, cumulative, without par
value--
Outstanding--2,496,775 shares and 2,934,990
shares, respectively.......................... $ 248,589 $ 292,163
Current redemption requirements for preference
stock included in current liabilities.......... (30,688) (30,688)
----------- -----------
$ 217,901 $ 261,475
----------- -----------
ComEd-Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trust:
Outstanding--8,000,000............................ $ 200,000 $ 200,000
----------- -----------
Long-Term Debt:
First mortgage bonds:
Maturing 1996 through 2001--5 1/4% to 9 3/8%.... $ 1,120,000 $ 1,270,000
Maturing 2002 through 2011--4.20% to 8 3/8%..... 1,640,400 1,465,400
Maturing 2012 through 2021--5.85% to 9 7/8%..... 1,391,000 1,391,000
Maturing 2022 through 2023--7 3/4% to 8 5/8%.... 1,160,000 1,160,000
----------- -----------
$ 5,311,400 $ 5,286,400
Sinking fund debentures, due 1999 through 2011--
2 3/4% to 7 5/8%................................. 105,164 110,505
Pollution control obligations, due 2004 through
2014--4.10% to 6 7/8%............................ 142,200 317,200
Other long-term debt.............................. 1,100,833 1,126,318
Current maturities of long-term debt included in
current liabilities.............................. (540,505) (235,992)
Unamortized net debt discount and premium......... (49,558) (55,096)
----------- -----------
$ 6,069,534 $ 6,549,335
----------- -----------
$13,099,157 $13,288,481
=========== ===========
</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 RETAINED EARNINGS
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Balance at Beginning of Year.................... $ 856,893 $ 560,971 $549,152
Add--Net income................................. 666,100 639,511 354,934
---------- ---------- --------
$1,522,993 $1,200,482 $904,086
---------- ---------- --------
Deduct--
Cash dividends declared on common stock..... $ 344,892 $ 343,619 $342,561
Other capital stock transactions--net....... 104 (30) 554
---------- ---------- --------
$ 344,996 $ 343,589 $343,115
---------- ---------- --------
Balance at End of Year.......................... $1,177,997 $ 856,893 $560,971
========== ========== ========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
22
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Cash Flow From Operating Activities:
Net income............................. $ 666,100 $ 639,511 $ 354,934
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization........ 990,779 949,413 929,365
Deferred income taxes and investment
tax credits--net.................... 129,770 156,817 126,281
Extraordinary loss related to early
redemption of long-term debt........ -- 33,158 --
Equity component of allowance for
funds used during construction...... (20,776) (13,129) (22,628)
Provisions for revenue refunds and
related interest.................... -- -- 37,548
Revenue refunds and related interest. -- 15,135 (1,221,650)
Recovery of regulatory assets........ 15,272 15,272 15,453
Provisions/(payments) for liability
for early retirement and separation
costs--net.......................... (29,888) 60,713 33,580
Net effect on cash flows of changes
in:
Receivables........................ 69,706 (178,665) 114,215
Coal and fuel oil.................. (11,186) (20,304) 2,880
Materials and supplies............. 9,053 51,073 18,102
Accounts payable excluding nuclear
fuel lease principal payments and
early retirement and separation
costs--net........................ 106,435 460,705 116,688
Accrued interest and taxes......... (47,057) (2,684) 70,408
Other changes in certain current
assets and liabilities............ 13,850 26,637 (55,843)
Other--net........................... 67,796 138,781 134,188
----------- ----------- -----------
$ 1,959,854 $ 2,332,433 $ 653,521
----------- ----------- -----------
Cash Flow From Investing Activities:
Construction expenditures.............. $ (982,274) $ (927,327) $ (739,679)
Nuclear fuel expenditures.............. (281,833) (289,118) (257,264)
Equity component of allowance for
funds used during construction........ 20,776 13,129 22,628
Contributions to nuclear
decommissioning funds................. (119,281) (132,653) (132,550)
Other investments and special depos-
its................................... (1,052) (1,601) 622,264
----------- ----------- -----------
$(1,363,664) $(1,337,570) $ (484,601)
----------- ----------- -----------
Cash Flow From Financing Activities:
Issuance of securities--
Long-term debt....................... $ 251,902 $ 62,000 $ 546,289
Preferred securities of subsidiary
trust............................... -- 200,000 --
Capital stock........................ 17,754 25,507 86,972
Retirement and redemption of securi-
ties--
Long-term debt....................... (433,084) (1,137,272) (703,930)
Capital stock........................ (44,513) (17,935) (23,643)
Deposits and securities held for re-
tirement and redemption of securi-
ties.................................. -- 106 3,191
Premium paid on early redemption of
long-term debt........................ -- (25,823) (4,564)
Cash dividends paid on common stock.... (344,553) (343,375) (342,322)
Proceeds from sale/leaseback of nu-
clear fuel............................ 316,617 193,215 306,649
Nuclear fuel lease principal payments.. (211,741) (237,845) (209,689)
Increase (Decrease) in short-term
borrowings............................ (139,400) 261,000 1,200
----------- ----------- -----------
$ (587,018) $(1,020,422) $ (339,847)
----------- ----------- -----------
Increase (Decrease) in Cash and Tempo-
rary Cash Investments.................. $ 9,172 $ (25,559) $ (170,927)
Cash and Temporary Cash Investments at
Beginning of Year...................... 51,376 76,935 247,862
----------- ----------- -----------
Cash and Temporary Cash Investments at
End of Year............................ $ 60,548 $ 51,376 $ 76,935
=========== =========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
23
<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 holding company of ComEd and Unicom
Enterprises in a corporate restructuring that became effective on September 1,
1994. ComEd, an electric utility, is the principal subsidiary of Unicom.
Unicom Enterprises is an unregulated subsidiary of Unicom and is engaged,
through subsidiaries, in energy service activities. Unicom also has one other
subsidiary that was formed to engage in unregulated activities.
The consolidated financial statements include the accounts of Unicom, ComEd,
the Indiana Company, ComEd Financing I and Unicom's unregulated subsidiaries.
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 or results of operations, are accounted for in
accordance with the equity method of accounting.
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Regulation. ComEd is subject to regulation as to accounting 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 in accordance with SFAS No. 71,
Accounting for the Effects of Certain Types of Regulation. 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.
24
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Regulatory Assets and Liabilities. Regulatory assets are incurred costs
which have been deferred and are amortized for ratemaking and accounting
purposes. Regulatory liabilities represent amounts to be settled with
customers through future rates. Regulatory assets and liabilities reflected on
the Consolidated Balance Sheets at December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1996 1995
---------- ----------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Regulatory assets:
Deferred income taxes (1)............................... $1,649,037 $1,689,832
Deferred carrying charges (2)........................... 396,879 409,923
Nuclear decommissioning costs--Dresden Unit 1 (3)....... 174,621 138,058
Unamortized loss on reacquired debt (4)................. 148,380 160,440
Other................................................... 65,890 69,133
---------- ----------
$2,434,807 $2,467,386
========== ==========
Regulatory liabilities:
Deferred income taxes (1)............................... $ 668,301 $ 601,002
========== ==========
</TABLE>
- --------
(1) Recorded in compliance with SFAS No. 109.
(2) Recorded as authorized in the Remand Order. The amortization period is
over the remaining lives of the Units.
(3) Amortized over the remaining life of Dresden station. See "Depreciation
and Decommissioning" below for additional information.
(4) Amortized over the remaining lives of the long-term debt issued to finance
the reacquisition. See "Loss on Reacquired Debt" below for additional
information.
See "Deferred Unrecovered Energy Costs" below regarding the fuel adjustment
clause, the DOE assessment and coal reserves.
If a portion of ComEd's operations was no longer subject to the provisions
of SFAS No. 71 as a result of a change in regulation or the effects of
competition, ComEd would be required to write off the related regulatory
assets and liabilities. In addition, ComEd would be required to determine any
impairment to other assets and purchase contracts and write down such assets
or contracts to their fair value.
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, which was adopted on January 1, 1996,
established accounting standards for the impairment of long-lived assets. The
SFAS also requires that regulatory assets which are no longer probable of
recovery through future revenue be charged to earnings. SFAS No. 121 did not
have an impact on ComEd's financial position or results of operations upon
adoption.
Deferred Unrecovered Energy Costs. The 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 uranium
enrichment facilities owned and previously operated by the DOE. As of December
31, 1996 and 1995, an asset related to the assessments of approximately $168
million and $179 million, respectively, was recorded, of which the current
portion of approximately $16 million and $15 million, respectively, was
included in current assets on the Consolidated Balance Sheets. As of December
31, 1996 and 1995, a corresponding liability of approximately $157 million and
$167 million, respectively, was recorded, of which approximately $16 million
and $15 million, respectively, was recorded in other current liabilities.
25
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
At December 31, 1996 and 1995, ComEd had unrecovered fuel costs in the form
of coal reserves of approximately $364 million and $448 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 coal is used for the generation of
electricity; however, ComEd is not earning a return on the expenditures for
coal reserves. Such fuel costs expected to be recovered within one year
amounting to approximately $73 million and $24 million at December 31, 1996
and 1995, respectively, have been included on the Consolidated Balance Sheets
in current assets as deferred unrecovered energy costs. ComEd expects to fully
recover the costs of the coal reserves by the year 2000. See Note 21 for
additional information concerning ComEd's coal commitments.
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, industrial and wholesale customers.
ComEd's electric service territory has an area of approximately 11,300 square
miles and an estimated population of approximately eight million as of
December 31, 1996 and 1995. It includes the city of Chicago, an area of about
225 square miles with an estimated population of approximately three million
from which ComEd derived approximately one-third of its ultimate consumer
revenues in 1996. ComEd had approximately 3.4 million electric customers at
December 31, 1996.
Depreciation and Decommissioning. ComEd's depreciation is provided on the
straight-line basis by amortizing the cost of depreciable plant and equipment
over estimated composite service lives. Non-nuclear plant and equipment is
depreciated at annual rates developed for each class of plant based on their
composite service lives. Provisions for depreciation were at average annual
rates of 3.25%, 3.14% and 3.13% of average depreciable utility plant and
equipment for the years 1996, 1995 and 1994, respectively. The annual rate for
nuclear plant and equipment is 3.09% for 1996, which includes increased
depreciation charges on ComEd's nuclear generating units, approved by the ICC
in September 1996, and excludes separately collected decommissioning costs,
and 2.88% for 1995 and 1994, which excludes separately collected
decommissioning costs. See Note 2 for additional information concerning the
ICC's approval of ComEd's request to increase depreciation charges on nuclear
generating units in 1996.
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 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 NRC
guidelines. ComEd's twelve operating units have estimated remaining service
lives ranging from 9 to 31 years. ComEd's first nuclear unit, Dresden Unit 1,
is retired and is expected to be dismantled upon the retirement of the last
unit 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, are estimated to aggregate $3.9
billion in current-year (1997) dollars excluding a contingency allowance.
ComEd estimates that it will expend approximately $15.5
26
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
billion, excluding any contingency allowance, for decommissioning costs
primarily during the period from 2007 through 2032. Such costs are expected to
be funded by the external decommissioning trusts 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 as well as changes
in the assumptions used in making such estimates, including changes in
technology, available alternatives for the disposal of nuclear waste, and
inflation.
Pursuant to the Rate Order, beginning in 1995, ComEd collects
decommissioning costs from its ratepayers under a rider which allows annual
adjustments to decommissioning cost collections outside the context of a
traditional rate proceeding. The current estimated decommissioning costs
allowed under the rider exclude a contingency allowance. Contingency
allowances used in decommissioning cost estimates provide for currently
unspecifiable costs that are likely to occur after decommissioning begins and
generally range from 20% to 25% of the currently specifiable costs. Under its
most recent annual rider, filed with the ICC on February 28, 1996, ComEd has
decreased its estimated annual decommissioning cost accrual from $113.5
million to $108.8 million, primarily reflecting stronger than expected after-
tax returns on the external trust funds in 1995. The ICC issued an order
approving the rider filing on April 24, 1996.
As a result of the ICC approval of the rider filing, beginning April 30,
1996, the effective date of the order, ComEd began accruing and collecting
$108.8 million annually for decommissioning costs. The assumptions used to
calculate the $108.8 million decommissioning cost accrual include: the
decommissioning cost estimate of $3.9 billion in current-year (1997) 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 5.5%. The annual accrual of $108.8 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 $15.5 billion. The annual accrual and collection amounts will be
reviewed again during the first quarter of 1997.
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, 1996, the total decommissioning costs
included in the accumulated provision for depreciation were $1,522 million.
For ComEd's retired nuclear unit, Dresden Unit 1, the total estimated
liability at December 31, 1996 in current-year (1997) dollars of $276 million
was recorded on the Consolidated Balance Sheets as a noncurrent liability and
the unrecovered portion of the liability of approximately $175 million was
recorded as a regulatory asset.
Under Illinois law, decommissioning cost collections are required to be
deposited into external trusts; and, consequently, such collections do not add
to the cash flows available for general corporate purposes. 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, 1996, the past accruals
that are required to be contributed to the external trusts aggregate $169
million. The fair value of funds accumulated in the external trusts at
December 31, 1996 was approximately $1,456 million which includes pre-tax
unrealized appreciation of $230 million. The earnings on the external trusts
accumulate in the fund balance and in the accumulated provision for
depreciation.
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-
27
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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 11 for further information concerning the
disposal of spent nuclear fuel, the one-time fee and the 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 1996, 1995 and
1994 were $354 million, $391 million and $358 million, 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.
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 1996, 1995 and 1994 were
9.02%, 9.52% and 9.85%, respectively. AFUDC does not contribute to the current
cash flow of Unicom or ComEd.
Interest. Total interest costs incurred on debt, leases and other
obligations for the years 1996, 1995 and 1994 were $626 million, $696 million
and $730 million, respectively.
Debt Discount, Premium and Expense. Discount, premium and expense on long-
term debt of ComEd are being amortized over the lives of the respective
issues.
Loss on Reacquired Debt. Consistent with regulatory treatment, the net loss
from ComEd's reacquisition in connection with refinancing 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.
Stock Option Awards/Employee Stock Purchase Plan. Unicom has elected to
adopt SFAS No. 123, "Accounting for Stock-Based Compensation", for disclosure
purposes only. Unicom accounts for its stock option awards and its employee
stock purchase plan under APB Opinion No. 25, "Accounting for Stock Issued to
Employees". See Note 5 for additional information.
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 cash flow information for the years 1996, 1995
and 1994 was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Supplemental Cash Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized)........... $538,351 $604,932 $645,658
Income taxes (net of refunds).................. $234,743 $367,708 $ (4,923)
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Capital lease obligations incurred by subsidiary
companies....................................... $320,975 $198,577 $309,716
</TABLE>
28
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) RATE MATTERS
On January 9, 1995, the ICC issued its Rate Order in the proceedings
relating to ComEd's February 1994 rate increase request. The Rate Order
provided, 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 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 additional information related to the
level of decommissioning cost collections. The ICC also 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 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. As of December 31, 1996, electric
operating revenues of approximately $651 million (excluding revenue taxes) are
subject to refund. Intervenors and ComEd have filed appeals of the Rate Order
with the Illinois Appellate Court, and oral argument was heard on January 28,
1997.
On December 11, 1995, ComEd announced a series of customer initiatives as
part of its larger ongoing effort to address the need to give all customer
classes the opportunity to benefit from increased competition in the electric
utility business, while retaining the benefits (such as reliability) of
current regulation and ensuring utilities' cost recovery for commitments made
under the obligation to serve customers. The initiatives include a five-year
cap on base electric rates at current levels and various customer service and
incentive pricing programs designed to allow customers more choice and control
over the services they seek and the prices they pay. These initiatives are in
addition to previously implemented special discount contract rate programs for
new or existing industrial customers. ComEd anticipates the initiatives will
be fully implemented in 1997 and will reduce its revenues by approximately $40
million annually (including the effects of previously implemented initiatives
and before income tax effects) primarily through changes in energy
utilization. Additionally in September 1996, the ICC approved ComEd's
additional depreciation initiative for 1996. ComEd's costs increased by $30
million in 1996 (before income tax effects), through the increase in
depreciation charges on its nuclear generating units. ComEd also continues to
consider the possibility of additional depreciation options.
Under ComEd's initiatives, the five-year base rate cap at current levels
became effective in December 1995 and will extend until January 1, 2001. The
rate cap does not affect ComEd's fuel cost or nuclear decommissioning cost
recovery provisions. ComEd's fuel cost variances will continue to be collected
through its fuel adjustment clause, and such collections will continue to be
subject to annual reconciliation proceedings before the ICC. Likewise, nuclear
decommissioning costs will continue to be collected as described in Note 1
under "Depreciation and Decommissioning."
See "Changes in the Electric Utility Industry" under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
information regarding the legislative proposal supported by ComEd.
(3) AUTHORIZED SHARES AND VOTING RIGHTS OF CAPITAL STOCK
At December 31, 1996, 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, 1996 were: preference stock--22,806,775
shares; $1.425 convertible preferred stock--75,003 shares; and prior
29
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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.
(4) COMMON STOCK
At December 31, 1996, shares of Unicom common stock were reserved for the
following purposes:
<TABLE>
<S> <C>
Long-Term Incentive Plan........................................ 3,544,609
Employee Stock Purchase Plan.................................... 703,570
Employee Savings and Investment Plan............................ 274,203
Exchange for ComEd common stock not held by Unicom.............. 110,323
1996 Directors' Fee Plan........................................ 194,888
---------
4,827,593
=========
</TABLE>
Common stock increased during the years 1996, 1995 and 1994 as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Shares of Common Stock Issued:
Long-Term Incentive Plan.......................... 132,579 481,751 --
Employee Stock Purchase Plan...................... 196,513 217,080 305,205
Employee Savings and Investment Plan.............. 339,100 217,100 85,400
Conversion of $1.425 convertible preferred stock.. -- -- 185,041
Conversion of warrants............................ -- -- 13,274
Exchange for ComEd common stock not held by
Unicom........................................... 25,323 -- --
1996 Directors' Fee Plan.......................... 5,112 -- --
------- ------- -------
698,627 915,931 588,920
======= ======= =======
<CAPTION>
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Amount of Common Stock Issued:
Total issued...................................... $17,733 $25,412 $14,782
Held by trustee for Unicom Stock Bonus Deferral
Plan............................................. (4,300) -- --
Other............................................. 38 95 (386)
------- ------- -------
$13,471 $25,507 $14,396
======= ======= =======
</TABLE>
At December 31, 1996 and 1995, 78,045 and 82,742 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.
(5) STOCK OPTION AWARDS/EMPLOYEE STOCK PURCHASE PLAN.
Unicom has a nonqualified stock option awards program under its Long-Term
Incentive Plan and an ESPP. The stock option awards program was adopted by
Unicom in July 1996 to reward valued employees responsible for, or
contributing to, the management, growth and profitability of Unicom and its
subsidiaries. As of December 31, 1996, 1,205,500 options have been granted
primarily to employees of ComEd and its subsidiaries. Of this amount, 15,500
options have been canceled and 1,190,000 are outstanding. The weighted average
exercise price for the outstanding stock options is $25.50. The stock options
granted in 1996 will expire ten years from their grant date. One-third of the
shares subject to the options vest on each of the next three anniversaries of
the option grant date. In addition, the stock options will become fully vested
immediately if the holder dies, retires, is terminated other than for cause or
qualifies for long-term disability, and will also vest in full upon a
30
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
change in control of Unicom. As of December 31, 1996, 2,000 of the granted
stock options are exercisable and none of the stock options have been
exercised.
The estimated fair market value for each of the stock options granted in
1996 was $3.74. The fair value of each stock option granted was estimated as
of the date of grant using the Black-Scholes option-pricing model. Assumptions
used to determine the estimated fair market value of the stock options include
(i) dividend yield of 6.30%, (ii) expected volatility of 20.98%, (iii) risk-
free interest rate of 6.64% and (iv) expected life of 7 years.
The ESPP allows employees to purchase Unicom common stock at a 10% discount
from market value. The stock is purchased in six month intervals, April and
October of each year. Substantially all of the employees of Unicom, ComEd and
certain subsidiaries are eligible to participate in the ESPP. Unicom issued
196,512, 217,080 and 150,495 shares of common stock in 1996, 1995 and 1994,
respectively, under the ESPP at an average annual purchase price of $23.51,
$25.34 and $19.80, respectively. ComEd issued 154,710 shares of common stock
at a purchase price of $21.72 in 1994 under the ESPP.
Unicom has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation". For financial reporting purposes,
Unicom has adopted APB No. 25, "Accounting for Stock Issued to Employees", and
thus no compensation cost has been recognized for the stock option awards
program or ESPP. If Unicom had recorded compensation expense for the stock
options granted and the shares of common stock issued under the ESPP in
accordance with SFAS No. 123 using the fair value based method of accounting,
the resulting effect on net income and earnings per share would have been de
minimis.
(6) COMED PREFERRED AND PREFERENCE STOCKS WITHOUT MANDATORY REDEMPTION
REQUIREMENTS
No shares of ComEd preferred or preference stocks without mandatory
redemption requirements were issued or redeemed during 1996 or 1995. 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. The series of ComEd
preference stock without mandatory redemption requirements outstanding at
December 31, 1996 are summarized as follows:
<TABLE>
<CAPTION>
INVOLUNTARY
SHARES AGGREGATE REDEMPTION LIQUIDATION
SERIES OUTSTANDING STATED VALUE PRICE(1) PRICE(1)
------ ----------- ------------ ---------- -----------
(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>
--------
(1) 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
31
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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.
(7) COMED PREFERENCE STOCK SUBJECT TO MANDATORY REDEMPTION REQUIREMENTS
During 1996, 1995 and 1994, no 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,
1996 are summarized as follows:
<TABLE>
<CAPTION>
SHARES AGGREGATE
SERIES OUTSTANDING STATED VALUE OPTIONAL REDEMPTION PRICE(1)
- -------------- ----------- ------------ --------------------------------------------------
(THOUSANDS
OF DOLLARS)
<S> <C> <C> <C>
$8.20 214,275 $ 21,428 $103 through October 31, 1997; and $101 thereafter
$8.40 Series B 330,000 32,778 $101
$8.85 262,500 26,250 $103 through July 31, 1998; and $101 thereafter
$9.25 600,000 60,000 $103 through July 31, 1999; and $101 thereafter
$9.00 390,000 38,659 Non-callable
$6.875 700,000 69,474 Non-callable
--------- --------
2,496,775 $248,589
========= ========
</TABLE>
- --------
(1) Per share plus accrued and unpaid dividends, if any.
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
ANNUAL SINKING FUND FUND INVOLUNTARY
SERIES REQUIREMENT PRICE(1) LIQUIDATION PRICE(1)
-------------- ------------------- ------- -------------------
<S> <C> <C> <C>
$8.20 35,715 shares $100 $100.00
$8.40 Series B 30,000 shares(2) $100 $ 99.326
$8.85 37,500 shares $100 $100.00
$9.25 75,000 shares $100 $100.00
$9.00 130,000 shares(2) $100 $ 99.125
$6.875 (3) $100 $ 99.25
</TABLE>
--------
(1) Per share plus accrued and unpaid dividends, if any.
(2) 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.
(3) All shares are required to be redeemed on May 1, 2000.
Annual remaining sinking fund requirements through 2001 on ComEd preference
stock outstanding at December 31, 1996 will aggregate $31 million in each of
1997-99, $88 million in 2000 and $18 million in 2001. During 1996, 1995 and
1994, 438,215 shares, 178,215 shares and 177,085 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.
(8) COMED-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF COMED
FINANCING I
In September 1995, ComEd Financing I (Trust), a wholly-owned subsidiary
trust of ComEd, issued 8,000,000 of its 8.48% ComEd-obligated mandatorily
redeemable preferred securities. The
32
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
sole asset of the Trust is $206.2 million principal amount of ComEd's 8.48%
subordinated deferrable interest notes due September 30, 2035. There is a full
and unconditional guarantee by ComEd of the Trust's obligations under the
securities issued by the Trust. However, ComEd's obligations are subordinate
and junior in right of payment to certain other indebtedness of ComEd. ComEd
has the right to defer payments of interest on the subordinated deferrable
interest notes by extending the interest payment period, at any time, for up
to 20 consecutive quarters. If interest payments on the subordinated
deferrable interest notes are so deferred, distributions on the preferred
securities will also be deferred. During any deferral, distributions will
continue to accrue with interest thereon. In addition, during any such
deferral, ComEd may not declare or pay any dividend or other distribution on,
or redeem or purchase, any of its capital stock.
The subordinated deferrable interest notes are redeemable by ComEd, in whole
or in part, from time to time, on or after September 30, 2000, or at any time
in the event of certain income tax circumstances. If the subordinated
deferrable interest notes are redeemed, the Trust must redeem preferred
securities having an aggregate liquidation amount equal to the aggregate
principal amount of the subordinated deferrable interest notes so redeemed. In
the event of the dissolution, winding up or termination of the Trust, the
holders of the preferred securities will be entitled to receive, for each
preferred security, a liquidation amount of $25 plus accrued and unpaid
distributions thereon, including interest thereon, to the date of payment,
unless in connection with the dissolution, the subordinated deferrable
interest notes are distributed to the holders of the preferred securities.
(9) LONG-TERM DEBT
Sinking fund requirements and scheduled maturities remaining through 2001
for ComEd's first mortgage bonds, sinking fund debentures and other long-term
debt outstanding at December 31, 1996, after deducting sinking fund debentures
reacquired for satisfaction of future sinking fund requirements, are
summarized as follows: 1997--$539 million; 1998--$497 million; 1999--$150
million; 2000--$462 million; and 2001--$108 million. Unicom Enterprises' note
payable to bank of $95 million will mature in 1998.
33
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
At December 31, 1996, ComEd's outstanding first mortgage bonds maturing
through 2001 were as follows:
<TABLE>
<CAPTION>
SERIES PRINCIPAL AMOUNT
--------------------------------------------------------------------------
(THOUSANDS OF DOLLARS)
<S> <C>
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
9 3/8% due February 15, 2000....................... 125,000
6 1/2% due April 15, 2000.......................... 230,000
6 3/8% due July 15, 2000........................... 100,000
7 1/2% due January 1, 2001......................... 100,000
----------
$1,120,000
==========
</TABLE>
Other long-term debt outstanding at December 31, 1996 is summarized as
follows:
<TABLE>
<CAPTION>
DEBT PRINCIPAL
SECURITY AMOUNT INTEREST RATE
- ------------ ---------- ---------------------------------------------
(THOUSANDS
OF
DOLLARS)
<S> <C> <C>
Unicom--
Loans Payable:
Loan due
January 1, 2003 $ 9,152 Interest rate of 8.31%
Loan due
January 1, 2004 9,749 Interest rate of 8.44%
----------
$ 18,901
----------
ComEd--
Notes:
Medium Term Notes,
Series 1N due
various dates
through
April 1, 1998 $ 35,500 Interest rates ranging from 9.52% to 9.65%
Medium Term Notes,
Series 3N due
various dates
through
October 15, 2004 296,000 Interest rates ranging from 9.00% to 9.20%
Medium Term Notes,
Series 4N due
May 15, 1997 20,000 Interest rate of 8.875%
Notes due
February 15, 1997 150,000 Interest rate of 7.00%
Notes due
July 15, 1997 100,000 Interest rate of 6.50%
Notes due
October 15, 2005 235,000 Interest rate of 6.40%
----------
$ 836,500
----------
Long-Term
Note Payable to
Bank:
Note due
June 1, 1998 $ 150,000 Prevailing interest rate of 6.08% at December 31, 1996
----------
Purchase
Contract Obligation
due April 30, 2005 $ 432 Interest rate of 3.00%
----------
Total ComEd $ 986,932
----------
Unicom Enterprises--
Note Payable to
Bank:
Note due
November 22,
1998 $ 95,000 Prevailing interest rate of 6.51% at
---------- December 31, 1996
Total Unicom $1,100,833
==========
</TABLE>
Long-term debt maturing within one year has been included in current
liabilities.
34
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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.
ComEd recorded an extraordinary loss of $33 million in the fourth quarter of
1995 related to the early redemption of $645 million of long-term debt which
reduced net income by $20 million (after reflecting income tax effects of $13
million) or $0.09 per common share.
(10) LINES OF CREDIT
ComEd had total bank lines of credit of $914 million and unused bank lines
of credit of $906 million at December 31, 1996. Of that amount, $906 million
(of which $175 million expires on September 29, 1997, $63 million expires in
equal quarterly installments commencing on March 31, 1997 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 the credit
rating of ComEd's outstanding first mortgage bonds 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 $906 million of such lines of
credit.
Unicom Enterprises has a $200 million credit facility which will expire in
1999, of which $105 million was unused as of December 31, 1996. The credit
facility can be used by Unicom Enterprises to finance investments in
unregulated 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 are
set at the time of a borrowing and are based on either a prime interest rate
or a floating rate bank index plus a spread which varies with the credit
rating of ComEd's outstanding first mortgage bonds.
(11) 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 DOE advised ComEd in
December 1996 that it anticipates it will be unable to begin acceptance of
spent nuclear fuel by January 1998. It is expected this delivery schedule will
be delayed significantly. 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. As provided for under the contract,
35
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
ComEd has elected to pay the one-time fee, with interest, just prior to the
first delivery of spent nuclear fuel to the DOE. The liability for the one-
time fee and the related interest is reflected in the Consolidated Balance
Sheets.
(12) 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 the 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 and based on published market data, as of December 31, 1996 and
1995 was as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------------------- --------------------------------
UNREALIZED UNREALIZED
COST BASIS GAINS FAIR VALUE COST BASIS GAINS FAIR VALUE
---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Short-term investments.. $ 32,778 $ 38 $ 32,816 $ 40,575 $ 283 $ 40,858
U.S. Government and
Agency issues.......... 251,994 6,885 258,879 156,745 17,636 174,381
Municipal bonds......... 331,936 17,985 349,921 496,707 34,970 531,677
Common stock............ 539,392 201,304 740,696 348,866 107,280 456,146
Other................... 69,867 4,181 74,048 29,757 4,708 34,465
---------- -------- ---------- ---------- -------- ----------
$1,225,967 $230,393 $1,456,360 $1,072,650 $164,877 $1,237,527
========== ======== ========== ========== ======== ==========
</TABLE>
At December 31, 1996 the debt securities held by the nuclear decommissioning
funds had the following maturities:
<TABLE>
<CAPTION>
COST BASIS FAIR VALUE
---------- ----------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Within 1 year....................................... $ 32,778 $ 32,816
1 through 5 years................................... 161,625 164,907
5 through 10 years.................................. 221,264 229,382
Over 10 years....................................... 258,284 271,971
</TABLE>
The net earnings of the nuclear decommissioning funds, which are recorded as
increases to the accumulated provision for depreciation, for the years 1996,
1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ----------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Gross proceeds from sales of securities.... $2,335,974 $ 2,598,889 $ 811,368
Less cost based on specific identification. (2,300,038) (2,581,714) (811,997)
---------- ----------- ---------
Realized gains (losses) on sales of securi-
ties...................................... $ 35,936 $ 17,175 $ (629)
Other realized fund earnings net of ex-
penses.................................... 33,008 46,294 38,148
---------- ----------- ---------
Total realized net earnings of the funds... $ 68,944 $ 63,469 $ 37,519
Unrealized gains (losses).................. 65,516 160,843 (57,948)
---------- ----------- ---------
Total net earnings (losses) of the funds.. $ 134,460 $ 224,312 $ (20,429)
========== =========== =========
</TABLE>
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
36
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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, ComEd-obligated mandatorily redeemable preferred securities of the
Trust and long-term debt were obtained from an independent consultant. The
estimated fair values, which include the current portions of redeemable
preference stock and long-term debt but exclude accrued interest and
dividends, as of December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------------------- --------------------------------
CARRYING UNREALIZED CARRYING UNREALIZED
VALUE LOSSES FAIR VALUE VALUE LOSSES FAIR VALUE
---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
ComEd preferred and
preference stocks.... $ 755,931 $ 3,948 $ 759,879 $ 800,197 $ 14,769 $ 814,966
ComEd-obligated
mandatorily
redeemable preferred
securities of the
Trust................ $ 200,000 $ 1,000 $ 201,000 $ 200,000 $ 6,000 $ 206,000
Long-term debt........ $6,345,533 $159,818 $6,505,351 $6,572,853 $470,175 $7,043,028
</TABLE>
Long-term notes payable, which are not included in the above table, amounted
to $264 million and $212 million at December 31, 1996 and 1995, respectively.
Such notes, for which interest is paid at fixed and prevailing rates, are
included in the consolidated financial statements at cost, which approximates
their fair value.
Current Liabilities. The carrying value of notes payable, which consists of
commercial paper and 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, 1996 and 1995; therefore, the carrying value is equal to the fair
value.
(13) 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. During
1995, these plans were amended to more closely base retirement benefits on
final pay. 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,
1996 and 1995.
During 1994, the companies implemented an early retirement program for
employees eligible to retire or who would become eligible to retire after
December 31, 1993 and before April 1, 1995. A total of 679 employees accepted
the program, resulting in the recognition of approximately $34 million of
additional pension cost and an additional increase to the projected benefit
obligation of that $34 million and $41 million of unrecognized net loss. The
charge to income was approximately $20.5 million, after reflecting income tax
effects, as a result of the program.
37
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
The funded status of these plans at December 31, 1996 and 1995 was as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1996 1995
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Actuarial present value of accumulated pension plan
benefits:
Vested benefit obligation.......................... $(3,025,000) $(2,904,000)
Nonvested benefit obligation....................... (127,000) (122,000)
----------- -----------
Accumulated benefit obligation..................... $(3,152,000) $(3,026,000)
Effect of projected future compensation levels..... (366,000) (352,000)
----------- -----------
Projected benefit obligation....................... $(3,518,000) $(3,378,000)
Fair value of plan assets, invested primarily in U.S.
Government, government-sponsored
corporation and agency securities, fixed income
funds, registered investment companies,
equity index funds and other equity and fixed income
funds .............................................. 3,282,000 3,059,000
----------- -----------
Plan assets less than projected benefit obligation... $ (236,000) $ (319,000)
Unrecognized prior service cost...................... (69,000) (73,000)
Unrecognized transition asset........................ (130,000) (142,000)
Unrecognized net loss................................ 58,000 189,000
----------- -----------
Accrued pension liability.......................... $ (377,000) $ (345,000)
=========== ===========
</TABLE>
The assumed discount rate was 7.5% at December 31, 1996 and 1995, 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 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Annual discount rate.......................................... 7.50% 8.00% 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................ 9.75% 9.75% 9.50%
</TABLE>
The components of pension costs, portions of which were recorded as
components of construction costs, for the years 1996, 1995 and 1994 were as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost............ $ 92,000 $ 87,000 $ 97,000
Interest cost on pro-
jected benefit obliga-
tion................... 246,000 225,000 213,000
Actual return on plan
assets................. (421,000) (681,000) 37,000
Early retirement program
cost................... -- -- 34,000
Net amortization and de-
ferral................. 115,000 418,000 (302,000)
--------- --------- ---------
$ 32,000 $ 49,000 $ 79,000
========= ========= =========
</TABLE>
In addition, an employee savings and investment plan is available to
eligible employees of ComEd and certain of its and Unicom's subsidiaries.
During the fourth quarter of 1995 (the first quarter of 1996 for bargaining
unit employees of the Indiana Company), the employee savings and investment
plan was amended. Under the plan, as amended, each participating employee may
contribute up to 20% of such employee's base pay and the participating
companies match the first 6% of such contribution equal to 100% of the first
2% of contributed base salary, 70% of the next 3% of contributed base salary
and 25% of the last 1% of contributed base salary. During 1996, 1995 and 1994,
the participating companies' contributions were $30 million, $25 million and
$23 million, respectively.
38
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(14) POSTRETIREMENT BENEFITS
ComEd and the Indiana Company provide certain postretirement health care,
dental care, vision care and life insurance for retirees and their dependents
and for the surviving dependents of eligible employees and retirees. The
employees become eligible for postretirement benefits when they reach age 55
with 10 years of service. The liability for postretirement benefits is funded
through trust funds based upon actuarially determined contributions that take
into account the amount deductible for income tax purposes. The postretirement
health care plan for ComEd and the Indiana Company was amended, effective
April 1, 1995. Prior to that date, the postretirement health care plan was
fully funded by the companies. With respect to employees who retire on or
after April 1, 1995, the plan is contributory, funded jointly by the companies
and the participating employees. Actuarial valuations were determined as of
January 1, 1996 and 1995.
Postretirement health care costs in 1996 and 1995 included $4 million and
$25 million, respectively, related to a voluntary separation offer for union
employees who accepted and left ComEd's employ combined with separation offers
to selected groups of non-union employees.
The funded status of the plan at December 31, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1996 1995
----------- ---------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Actuarial present value of accumulated postretirement
benefit obligation:
Retirees.............................................. $ (615,000) $(551,000)
Active fully eligible participants.................... (23,000) (21,000)
Other participants.................................... (439,000) (418,000)
----------- ---------
Accumulated benefit obligation........................ $(1,077,000) $(990,000)
Fair value of plan assets, invested primarily in S&P
500 common stocks, registered investment companies and
U.S. Government, government agency, municipal and
listed corporate
obligations........................................... 666,000 602,000
----------- ---------
Plan assets less than accumulated postretirement bene-
fit obligation........................................ $ (411,000) $(388,000)
Unrecognized transition obligation..................... 370,000 392,000
Unrecognized prior service cost........................ 45,000 48,000
Unrecognized net gain.................................. (271,000) (267,000)
----------- ---------
Accrued liability for postretirement benefits.......... $ (267,000) $(215,000)
=========== =========
</TABLE>
Different health care cost trends are used for pre-Medicare and post-
Medicare expenses. Pre-Medicare trend rates were 9.0% and 9.5%, respectively,
at December 31, 1996 and 1995, grading down in 0.5% annual increments and
leveling off at 5.0%. Post-Medicare trend rates were 7.0% and 7.5%,
respectively, at December 31, 1996 and 1995, grading down in 0.5% annual
increments to 5.0%. The assumed discount rate was 7.5% at December 31, 1996
and 1995. That rate was used to determine the accumulated benefit obligations.
The effect of a 1% increase in the health care cost trend rate for each future
year would increase the accumulated postretirement health care obligations by
approximately $158 million.
39
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
The components of postretirement health care costs, portions of which were
recorded as components of construction costs, for the years 1996, 1995 and
1994 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost................................ $32,000 $ 31,000 $ 47,000
Interest cost on accumulated benefit obliga-
tion....................................... 73,000 69,000 81,000
Actual loss (return) on plan assets......... (90,000) (137,000) 9,000
Amortization of transition obligation....... 22,000 23,000 29,000
Severance plan cost......................... 4,000 25,000 --
Other....................................... 29,000 83,000 (49,000)
------- -------- --------
$70,000 $ 94,000 $117,000
======= ======== ========
</TABLE>
Postretirement benefit costs were determined under the rules prescribed by
SFAS No. 106, including the use of the projected unit credit actuarial cost
method. The discount rates used were 7.5%, 8.0% and 7.5%, respectively, for
1996, 1995 and 1994 and the estimated long-term rate of return of fund assets,
net of income tax effects, were 9.38%, 9.32% and 9.04%, respectively, for
1996, 1995 and 1994. Pre-Medicare health care cost trend rate was 14% for
1994, grading down in 0.5% annual increments to 5.0%. Post-Medicare health
care cost trend rate was 11.5% for 1994, grading down in 0.5% annual
increments to 5.0%. Pre-Medicare trend rates were 13.5% for the first three
months of 1995 and 10% for the remainder of the year, grading down in 0.5%
annual increments to 5.0%. Post-Medicare trend rates were 11% for the first
three months of 1995 and 8% for the remainder of the year, grading down in
0.5% annual increments to 5.0%. The effect of a 1% increase in the health care
cost trend rate for each future year would increase the aggregate of the
service and interest cost components of postretirement benefit costs by
approximately $21 million for 1996.
(15) SEPARATION PLAN COSTS
Operation and maintenance expenses included $12 million for the year 1996
and $97 million for the year 1995 related to a voluntary separation offer for
union employees who accepted and left ComEd's employ combined with separation
plans offered to selected groups of non-union employees. These employee
separation plans reduced net income by $7 million or $0.03 per common share
for the year 1996 and $59 million or $0.27 per common share for the year 1995.
(16) INCOME TAXES
The components of the net deferred income tax liability at December 31, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1996 1995
---------- ----------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Deferred income tax liabilities:
Accelerated cost recovery and liberalized deprecia-
tion, net of removal costs........................... $3,514,300 $3,379,987
Overheads capitalized................................. 261,437 252,910
Repair allowance...................................... 228,426 219,585
Regulatory assets recoverable through future rates.... 1,649,037 1,689,832
Deferred income tax assets:
Postretirement benefits............................... (269,180) (235,360)
Unbilled revenues..................................... (136,406) (116,274)
Alternative minimum tax............................... (80,159) (145,019)
Unamortized investment tax credits to be settled
through future rates................................. (430,297) (452,210)
Other regulatory liabilities to be settled through fu-
ture rates........................................... (238,004) (148,792)
Other--net............................................ (44,998) (45,301)
---------- ----------
Net deferred income tax liability...................... $4,454,156 $4,399,358
========== ==========
</TABLE>
40
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
The $55 million increase in the net deferred income tax liability from
December 31, 1995 to December 31, 1996 is comprised of $163 million increase
of deferred income tax expense and a $108 million decrease in regulatory
assets net of regulatory liabilities pertaining to income taxes for the year.
The amount of regulatory assets included in deferred income tax liabilities
primarily relates to the equity component of AFUDC which is 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. The amount of other regulatory
liabilities included in deferred income tax assets primarily relates to
deferred income taxes provided at rates in excess of the current statutory
rate.
The effects of an income tax refund related to prior years were recorded in
1996, resulting in an increase to net income of $26 million or $0.12 per
common share.
The components of net income tax expense charged to continuing operations
for the years 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Operating income:
Current income taxes........................... $328,369 $339,989 $158,342
Deferred income taxes.......................... 161,176 186,529 168,402
Investment tax credits deferred--net........... (33,378) (28,710) (28,757)
Other (income) and deductions................... (7,385) (7,685) (22,498)
-------- -------- --------
Net income taxes charged to continuing opera-
tions.......................................... $448,782 $490,123 $275,489
======== ======== ========
</TABLE>
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 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Net income before extraordinary item......... $ 666,100 $ 659,533 $354,934
Net income taxes charged to continuing opera-
tions....................................... 448,782 490,123 275,489
Provision for dividends on ComEd preferred
and preference stocks....................... 64,424 69,961 64,927
---------- ---------- --------
Pre-tax income before provision for divi-
dends....................................... $1,179,306 $1,219,617 $695,350
========== ========== ========
Effective income tax rate.................... 38.1% 40.2% 39.6%
========== ========== ========
</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 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Federal income taxes computed at statutory rate.. $412,757 $426,866 $243,373
Equity component of AFUDC which was excluded from
taxable income.................................. (7,272) (4,595) (7,920)
Amortization of investment tax credits........... (33,378) (28,710) (28,810)
State income taxes, net of federal income taxes.. 58,387 65,972 40,140
Differences between book and tax accounting, pri-
marily property-related deductions.............. 14,150 27,534 26,505
Other--net....................................... 4,138 3,056 2,201
-------- -------- --------
Net income taxes charged to continuing opera-
tions........................................... $448,782 $490,123 $275,489
======== ======== ========
</TABLE>
Current federal income tax liabilities which were recorded prior to 1995
included 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 were carried forward and portions were
41
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
applied as credits against the post-1994 regular federal income tax
liabilities. The remaining excess amounts of AMT can be carried forward
indefinitely as credits against future years' regular federal income tax
liabilities.
(17) TAXES, EXCEPT INCOME TAXES
Provisions for taxes, except income taxes, for the years 1996, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Illinois public utility revenue............... $227,062 $229,546 $211,263
Illinois invested capital..................... 104,663 106,830 109,373
Municipal utility gross receipts.............. 168,715 167,758 145,011
Real estate................................... 129,770 176,454 180,221
Municipal compensation........................ 78,544 78,602 72,647
Other--net.................................... 74,821 74,107 69,281
-------- -------- --------
$783,575 $833,297 $787,796
======== ======== ========
</TABLE>
The reduction in ComEd's real estate taxes in 1996 results primarily from
ongoing challenges by ComEd of the methodology used by local taxing
authorities to assess the value of ComEd's nuclear generating stations.
Approximately half of the 1996 reduction in ComEd's real estate taxes is
related to the year 1995.
(18) LEASE OBLIGATIONS OF SUBSIDIARY COMPANIES
Under its nuclear fuel lease 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. With respect
to the commercial paper/bank borrowing portion, $100 million will expire on
November 23, 1998 and $200 million will expire on November 23, 1999. With
respect to the intermediate term notes, a portion expires in November 1997,
and each November thereafter, through November 2001 and in November 2003. At
December 31, 1996, ComEd's obligation to the lessor for leased nuclear fuel
amounted to approximately $687 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, 1996
for capital leases are estimated to aggregate $788 million, including $241
million in 1997, $195 million in 1998, $150 million in 1999, $91 million in
2000, $45 million in 2001 and $66 million in 2002-2043. The estimated interest
component of such rental payments aggregates $106 million. The estimated
portions of obligations due within one year under capital leases of
approximately $174 million and $168 million at December 31, 1996 and 1995,
respectively, are included in current liabilities.
Future minimum rental payments at December 31, 1996 for operating leases are
estimated to aggregate $173 million, including $12 million in 1997, $13
million in 1998, $12 million in 1999, $10 million in 2000, $10 million in 2001
and $116 million in 2002-2024.
(19) 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,
42
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
operation or maintenance accounts and provides its own financing. At December
31, 1996, for its share of ownership in the station, ComEd had an investment
of $641 million in production and transmission plant in service (before
reduction of $197 million for the related accumulated provision for
depreciation) and $21 million in construction work in progress.
(20) INVESTMENTS IN URANIUM-RELATED PROPERTIES
In 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 $34
million or $0.16 per common share.
(21) COMMITMENTS AND CONTINGENT LIABILITIES
Purchase commitments, principally related to construction and nuclear fuel,
approximated $1,060 million at December 31, 1996, comprised of approximately
$1,018 million for ComEd and the Indiana Company and approximately $42 million
for Unicom Thermal. In addition, ComEd has substantial commitments for the
purchase of coal. 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 provide for the purchase of certain coal at prices
substantially above currently prevailing market prices. 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 $53 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 $21 million and $73
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.
43
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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 $36 million in the event losses exceed
accumulated reserve funds.
During 1989 and 1991, actions were brought in federal and state courts in
Colorado against ComEd and 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, which verdicts were upheld
on appeal. The remaining claims in the 1989 actions are the subject of a
settlement agreement entered into by counsel for the plaintiffs and Cotter. If
the settlement agreement is implemented, the 1989 actions will be dismissed.
Although the remaining cases will necessarily involve the resolution of
numerous contested issues of fact and law, Unicom's and ComEd's determination
is that these actions will not have a material impact on their 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
(1997) 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 included on the
Consolidated Balance Sheets as of December 31, 1996 and 1995, 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, 1996 and 1995, a reserve of
$8 million has been included on the Consolidated Balance Sheets, representing
ComEd's estimate of the liability associated with cleanup costs of remediation
sites other than former MGP sites. Approximately half of this reserve relates
to anticipated cleanup costs associated with a property formerly used as a
tannery which was purchased by ComEd in 1973. 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.
44
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONCLUDED
(22) QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
AVERAGE
NUMBER OF EARNINGS
COMMON PER
OPERATING OPERATING NET SHARES COMMON
THREE MONTHS ENDED REVENUES INCOME INCOME OUTSTANDING SHARE
- ------------------ ---------- --------- -------- ----------- --------
(THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
March 31, 1995............... $1,578,136 $260,579 $ 88,601 214,429 $0.41
June 30, 1995................ $1,559,521 $276,584 $108,866 214,677 $0.51
September 30, 1995........... $2,190,862 $582,006 $407,433 214,769 $1.90
December 31, 1995............ $1,581,526 $219,327 $ 34,611 214,889 $0.16
March 31, 1996............... $1,683,929 $297,551 $136,932 215,248 $0.64
June 30, 1996................ $1,547,916 $253,063 $100,313 215,438 $0.47
September 30, 1996........... $2,067,901 $474,895 $334,980 215,568 $1.55
December 31, 1996............ $1,637,278 $237,799 $ 93,875 215,747 $0.44
</TABLE>
(23) SUBSEQUENT EVENTS
In January 1997, ComEd issued $150 million principal amount of 7.375% Notes
due January 15, 2004, $150 million principal amount of 7.625% Notes due
January 15, 2007 and $150 million principal amount of Company-obligated
preferred securities of subsidiary trust.
On January 24, 1997, ComEd announced that it would redeem on March 11, 1997
all of its $200 million principal amount of First Mortgage 9 1/2% Bonds,
Series 57, due May 1, 2016.
45
<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
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of
earliest event reported): January 31, 1997
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 Current Report is to file certain financial information
regarding the Registrant (Commonwealth Edison Company) and its subsidiaries.
Such financial information is set forth in the exhibits to this Current Report.
Item 5. Other Events
- ------- ------------------------------
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,
1996:
--Summary of Selected Consolidated Financial Data
--Cash Dividends Paid Per Share of Common Stock
--1996 Consolidated Revenues and Sales
--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 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Commonwealth Edison Company
(Registrant)
By: Roger F. Kovack
----------------------
Roger F. Kovack
Comptroller
Date: February 13, 1997
-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, 1996:
--Summary of Selected Consolidated Financial Data
--Cash Dividends Paid Per Share of Common Stock
--1996 Consolidated Revenues and Sales
--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
----------
* Previously filed and incorporated by reference to Commonwealth
Edison Company's Form 8-K Current Report dated January 31, 1997.
<PAGE>
Exhibit (23)
Commonwealth Edison Company
Form 8-K 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 31, 1997, on Commonwealth Edison
Company and subsidiary companies' consolidated financial statements as of and
for the year ended December 31, 1996, included as an Exhibit to this Form 8-K
Current Report of Commonwealth Edison Company dated January 31, 1997, 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); (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); and (3) prospectus
dated September 19, 1995, constituting part of Amendment No. 1 to Form S-3
Registration Statement File No. 33-61343, as amended (relating to Company-
Obligated Mandatorily Redeemable Preferred Securities of ComEd Financing I). 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 twelve months ended December 31,
1996, 1995 and 1994 appearing in Exhibit 99 of this Form 8-K.
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 13, 1997
<PAGE>
Exhibit 99
Commonwealth Edison Company
Form 8-K File No. 1-1839
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
Certain portions of this document contain forward looking statements with
respect to the consequences of future events, including estimates of costs
associated with certain actions and outcomes. Unforeseen events or conditions
may require changes in the factors affecting such estimates and the projected
results thereof. Consequently, actual results could differ materially from the
estimates presented. See the last paragraph under the subheading "Liquidity
and Capital Resources--Construction Program" in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for additional
information regarding certain caveats affecting forward looking statements.
Forward looking information is contained in various sections of this report,
including, without limitation, (i) Note 1 of Notes to Financial Statements in
the third and fifth paragraphs under the subheading "Depreciation and
Decommissioning Costs" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the last paragraph under the
subheading "Regulation--Nuclear Matters," with respect to the estimated costs
of decommissioning nuclear generating stations, (ii) "Management's Discussion
and Analysis of Financial Condition and Results of Operations" under the
subheading "Liquidity and Capital Resources--Construction Program," regarding
ComEd's construction program budget, (iii) the fourth paragraph under the
subheading "Results of Operations--Operation and Maintenance Expenses" under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and (iv) the last paragraph in Note 21 of Notes to Financial
Statements, regarding cleanup costs associated with MGP and other remediation
sites.
INDEX
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Definitions.............................................................. 2
Summary of Selected Consolidated Financial Data.......................... 3
Cash Dividends Paid Per Share of Common Stock............................ 3
1996 Consolidated Revenues and Sales..................................... 3
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 4-15
Report of Independent Public Accountants................................. 16
Consolidated Financial Statements--
Statements of Consolidated Income for the years 1996, 1995 and 1994.... 17
Consolidated Balance Sheets--December 31, 1996 and 1995................ 18-19
Statements of Consolidated Capitalization--December 31, 1996 and 1995.. 20
Statements of Consolidated Retained Earnings for the years 1996, 1995
and 1994.............................................................. 21
Statements of Consolidated Cash Flows for the years 1996, 1995 and
1994.................................................................. 22
Notes to Financial Statements.......................................... 23-42
</TABLE>
1
<PAGE>
DEFINITIONS
The following terms are used in this document with the following meanings:
<TABLE>
<CAPTION>
TERM MEANING
- ----------------------- ------------------------------------------------------------------
<S> <C>
AFUDC Allowance for funds used during construction
AMT Alternative minimum tax
APB Accounting Principles Board
CERCLA Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended
ComEd Commonwealth Edison Company
Cotter Cotter Corporation, which is a wholly-owned subsidiary of ComEd.
DOE U.S. Department of Energy
ESPP Employee stock purchase plan
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
FERC Order FERC Open Access Order issued in April 1996
Fuel Matters Settlement A settlement effected in November 1993 relating to various ICC
fuel reconciliation proceedings involving ComEd.
ICC Illinois Commerce Commission
Indiana Company Commonwealth Edison Company of Indiana, Inc., which is a wholly-
owned subsidiary of ComEd.
ISO Independent System Operator
MGP Manufactured gas plant
NEIL Nuclear Electric Insurance Limited
NML Nuclear Mutual Limited
NRC Nuclear Regulatory Commission
Rate Matters Settlement A settlement effected in November 1993 relating to various rate
proceedings involving ComEd.
Rate Order ICC rate order issued in January 1995, as subsequently modified
Remand Order ICC rate order issued in January 1993, as subsequently modified
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
Trust ComEd Financing I, which is a wholly-owned subsidiary trust of
ComEd.
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>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(MILLIONS OF DOLLARS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C> <C>
Electric operating revenues... $ 6,935 $ 6,910 $ 6,278 $ 5,260 $ 6,026
Net income.................... $ 743 $ 717(1) $ 424 $ 112(3) $ 514
Earnings per common share..... $ 3.17 $ 3.02(1) $ 1.68 $ 0.22(3) $ 2.08
Cash dividends declared per
common share................. $ 1.60 $ 1.60 $ 1.60(2) $ 1.60 $ 2.30
Total assets (at end of year). $23,217 $23,119 $23,076 $24,380 $20,993
Long-term obligations at end
of year excluding current
portion:
Long-term debt, preference
stock and preferred
securities subject to
mandatory redemption
requirements................ $ 6,376 $ 6,950 $ 7,745 $ 7,861 $ 7,913
Accrued spent nuclear fuel
disposal fee and related
interest.................... $ 657 $ 624 $ 590 $ 567 $ 549
Capital lease obligations.... $ 475 $ 374 $ 431 $ 321 $ 347
Other long-term obligations.. $ 1,983 $ 1,819 $ 1,754 $ 1,718 $ 666
</TABLE>
- --------
(1) Includes an extraordinary loss related to the early redemption of long-term
debt of $20 million or $0.09 per common share.
(2) Excludes a special dividend (consisting of $40 million cash and the common
stock of Unicom Enterprises Inc.) effected on September 1, 1994 in
connection with the holding company corporate restructuring.
(3) Includes the cumulative effect of change in accounting for income taxes of
$10 million or $0.05 per common share.
CASH DIVIDENDS PAID PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
1996 (BY QUARTERS) 1995 (BY QUARTERS)
------------------------- -------------------------
FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash dividends paid......... 40c 40c 40c 40c 40c 40c 40c 40c
</TABLE>
1996 CONSOLIDATED REVENUES AND SALES
<TABLE>
<CAPTION>
ELECTRIC INCREASE/
OPERATING (DECREASE) KILOWATTHOUR INCREASE/
REVENUES OVER SALES (DECREASE) INCREASE
(THOUSANDS) 1995 (MILLIONS) OVER 1995 CUSTOMERS OVER 1995
----------- ---------- ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Residential............. $2,541,873 (3.0)% 22,310 (4.3)% 3,102,101 0.7%
Small commercial and
industrial............. 2,113,716 1.9% 25,131 (0.7)% 289,803 0.3%
Large commercial and
industrial............. 1,445,708 1.4% 23,896 0.5% 1,550 0.7%
Public authorities...... 503,004 3.3% 7,336 2.5% 12,142 0.9%
Electric railroads...... 29,651 10.3% 424 8.7% 2 --
---------- ------ ---------
Ultimate consumers...... $6,633,952 -- 79,097 (1.1)% 3,405,598 0.7%
Sales for resale........ 235,041 12,178 44
Other revenues.......... 65,554 -- --
---------- ------ ---------
Total.................. $6,934,547 0.4% 91,275 (0.1)% 3,405,642 0.7%
========== ====== =========
</TABLE>
3
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CHANGES IN THE ELECTRIC UTILITY INDUSTRY
Unicom and its predominant business, electric energy generation,
transmission and distribution, are in a period of fundamental change in the
manner in which customers obtain, and energy suppliers provide, energy
services. These changes are attributable to changes in technology, the
relaxation of regulatory barriers to utilities' respective service territories
as well as to efforts to change the manner in which electric utilities are
regulated. Federal law and regulations have been amended to provide for open
transmission system access, and various states are considering, or have
adopted, new regulatory structures to allow access by some or all customers to
energy suppliers in addition to the local utility.
ComEd and other energy suppliers, energy customers and other interested
parties have been active participants in the discussions related to the
economic and technical issues associated with reform. As a result of these
efforts, legislation was introduced in Illinois during January 1997 which is
intended to provide both electric service providers and their customers with
an orderly transition to a less regulated market for electric service. Under
the legislative proposal, utilities would be granted a period in which to
offer direct access experiments that would allow them and customers to gain
experience with the effects of such access, with a requirement to provide such
access starting in 2000. Such a requirement would be phased-in to customers
over several years, starting with larger load customers. The legislation would
provide utilities with an opportunity to recover costs, which might not
otherwise be recoverable, in charges for electric service in a less regulated
market through, among other things, cost savings and a transition charge for
customers who use alternate suppliers of electric power and energy. The
legislation would provide for a leveling of certain regulatory oversight and
tax provisions among electric service providers in Illinois and would also
allow certain restructurings of utility operations in order to facilitate
their response to a competitive environment. The legislation would provide for
annual base rate decreases of 1.5 percent, starting in 2000 and continuing
through 2004. ComEd supports the proposed legislation and believes there is
support among a number of constituencies for its provisions. Other legislative
proposals have also been introduced for consideration, which contain different
provisions with respect to timing and cost recovery. The Governor of Illinois
has formed a three-person advisory committee to advise with respect to
electric utility deregulation issues. No assurance can be given as to when any
such legislation may be adopted or in what form it may be adopted.
In response to changes in the industry, ComEd has implemented certain
customer initiatives designed to improve and strengthen customer relationships
and is undertaking an evaluation of its operations and assets, particularly
generating assets, with a view toward positioning itself for market and
industry changes. As discussed below, ComEd's actions to date have included a
five-year base rate cap, efforts to control expenditure growth through
personnel reductions, operational efficiencies and sales of generating plants.
Although ComEd's operating results and financial condition have historically
been affected by various rate proceedings, ComEd expects that these industry
changes, and ComEd's activities anticipating or responding to them, will
directly impact its operating results and financial condition over the next
several years.
Electric Utility Industry. The electric utility industry has historically
consisted of vertically integrated companies which combine generation,
transmission and distribution assets; serving customers within relatively
defined service territories; and operating under extensive regulation with
respect to rates, operations and other matters. Utilities operated under a
regulatory compact with the state, with a statutory obligation to serve all of
the electricity needs within their service territory in a nondiscriminatory
manner. Historically investment and operating decisions have been made based
upon the utilities' respective assessment of those current and projected needs
of its customers. In view of this obligation, regulation has focused on
investment and operating costs, and rates have been
4
<PAGE>
based on a recovery of some or all of such prudently incurred costs plus a
return on invested capital. Such rate regulation, and the ability of utilities
to recover investment and other costs through rates, has provided the basis
for recording certain costs as regulatory assets. These assets represent costs
which are allocated over future periods reflecting related regulatory
treatment, rather than expensed in the current period.
As noted previously, the United States electric utility industry is in a
process of fundamental change as state legislators and regulators re-examine
their approach to regulation and its objectives and consider a transition to a
competitive or market-based system of pricing for electric energy. Although
the process and approach have varied from state to state in terms of the
elements and timing of implementation, it is evident that the question is no
longer if, but rather how and when there will be a more competitive
electricity market. The Federal Energy Policy Act of 1992, among other things,
empowered FERC to introduce a greater level of competition into the wholesale
marketplace for electric energy. In April 1996, the FERC Order was issued
requiring utilities to file open access tariffs with regard to their
transmission systems. These tariffs set forth the terms, including prices,
under which other parties and the utility's wholesale marketing function may
use the utility's transmission system. ComEd has filed an open access tariff
with the FERC. The FERC Order requires the separation of the transmission
operations and wholesale marketing functions so as to ensure that unaffiliated
third parties have access to the same information as to system availability
and other requirements. The FERC Order further requires utilities to operate
an electronic bulletin board to make transmission price and access data
available to all potential users. A key feature of the FERC Order is that it
contemplates full recovery of a utility's costs "stranded" by competition.
These costs are "stranded" or "strandable" to the extent market-based rates
would be insufficient to allow for their full recovery. To recover stranded
costs, the utility must show that it had a reasonable expectation that it
would continue to serve the customer in question under its regulatory compact.
An important element of reform proposals under consideration is the ability
of other suppliers to provide energy in competition with a utility within its
service territory. This element generally has included consideration of some
future form of "retail wheeling," whereby a utility's transmission and
distribution system is made available to other energy suppliers for delivery
of their services to retail customers. In addition, some governmental
entities, such as cities, may elect to "municipalize" a utility's distribution
facilities through condemnation proceedings. Such municipalities would then be
able to purchase electric power on a wholesale basis and resell it to
customers over the newly acquired facilities. The FERC Order provides for the
recovery of a utility's investment stranded by municipalization. While
municipalization is possible under the present regulatory system, ComEd is not
required to grant alternative electric suppliers access to its distribution
system through any type of "retail wheeling."
Presumably, under such a modified regulatory structure, customers will base
energy purchase decisions on a combination of factors, including price,
reliability and service. In addition to the potential effects on revenues and
marketing and sales efforts, such changes can raise the question as to whether
an affected utility's rates are based on cost-based regulation, allowing
recovery of incurred costs, or are based on something else, i.e., the
marketplace. Under generally accepted accounting principles, the latter
determination would require the write off of regulatory assets and liabilities
and would require an examination as to the recoverability in revenues of other
incurred costs, with any portion determined to be unrecoverable being subject
to write off. Various approaches have been proposed to deal with such
strandable costs, from full recovery, as provided in the FERC Order, to no
recovery, as proposed by at least some of the participants in virtually all
legislative debates on regulatory reform proposals. For additional
information, see "Regulatory Assets and Liabilities" in Note 1 of Notes to
Financial Statements.
5
<PAGE>
Retail wheeling and municipalization are significant issues for electric
utility companies, including ComEd, because of their potential to strand a
utility's costs. Without the development of a more fully competitive
marketplace, it is not possible to develop an estimate of strandable costs with
any degree of accuracy. Any calculation of potentially strandable costs requires
that a set of assumptions be made, including the timing of open access (customer
choice), the extent of open access allowed, potential market prices over time,
sales and load growth forecasts, operating performance over time, allowed rates
over time, cost structure over time, mitigation opportunities and strandable
cost recoveries. The calculation of strandable costs is extremely sensitive to
the assumptions made, and the resulting estimates are potentially misleading if
removed from the context in which they were calculated. At this point in time,
ComEd does not subscribe to a certain set of assumptions or a particular
estimate. The proposed legislation described above, which ComEd supports, would
provide utilities the opportunity to recover their stranded costs, if any.
However, ComEd believes the amount of its strandable costs could be material
without allowance for recovery of costs and investments it incurred under its
regulatory compact, including its duty to serve. Most reform proposals
anticipating increased competition include some form of stranded cost recovery.
ComEd is taking steps, such as cost-control measures, improving generating
station reliability and additional depreciation, to minimize its potential
stranded investment. See Note 2 of Notes to Financial Statements for additional
information.
ComEd. ComEd is responding, and is undertaking a significant planning effort
with respect to further responses, to the developments within the utility
industry. During the past several years, such efforts have focused on cost
reductions, including personnel reductions, efficiencies in purchasing and
inventory management, and an incentive compensation system keyed to cost
reduction and control. Notwithstanding these efforts, ComEd's costs remain
high in comparison to its neighboring utilities.
ComEd is examining its assets, particularly generating assets, with a view
toward rationalizing their investment and operating costs against their
ability to contribute to the revenues of ComEd under various market scenarios.
Such an assessment involves the consideration of numerous factors, including
revenue contribution, operating costs, impacts on ComEd's service obligations,
purchase commitments and remaining assets, and the impact of various options.
Such options include continued operation, indefinite suspension from
operation, sale to a third party and retirement. If ComEd retired a generating
plant, particularly a nuclear plant, without regulatory or legislative
provision for continued recovery of its investment, such retirement could have
a material impact on ComEd's and Unicom's financial position and results of
operations.
On April 17, 1996, ComEd announced that it had finalized agreements to sell
two of its coal-fired generating stations, representing approximately 1,600
megawatts of generating capacity. Under the agreements, State Line and Kincaid
stations would be sold for a total of $250 million, which approximates the
book value of the stations. The net proceeds, after income tax effects, would
be approximately $200 million, which would be used to retire or redeem
existing debt. Under the terms of the sales, ComEd would enter into exclusive
15-year purchased power agreements for the output of the plants. The
agreements are subject to regulatory approval, and proceedings have been
initiated to obtain those approvals. Numerous parties have intervened in the
proceedings, including various governmental and consumer groups and ComEd's
principal union. The union has also filed a lawsuit in state court alleging
that the labor provisions of the Kincaid agreement are violative of state law
and seeking to enjoin the ICC proceedings. ComEd had previously filed an
action in federal court seeking confirmation that the state law is preempted
by federal labor law, and ComEd believes that the union's allegations are
without merit. These actions have now been consolidated and are pending in
federal court. The State Line and Kincaid agreements give the purchasers the
right to terminate the agreements if a closing has not occurred prior to
December 31, 1996 for State Line and June 30, 1997 for Kincaid. Such closing
has not occurred as of January 31, 1997.
With respect to its transmission assets, ComEd is participating with
approximately 20 other electric utility companies in an effort to form an ISO
for the midwest United States. Under the structure currently contemplated, the
ISO would set standard transmission rates and facilitate compliance with the
FERC Order. In addition, while individual utility companies would continue to
own their
6
<PAGE>
transmission lines, the ISO would oversee regional planning to avoid
transmission constraints. Creation of the ISO will be subject to further
negotiations among the parties as well as federal and state regulatory
approval.
ComEd is also taking actions to strengthen its relationship with its
customers. On December 11, 1995, ComEd instituted a five-year base rate cap
for all of its customers. The base rate cap does not affect ComEd's fuel cost
or nuclear decommissioning cost recovery provisions. See Note 2 of Notes to
Financial Statements for additional information about ComEd's base rate cap
and other initiatives intended to give customers more choice and control over
the services they seek and the price they pay.
LIQUIDITY AND CAPITAL RESOURCES
Construction Program. ComEd and the Indiana Company have a construction
program for the year 1997, which consists principally of improvements to their
existing nuclear and other electric production, transmission and distribution
facilities. It does not include funds to add new generating capacity to
ComEd's system. The program, as currently approved by ComEd, calls for
electric plant and equipment expenditures of approximately $982 million
(excluding nuclear fuel expenditures of approximately $322 million). It is
estimated that such construction expenditures, with cost escalation computed
at 3.5% annually, will be as follows:
<TABLE>
<CAPTION>
1997
------------
(MILLIONS OF
DOLLARS)
<S> <C>
Production...................................................... $420
Transmission and Distribution................................... 421
General......................................................... 141
----
Total........................................................ $982
====
</TABLE>
Such construction program includes the replacement of the steam generators
at ComEd's Braidwood Unit 1 and Byron Unit 1 nuclear generating units expected
to be placed in service prior to year-end 1998. The estimated replacement cost
is approximately $460 million, including approximately $80 million for the
cost of removal of the existing steam generators. Approximately $130 million
of this estimated cost is included in the construction expenditures shown
above. Approximately $140 million has been incurred through December 31, 1996.
In addition, ComEd has continued to monitor the degradation of the steam
generators at its Zion nuclear generating station. Recent studies indicate
that the degradation is continuing and that replacement may be required sooner
than 2005. No amount has been included in ComEd's construction budget for
replacement of these steam generators, since ComEd has not decided whether or
when to effect a replacement. Based upon its experience with the replacement
activities at Braidwood and Byron, and depending on the timing of any
replacement at Zion, ComEd believes such cost could be approximately $435
million if a decision to replace is made.
ComEd's forecasts of peak load indicate a need for additional resources to
meet demand, either through generating capacity, through equivalent purchased
power or through the development of additional demand-side management
resources, in 1998 and each year thereafter. However, it believes that
adequate resources, including cost-effective demand-side management resources,
non-utility generation resources and other utility power purchases, could be
obtained in sufficient quantities to meet such forecasted needs. If ComEd
instead were to build additional capacity to meet its needs, it would need to
make additional capital expenditures during 1997.
Purchase commitments for ComEd and the Indiana Company, principally related
to construction and nuclear fuel, approximated $1,018 million at December 31,
1996. In addition, ComEd's estimated commitments for the purchase of coal are
indicated in the following table.
<TABLE>
<CAPTION>
CONTRACT PERIOD COMMITMENT (1)
-------------- --------- --------------
<S> <C> <C>
Black Butte Coal Co................................ 1997-2000 $807
Decker Coal Co..................................... 1997-2014 $582
Big Horn Coal Co................................... 1998 $ 22
</TABLE>
--------
(1) In millions of dollars, excluding transportation costs. No estimate of
future cost escalation has been made.
7
<PAGE>
For additional information concerning these coal contracts and ComEd's fuel
supply, see "Results of Operations" below and Notes 1 and 21 of Notes to
Financial Statements.
The foregoing paragraphs in this "Construction Program" section include
forward-looking statements with respect to the future levels of capital
expenditures which are necessarily based upon assumptions regarding estimated
costs and availability of materials and services as well as contingencies.
Unforeseen events or conditions may require changes in the scope of work with
consequent changes in the timing and level of the projected expenditures. In
addition, changes in laws and regulations, or their interpretation and
enforcement, can affect the scope of certain projects, the manner in which
they are undertaken and the costs associated therewith. While ComEd gives
consideration to such factors in developing its budgets, such consideration
cannot predict the course of future events or anticipate the interaction of
multiple factors beyond management's control upon project timing and cost.
Consequently, actual results could differ materially from those described.
Capital Resources. ComEd forecasts 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. See Notes 7 and 9 of Notes to Financial Statements
for the summaries of the annual sinking fund requirements and scheduled
maturities for ComEd preference stock and long-term debt, respectively. The
forecast assumes the rate levels reflected in the Rate Order remain in effect.
See "Regulation," subcaption "Rate Matters" below for additional information.
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. 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. See Note 18 of Notes to Financial Statements for
more information concerning ComEd's nuclear fuel lease facility. ComEd has
approximately $906 million of unused bank lines of credit at December 31, 1996
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 the
credit ratings of ComEd's outstanding first mortgage bonds 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 10 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 1996, 1995 and 1994.
During 1996, ComEd sold and leased back approximately $317 million of
nuclear fuel through its existing nuclear fuel lease facility. In addition,
ComEd issued $199 million of pollution control obligations, the proceeds of
which were used to redeem an equivalent amount of other pollution control
obligations. In January 1997, ComEd issued $150 million principal amount of
7.375% Notes due January 15, 2004, $150 million principal amount of 7.625%
Notes due January 15, 2007 and $150 million principal amount of Company-
obligated preferred securities of subsidiary trust, the proceeds of which will
be used to discharge current maturities of long-term debt and to redeem on
March 11, 1997 $200 million principal amount of First Mortgage 9 1/2% Bonds,
Series 57, due May 1, 2016. See the Statements of Consolidated Cash Flows and
Note 4 of Notes to Financial Statements for information regarding common stock
activity.
As of January 31, 1997, ComEd has an effective "shelf" registration
statement with the SEC for the future sale of up to an additional $505 million
of debt securities and cumulative preference stock for general corporate
purposes of ComEd, including the discharge or refund of other outstanding
securities.
8
<PAGE>
ComEd's securities and other securities guaranteed by ComEd are currently
rated by three principal securities rating agencies 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- BBB-
Preference stock................................. baa3 BBB- BBB-
Company-obligated mandatorily redeemable pre-
ferred securities of the Trust.................. baa3 BBB- BBB-
Commercial paper................................. P-2 A-2 D-2
</TABLE>
In January 1997, Moody's changed the rating outlook on ComEd's securities
from "stable" to "negative" and Duff & Phelps added ComEd's securities to
"Rating Watch--Down". As of January 1997, Standard & Poor's rating outlook on
ComEd remained "stable."
Capital Structure. The ratio of long-term debt to total capitalization has
decreased to 46.1% at December 31, 1996 from 49.3% at December 31, 1995. This
decrease is related primarily to the retirement of long-term debt, the
increase in current maturities of long-term debt reclassified to current
liabilities and the increase in retained earnings.
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 Matters. On January 9, 1995, the ICC issued its Rate Order in the
proceedings relating to ComEd's February 1994 rate increase request. The Rate
Order provided, 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 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 for additional information related to the level of decommissioning
cost collections. The ICC also 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 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. As of December 31, 1996, electric operating revenues of approximately
$651 million (excluding revenue taxes) are subject to refund. Intervenors and
ComEd have filed appeals of the Rate Order with the Illinois Appellate Court,
and oral argument was heard on January 28, 1997. See Note 2 of Notes to
Financial Statements for additional information.
Nuclear Matters. Nuclear operations have been, and remain, an important
focus of ComEd--given the impact of such operations on overall operating and
maintenance expenditures and the ability of nuclear power plants to produce
electric energy at a relatively low marginal cost. ComEd operates a large
number of nuclear plants, ranging from the older Zion, Dresden and Quad Cities
stations to the more recently completed LaSalle, Byron and Braidwood stations,
and is intent upon safe, reliable and efficient operation. These plants were
constructed over a period of time in which technology, construction procedures
and regulatory initiatives and oversight have evolved, with the result that
older plants generally require greater attention and resources to meet
regulatory requirements and expectations as well as to maintain operational
reliability.
9
<PAGE>
On January 29, 1997, the NRC determined that ComEd's Dresden nuclear
generating station should remain on the NRC's list of plants to be monitored
closely, where it has been since being placed on that list in 1992. The NRC
also determined that ComEd's LaSalle and Zion nuclear generating stations
should be added to that list. Although in each case the NRC recognized that
ComEd had undertaken significant management changes and had accomplished a
number of performance improvements, it expressed concern with specific issues
at each station and expressed a general concern with the sustainability of
improvements as the basis for its determination. The determination does not
prevent ComEd from operating the generating units; however, it does mean that
the NRC will devote additional resources to monitoring ComEd's operating
performance and that ComEd will need to work to demonstrate to the NRC the
sustainability of improvements which it believes it has undertaken and is
continuing to implement.
The NRC also took the unusual additional step of requiring ComEd to submit
information to allow the NRC to determine what actions, if any, should be
taken to assure that ComEd can safely operate its six nuclear generating
stations while sustaining performance improvement at each site. The request
also requires ComEd to submit information regarding the criteria that it has
established, or plans to establish, to measure performance and to explain
ComEd's proposed actions if the criteria are not met. The request states the
NRC staff's concerns with the "cyclical safety performance of ComEd nuclear
stations," noting the presence on the list of plants to be monitored closely
of Dresden, LaSalle and Zion stations at various times during the past ten
years. It also noted concerns regarding "ComEd's ability to establish lasting
and effective programs that result in sustained performance improvement." The
request does acknowledge the management and organizational changes implemented
by ComEd, including the "additional focus placed on management and leadership,
accountability, the problem identification and corrective action processes,
material condition improvement, work control, and radiation protection." It
also acknowledges improvements seen at Dresden and Quad Cities stations; but
indicated at the same time performance declines were observed at both LaSalle
and Zion stations. The operational problems identified by the NRC are
consistent with weaknesses identified in recent station self-assessments
initiated by ComEd; and management has undertaken to develop and implement
programs designed to address these issues. Consequently, ComEd's management
believes that it can provide sufficient information to the NRC demonstrating
ComEd's ability to operate its nuclear generating stations while sustaining
performance improvements.
ComEd has devoted, and intends to continue to devote, significant resources
to the management and operation of its nuclear generating stations. Over the
past several years, it has increased and reinforced station management with
managers drawn from other utilities having experience with similar operational
and performance issues. It has also sought to identify, anticipate and address
operating and performance issues in a safe, cost-effective manner while
seeking to improve the availability and capacity factors of its nuclear
generating units. Such activities have included improvements in operating and
personnel procedures and repair and replacement of equipment and can result in
longer unit outages. In this regard, ComEd's management decided to continue
the present unit outages at its LaSalle station until the identified
performance issues have been appropriately addressed. ComEd presently expects
such outages to extend into the summer of 1997.
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 1994. In 1996, an intervenor
filed testimony in the fuel reconciliation proceeding for 1994 seeking a
refund of approximately $90 million relating to nuclear station performance.
ComEd estimates that it will expend approximately $15.5 billion, excluding
any contingency allowance, for decommissioning costs primarily during the
period from 2007 through 2032. Such costs, which are estimated to aggregate
$3.9 billion in current-year (1997) dollars, are expected to be funded by
external decommissioning trusts which ComEd established in compliance with
Illinois law and into which ComEd has been making annual contributions. Future
decommissioning cost estimates may be
10
<PAGE>
significantly affected by the adoption of or changes to NRC regulations as
well as changes in the assumptions used in making such estimates, including
changes in technology, available alternatives for the disposal of nuclear
waste, and inflation. See Note 1 of Notes to Financial Statements under
"Depreciation and Decommissioning" for additional information regarding
decommissioning costs.
Environmental Matters. 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. See
Note 21 of Notes to Financial Statements for additional information regarding
certain effects of CERCLA on ComEd.
RESULTS OF OPERATIONS
Net Income on Common Stock. The 1996 results reflect, among other factors, a
1% decrease in overall operation and maintenance expenses as compared to 1995
and the positive effects of an income tax refund related to prior years (net
income effect of $26 million or $0.12 per common share) and a reduction in
real estate taxes (net income effect of $28 million or $0.13 per common
share). Approximately half of the reduction in real estate taxes is related to
the year 1995. The real estate tax reduction results primarily from ongoing
challenges by ComEd of the methodology used by local taxing authorities to
assess the value of ComEd's nuclear generating stations. The 1996 results also
reflect a 9% reduction in the total of interest expense on debt and dividend
requirements on preferred and preference stocks compared to 1995 largely due
to the early retirement of debt at the end of 1995. In September 1996, the ICC
approved ComEd's request to increase depreciation charges on its nuclear
generating units by $30 million for the year 1996, reducing net income by $20
million or $0.09 per common share.
The 1995 results reflect higher revenues, primarily as a result of higher
kilowatthour sales, and the higher rate levels, which became effective in
January 1995 under the Rate Order. The higher kilowatthour sales reflect the
unusually hot summer weather in 1995. The 1995 results were also affected by
higher operation and maintenance expenses, which reflect an after-tax charge
of $59 million or $0.27 per common share for a voluntary employee separation
offer to certain ComEd employees. ComEd also recorded an after-tax charge of
$20 million or $0.09 per common share related to the early redemption of $645
million of long-term debt.
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. The 1994 results also reflect ComEd's
increased kilowatthour sales to ultimate consumers as the result of an
improving economy and warmer weather. The effects of these items were
partially offset by higher operation and maintenance expenses, which include
an after-tax charge of $20 million or $0.09 per common share for additional
pension costs related to an early retirement offer made to certain employees
during 1994. ComEd also recorded a reduction in the carrying value of its
investments in uranium-related properties in 1994, which reduced net income by
$34 million or $0.16 per common share.
Operating Revenues. ComEd's electric operating revenues reflect revenues
from sales to ultimate consumers (including residential, commercial and
industrial customers within its service territory), revenues from sales for
resale (i.e., sales to wholesale customers, principally other electric
utilities), and revenues from collections under its fuel adjustment clause
(which is intended to recover ComEd's fuel cost for generating electric energy
and the energy portion of purchased power cost in relation to the amount
included in ComEd's base rates). Operating revenues are affected by
kilowatthour sales, rates and fuel adjustment clause recoveries. Kilowatthour
sales, in turn, are affected by weather, the level of economic activity within
ComEd's service area, and off-system or wholesale sales to other utilities.
Off-system sales opportunities are affected by a number of factors, including
nuclear generating availability and performance.
11
<PAGE>
During 1996, electric operating revenues increased $25 million principally
reflecting increased sales for resale and increased energy cost recoveries
under ComEd's fuel adjustment clause, although kilowatthour sales to ultimate
consumers were down 1.1% from the prior year due to the cooler summer weather
compared to the exceptionally hot summer in 1995. Operating revenues increased
$632 million in 1995, as compared to 1994, primarily due to an increase of
4.6% in kilowatthour sales to ultimate consumers attributable to the hot
summer weather as well as a rate increase that became effective in January
1995. Operating revenues increased $1,017 million in 1994, as compared to
1993, principally reflecting the favorable comparison to the prior year in
which the refunds associated with the Rate Matters Settlement and the Fuel
Matters Settlement were deducted from revenues, but also reflecting a 2.8%
increase in kilowatthour sales to ultimate consumers as a result of warmer
summer weather, colder winter weather and improved economic activity within
ComEd's service territory. The 1994 revenues were also affected by a decline
in the amount of energy costs recovered under the fuel adjustment clause.
Kilowatthour sales including sales for resale decreased 0.1% in 1996,
increased 7.3% in 1995 and decreased 3.0% in 1994.
Fuel Costs. Changes in fuel expense for 1996, 1995 and 1994 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 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>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Cost of fuel consumed (per million Btu):
Nuclear........................................... $0.53 $0.52 $0.53
Coal.............................................. $2.41 $2.43 $2.31
Oil............................................... $3.41 $3.06 $2.89
Natural gas....................................... $2.75 $1.85 $2.27
Average all fuels................................. $1.17 $1.05 $1.08
Net generation of electric energy (millions of
kilowatthours).................................... 93,048 96,608 90,243
Fuel sources of kilowatthour generation:
Nuclear........................................... 67% 73% 71%
Coal.............................................. 30 24 25
Oil............................................... 1 -- 1
Natural gas....................................... 2 3 3
------ ------ ------
100% 100% 100%
====== ====== ======
</TABLE>
The decrease in nuclear generation as a percentage of total generation for
1996 compared to the prior years is primarily due to scheduled and non-
scheduled outages at certain of ComEd's nuclear generating stations.
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
uranium enrichment facilities owned and 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) to 2007. 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 as a result of its 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 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, 1996, ComEd had unrecovered fuel costs in the form of coal
reserves of
12
<PAGE>
approximately $364 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 and 21 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>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Kilowatthours (millions)................................ 6,129 2,475 2,071
Cost per kilowatthour................................... 2.37c 2.60c 2.86c
</TABLE>
Deferred Under or Overrecovered Energy Costs--Net. Operating expenses for
the years 1996, 1995 and 1994 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. Operation and maintenance expenses
include the expenses associated with operating and maintaining ComEd's
generation, transmission and distribution assets as well as administrative
overhead and support. Given the variety of expense categories covered, there
are a number of factors which affect the level of such expenses within any
given year. Two major components of such expenses, however, are the costs
associated with operating and maintaining ComEd's fossil and nuclear
generating facilities. Generating station expenses are affected by the cost of
materials, regulatory requirements and expectations, the age of facilities as
well as cost control efforts.
During the three years presented in the financial statements, the aggregate
level of operation and maintenance expenses decreased 1% in 1996 and increased
4% during 1995 and 2% during 1994. All three years include increases in the
level of generating station expenses, as discussed below. The year to year
variations reflect, in substantial part, the impact in 1995 of an early
separation program offered to ComEd's employees, which resulted in a $97
million charge related to the offered incentives. Additional factors in each
year also affected the level of operation and maintenance expenses.
Operation and maintenance expenses associated with generating stations have
increased during the three year period as a result of activities associated
with the repair, replacement and improvement of generating facility equipment.
During 1996, 1995 and 1994, operation and maintenance expenses associated with
fossil generating stations increased $4 million, $3 million and $4 million,
respectively. In the same years, operation and maintenance expenses associated
with nuclear generating stations increased $88 million, $32 million and $9
million, respectively. During 1994, the increases were attributable to
scheduled maintenance and unplanned equipment repairs. In 1995, ComEd
increased the number and scope of maintenance activities associated with
generating stations. Such efforts are the result of station performance
evaluations performed to identify the sources and causes of unplanned
equipment repairs. The goal of such efforts is to design and implement cost
effective repairs and improvements to improve station availability. The
efforts begun in 1995 continued into 1996 and are expected to continue through
1998.
The increase in operation and maintenance expenses associated with nuclear
generating stations has been driven by ComEd's objective to improve station
availability as well as to meet regulatory requirements and expectations.
ComEd is actively embarked upon a program to improve the quality of
13
<PAGE>
nuclear operations, including safety and efficiency, which is also expected to
achieve a longer term goal of improved availability and to be positioned to
take advantage of opportunities in the wholesale market for revenue
generation. During the three years presented in the financial statements,
ComEd has increased and reinforced station management with managers drawn from
other utilities having experience with similar operating issues. It has also
sought to identify, anticipate and address nuclear station operating and
performance issues in a safe, cost-effective manner while seeking to improve
the availability and capacity factors of its nuclear generating units. Such
activities have included improvements in operating and personnel procedures
and repair and replacement of equipment, and can result in longer unit
outages. Such activities have involved increased maintenance and repair
expenses in recent years. ComEd expects 1997 overall operation and maintenance
expenses to increase by approximately $150 million over 1996 expenses.
Approximately $100 million of this increase is related to nuclear operations
and is intended to address previously identified operational issues (including
issues identified by the NRC in connection with its determination regarding
the plants to be monitored closely) and to achieve a longer term benefit of
improved capacity factors. ComEd expects this increased level of expenses to
continue through 1998.
Operation and maintenance expenses associated with transmission and
distribution facilities increased $11 million in 1996 and decreased $3 million
and $18 million in 1995 and 1994, respectively. The 1996 increase reflects
higher maintenance expenses. The decreases in 1995 and 1994 reflect cost
control efforts. Costs of customer-related activities, including customer
assistance, energy sales services and uncollectible accounts, increased $17
million and $10 million in 1996 and 1995, respectively.
Operation and maintenance expenses also include compensation and benefits
expenses. During the period from 1995 to 1996, ComEd undertook to reduce the
size of its workforce by offering incentives for employees to leave
voluntarily. Such incentives included both current payments and earlier
eligibility for post-retirement health care benefits, and resulted in 1995
provisions of $72 million for the payments and $25 million for the benefits
incentives and 1996 provisions of $8 million for payments and $4 million for
benefits incentives. ComEd also offered an early retirement program during
1994, which increased pension expense by approximately $34 million in that
year. During 1995 and 1996, charges related to post-retirement health care
benefits (after excluding the effects of the separation program) decreased $40
million and $12 million, respectively, primarily as a result of a plan
amendment effected in mid-1995 which required retired employee contributions
to the plan for the first time. Favorable experience also allowed the use of
lower health care cost trend rates, producing a lower charge for 1995 and
1996. During 1996, ComEd also recorded a reduction of $12 million in the
provisions for pension costs in 1996 as compared to 1995. Finally, operation
and maintenance expenses reflect $38 million, $65 million and $50 million for
employee incentive compensation plan costs in 1996, 1995 and 1994,
respectively. The payments, which were made partly in cash and partly in
shares of Unicom common stock, were made under Unicom's Long-Term Incentive
Plan as the result of the achievement during the indicated years of specified
financial performance, cost containment and operating performance goals.
Operation and maintenance expenses in 1996, 1995 and 1994 include
approximately $19 million, $16 million and $20 million, respectively, for wage
increases. The effects of inflation have also increased operation and
maintenance expenses during the years and are also reflected in the increases
and decreases discussed herein.
Operation and maintenance expenses associated with certain administrative
and general costs decreased $11 million in 1995 and increased $12 million in
1994. The decrease in 1995 was due to a variety of reasons including a
decrease in expenses related to insurance, injuries and damages and the
provision for vacation pay liability. The increase in 1994 was primarily due
to increased provisions for injuries and damages and obsolete materials.
Depreciation. Depreciation expense increased in 1996, 1995 and 1994 as a
result of additions to plant in service and an increase in the nuclear
depreciation rate for 1996. In September 1996, the ICC
14
<PAGE>
approved ComEd's additional depreciative initiative for 1996, which increased
depreciation expense by $30 million in 1996. ComEd also continues to consider
the possibility of additional depreciation options. See "Depreciation and
Decommissioning" in Note 1 of Notes to Financial Statements and Note 2 of
Notes to Financial Statements for additional information.
Interest on Debt. Changes in interest on long-term debt and notes payable
for the years 1996, 1995 and 1994 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, the
retirement and early redemption 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>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Long-term debt outstanding:
Average amount (millions).......................... $6,644 $7,528 $7,934
Average interest rate.............................. 7.67% 7.78% 7.83%
Notes payable outstanding:
Average amount (millions).......................... $ 230 $ 51 $ 9
Average interest rate.............................. 5.79% 6.40% 6.48%
</TABLE>
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 is reviewing the
accounting for nuclear decommissioning costs and issued an exposure draft in
February 1996 requesting written comment. If current electric utility industry
accounting practices for such decommissioning costs are changed, annual
provisions for decommissioning could increase and the estimated cost for
decommissioning could be recorded as a liability rather than as accumulated
depreciation. ComEd does not believe that such changes, if required, would
have an adverse effect on the results of operations due to its ability to
recover decommissioning costs through rates.
Investments in Uranium-Related Properties. In 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 $34 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 capitalization
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 1996, 1995 and 1994
were 2.90, 2.79 and 1.99, respectively. The ratios of earnings to fixed
charges and preferred and preference stock dividend requirements for the years
1996, 1995 and 1994 were 2.48, 2.39 and 1.73, 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.
15
<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, 1996 and 1995, and
the related statements of consolidated income, retained earnings, and cash
flows for each of the three years in the period ended December 31, 1996. 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 ofDecember 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Chicago, Illinois
January 31, 1997
16
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME
The following Statements of Consolidated Income for the years 1996, 1995 and
1994 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, competition, taxes, environmental control, energy use, fuel supply,
cost of labor, fuel, purchased power and other matters, the nature and effect
of which cannot now be determined.
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
(THOUSANDS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Electric Operating Revenue................ $6,934,547 $6,909,786 $6,277,521
---------- ---------- ----------
Electric Operating Expenses and Taxes:
Fuel..................................... $1,167,039 $1,089,841 $1,049,853
Purchased power.......................... 145,299 64,378 59,123
Deferred (under)/overrecovered energy
costs--net.............................. (9,184) (2,732) 1,940
Operation................................ 1,496,175 1,597,964 1,525,258
Maintenance.............................. 652,495 566,749 561,320
Depreciation............................. 951,863 897,305 887,432
Recovery of regulatory assets............ 15,272 15,272 15,453
Taxes (except income).................... 782,668 832,026 787,796
Income taxes--
Current--Federal....................... 265,325 257,083 158,301
--State................................ 74,192 87,138 1,913
Deferred--Federal--net................. 140,122 172,403 104,290
--State--net........................... 16,141 15,605 65,017
Investment tax credits deferred--net..... (33,378) (28,710) (28,757)
---------- ---------- ----------
$5,664,029 $5,564,322 $5,188,939
---------- ---------- ----------
Electric Operating Income................. $1,270,518 $1,345,464 $1,088,582
---------- ---------- ----------
Other Income and (Deductions):
Interest on long-term debt............... $ (509,898) $ (585,806) $ (621,225)
Interest on notes payable................ (13,308) (3,280) (557)
Allowance for funds used during
construction--
Borrowed funds......................... 19,426 11,137 18,912
Equity funds........................... 20,776 13,129 22,628
Income taxes applicable to nonoperating
activities.............................. 7,812 5,085 27,074
Interest and other costs for 1993
Settlements............................. -- (61) (21,464)
Provision for dividends on company-
obligated mandatorily redeemable
preferred securities of subsidiary
trust................................... (16,960) (4,428) --
Miscellaneous--net....................... (34,998) (44,064) (90,004)
---------- ---------- ----------
$ (527,150) $ (608,288) $ (664,636)
---------- ---------- ----------
Net Income Before Extraordinary Item...... $ 743,368 $ 737,176 $ 423,946
Extraordinary Loss Related to Early
Redemption of Long-Term Debt, Less
Applicable Income Taxes.................. -- (20,022) --
---------- ---------- ----------
Net Income................................ $ 743,368 $ 717,154 $ 423,946
Provision for Dividends on Preferred and
Preference Stocks........................ 64,424 69,961 64,927
---------- ---------- ----------
Net Income on Common Stock................ $ 678,944 $ 647,193 $ 359,019
========== ========== ==========
Average Number of Common Shares
Outstanding.............................. 214,205 214,193 214,008
Earnings Per Common Share Before
Extraordinary Item ...................... $ 3.17 $ 3.11 $ 1.68
Extraordinary Loss Related to Early
Redemption of Long-Term Debt, Less
Applicable Income Taxes.................. -- (0.09) --
---------- ---------- ----------
Earnings Per Common Share................. $ 3.17 $ 3.02 $ 1.68
========== ========== ==========
</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
------------------------
ASSETS 1996 1995
------ ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Utility Plant:
Plant and equipment, at original cost (includes
construction work in progress of $1,034 million
and $1,105 million, respectively)................. $27,900,632 $27,052,778
Less--Accumulated provision for depreciation....... 11,479,991 10,565,093
----------- -----------
$16,420,641 $16,487,685
Nuclear fuel, at amortized cost.................... 805,623 734,667
----------- -----------
$17,226,264 $17,222,352
----------- -----------
Investments:
Nuclear decommissioning funds...................... $ 1,456,360 $ 1,237,527
Subsidiary companies............................... 118,188 113,657
Other investments, at cost......................... 14,903 20,478
----------- -----------
$ 1,589,451 $ 1,371,662
----------- -----------
Current Assets:
Cash............................................... $ 89 $ 972
Temporary cash investments......................... 28,801 14,138
Special deposits................................... 1,610 3,546
Receivables--
Customers........................................ 568,155 579,861
Taxes............................................ -- 75,536
Other............................................ 103,243 82,824
Provisions for uncollectible accounts............ (12,893) (11,828)
Coal and fuel oil, at average cost................. 140,362 129,176
Materials and supplies, at average cost............ 324,485 333,539
Deferred unrecovered energy costs.................. 104,651 46,028
Deferred income taxes related to current assets and
liabilities....................................... 119,917 107,931
Prepayments and other.............................. 35,315 44,661
----------- -----------
$ 1,413,735 $ 1,406,384
----------- -----------
Deferred Charges and Other Noncurrent Assets:
Regulatory assets.................................. $ 2,434,807 $ 2,467,386
Unrecovered energy costs........................... 444,009 588,152
Other.............................................. 108,834 63,124
----------- -----------
$ 2,987,650 $ 3,118,662
----------- -----------
$23,217,100 $23,119,060
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
18
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
CAPITALIZATION AND LIABILITIES 1996 1995
------------------------------ ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Capitalization (see accompanying statements):
Common stock equity.................................. $ 6,043,093 $ 5,706,130
Preferred and preference stocks without mandatory
redemption requirements............................. 507,342 508,034
Preference stock subject to mandatory redemption re-
quirements.......................................... 217,901 261,475
Company-obligated mandatorily redeemable preferred
securities of subsidiary trust*..................... 200,000 200,000
Long-term debt....................................... 5,957,604 6,488,434
----------- -----------
$12,925,940 $13,164,073
----------- -----------
Current Liabilities:
Notes payable--
Commercial paper.................................... $ 121,000 $ 261,000
Bank loans.......................................... 7,750 7,150
Current portion of long-term debt, redeemable prefer-
ence stock and capitalized lease obligations........ 743,528 433,299
Accounts payable..................................... 478,876 614,283
Accrued interest..................................... 166,862 170,284
Accrued taxes........................................ 182,366 215,965
Dividends payable.................................... 101,216 102,192
Customer deposits.................................... 51,585 44,521
Other................................................ 98,444 93,841
----------- -----------
$ 1,951,627 $ 1,942,535
----------- -----------
Deferred Credits and Other Noncurrent Liabilities:
Deferred income taxes................................ $ 4,568,832 $ 4,506,704
Accumulated deferred investment tax credits.......... 655,662 689,041
Accrued spent nuclear fuel disposal fee and related
interest............................................ 657,449 624,191
Obligations under capital leases..................... 474,841 373,697
Regulatory liabilities............................... 668,301 601,002
Other................................................ 1,314,448 1,217,817
----------- -----------
$ 8,339,533 $ 8,012,452
----------- -----------
Commitments and Contingent Liabilities (Note 21)
$23,217,100 $23,119,060
=========== ===========
</TABLE>
*As described in Note 8 of Notes to Financial Statements, the sole asset of
ComEd Financing I, a subsidiary trust of ComEd, is $206.2 million principal
amount of ComEd's 8.48% subordinated deferrable interest notes due September
30, 2035.
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 CAPITALIZATION
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1996 1995
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Common Stock Equity:
Common stock, $12.50 par value per share--
Outstanding--214,218,454 shares and
214,194,950 shares, respectively......... $ 2,677,731 $ 2,677,437
Premium on common stock and other paid-in
capital................................... 2,223,396 2,223,004
Capital stock and warrant expense.......... (15,990) (16,159)
Retained earnings.......................... 1,157,956 821,848
----------- -----------
$ 6,043,093 $ 5,706,130
----------- -----------
Preferred and Preference Stocks Without
Mandatory Redemption Requirements:
Preference stock, cumulative, without par
value--
Outstanding--13,499,549 shares............ $ 504,957 $ 504,957
$1.425 convertible preferred stock,
cumulative, without par value--
Outstanding--75,003 shares and 96,753
shares, respectively..................... 2,385 3,077
Prior preferred stock, cumulative, $100 par
value per share--
No shares outstanding..................... -- --
----------- -----------
$ 507,342 $ 508,034
----------- -----------
Preference Stock Subject to Mandatory Redemption
Requirements:
Preference stock, cumulative, without par
value--
Outstanding--2,496,775 shares and
2,934,990 shares, respectively........... $ 248,589 $ 292,163
Current redemption requirements for
preference stock included in current
liabilities............................... (30,688) (30,688)
----------- -----------
$ 217,901 $ 261,475
----------- -----------
Company-Obligated Mandatorily Redeemable
Preferred Securities of Subsidiary Trust:
Outstanding--8,000,000..................... $ 200,000 $ 200,000
----------- -----------
Long-Term Debt:
First mortgage bonds:
Maturing 1996 through 2001--5 1/4% to 9
3/8%.................................... $ 1,120,000 $ 1,270,000
Maturing 2002 through 2011--4.20% to 8
3/8%.................................... 1,640,400 1,465,400
Maturing 2012 through 2021--5.85% to 9
7/8%.................................... 1,391,000 1,391,000
Maturing 2022 through 2023--7 3/4% to 8
5/8%.................................... 1,160,000 1,160,000
----------- -----------
$ 5,311,400 $ 5,286,400
Sinking fund debentures, due 1999 through
2011--2 3/4% to 7 5/8%.................... 105,164 110,505
Pollution control obligations, due 2004
through 2014--4.10% to 6 7/8%............. 142,200 317,200
Other long-term debt....................... 986,932 1,064,318
Current maturities of long-term debt
included in current liabilities........... (538,534) (234,893)
Unamortized net debt discount and premium.. (49,558) (55,096)
----------- -----------
$ 5,957,604 $ 6,488,434
----------- -----------
$12,925,940 $13,164,073
=========== ===========
</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 RETAINED EARNINGS
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Balance at Beginning of Year.................... $ 821,848 $ 517,335 $549,152
Add--Net income................................. 743,368 717,154 423,946
---------- ---------- --------
$1,565,216 $1,234,489 $973,098
---------- ---------- --------
Deduct--
Dividends declared on--
Common stock................................ $ 342,732 $ 342,710 $390,281
Preferred and preference stocks............. 64,096 66,855 65,381
Other capital stock transactions--net......... 432 3,076 101
---------- ---------- --------
$ 407,260 $ 412,641 $455,763
---------- ---------- --------
Balance at End of Year.......................... $1,157,956 $ 821,848 $517,335
========== ========== ========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
21
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Cash Flow From Operating Activities:
Net income............................. $ 743,368 $ 717,154 $ 423,946
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization........ 988,944 948,683 929,325
Deferred income taxes and investment
tax credits--net.................... 124,857 158,296 127,186
Extraordinary loss related to early
redemption of long-term debt........ -- 33,158 --
Equity component of allowance for
funds used during construction...... (20,776) (13,129) (22,628)
Provisions for revenue refunds and
related interest.................... -- -- 37,548
Revenue refunds and related interest. -- 15,135 (1,221,650)
Recovery of regulatory assets........ 15,272 15,272 15,453
Provisions/(payments) for liability
for early retirement and separation
costs--net.......................... (29,888) 60,713 33,580
Net effect on cash flows of changes
in:
Receivables........................ 67,888 (169,211) 114,935
Coal and fuel oil.................. (11,186) (20,304) 2,880
Materials and supplies............. 9,053 51,073 18,102
Accounts payable excluding nuclear
fuel lease principal payments and
early retirement and separation
costs--net........................ 110,437 465,475 118,190
Accrued interest and taxes......... (37,021) (5,765) 72,827
Other changes in certain current
assets and liabilities............ 13,765 26,555 (52,862)
Other--net........................... 105,543 145,591 123,915
----------- ----------- -----------
$ 2,080,256 $ 2,428,696 $ 720,747
----------- ----------- -----------
Cash Flow From Investing Activities:
Construction expenditures.............. $ (949,871) $ (899,366) $ (720,602)
Nuclear fuel expenditures.............. (281,833) (289,118) (257,264)
Equity component of allowance for
funds used during construction........ 20,776 13,129 22,628
Contributions to nuclear
decommissioning funds................. (119,281) (132,653) (132,550)
Other investments and special depos-
its................................... (52) 19,599 622,264
----------- ----------- -----------
$(1,330,261) $(1,288,409) $ (465,524)
----------- ----------- -----------
Cash Flow From Financing Activities:
Issuance of securities--
Long-term debt....................... $ 198,902 $ -- $ 546,289
Preferred securities of subsidiary
trust............................... -- 200,000 --
Capital stock........................ 669 112 83,904
Retirement and redemption of securi-
ties--
Long-term debt....................... (431,985) (1,137,272) (703,930)
Capital stock........................ (44,513) (17,935) (23,643)
Deposits and securities held for re-
tirement and redemption of securi-
ties.................................. -- 106 3,191
Premium paid on early redemption of
long-term debt........................ -- (25,823) (4,564)
Cash dividends paid on capital stock... (424,764) (414,385) (446,342)
Proceeds from sale/leaseback of nu-
clear fuel............................ 316,617 193,215 306,649
Nuclear fuel lease principal payments.. (211,741) (237,845) (209,689)
Increase (Decrease) in short-term
borrowings............................ (139,400) 261,000 1,200
----------- ----------- -----------
$ (736,215) $(1,178,827) $ (446,935)
----------- ----------- -----------
Increase (Decrease) in Cash and Tempo-
rary Cash Investments.................. $ 13,780 $ (38,540) $ (191,712)
Cash and Temporary Cash Investments at
Beginning of Year...................... 15,110 53,650 245,362
----------- ----------- -----------
Cash and Temporary Cash Investments at
End of Year............................ $ 28,890 $ 15,110 $ 53,650
=========== =========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
22
<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 holding company of ComEd and Unicom Enterprises in a corporate
restructuring.
Principles of Consolidation. The consolidated financial statements include
the accounts of ComEd, the Indiana Company and ComEd Financing I. 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.
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Regulation. ComEd is subject to regulation as to accounting 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 in accordance with SFAS No. 71,
Accounting for the Effects of Certain Types of Regulation. 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.
Regulatory Assets and Liabilities. Regulatory assets are incurred costs
which have been deferred and are amortized for ratemaking and accounting
purposes. Regulatory liabilities represent amounts to be settled with
customers through future rates. Regulatory assets and liabilities reflected on
the Consolidated Balance Sheets at December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1996 1995
---------- ----------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Regulatory assets:
Deferred income taxes (1)............................... $1,649,037 $1,689,832
Deferred carrying charges (2)........................... 396,879 409,923
Nuclear decommissioning costs--Dresden Unit 1 (3)....... 174,621 138,058
Unamortized loss on reacquired debt (4)................. 148,380 160,440
Other................................................... 65,890 69,133
---------- ----------
$2,434,807 $2,467,386
========== ==========
Regulatory liabilities:
Deferred income taxes (1)............................... $ 668,301 $ 601,002
========== ==========
</TABLE>
- --------
(1) Recorded in compliance with SFAS No. 109.
(2) Recorded as authorized in the Remand Order. The amortization period is
over the remaining lives of the Units.
(3) Amortized over the remaining life of Dresden station. See "Depreciation
and Decommissioning" below for additional information.
(4) Amortized over the remaining lives of the long-term debt issued to finance
the reacquisition. See "Loss on Reacquired Debt" below for additional
information.
See "Deferred Unrecovered Energy Costs" below regarding the fuel adjustment
clause, the DOE assessment and coal reserves.
If a portion of ComEd's operations was no longer subject to the provisions
of SFAS No. 71 as a result of a change in regulation or the effects of
competition, ComEd would be required to write off the
23
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
related regulatory assets and liabilities. In addition, ComEd would be
required to determine any impairment to other assets and purchase contracts
and write down such assets or contracts to their fair value.
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, which was adopted on January 1, 1996,
established accounting standards for the impairment of long-lived assets. The
SFAS also requires that regulatory assets which are no longer probable of
recovery through future revenue be charged to earnings. SFAS No. 121 did not
have an impact on ComEd's financial position or results of operations upon
adoption.
Deferred Unrecovered Energy Costs. The 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 uranium
enrichment facilities owned and previously operated by the DOE. As of December
31, 1996 and 1995, an asset related to the assessments of approximately $168
million and $179 million, respectively, was recorded, of which the current
portion of approximately $16 million and $15 million, respectively, was
included in current assets on the Consolidated Balance Sheets. As of December
31, 1996 and 1995, a corresponding liability of approximately $157 million and
$167 million, respectively, was recorded, of which approximately $16 million
and $15 million, respectively, was recorded in other current liabilities.
At December 31, 1996 and 1995, ComEd had unrecovered fuel costs in the form
of coal reserves of approximately $364 million and $448 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 coal is used for the generation of
electricity; however, ComEd is not earning a return on the expenditures for
coal reserves. Such fuel costs expected to be recovered within one year
amounting to approximately $73 million and $24 million at December 31, 1996
and 1995, respectively, have been included on the Consolidated Balance Sheets
in current assets as deferred unrecovered energy costs. ComEd expects to fully
recover the costs of the coal reserves by the year 2000. See Note 21 for
additional information concerning ComEd's coal commitments.
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, industrial and wholesale customers.
ComEd's electric service territory has an area of approximately 11,300 square
miles and an estimated population of approximately eight million as of
December 31, 1996 and 1995. It includes the city of Chicago, an area of about
225 square miles with an estimated population of approximately three million
from which ComEd derived approximately one-third of its ultimate consumer
revenues in 1996. ComEd had approximately 3.4 million electric customers at
December 31, 1996.
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. Non-nuclear plant and equipment is
depreciated at annual rates developed for each class of plant based on their
composite service lives. Provisions for depreciation were at average annual
rates of 3.25%,
24
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
3.14% and 3.13% of average depreciable utility plant and equipment for the
years 1996, 1995 and 1994, respectively. The annual rate for nuclear plant and
equipment is 3.09% for 1996, which includes increased depreciation charges on
ComEd's nuclear generating units, approved by the ICC in September 1996, and
excludes separately collected decommissioning costs, and 2.88% for 1995 and
1994, which excludes separately collected decommissioning costs. See Note 2
for additional information concerning the ICC's approval of ComEd's request to
increase depreciation charges on nuclear generating units in 1996.
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 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 NRC
guidelines. ComEd's twelve operating units have estimated remaining service
lives ranging from 9 to 31 years. ComEd's first nuclear unit, Dresden Unit 1,
is retired and is expected to be dismantled upon the retirement of the last
unit 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, are estimated to aggregate $3.9
billion in current-year (1997) dollars excluding a contingency allowance.
ComEd estimates that it will expend approximately $15.5 billion, excluding any
contingency allowance, for decommissioning costs primarily during the period
from 2007 through 2032. Such costs are expected to be funded by the external
decommissioning trusts 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 as well as changes in the assumptions used in
making such estimates, including changes in technology, available alternatives
for the disposal of nuclear waste, and inflation.
Pursuant to the Rate Order, beginning in 1995, ComEd collects
decommissioning costs from its ratepayers under a rider which allows annual
adjustments to decommissioning cost collections outside the context of a
traditional rate proceeding. The current estimated decommissioning costs
allowed under the rider exclude a contingency allowance. Contingency
allowances used in decommissioning cost estimates provide for currently
unspecifiable costs that are likely to occur after decommissioning begins and
generally range from 20% to 25% of the currently specifiable costs. Under its
most recent annual rider, filed with the ICC on February 28, 1996, ComEd has
decreased its estimated annual decommissioning cost accrual from $113.5
million to $108.8 million, primarily reflecting stronger than expected after-
tax returns on the external trust funds in 1995. The ICC issued an order
approving the rider filing on April 24, 1996.
As a result of the ICC approval of the rider filing, beginning April 30,
1996, the effective date of the order, ComEd began accruing and collecting
$108.8 million annually for decommissioning costs. The assumptions used to
calculate the $108.8 million decommissioning cost accrual include: the
decommissioning cost estimate of $3.9 billion in current-year (1997) 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 5.5%. The annual accrual of $108.8 million
25
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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 $15.5 billion. The annual accrual and collection amounts will be
reviewed again during the first quarter of 1997.
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, 1996, the total decommissioning costs
included in the accumulated provision for depreciation were $1,522 million.
For ComEd's retired nuclear unit, Dresden Unit 1, the total estimated
liability at December 31, 1996 in current-year (1997) dollars of $276 million
was recorded on the Consolidated Balance Sheets as a noncurrent liability and
the unrecovered portion of the liability of approximately $175 million was
recorded as a regulatory asset.
Under Illinois law, decommissioning cost collections are required to be
deposited into external trusts; and, consequently, such collections do not add
to the cash flows available for general corporate purposes. 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, 1996, the past accruals
that are required to be contributed to the external trusts aggregate $169
million. The fair value of funds accumulated in the external trusts at
December 31, 1996 was approximately $1,456 million which includes pre-tax
unrealized appreciation of $230 million. The earnings on the external trusts
accumulate in the fund balance and in the accumulated provision for
depreciation.
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 11 for further
information concerning the disposal of spent nuclear fuel, the one-time fee
and the 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 1996, 1995 and 1994 were $354 million, $391 million and $358
million, respectively.
Income Taxes. ComEd is 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.
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 1996, 1995 and 1994 were
9.02%, 9.52% and 9.85%, respectively. AFUDC does not contribute to the current
cash flow of ComEd.
26
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Interest. Total interest costs incurred on debt, leases and other
obligations for the years 1996, 1995 and 1994 were $620 million, $693 million
and $730 million, 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 in connection with refinancing 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.
Stock Option Awards/Employee Stock Purchase Plan. ComEd has elected to adopt
SFAS No. 123, "Accounting for Stock-Based Compensation", for disclosure
purposes only. ComEd accounts for its stock option awards and its employee
stock purchase plan under APB Opinion No. 25, "Accounting for Stock Issued to
Employees". See Note 5 for additional information.
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 cash flow information for the years 1996, 1995
and 1994 was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Supplemental Cash Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized)........... $533,498 $604,202 $645,424
Income taxes (net of refunds).................. $238,920 $368,842 $ (4,923)
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Capital lease obligations incurred............... $320,975 $198,577 $309,716
</TABLE>
(2) RATE MATTERS
On January 9, 1995, the ICC issued its Rate Order in the proceedings
relating to ComEd's February 1994 rate increase request. The Rate Order
provided, 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 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 additional information related to the
level of decommissioning cost collections. The ICC also 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 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. As of December 31, 1996, electric
operating revenues of approximately $651 million (excluding revenue taxes) are
subject to refund. Intervenors and ComEd have filed appeals of the Rate Order
with the Illinois Appellate Court, and oral argument was heard on January 28,
1997.
27
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
On December 11, 1995, ComEd announced a series of customer initiatives as
part of its larger ongoing effort to address the need to give all customer
classes the opportunity to benefit from increased competition in the electric
utility business, while retaining the benefits (such as reliability) of
current regulation and ensuring utilities' cost recovery for commitments made
under the obligation to serve customers. The initiatives include a five-year
cap on base electric rates at current levels and various customer service and
incentive pricing programs designed to allow customers more choice and control
over the services they seek and the prices they pay. These initiatives are in
addition to previously implemented special discount contract rate programs for
new or existing industrial customers. ComEd anticipates the initiatives will
be fully implemented in 1997 and will reduce its revenues by approximately $40
million annually (including the effects of previously implemented initiatives
and before income tax effects) primarily through changes in energy
utilization. Additionally, in September 1996, the ICC approved ComEd's
additional depreciation initiative for 1996. ComEd's costs increased by $30
million in 1996 (before income tax effects), through the increase in
depreciation charges on its nuclear generating units. ComEd also continues to
consider the possibility of additional depreciation options.
Under ComEd's initiatives, the five-year base rate cap at current levels
became effective in December 1995 and will extend until January 1, 2001. The
rate cap does not affect ComEd's fuel cost or nuclear decommissioning cost
recovery provisions. ComEd's fuel cost variances will continue to be collected
through its fuel adjustment clause, and such collections will continue to be
subject to annual reconciliation proceedings before the ICC. Likewise, nuclear
decommissioning costs will continue to be collected as described in Note 1
under "Depreciation and Decommissioning."
See "Changes in the Electric Utility Industry" under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
information regarding the legislative proposal supported by ComEd.
(3) AUTHORIZED SHARES AND VOTING RIGHTS OF CAPITAL STOCK
At December 31, 1996, the authorized shares of ComEd capital stock were:
common stock--250,000,000 shares; preference stock--22,806,775 shares; $1.425
convertible preferred stock--75,003 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.
(4) COMMON STOCK
At December 31, 1996, shares of common stock were reserved for the following
purposes:
<TABLE>
<S> <C>
Conversion of $1.425 convertible preferred stock.................. 76,503
Conversion of warrants............................................ 26,015
-------
102,518
=======
</TABLE>
Common stock for the years 1996, 1995 and 1994 was issued as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ----- -------
<S> <C> <C> <C>
Employee Stock Purchase Plan......................... -- -- 154,710
Employee Savings and Investment Plan................. -- -- 81,400
Conversion of $1.425 convertible preferred stock..... 22,146 3,630 190,050
Conversion of warrants............................... 1,358 299 13,714
------ ----- -------
23,504 3,929 439,874
====== ===== =======
</TABLE>
28
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
At December 31, 1996 and 1995, 78,045 and 82,742 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.
(5) STOCK OPTION AWARDS/EMPLOYEE STOCK PURCHASE PLAN
Unicom has a nonqualified stock option awards program under its Long-Term
Incentive Plan and an ESPP. The stock option awards program was adopted by
Unicom in July 1996 to reward valued employees responsible for, or
contributing to, the management, growth and profitability of Unicom and its
subsidiaries. As of December 31, 1996, 1,205,500 options have been granted
primarily to employees of ComEd and its subsidiaries. Of this amount, 15,500
options have been canceled and 1,190,000 are outstanding. The weighted average
exercise price for the outstanding stock options is $25.50. The stock options
granted in 1996 will expire ten years from their grant date. One-third of the
shares subject to the options vest on each of the next three anniversaries of
the option grant date. In addition, the stock options will become fully vested
immediately if the holder dies, retires, is terminated other than for cause or
qualifies for long-term disability, and will also vest in full upon a change
in control of Unicom. As of December 31, 1996, 2,000 of the granted stock
options are exercisable and none of the stock options have been exercised.
The estimated fair market value for each of the stock options granted in
1996 was $3.74. The fair value of each stock option granted was estimated as
of the date of grant using the Black-Scholes option-pricing model. Assumptions
used to determine the estimated fair market value of the stock options include
(i) dividend yield of 6.30%, (ii) expected volatility of 20.98%, (iii) risk-
free interest rate of 6.64% and (iv) expected life of 7 years.
The ESPP allows employees to purchase Unicom common stock at a 10% discount
from market value. The stock is purchased in six month intervals, April and
October of each year. Substantially all of the employees of Unicom, ComEd and
certain subsidiaries are eligible to participate in the ESPP. Unicom issued
196,512, 217,080, and 150,495 shares of common stock in 1996, 1995 and 1994,
respectively, under the ESPP at an average annual purchase price of $23.51,
$25.34 and $19.80, respectively. ComEd issued 154,710 shares of common stock
at a purchase price of $21.72 in 1994 under the ESPP.
ComEd has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation". For financial reporting purposes,
ComEd has adopted APB No. 25, "Accounting for Stock Issued to Employees", and
thus no compensation cost has been recognized for the stock option awards
program or ESPP. If ComEd had recorded compensation expense for the stock
options granted and the shares of common stock issued under the ESPP in
accordance with SFAS No. 123 using the fair value based method of accounting,
the resulting effect on net income and earnings per share would have been de
minimis.
29
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(6) PREFERRED AND PREFERENCE STOCKS WITHOUT MANDATORY REDEMPTION REQUIREMENTS
No shares of preferred or preference stocks without mandatory redemption
requirements were issued or redeemed during 1996 or 1995. 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. The series of preference stock without
mandatory redemption requirements outstanding at December 31, 1996 are
summarized as follows:
<TABLE>
<CAPTION>
INVOLUNTARY
SHARES AGGREGATE REDEMPTION LIQUIDATION
SERIES OUTSTANDING STATED VALUE PRICE(1) PRICE(1)
------- ----------- ------------ ---------- -----------
(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>
--------
(1) 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.
(7) PREFERENCE STOCK SUBJECT TO MANDATORY REDEMPTION REQUIREMENTS
During 1996, 1995 and 1994, no 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, 1996
are summarized as follows:
<TABLE>
<CAPTION>
SHARES AGGREGATE
SERIES OUTSTANDING STATED VALUE OPTIONAL REDEMPTION PRICE(1)
- -------------- ----------- ------------ --------------------------------------------------
(THOUSANDS
OF DOLLARS)
<S> <C> <C> <C>
$8.20 214,275 $ 21,428 $103 through October 31, 1997; and $101 thereafter
$8.40 Series B 330,000 32,778 $101
$8.85 262,500 26,250 $103 through July 31, 1998; and $101 thereafter
$9.25 600,000 60,000 $103 through July 31, 1999; and $101 thereafter
$9.00 390,000 38,659 Non-callable
$6.875 700,000 69,474 Non-callable
--------- --------
2,496,775 $248,589
========= ========
</TABLE>
- --------
(1) Per share plus accrued and unpaid dividends, if any.
30
<PAGE>
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
ANNUAL SINKING FUND INVOLUNTARY
SERIES FUND REQUIREMENT PRICE(1) LIQUIDATION PRICE(1)
-------------- ----------------- -------- --------------------
<S> <C> <C> <C>
$8.20 35,715 shares $100 $100.00
$8.40 Series B 30,000 shares(2) $100 $ 99.326
$8.85 37,500 shares $100 $100.00
$9.25 75,000 shares $100 $100.00
$9.00 130,000 shares(2) $100 $ 99.125
$6.875 (3) $100 $ 99.25
</TABLE>
--------
(1) Per share plus accrued and unpaid dividends, if any.
(2) 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.
(3) All shares are required to be redeemed on May 1, 2000.
Annual remaining sinking fund requirements through 2001 on preference stock
outstanding at December 31, 1996 will aggregate $31 million in each of 1997-
99, $88 million in 2000, and $18 million in 2001. During 1996, 1995 and 1994,
438,215 shares, 178,215 shares and 177,085 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.
(8) COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF COMED
FINANCING I
In September 1995, ComEd Financing I (Trust), a wholly-owned subsidiary
trust of ComEd, issued 8,000,000 of its 8.48% company-obligated mandatorily
redeemable preferred securities. The sole asset of the Trust is $206.2 million
principal amount of ComEd's 8.48% subordinated deferrable interest notes due
September 30, 2035. There is a full and unconditional guarantee by ComEd of
the Trust's obligations under the securities issued by the Trust. However,
ComEd's obligations are subordinate and junior in right of payment to certain
other indebtedness of ComEd. ComEd has the right to defer payments of interest
on the subordinated deferrable interest notes by extending the interest
payment period, at any time, for up to 20 consecutive quarters. If interest
payments on the subordinated deferrable interest notes are so deferred,
distributions on the preferred securities will also be deferred. During any
deferral, distributions will continue to accrue with interest thereon. In
addition, during any such deferral, ComEd may not declare or pay any dividend
or other distribution on, or redeem or purchase, any of its capital stock.
The subordinated deferrable interest notes are redeemable by ComEd, in whole
or in part, from time to time, on or after September 30, 2000, or at any time
in the event of certain income tax circumstances. If the subordinated
deferrable interest notes are redeemed, the Trust must redeem preferred
securities having an aggregate liquidation amount equal to the aggregate
principal amount of the subordinated deferrable interest notes so redeemed. In
the event of the dissolution, winding up or termination of the Trust, the
holders of the preferred securities will be entitled to receive, for each
preferred security, a liquidation amount of $25 plus accrued and unpaid
distributions thereon, including interest thereon, to the date of payment,
unless in connection with the dissolution, the subordinated deferrable
interest notes are distributed to the holders of the preferred securities.
(9) LONG-TERM DEBT
Sinking fund requirements and scheduled maturities remaining through 2001
for first mortgage bonds, sinking fund debentures and other long-term debt
outstanding at December 31, 1996, after
31
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
deducting sinking fund debentures reacquired for satisfaction of future
sinking fund requirements, are summarized as follows: 1997--$539 million;
1998--$497 million; 1999--$150 million; 2000-- $462 million; and 2001--$108
million.
At December 31, 1996, outstanding first mortgage bonds maturing through 2001
were as follows:
<TABLE>
<CAPTION>
SERIES PRINCIPAL AMOUNT
------ ----------------------
(THOUSANDS OF DOLLARS)
<S> <C>
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
9 3/8% due February 15, 2000...................... 125,000
6 1/2% due April 15, 2000......................... 230,000
6 3/8% due July 15, 2000.......................... 100,000
7 1/2% due January 1, 2001........................ 100,000
----------
$1,120,000
==========
</TABLE>
Other long-term debt outstanding at December 31, 1996 is summarized as
follows:
<TABLE>
<CAPTION>
PRINCIPAL
DEBT SECURITY AMOUNT INTEREST RATE
- ------------- ---------- ----------------------------------------------
(THOUSANDS
OF
DOLLARS)
<S> <C> <C>
Notes:
Medium Term
Notes, Series 1N
due various dates
through April 1,
1998 $ 35,500 Interest rates ranging from 9.52% to 9.65%
Medium Term
Notes, Series 3N
due various dates
through October
15, 2004 296,000 Interest rates ranging from 9.00% to 9.20%
Medium Term
Notes, Series 4N
due May 15, 1997 20,000 Interest rate of 8.875%
Notes due 150,000 Interest rate of 7.00%
February
15, 1997
Notes due 100,000 Interest rate of 6.50%
July 15, 1997
Notes due 235,000 Interest rate of 6.40%
October 15, 2005
--------
$836,500
--------
Long-Term
Note Payable to
Bank:
Note due $150,000 Prevailing interest rate of 6.08% at December
June 1, 1998 31, 1996
--------
Purchase
Contract
Obligation
due April
30, 2005 $ 432 Interest rate of 3.00%
--------
$986,932
========
</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.
ComEd recorded an extraordinary loss of $33 million in the fourth quarter of
1995 related to the early redemption of $645 million of long-term debt which
reduced net income by $20 million (after reflecting income tax effects of $13
million) or $0.09 per common share.
32
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(10) LINES OF CREDIT
ComEd had total bank lines of credit of $914 million and unused bank lines
of credit of $906 million at December 31, 1996. Of that amount, $906 million
(of which $175 million expires on September 29, 1997, $63 million expires in
equal quarterly installments commencing on March 31, 1997 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 the credit
rating of ComEd's outstanding first mortgage bonds 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 $906 million of such lines of
credit.
(11) 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 DOE advised ComEd in
December 1996 that it anticipates it will be unable to begin acceptance of
spent nuclear fuel by January 1998. It is expected this delivery schedule will
be delayed significantly. 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. As provided for under the contract,
ComEd has elected to pay the one-time fee, with interest, just prior to the
first delivery of spent nuclear fuel to the DOE. The liability for the one-
time fee and the related interest is reflected in the Consolidated Balance
Sheets.
(12) 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 the 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 and based on published market data, as of December 31, 1996 and
1995 was as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------------------- --------------------------------
UNREALIZED UNREALIZED
COST BASIS GAINS FAIR VALUE COST BASIS GAINS FAIR VALUE
---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Short-term investments.. $ 32,778 $ 38 $ 32,816 $ 40,575 $ 283 $ 40,858
U.S. Government and
Agency issues.......... 251,994 6,885 258,879 156,745 17,636 174,381
Municipal bonds......... 331,936 17,985 349,921 496,707 34,970 531,677
Common stock............ 539,392 201,304 740,696 348,866 107,280 456,146
Other................... 69,867 4,181 74,048 29,757 4,708 34,465
---------- -------- ---------- ---------- -------- ----------
$1,225,967 $230,393 $1,456,360 $1,072,650 $164,877 $1,237,527
========== ======== ========== ========== ======== ==========
</TABLE>
33
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
At December 31, 1996, the debt securities held by the nuclear
decommissioning funds had the following maturities:
<TABLE>
<CAPTION>
COST BASIS FAIR VALUE
---------- ----------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Within 1 year....................................... $ 32,778 $ 32,816
1 through 5 years................................... 161,625 164,907
5 through 10 years.................................. 221,264 229,382
Over 10 years....................................... 258,284 271,971
</TABLE>
The net earnings of the nuclear decommissioning funds, which are recorded as
increases to the accumulated provision for depreciation, for the years 1996,
1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ----------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Gross proceeds from sales of securities... $2,335,974 $ 2,598,889 $ 811,368
Less cost based on specific identifica-
tion..................................... (2,300,038) (2,581,714) (811,997)
---------- ----------- ---------
Realized gains (losses) on sales of secu-
rities................................... $ 35,936 $ 17,175 $ (629)
Other realized fund earnings net of ex-
penses................................... 33,008 46,294 38,148
---------- ----------- ---------
Total realized net earnings of the funds.. $ 68,944 $ 63,469 $ 37,519
Unrealized gains (losses)................. 65,516 160,843 (57,948)
---------- ----------- ---------
Total net earnings (losses) of the funds. $ 134,460 $ 224,312 $ (20,429)
========== =========== =========
</TABLE>
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, company-obligated mandatorily redeemable preferred securities of the
Trust and long-term debt were obtained from an independent consultant. The
estimated fair values, which include the current portions of redeemable
preference stock and long-term debt but exclude accrued interest and
dividends, as of December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------------------- --------------------------------
CARRYING UNREALIZED CARRYING UNREALIZED
VALUE LOSSES FAIR VALUE VALUE LOSSES FAIR VALUE
---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Preferred and preference
stocks................. $ 755,931 $ 3,948 $ 759,879 $ 800,197 $ 14,769 $ 814,966
Company-obligated
mandatorily redeemable
preferred securities of
the Trust.............. $ 200,000 $ 1,000 $ 201,000 $ 200,000 $ 6,000 $ 206,000
Long-term debt.......... $6,345,533 $159,818 $6,505,351 $6,572,853 $470,175 $7,043,028
</TABLE>
Long-term notes payable to banks, which are not included in the above table,
amounted to $150 million at December 31, 1996 and 1995. Such notes, for which
interest is paid at prevailing rates, are included in the consolidated
financial statements at cost, which approximates their fair value.
Current Liabilities. The carrying value of notes payable, which consists of
commercial paper and 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.
34
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Other Noncurrent Liabilities. The carrying value of accrued spent nuclear
fuel disposal fee and related interest represents the settlement value as of
December 31, 1996 and 1995; therefore, the carrying value is equal to the fair
value.
(13) 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. During
1995, these plans were amended to more closely base retirement benefits on
final pay. 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,
1996 and 1995.
During 1994, the companies implemented an early retirement program for
employees eligible to retire or who would become eligible to retire after
December 31, 1993 and before April 1, 1995. A total of 679 employees accepted
the program, resulting in the recognition of approximately $34 million of
additional pension cost and an additional increase to the projected benefit
obligation of that $34 million and $41 million of unrecognized net loss. The
charge to income was approximately $20.5 million, after reflecting income tax
effects, as a result of the program.
The funded status of these plans at December 31, 1996 and 1995 was as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1996 1995
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Actuarial present value of accumulated pension plan
benefits:
Vested benefit obligation.......................... $(3,025,000) $(2,904,000)
Nonvested benefit obligation....................... (127,000) (122,000)
----------- -----------
Accumulated benefit obligation..................... $(3,152,000) $(3,026,000)
Effect of projected future compensation levels..... (366,000) (352,000)
----------- -----------
Projected benefit obligation....................... $(3,518,000) $(3,378,000)
Fair value of plan assets, invested primarily in
U.S. Government, government-sponsored corporation
and agency securities, fixed income funds, regis-
tered investment companies, equity index funds and
other equity and fixed income funds................ 3,282,000 3,059,000
----------- -----------
Plan assets less than projected benefit obligation.. $ (236,000) $ (319,000)
Unrecognized prior service cost..................... (69,000) (73,000)
Unrecognized transition asset....................... (130,000) (142,000)
Unrecognized net loss............................... 58,000 189,000
----------- -----------
Accrued pension liability.......................... $ (377,000) $ (345,000)
=========== ===========
</TABLE>
The assumed discount rate was 7.5% at December 31, 1996 and 1995, 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 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Annual discount rate.......................................... 7.50% 8.00% 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................ 9.75% 9.75% 9.50%
</TABLE>
35
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
The components of pension costs, portions of which were recorded as
components of construction costs, for the years 1996, 1995 and 1994 were as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost............................. $ 92,000 $ 87,000 $ 97,000
Interest cost on projected benefit
obligation............................. 246,000 225,000 213,000
Actual return on plan assets............. (421,000) (681,000) 37,000
Early retirement program cost............ -- -- 34,000
Net amortization and deferral............ 115,000 418,000 (302,000)
--------- --------- ---------
$ 32,000 $ 49,000 $ 79,000
========= ========= =========
</TABLE>
In addition, an employee savings and investment plan is available to
eligible employees of ComEd and certain of its and Unicom's subsidiaries.
During the fourth quarter of 1995 (the first quarter of 1996 for bargaining
unit employees of the Indiana Company), the employee savings and investment
plan was amended. Under the plan, as amended, each participating employee may
contribute up to 20% of such employee's base pay and the participating
companies match the first 6% of such contribution equal to 100% of the first
2% of contributed base salary, 70% of the next 3% of contributed base salary
and 25% of the last 1% of contributed base salary. During 1996, 1995 and 1994,
the participating companies' contributions were $30 million, $25 million and
$23 million, respectively.
(14) POSTRETIREMENT BENEFITS
ComEd and the Indiana Company provide certain postretirement health care,
dental care, vision care and life insurance for retirees and their dependents
and for the surviving dependents of eligible employees and retirees. The
employees become eligible for postretirement benefits when they reach age 55
with 10 years of service. The liability for postretirement benefits is funded
through trust funds based upon actuarially determined contributions that take
into account the amount deductible for income tax purposes. The postretirement
health care plan for ComEd and the Indiana Company was amended, effective
April 1, 1995. Prior to that date, the postretirement health care plan was
fully funded by the companies. With respect to employees who retire on or
after April 1, 1995, the plan is contributory, funded jointly by the companies
and the participating employees. Actuarial valuations were determined as of
January 1, 1996 and 1995.
Postretirement health care costs in 1996 and 1995 included $4 million and
$25 million, respectively, related to a voluntary separation offer for union
employees who accepted and left ComEd's employ combined with separation offers
to selected groups of non-union employees.
The funded status of the plan at December 31, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1996 1995
----------- ---------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Actuarial present value of accumulated postretirement
benefit obligation:
Retirees............................................. $ (615,000) $(551,000)
Active fully eligible participants................... (23,000) (21,000)
Other participants................................... (439,000) (418,000)
----------- ---------
Accumulated benefit obligation....................... $(1,077,000) $(990,000)
Fair value of plan assets, invested primarily in S&P
500 common stocks, registered investment companies
and U.S. Government, government agency, municipal and
listed corporate obligations......................... 666,000 602,000
----------- ---------
Plan assets less than accumulated postretirement bene-
fit obligation....................................... $ (411,000) $(388,000)
Unrecognized transition obligation.................... 370,000 392,000
Unrecognized prior service cost....................... 45,000 48,000
Unrecognized net gain................................. (271,000) (267,000)
----------- ---------
Accrued liability for postretirement benefits......... $ (267,000) $(215,000)
=========== =========
</TABLE>
36
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Different health care cost trends are used for pre-Medicare and post-
Medicare expenses. Pre-Medicare trend rates were 9.0% and 9.5%, respectively,
at December 31, 1996 and 1995, grading down in 0.5% annual increments and
leveling off at 5.0%. Post-Medicare trend rates were 7.0% and 7.5%,
respectively, at December 31, 1996 and 1995, grading down in 0.5% annual
increments to 5.0%. The assumed discount rate was 7.5% at December 31, 1996
and 1995. That rate was used to determine the accumulated benefit obligations.
The effect of a 1% increase in the health care cost trend rate for each future
year would increase the accumulated postretirement health care obligations by
approximately $158 million.
The components of postretirement health care costs, portions of which were
recorded as components of construction costs, for the years 1996, 1995 and
1994 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- --------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost.............................. $ 32,000 $ 31,000 $ 47,000
Interest cost on accumulated benefit obli-
gation................................... 73,000 69,000 81,000
Actual loss (return) on plan assets....... (90,000) (137,000) 9,000
Amortization of transition obligation..... 22,000 23,000 29,000
Severance plan cost....................... 4,000 25,000 --
Other..................................... 29,000 83,000 (49,000)
-------- --------- --------
$ 70,000 $ 94,000 $117,000
======== ========= ========
</TABLE>
Postretirement benefit costs were determined under the rules prescribed by
SFAS No. 106, including the use of the projected unit credit actuarial cost
method. The discount rates used were 7.5%, 8.0% and 7.5%, respectively, for
1996, 1995 and 1994 and the estimated long-term rate of return of fund assets,
net of income tax effects, were 9.38%, 9.32% and 9.04%, respectively, for
1996, 1995 and 1994. Pre-Medicare health care cost trend rate was 14% for
1994, grading down in 0.5% annual increments to 5.0%. Post-Medicare health
care cost trend rate was 11.5% for 1994, grading down in 0.5% annual
increments to 5.0%. Pre-Medicare trend rates were 13.5% for the first three
months of 1995 and 10% for the remainder of the year, grading down in 0.5%
annual increments to 5.0%. Post-Medicare trend rates were 11% for the first
three months of 1995 and 8% for the remainder of the year, grading down in
0.5% annual increments to 5.0%. The effect of a 1% increase in the health care
cost trend rate for each future year would increase the aggregate of the
service and interest cost components of postretirement benefit costs by
approximately $21 million for 1996.
(15) SEPARATION PLAN COSTS
Operation and maintenance expenses included $12 million for the year 1996
and $97 million for the year 1995 related to a voluntary separation offer for
union employees who accepted and left ComEd's employ combined with separation
plans offered to selected groups of non-union employees. These employee
separation plans reduced net income by $7 million or $0.03 per common share
for the year 1996 and $59 million or $0.27 per common share for the year 1995.
37
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(16) INCOME TAXES
The components of the net deferred income tax liability at December 31, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1996 1995
---------- ----------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Deferred income tax liabilities:
Accelerated cost recovery and liberalized deprecia-
tion, net of removal costs........................... $3,507,916 $3,379,987
Overheads capitalized................................. 261,437 252,910
Repair allowance...................................... 228,426 219,585
Regulatory assets recoverable through future rates.... 1,649,037 1,689,832
Deferred income tax assets:
Postretirement benefits............................... (269,153) (235,353)
Unbilled revenues..................................... (136,406) (116,274)
Alternative minimum tax............................... (80,159) (145,019)
Unamortized investment tax credits to be settled
through future rates................................. (430,297) (452,210)
Other regulatory liabilities to be settled through fu-
ture rates........................................... (238,004) (148,792)
Other--net............................................ (43,882) (45,893)
---------- ----------
Net deferred income tax liability...................... $4,448,915 $4,398,773
========== ==========
</TABLE>
The $50 million increase in the net deferred income tax liability from
December 31, 1995 to December 31, 1996 is comprised of $158 million increase
of deferred income tax expense and a $108 million decrease in regulatory
assets net of regulatory liabilities pertaining to income taxes for the year.
The amount of regulatory assets included in deferred income tax liabilities
primarily relates to the equity component of AFUDC which is 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. The amount of other regulatory
liabilities included in deferred income tax assets primarily relates to
deferred income taxes provided at rates in excess of the current statutory
rate.
The effects of an income tax refund related to prior years were recorded in
1996, resulting in an increase to net income of $26 million or $0.12 per
common share.
The components of net income tax expense charged to continuing operations
for the years 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Electric operating income:
Current income taxes........................... $339,517 $344,221 $160,214
Deferred income taxes.......................... 156,263 188,008 169,307
Investment tax credits deferred--net........... (33,378) (28,710) (28,757)
Other (income) and deductions................... (7,385) (7,685) (23,062)
-------- -------- --------
Net income taxes charged to continuing opera-
tions.......................................... $455,017 $495,834 $277,702
======== ======== ========
</TABLE>
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 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- --------
<S> <C> <C> <C>
Pre-tax book income (thousands)............... $1,198,385 $1,233,010 $701,648
Effective income tax rate..................... 38.0% 40.2% 39.6%
</TABLE>
38
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Federal income taxes computed at statutory rate.. $419,435 $431,554 $245,577
Equity component of AFUDC which was excluded from
taxable income.................................. (7,272) (4,595) (7,920)
Amortization of investment tax credits........... (33,378) (28,710) (28,810)
State income taxes, net of federal income taxes.. 58,381 65,972 40,140
Differences between book and tax accounting, pri-
marily property-related deductions.............. 14,150 27,534 26,505
Other--net....................................... 3,701 4,079 2,210
-------- -------- --------
Net income taxes charged to continuing opera-
tions........................................... $455,017 $495,834 $277,702
======== ======== ========
</TABLE>
Current federal income tax liabilities which were recorded prior to 1995
included 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 were carried forward and portions were applied as
credits against the post-1994 regular federal income tax liabilities. The
remaining excess amounts of AMT can be carried forward indefinitely as credits
against future years' regular federal income tax liabilities.
(17) TAXES, EXCEPT INCOME TAXES
Provisions for taxes, except income taxes, for the years 1996, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Illinois public utility revenue............... $227,062 $229,546 $211,263
Illinois invested capital..................... 104,663 106,830 109,373
Municipal utility gross receipts.............. 168,715 167,758 145,011
Real estate................................... 129,985 175,747 180,221
Municipal compensation........................ 78,544 78,602 72,647
Other--net.................................... 73,699 73,543 69,281
-------- -------- --------
$782,668 $832,026 $787,796
======== ======== ========
</TABLE>
The reduction in ComEd's real estate taxes in 1996 results primarily from
ongoing challenges by ComEd of the methodology used by local taxing
authorities to assess the value of ComEd's nuclear generating stations.
Approximately half of the 1996 reduction in ComEd's real estate taxes is
related to the year 1995.
(18) LEASE OBLIGATIONS
Under its nuclear fuel lease 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. With respect
to the commercial paper/bank borrowing portion, $100 million will expire on
November 23, 1998 and $200 million will expire on November 23, 1999. With
respect to the intermediate term notes, a portion expires in November 1997,
and each November thereafter, through November 2001 and in November 2003. At
December 31, 1996, ComEd's obligation to the lessor for leased nuclear fuel
amounted to approximately $687 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.
39
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Future minimum rental payments, net of executory costs, at December 31, 1996
for capital leases are estimated to aggregate $776 million, including $241
million in 1997, $195 million in 1998, $150 million in 1999, $91 million in
2000, $45 million in 2001 and $54 million in 2002-2005. The estimated interest
component of such rental payments aggregates $93 million. The estimated
portions of obligations due within one year under capital leases of
approximately $174 million and $168 million at December 31, 1996 and 1995,
respectively, are included in current liabilities.
Future minimum rental payments at December 31, 1996 for operating leases are
estimated to aggregate $138 million, including $11 million in 1997, $11
million in 1998, $10 million in 1999, $9 million in 2000, $8 million in 2001
and $89 million in 2002-2024.
(19) 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, 1996, for its share of ownership
in the station, ComEd had an investment of $641 million in production and
transmission plant in service (before reduction of $197 million for the
related accumulated provision for depreciation) and $21 million in
construction work in progress.
(20) INVESTMENTS IN URANIUM-RELATED PROPERTIES
In 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 $34
million or $0.16 per common share.
(21) COMMITMENTS AND CONTINGENT LIABILITIES
Purchase commitments, principally related to construction and nuclear fuel,
approximated $1,018 million at December 31, 1996. In addition, ComEd has
substantial commitments for the purchase of coal. 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 provide for the purchase of
certain coal at prices substantially above currently prevailing market prices.
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 $53 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
40
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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 $21 million and $73
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 $36 million in the event losses exceed
accumulated reserve funds.
During 1989 and 1991, actions were brought in federal and state courts in
Colorado against ComEd and 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, which verdicts were upheld
on appeal. The remaining claims in the 1989 actions are the subject of a
settlement agreement entered into by counsel for the plaintiffs and Cotter. If
the settlement agreement is implemented, the 1989 actions will be dismissed.
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
(1997) 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 included on the
Consolidated Balance Sheets as of December 31, 1996 and 1995, which reflects
the low end of the range of ComEd's estimate of the liability associated with
41
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONCLUDED
former MGP sites. In addition, as of December 31, 1996 and 1995, a reserve of
$8 million has been included on the Consolidated Balance Sheets, representing
ComEd's estimate of the liability associated with cleanup costs of remediation
sites other than former MGP sites. Approximately half of this reserve relates
to anticipated cleanup costs associated with a property formerly used as a
tannery which was purchased by ComEd in 1973. 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. 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.
(22) QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
AVERAGE
NET NUMBER OF EARNINGS
ELECTRIC ELECTRIC INCOME ON COMMON PER
OPERATING OPERATING NET COMMON SHARES COMMON
THREE MONTHS ENDED REVENUES INCOME INCOME STOCK OUTSTANDING SHARE
- ------------------- ---------- --------- -------- --------- ----------- --------
(THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
March 31, 1995.......... $1,578,136 $262,149 $107,046 $ 90,138 214,191 $0.42
June 30, 1995........... $1,559,535 $278,230 $127,377 $110,512 214,192 $0.52
September 30, 1995...... $2,190,879 $583,819 $426,351 $409,677 214,193 $1.91
December 31, 1995....... $1,581,236 $221,266 $ 56,380 $ 36,866 214,195 $0.17
March 31, 1996.......... $1,683,489 $298,711 $155,891 $139,377 214,195 $0.65
June 30, 1996........... $1,547,632 $254,690 $119,448 $102,976 214,198 $0.48
September 30, 1996...... $2,066,975 $475,839 $353,147 $337,262 214,209 $1.57
December 31, 1996....... $1,636,451 $241,278 $114,882 $ 99,329 214,218 $0.46
</TABLE>
(23) SUBSEQUENT EVENTS
In January 1997, ComEd issued $150 million principal amount of 7.375% Notes
due January 15, 2004, $150 million principal amount of 7.625% Notes due
January 15, 2007 and $150 million principal amount of Company-obligated
preferred securities of subsidiary trust.
On January 24, 1997, ComEd announced that it would redeem on March 11, 1997
all of its $200 million principal amount of First Mortgage 9 1/2% Bonds,
Series 57, due May 1, 2016.
42
