<PAGE>
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): September 22, 1999
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No.
- ----------- ------------------------------------- ------------------
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
<PAGE>
Item 5. Other Events
Merger Transaction. On September 23, 1999, Unicom Corporation ("Unicom")
announced that it entered into an Agreement and Plan of Exchange and Merger,
dated as of September 22, 1999 (the "Merger Agreement"), with PECO Energy
Company, a Pennsylvania corporation ("PECO") and Newholdco Corporation, a
Pennsylvania corporation and wholly owned subsidiary of PECO ("Newco"). The
Merger Agreement provides for (a) the mandatory exchange of the outstanding
common stock of PECO for common stock of Newco or cash ("Share Exchange") and
(b) the merger of Unicom with and into Newco (the "Merger" and, together with
the Share Exchange, the "Merger Transaction").
On September 23, 1999, Unicom filed with the Securities and Exchange
Commission a Current Report on Form 8-K announcing the Merger Transaction.
Attached to this Current Report on Form 8-K are the following documents: (i) the
Merger Agreement and (ii) the Amendment to the Rights Agreement, dated as of
September 22, 1999, between Unicom and First Chicago Trust Company of New York,
as Rights Agent.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired. Not applicable.
(b) Pro Forma Financial Information. Not applicable.
(c) Exhibits
2.1 Agreement and Plan of Exchange and Merger, dated as of September
22, 1999, among Unicom, PECO and Newco.(*)
4.1 Amendment to Rights Agreement, dated as of September 22, 1999,
between Unicom and First Chicago Trust Company of New York, as Rights Agent.(+)
(*) Applicable to Unicom and ComEd
(+) Applicable to Unicom
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
UNICOM CORPORATION
(Registrant)
Date: September 28, 1999 By: John C. Bukovski
---------------------------
John C. Bukovski
Senior Vice President
COMMONWEALTH EDISON COMPANY
(Registrant)
Date: September 28, 1999 By: John C. Bukovski
---------------------------
John C. Bukovski
Senior Vice President
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
1. None
2.1 Agreement and Plan of Exchange and Merger, dated as of September 22,
1999, among Unicom, PECO and Newco.(*)
4.1 Amendment to Rights Agreement, dated as of September 22, 1999, between
Unicom and First Chicago Trust Company of New York, as Rights Agent.(+)
16. None
17. None
20. None
23. None
24. None
27. None
99. None
(*) Applicable to Unicom and ComEd
(+) Applicable to Unicom
<PAGE>
Exhibit (2)-1
Unicom Corporation and
Commonwealth Edison Company
Form 8-K File No. 1-11375 and 1-1839
AGREEMENT AND PLAN OF EXCHANGE AND MERGER
Dated as of September 22, 1999,
Among
PECO ENERGY COMPANY,
NEWHOLDCO CORPORATION
And
UNICOM CORPORATION
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
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ARTICLE I The Exchange and Merger
-----------------------
SECTION 1.01. The Exchange and Merger..................................... 2
SECTION 1.02. Closing..................................................... 2
SECTION 1.03. Merger Effective Time....................................... 3
SECTION 1.04. Effects..................................................... 3
SECTION 1.05. Articles of Incorporation and By-laws....................... 4
SECTION 1.06. Newco Board of Directors.................................... 4
SECTION 1.07. Newco Senior Officers....................................... 4
SECTION 1.08. Operations.................................................. 5
ARTICLE II Effect on the Capital Stock of the
----------------------------------
Constituent Corporations
------------------------
SECTION 2.01. Effect on Capital Stock..................................... 5
SECTION 2.02. Exchange of Certificates.................................... 16
Section 2.03. Certain Adjustments......................................... 23
ARTICLE III Representations and Warranties of the Company
---------------------------------------------
SECTION 3.01. Organization, Standing and Power............................ 25
SECTION 3.02. Company Subsidiaries; Equity Interests...................... 25
SECTION 3.03. Capital Structure........................................... 26
SECTION 3.04. Authority; Execution and Delivery;
Enforceability............................................ 28
SECTION 3.05. No Conflicts; Consents...................................... 29
SECTION 3.06. SEC Documents; Undisclosed Liabilities...................... 31
SECTION 3.07. Information Supplied........................................ 32
SECTION 3.08. Absence of Certain Changes or Events........................ 32
SECTION 3.09. Taxes....................................................... 33
SECTION 3.10. Absence of Changes in Benefit Plans......................... 35
SECTION 3.11. ERISA Compliance; Excess Parachute Payments................. 35
SECTION 3.12. Litigation.................................................. 38
SECTION 3.13. Compliance with Applicable Laws; Permits.................... 38
SECTION 3.14. Brokers; Schedule of Fees and Expenses...................... 39
SECTION 3.15. Opinion of Financial Advisor................................ 39
SECTION 3.16. Year 2000................................................... 39
SECTION 3.17. Environmental Matters....................................... 40
SECTION 3.18. Labor and Employee Relations................................ 42
SECTION 3.19. Operations of Nuclear Power Plants.......................... 43
SECTION 3.20. Parent Share Ownership...................................... 43
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SECTION 3.21. Regulation as a Utility..................................... 44
SECTION 3.22. Contracts; No Default....................................... 44
SECTION 3.23. Title to Properties......................................... 44
SECTION 3.24. Intellectual Property....................................... 45
Section 3.25. Hedging..................................................... 45
Section 3.26. Regulatory Proceedings...................................... 45
ARTICLE IV Representations and Warranties of Parent and Newco
--------------------------------------------------
SECTION 4.01. Organization, Standing and Power............................ 46
SECTION 4.02. Parent Subsidiaries; Equity Interests....................... 46
SECTION 4.03. Capital Structure........................................... 47
SECTION 4.04. Authority; Execution and Delivery;
Enforceability............................................ 49
SECTION 4.05. No Conflicts; Consents...................................... 50
SECTION 4.06. SEC Documents; Undisclosed Liabilities...................... 51
SECTION 4.07. Information Supplied........................................ 52
SECTION 4.08. Absence of Certain Changes or Events........................ 53
SECTION 4.09. Taxes....................................................... 53
SECTION 4.10. Absence of Changes in Benefit Plans......................... 55
SECTION 4.11. ERISA Compliance; Excess Parachute Payments................. 55
SECTION 4.12. Litigation.................................................. 58
SECTION 4.13. Compliance with Applicable Laws; Permits.................... 58
SECTION 4.14. Brokers; Schedule of Fees and Expenses...................... 59
SECTION 4.15. Opinions of Financial Advisor............................... 59
SECTION 4.16. Year 2000................................................... 59
SECTION 4.17. Environmental Matters....................................... 59
SECTION 4.18. Labor and Employee Relations................................ 61
SECTION 4.19. Operations of Nuclear Power Plants.......................... 61
SECTION 4.20. Company Share Ownership..................................... 62
SECTION 4.21. Regulation as a Utility..................................... 63
SECTION 4.22. Contracts; No Default....................................... 63
SECTION 4.23. Title to Properties......................................... 63
SECTION 4.24. Intellectual Property....................................... 64
Section 4.25. Hedging..................................................... 64
Section 4.26. Regulatory Proceedings...................................... 64
ARTICLE V Covenants Relating to Conduct of Business
-----------------------------------------
SECTION 5.01. Conduct of Business......................................... 65
SECTION 5.02. No Solicitation by Company.................................. 76
SECTION 5.03. No Solicitation by Parent................................... 79
ARTICLE VI Additional Agreements
---------------------
SECTION 6.01. Preparation of the Form S-4 and the Proxy
Statement; Shareholders Meetings.......................... 82
SECTION 6.02. Access to Information; Confidentiality...................... 84
SECTION 6.03. Regulatory Matters; Reasonable Best Efforts................. 85
</TABLE>
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SECTION 6.04. Company and Parent Stock Options and
Other Stock Plans......................................... 87
SECTION 6.05. Benefit Plans; Workforce Matters............................ 91
SECTION 6.06. Indemnification............................................. 93
SECTION 6.07. Fees and Expenses........................................... 94
SECTION 6.08. Public Announcements........................................ 96
SECTION 6.09. Transfer Taxes.............................................. 96
SECTION 6.10. Affiliates.................................................. 96
SECTION 6.11. Stock Exchange Listing...................................... 97
SECTION 6.12. Rights Agreements; Consequences if
Rights Triggered.......................................... 97
SECTION 6.13. Tax Treatment............................................... 98
SECTION 6.14. Reorganization and Amendment................................ 98
SECTION 6.15. Company Common Stock Repurchase............................. 98
SECTION 6.16. Parity of Compensation...................................... 99
SECTION 6.17. Board Seats................................................. 99
ARTICLE VII Conditions Precedent
--------------------
SECTION 7.01. Conditions to Each Party's Obligation
To Effect The Merger...................................... 100
SECTION 7.02. Conditions to Obligations of Parent
and Newco................................................. 102
SECTION 7.03. Conditions to Obligations of the Company.................... 103
ARTICLE VIII Termination, Amendment and Waiver
---------------------------------
SECTION 8.01. Termination................................................. 104
SECTION 8.02. Effect of Termination....................................... 107
SECTION 8.03. Amendment................................................... 108
SECTION 8.04. Extension; Waiver........................................... 108
SECTION 8.05. Procedure for Termination, Amendment,
Extension or Waiver....................................... 108
ARTICLE IX General Provisions
------------------
SECTION 9.01. Nonsurvival of Representations
and Warranties............................................ 108
SECTION 9.02. Notices..................................................... 109
SECTION 9.03. Definitions................................................. 110
SECTION 9.04. Interpretation; Disclosure Letters.......................... 110
SECTION 9.05. Severability................................................ 111
SECTION 9.06. Counterparts................................................ 111
SECTION 9.07. Entire Agreement; No Third-Party
Beneficiaries............................................. 111
SECTION 9.08. Governing Law............................................... 111
SECTION 9.09. Assignment.................................................. 112
SECTION 9.10. Enforcement................................................. 112
SECTION 9.11. Newco Obligations........................................... 112
</TABLE>
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8
<TABLE>
<CAPTION>
INDEX OF DEFINED TERMS
Defined Term Section
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<S> <C>
"Affiliate" Section 9.03
"Agreement" Recitals
"AmerGen" Section 5.01(b)(iv)
"Applicable Law" Section 3.05(a)
"Articles of Exchange" Section 1.03(a)
"Atomic Energy Act" Section 3.05(b)
"Average Price" Section 2.01(a)(viii)
"Certificates" Section 2.02(b)(v)
"Closing" Section 1.02
"Closing Date" Section 1.02
"Code" Recitals
"ComEd" Section 1.08(a)
"Company" Recitals
"Company Acquisition Agreement" Section 5.02(b)
"Company Benefit Plans" Section 3.11(h)
"Company Board" Section 3.04(b)
"Company By-laws" Section 3.01
"Company Cash Consideration" Section 2.01(b)(ii)
"Company Cash Designees" Section 2.01(b)(v)
"Company Cash Election" Section 2.01(b)(iv)
"Company Cash Election Shares" Section 2.01(b)(v)
"Company Cash Number" Section 2.01(b)(iii)
"Company Cash Shares" Section 2.01(b)(vi)
"Company Certificates" Section 2.02(b)(v)
"Company Chairman" Section 6.16
"Company Charter" Section 3.01
"Company Common Stock" Recitals
"Company Competing Transaction" Section 5.02(a)
"Company Conversion Number" Section 2.01(b)(ii)
"Company Deminimis Shares" Section 2.01(b)(iv)
"Company Disclosure Letter" Section 3.02(a)
"Company Dissent Shares" Section 2.01(b)(xi)
"Company Employee Stock Option" Section 6.04(f)
"Company Employment Arrangements" Section 3.10
"Company Exchange Ratio" Section 2.01(b)(ii)
"Company Material Adverse Effect" Section 3.01
"Company Non-Election" Section 2.01(b)(iv)
"Company Non-Election Shares" Section 2.01(b)(vii)
"Company Non-Prorated Cash Shares" Section 2.01(b)(v)
"Company Nuclear Facilities" Section 3.19
"Company Odd Lot Cash Election Shares" Section 2.01(b)(iv)
"Company Permits" Section 3.13(b)
"Company Reorganization" Section 5.01(g)
</TABLE>
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9
<TABLE>
<S> <C>
"Company Required Statutory Approvals" Section 3.05(b)
"Company Rights" Section 3.03(a)
"Company Rights Agreement" Section 3.03(a)
"Company SEC Documents" Section 3.06
"Company Shareholder Approval" Section 3.04(c)
"Company Shareholders Meeting" Section 6.01(d)
"Company Stock Election" Section 2.01(b)(iv)
"Company Stock Election Shares" Section 2.01(b)(v)
"Company Stock Number" Section 2.01(b)(iii)
"Company Stock Plans" Section 6.04(f)
"Company Subsidiaries" Section 3.01
"Confidentiality Agreement" Section 6.02
"Consent" Section 3.05(b)
"Contract" Section 3.05(a)
"ERISA" Section 3.11(b)
"Election Deadline" Section 2.02(b)
"Environmental Claims" Section 3.17(f)(i)
"Environmental Laws" Section 3.17(f)(ii)
"Environmental Permits" Section 3.17(f)(iii)
"Exchange Act" Section 3.05(b)
"Exchange Agent" Section 2.02(a)
"Exchange Consideration" Section 2.01(a)(ii)
"Exchange Effective Time" Section 1.03(a)
"Exchange Fund" Section 2.02(a)
"FERC" Section 3.05(b)
"Filed Company SEC Documents" Section 4.08
"Filed Parent SEC Documents" Section 4.08
"Final Order" Section 7.01(c)
"First Step Exchange" Recitals
"Form S-4" Section 3.07
"Form of Election" Section 2.02(b)
"GAAP" Section 3.06
"Governmental Entity" Section 3.05(b)
"Hazardous Materials" Section 3.17(f)(iv)
"HSR Act" Section 3.05(b)
"IBCA" Section 1.01(b)
"ICC" Section 3.05(b)
"Illinois Articles of Merger" Section 1.03(b)
"Indemnified Party" Section 6.06(c)
"Intellectual Property Rights" Section 3.24
"Judgment" Section 3.05(a)
"Liens" Section 3.02(a)
"Losses" Section 6.06(c)
"Material Adverse Effect" Section 9.03
"Merger" Recitals
"Merger Consideration" Section 2.01(b)(ii)
"Merger Effective Time" Section 1.03(b)
"NRC" Section 3.05(b)
</TABLE>
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10
<TABLE>
<S> <C>
"NYSE" Section 2.02(e)(ii)
"Newco" Recitals
"Newco Articles" Section 1.05(a)
"Newco Board" Section 1.06(b)
"Newco By-laws" Section 1.05(b)
"Newco Common Stock" Recitals
"Newholdco Corporation" Section 9.03
"Outside Date" Section 8.01(b)
"PBCL" Section 1.01(a)
"PCBs" Section 3.17(f)(iv)
"PPUC" Section 4.05(b)
"PUHCA" Section 3.02(a)
"PURPA" Section 3.02(a)
"Parent" Recitals
"Parent Acquisition Agreement" Section 5.03(b)
"Parent Benefit Plans" Section 4.10
"Parent Board" Section 4.04(b)
"Parent By-laws" Section 4.01
"Parent Capital Stock" Section 4.03(a)
"Parent Cash Consideration" Section 2.01(a)(ii)
"Parent Cash Designees" Section 2.01(a)(v)
"Parent Cash Election" Section 2.01(a)(iv)
"Parent Cash Election Shares" Section 2.01(a)(v)
"Parent Cash Number" Section 2.01(a)(iii)
"Parent Cash Shares" Section 2.01(a)(vi)
"Parent Certificate" Section 2.02(b)(v)
"Parent Chairman" Section 6.16
"Parent Charter" Section 4.01
"Parent Common Stock" Recitals
"Parent Competing Transaction" Section 5.03(a)
"Parent Deminimis Shares" Section 2.01(a)(iv)
"Parent Disclosure Letter" Section 4.02(a)
"Parent Dissent Shares" Section 2.01(a)(x)
"Parent Employee Stock Option" Section 6.04(f)
"Parent Employment Arrangements" Section 4.10
"Parent Exchange Ratio" Section 2.01(a)(ii)
"Parent Material Adverse Effect" Section 4.01
"Parent Non-Election" Section 2.01(a)(iv)
"Parent Non-Election Shares" Section 2.01(a)(vii)
"Parent Non-Prorated Cash Shares" Section 2.01(a)(v)
"Parent Nuclear Facilities" Section 4.19
"Parent Permits" Section 4.13(b)
"Parent Preferred Stock" Section 4.03(a)
"Parent Reorganization" Section 5.02(g)
"Parent Required Statutory Approvals" Section 4.05(b)
"Parent SAR" Section 6.04(f)
"Parent SEC Documents" Section 4.06
"Parent Shareholder Approval" Section 4.04(c)
</TABLE>
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11
<TABLE>
<S> <C>
"Parent Shareholders Meeting" Section 6.01(e)
"Parent Stock Election" Section 2.01(a)(iv)
"Parent Stock Election Shares" Section 2.01(a)(v)
"Parent Stock Number" Section 2.01(a)(iii)
"Parent Stock Plans" Section 6.04(f)
"Parent Subsidiaries" Section 4.01
"Power Purchase Agreement" Section 5.01(a)(xii)
"Pennsylvania Articles of Merger" Section 1.03(b)
"Person" Section 9.03
"Power Act" Section 3.02(a)
"Proxy Statement" Section 3.05(b)
"Qualified Plans" Section 3.11(a)
"Qualifying Company Proposal" Section 5.02(d)
"Qualifying Parent Proposal" Section 5.03(d)
"Reallocation" Section 2.03
"Release" Section 3.17(f)(v)
"Representatives" Section 5.02(a)
"SEC" Section 3.05(b)
"Second Step Merger" Recitals
"Sections 11.65 and 11.70" Section 2.01(b)(xi)
"Securities Act" Section 3.06
"Share Issuance" Section 1.01(c)
"Stock Plan" Section 6.04(e)
"Subchapter D" Section 2.01(a)(xi)
"Subsidiary" Section 9.03
"Surviving Corporation" Section 1.01(b)
"Taxes" Section 3.09(g)
"Tax Return" Section 3.09(g)
"Trading Day" Section 2.01(a)(viii)
"Transition Period" Section 6.16
"Transfer Taxes" Section 6.09
"Voting Company Debt" Section 3.03(d)
"Voting Parent Debt" Section 4.03(a)
</TABLE>
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AGREEMENT AND PLAN OF EXCHANGE AND MERGER dated as of
September 22, 1999 (this "Agreement"), among PECO ENERGY COMPANY,
a Pennsylvania corporation ("Parent"), NEWHOLDCO CORPORATION (as
defined herein), a Pennsylvania corporation and a wholly owned
subsidiary of Parent ("Newco"), and UNICOM CORPORATION, an
Illinois corporation (the "Company").
WHEREAS the respective Boards of Directors of Parent, Newco and the
Company have approved the consummation of the business combination provided for
in this Agreement, pursuant to which (a) Parent and Newco will, on the terms and
subject to the conditions set forth in this Agreement, effect a mandatory share
exchange (the "First Step Exchange") whereby each outstanding share of common
stock, no par value, of Parent (the "Parent Common Stock") shall be acquired by
Newco in exchange for common stock, no par value, of Newco (the "Newco Common
Stock") or cash, as herein provided, (b) immediately thereafter, the Company
will, on the terms and subject to the conditions set forth in this Agreement,
merge with and into Newco (the "Second Step Merger" and, together with the First
Step Exchange, the "Merger"), whereby each share of common stock, no par value,
of the Company (the "Company Common Stock") will be converted into the right to
receive Newco Common Stock or cash, as herein provided, (c) the holders of
Parent Common Stock and Company Common Stock will together own all of the
outstanding shares of Newco Common Stock and (d) each share of each other class
of capital stock of Parent and the Company shall be unaffected and remain
outstanding;
WHEREAS for Federal income tax purposes it is intended that the Merger
constitutes transactions described in Section 351 of the Internal Revenue Code
of 1986, as amended (the "Code"), and the Second Step Merger constitutes a
transaction described in Section 368(a) of the Code; and
WHEREAS Parent, Newco and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
<PAGE>
2
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
ARTICLE I
The Exchange and Merger
-----------------------
SECTION 1.01. The Exchange and Merger. (a) On the terms and subject
to the conditions set forth in this Agreement, in accordance with the Business
Corporation Law of the Commonwealth of Pennsylvania ("PBCL"), Parent and Newco
shall effect the First Step Exchange at the Exchange Effective Time (as defined
in Section 1.03). As a result of the First Step Exchange, Parent shall become a
wholly owned subsidiary of Newco. The effects and the consequences of the First
Step Exchange and the Second Step Merger shall be as set forth in Section 1.04.
(b) On the terms and subject to the conditions set forth in this
Agreement, in accordance with the Illinois Business Corporation Act (the "IBCA")
and the PBCL, the Company shall be merged with and into Newco at the Merger
Effective Time (as defined in Section 1.03). At the Merger Effective Time, the
separate corporate existence of the Company shall cease and Newco shall continue
as the surviving corporation (the "Surviving Corporation").
(c) The First Step Exchange, the Second Step Merger, the issuance by
Newco of Newco Common Stock in connection with the Merger (the "Share Issuance")
and the other transactions contemplated by this Agreement are referred to in
this Agreement collectively as the "Transactions".
SECTION 1.02. Closing. The closing (the "Closing") of the Merger
shall take place at such location as shall be determined by the parties at 10:00
a.m. on the second business day following the satisfaction (or, to the extent
permitted by Applicable Law (as defined in Section 3.05), waiver by all parties)
of the conditions set forth in Section 7.01, or, if on such day any condition
set forth in Section 7.02 or 7.03 has not been satisfied (or, to the extent
permitted by Applicable Law, waived by the party or parties entitled to the
benefits thereof), as soon as practicable after all the conditions set forth in
Article VII have been satisfied (or, to the extent permitted by Applicable Law,
waived by the parties entitled to the
<PAGE>
3
benefits thereof), or at such other place, time and date as shall be agreed in
writing between Parent and the Company. The date on which the Closing occurs is
referred to in this Agreement as the "Closing Date".
SECTION 1.03. Merger Effective Time. (a) Prior to the Closing,
Parent shall prepare, and on the Closing Date Parent shall file with the
Department of State of the Commonwealth of Pennsylvania, articles of exchange or
other appropriate documents (in any such case, the "Articles of Exchange")
executed in accordance with the relevant provisions of the PBCL and shall make
all other filings or recordings required under the PBCL to effect the First Step
Exchange. The First Step Exchange shall become effective at such time as the
Articles of Exchange are duly filed with such Department of State, or at such
other time as Newco and Parent shall agree and specify in the Articles of
Exchange (the time the First Step Exchange becomes effective being the "Exchange
Effective Time").
(b) Prior to the Closing and after the Exchange Effective Time, Newco
and the Company shall prepare, and on the Closing Date and after the Exchange
Effective Time Newco and the Company shall (i) file with the Department of State
of the Commonwealth of Pennsylvania, the articles of merger or other appropriate
documents (in any such case, the "Pennsylvania Articles of Merger") executed in
accordance with the relevant provisions of the PBCL and shall make all other
filings or recordings required under the PBCL to effect the Second Step Merger
and (ii) thereafter file with the Secretary of State of the State of Illinois,
articles of merger or other appropriate documents (in any such case, the
"Illinois Articles of Merger") executed in accordance with the relevant
provisions of the IBCA and shall make all other filings or recordings required
under the IBCA to effect the Second Step Merger. The Second Step Merger shall
become effective at such time as the Illinois Articles of Merger are duly filed
as provided by Applicable Law and the Secretary of State of the State of
Illinois has issued a certificate of merger in respect of the Second Step
Merger, or at such other time as Newco and the Company shall agree and specify
as provided by Applicable Law (the time the Second Step Merger becomes effective
being the "Merger Effective Time").
SECTION 1.04. Effects. The First Step Exchange shall have the
effects set forth in Section 1931 of the PBCL. The Second Step Merger shall
have the effects set
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4
forth in Section 1929 of the PBCL and Section 11.50 of the IBCA.
SECTION 1.05. Articles of Incorporation and By-laws. (a) At the
Merger Effective Time, the Articles of Incorporation of Newco (the "Newco
Articles") shall, until thereafter changed or amended as provided therein or by
Applicable Law and as Parent and the Company shall have agreed prior to the
Merger Effective Time, be the Articles of Incorporation of the Surviving
Corporation and shall in any case be amended to provide that the name of Newco
be changed to such name as shall be mutually agreed to by Parent and the
Company.
(b) At the Merger Effective Time, the By-laws of Newco (the "Newco
By-laws") shall, until thereafter changed or amended as provided therein or by
Applicable Law and as Parent and the Company shall have agreed prior to the
Merger Effective Time, be the By-laws of the Surviving Corporation, and shall in
any case be amended by inserting the provisions set forth in Exhibit A as
Article X thereof.
SECTION 1.06. Newco Board of Directors. (a) The directors of Parent
immediately prior to the Exchange Effective Time shall be the directors of Newco
as of the Exchange Effective Time, until the earlier of the Merger Effective
Time or their resignation or removal or the due election and qualification of
their respective successors, as the case may be.
(b) In accordance with the Newco By-laws, as amended pursuant to
Section 1.05(b), as of the Merger Effective Time, the Board of Directors of the
Surviving Corporation (the "Newco Board") shall consist of 16 members, eight of
whom shall be serving as members of the Board of Directors of Parent immediately
prior to the Merger Effective Time who are recommended by the Board of Directors
of Parent immediately prior to the Merger Effective Time, and eight of whom of
whom shall be members of the Board of Directors of the Company immediately prior
to the Merger Effective Time who are recommended by the Board of Directors of
the Company immediately prior to the Merger Effective Time.
SECTION 1.07. Newco Senior Officers. As of the Merger Effective Time
the senior officers of Newco shall be as set forth in Exhibit B and shall hold
office until their respective successors are duly elected and qualified, or
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5
until their earlier death, resignation or removal in accordance with the Newco
By-Laws.
SECTION 1.08. Operations. (a) Corporate Offices. The Surviving
Corporation shall maintain (i) in Chicago, Illinois offices serving as its
corporate headquarters, (ii) in southeastern Pennsylvania offices serving as the
headquarters of the generation and power marketing businesses of the Surviving
Corporation and its subsidiaries, and (ii) offices in Chicago, Illinois and
southeastern Pennsylvania as the headquarters of Commonwealth Edison Company, an
Illinois corporation ("ComEd"), and Parent, respectively. The chief nuclear
officer of the Surviving Corporation shall maintain offices in both Chicago,
Illinois and Southeastern Pennsylvania.
(b) Charities. The parties agree that provision of charitable
contribution and community support in the respective service areas of Parent and
the Company and their respective subsidiaries serves a number of important
goals. During the two-year period immediately following the Merger Effective
Time, the Surviving Corporation shall provide, directly or indirectly,
charitable contributions and traditional local community support within the
respective service areas of Parent and the Company and each of their
subsidiaries that are utilities at levels substantially comparable to and no
less than the levels of charitable contributions and community support provided
by Parent and the Company and such subsidiaries within their service areas
within the two-year period immediately prior to the Merger Effective Time.
ARTICLE II
Effect on the Capital Stock of the
----------------------------------
Constituent Corporations; Exchange of Certificates
--------------------------------------------------
SECTION 2.01. Effect on Capital Stock. (a) First Step Exchange. At
the Exchange Effective Time, by virtue of the First Step Exchange and without
any action on the part of the holder of any shares of Parent Common Stock or
Newco Common Stock:
(i) Cancelation of Treasury Stock. Each share of Parent Common Stock
that is owned by Parent shall automatically be canceled and retired and
shall cease to exist, and no Newco Common Stock or other
<PAGE>
6
consideration shall be delivered or deliverable in exchange therefor.
(ii) Exchange of Parent Common Stock. (A) Subject to Section
2.01(a)(i) and Section 2.02(a)(iii), each issued share of Parent Common
Stock shall be exchanged for either (1) $45.00 in cash (the "Parent Cash
Consideration") or (2) one fully paid and nonassessable share of Newco
Common Stock (the "Parent Exchange Ratio"), in each case as the holder
thereof shall have elected or be deemed to have elected, in accordance with
Section 2.01(a)(iv).
(B) The Parent Cash Consideration and shares of Newco Common
Stock to be issued by Newco upon the exchange of shares of Parent
Common Stock pursuant to this Section 2.01(a)(ii) are referred to
collectively as "Exchange Consideration". As of the Exchange
Effective Time, all such shares of Parent Common Stock shall be
exchanged for Exchange Consideration and such shares of Parent Common
Stock shall remain outstanding and shall be owned and held by Newco,
and each holder of a certificate representing any such shares of
Parent Common Stock shall cease to have any rights with respect
thereto, except the right to receive Exchange Consideration upon
surrender of such certificate in accordance with Section 2.02, without
interest.
(iii) Allocation. Notwithstanding anything in this Agreement to the
contrary, the number of shares of Parent Common Stock to be converted into
the right to receive the Parent Cash Consideration in the First Step
Exchange (the "Parent Cash Number") will be equal to 16,666,666 shares of
Parent Common Stock. The number of shares of Parent Common Stock to be
converted into the right to receive the Parent Stock Consideration in the
First Step Exchange (the "Parent Stock Number") will be equal to (A) the
number of shares of Parent Common Stock issued and outstanding immediately
prior to the Exchange Effective Time (ignoring for this purpose any Parent
Common Stock to be canceled pursuant to Section 2.01(a)(i)) less (B) the
Parent Cash Number.
(iv) Election. Subject to allocation in accordance with the
provisions of this Section 2.01(a), each record holder of shares of Parent
Common Stock
<PAGE>
7
(other than shares to be canceled in accordance with Section 2.01(a)(i))
issued and outstanding immediately prior to the Election Deadline (as
defined in Section 2.02(b)) will be entitled, in accordance with Section
2.02(b), (i) to elect to receive in respect of each such share (A) the
Parent Cash Consideration (a "Parent Cash Election") or (B) the Parent
Stock Consideration (a "Parent Stock Election") or (ii) to indicate that
such record holder has no preference as to the receipt of the Parent Cash
Consideration or the Parent Stock Consideration for all such shares held by
such holder (a "Parent Non-Election"); provided, however, that record
holders of Parent Common Stock who own, as of the date of the Election
Deadline, less than 100 shares of Parent Common Stock in respect of which a
Parent Non-Election is made or no election is made (all such shares,
collectively with Parent Odd Lot Cash Election Shares (as hereinafter
defined) being herein referred to as the "Parent Deminimis Shares"), will
be deemed to have elected to receive the Parent Cash Consideration for such
shares. "Parent Odd Lot Cash Election Shares" means shares of Parent Common
Stock held by record holders of Parent Common Stock who, as of the date of
the Election Deadline, own less than 100 shares of Parent Common Stock and
have made Parent Cash Elections in respect of all such shares.
(v) Allocation of Parent Cash Election Shares. In the event that the
aggregate number of shares in respect of which Parent Cash Elections have
been made or are deemed to have been made in accordance with the proviso at
the end of the first sentence of Section 2.01(a)(iv) (the "Parent Cash
Election Shares") exceeds the Parent Cash Number, all shares of Parent
Common Stock in respect of which Parent Stock Elections have been made
("the Parent Stock Election Shares") and all Parent Non-Election Shares (as
defined in Section 2.01(a)(vii)) will be converted into the right to
receive the Parent Stock Consideration, and the Parent Cash Election Shares
will be converted into the right to receive the Parent Cash Consideration
or the Parent Stock Consideration in the following manner:
(A) all Parent Deminimis Shares will be converted into the right
to receive the Parent Cash Consideration;
<PAGE>
8
(B) the number of Parent Cash Election Shares, other than Parent
Deminimis Shares, covered by each Form of Election (as defined in
Section 2.02(b)) to be converted into Parent Cash Consideration will
be determined by multiplying the number of Parent Cash Election Shares
covered by such Form of Election by a fraction, (A) the numerator of
which is the Parent Cash Number less the number of Parent Deminimis
Shares and (B) the denominator of which is the aggregate number of
Parent Cash Election Shares less the number of Parent Deminimis
Shares, rounded down to the nearest whole number; provided, however,
that, if as a result of such proration, any holder of Parent Cash
Election Shares would, but for this proviso, receive less than 100
shares of Newco Common Stock in accordance with Section 2.01(a)(v)(C),
all Parent Cash Election Shares held by such holders (the "Parent Non-
Prorated Cash Shares") will be converted into the Parent Cash
Consideration and the remaining Parent Cash Election Shares to be
converted into the Parent Cash Consideration will be determined by
multiplying the number of Parent Cash Election Shares covered by such
Form of Election by a fraction, (A) the numerator of which is the
Parent Cash Number less the sum of the number of Parent Deminimis
Shares and Parent Non-Prorated Cash Shares and (B) the denominator of
which is the aggregate number of Parent Cash Election Shares less the
sum of the number of Parent Deminimis Shares and Parent Non-Prorated
Cash Shares, rounded down to the nearest whole number; provided
further, however, that, if the number of Parent Non-Prorated Cash
Shares exceeds the difference between the Parent Cash Number and the
number of Parent Deminimis Shares, the Parent Non-Prorated Cash Shares
will be converted into the Parent Cash Consideration by selecting, by
lottery or such other method as mutually agreed to by Parent and the
Company, from among the record holders of Parent Non-Prorated Cash
Shares a sufficient number of such holders (the "Parent Cash
Designees") such that the number of Parent Cash Election Shares held
by the Parent Cash Designees will, when added to the Parent Deminimis
Shares, be equal as closely as practicable to the Parent Cash Number,
and all such Parent Cash Election
<PAGE>
9
Shares held by such Parent Cash Designees will be converted into the
right to receive the Parent Cash Consideration; and
(C) all Parent Cash Election Shares not converted into Parent
Cash Consideration in accordance with Section 2.01(a)(v)(A) or (B)
will be converted into the right to receive the Parent Stock
Consideration.
(vi) Allocation of Parent Stock Election Shares. In the event that the
aggregate number of Parent Stock Election Shares exceeds the Parent Stock
Number, all Parent Cash Election Shares and all Parent Non-Election Shares
(together, the "Parent Cash Shares") will be converted into the right to
receive the Parent Cash Consideration, and all Parent Stock Election Shares
will be converted into the right to receive the Parent Cash Consideration
or the Parent Stock Consideration in the following manner:
(A) the number of Parent Stock Election Shares covered by each
Form of Election to be converted into Parent Cash Consideration will
be determined by multiplying the number of Parent Stock Election
Shares covered by such Form of Election by a fraction, (1) the
numerator of which is the Parent Cash Number less the number of Parent
Cash Shares and (2) the denominator of which is the aggregate number
of Parent Stock Election Shares, rounded down to the nearest whole
number; and
(B) all Parent Stock Election Shares not converted into Parent
Cash Consideration in accordance with Section 2.01(a)(vi)(A) will be
converted into the right to receive the Parent Stock Consideration.
(vii) No Allocation. In the event that neither Section 2.01(a)(v)
nor Section 2.01(a)(vi) is applicable, all Parent Cash Election Shares and
deemed Parent Cash Election Shares will be converted into the right to
receive the Parent Cash Consideration, all Parent Stock Election Shares
will be converted into the right to receive the Parent Stock Consideration,
a number of Parent Non-Election Shares (as hereinafter defined) equal to
the Parent Cash Number minus the sum of Parent Cash Election Shares and
Parent Deminimis
<PAGE>
10
Shares will be converted into the right to receive the Parent Cash
Consideration and a number of Parent Non-Election Shares equal to the
Parent Stock Number minus Parent Stock Election Shares will be converted
into the right to receive the Parent Stock Consideration. "Parent Non-
Election Shares" means, collectively, shares of Parent Common Stock in
respect of which a Parent Non-Election is made or as to which no election
is made, other than Parent Deminimis Shares.
(viii) Computations. The Exchange Agent (as defined in Section
2.02(c)) consultation with Parent and the Company, will make all
computations to give effect to this Section 2.01(a).
(ix) Parent Preferred Stock. The Parent Preferred Stock (as defined
in Section 4.03(a)) outstanding immediately prior to the Exchange Effective
Time shall remain outstanding, without change, after the Exchange Effective
Time, and no consideration shall be delivered or deliverable in exchange
therefor.
(x) Dissent Rights. Notwithstanding anything in this Agreement to
the contrary, shares ("Parent Dissent Shares") of Parent Common Stock that
are outstanding immediately prior to the Exchange Effective Time and that
are held by any person who is entitled to demand and properly demands
payment of the fair value of such Parent Dissent Shares pursuant to, and
who complies in all respects with, Subchapter D of Chapter 15 of the PBCL
("Subchapter D") shall not be converted into Exchange Consideration as
provided in Section 2.01(a)(ii), but rather the holders of Parent Dissent
Shares shall be entitled to payment of the fair value of such Parent
Dissent Shares in accordance with Subchapter D; provided, however, that if
any such holder shall fail to perfect or otherwise shall waive, withdraw or
lose the right to receive payment of fair market value under Subchapter D,
then the right of such holder to be paid the fair value of such holder's
Parent Dissent Shares shall cease and such Parent Dissent Shares shall be
deemed to have been converted as of the Exchange Effective Time into, and
to have become exchangeable solely for the right to receive, Exchange
Consideration as provided in Section 2.01(a)(ii).
<PAGE>
11
(b) Second Step Merger. At the Merger Effective Time, by virtue of
the Second Step Merger and without any action on the part of the holder of any
shares of Company Common Stock or Newco Common Stock:
(i) Cancelation of Treasury Stock and Newco-Owned Stock. Each share
of Company Common Stock that is owned by the Company or Newco shall no
longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and no Newco Common Stock or other consideration
shall be delivered or deliverable in exchange therefor.
(ii) Conversion of Company Common Stock. (A) Subject to Sections
2.01(b)(i), 2.01(b)(iii) and 2.02(e), each issued share of Company Common
Stock shall be converted into the right to receive either (1) $42.75 in
cash (the "Company Cash Consideration") or (2) 0.95 (the "Company
Conversion Number") fully paid and nonassessable shares of Newco Common
Stock (the "Company Exchange Ratio"), in each case as the holder thereof
shall have elected or be deemed to have elected, in accordance with Section
2.01(b)(iv).
(B) The Company Cash Consideration, shares of Newco Common Stock to
be issued upon the conversion of shares of Company Common Stock pursuant to
this Section 2.01(b)(ii) and cash in lieu of fractional shares of Newco
Common Stock as contemplated by Section 2.02(e) are referred to
collectively as "Merger Consideration". As of the Merger Effective Time,
all such shares of Company Common Stock shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such shares of Company Common
Stock shall cease to have any rights with respect thereto, except the right
to receive Merger Consideration upon surrender of such certificate in
accordance with Section 2.02, without interest.
(iii) Allocation. Notwithstanding anything in this Agreement to the
contrary, the number of shares of the Company Common Stock to be converted
into the right to receive the Company Cash Consideration in the Second Step
Merger (the "Company Cash Number") will be equal to 17,543,859 shares of
the Company Common Stock. The number of shares of the Company Common Stock
to be converted into the right to receive the Company Stock
<PAGE>
12
Consideration in the Second Step Merger (the "Company Stock Number") will
be equal to (A) the number of shares of the Company Common Stock issued and
outstanding immediately prior to the Merger Effective Time (ignoring for
this purpose any Company Common Stock to be canceled pursuant to Section
2.01(b)(i)) less (B) the Company Cash Number.
(iv) Election. Subject to allocation in accordance with the
provisions of this Section 2.01(b), each record holder of shares of the
Company Common Stock (other than shares to be canceled in accordance with
Section 2.01(b)(i)) issued and outstanding immediately prior to the
Election Deadline will be entitled, in accordance with Section 2.02(b), (i)
to elect to receive in respect of each such share (A) the Company Cash
Consideration (a "Company Cash Election") or (B) the Company Stock
Consideration (a "Company Stock Election") or (ii) to indicate that such
record holder has no preference as to the receipt of the Company Cash
Consideration or the Company Stock Consideration for all such shares held
by such holder (a "Company Non-Election"); provided, however, that record
holders of Company Common Stock who own, as of the date of the Election
Deadline, less than 100 shares of the Company Common Stock in respect of
which a Company Non-Election is made or no election is made (all such
shares, collectively with Company Odd Lot Cash Election Shares (as
hereinafter defined) being herein referred to as the "Company Deminimis
Shares") will be deemed to have elected to receive the Company Cash
Consideration for such shares. "Company Odd Lot Cash Election Shares"
means shares of Company Common Stock held by record holders of Company
Common Stock who, as of the date of the Election Deadline, own less than
100 Shares of Company Common Stock and have made Company Cash Elections in
respect of all such shares.
(v) Allocation of the Company Cash Election Shares. In the event
that the aggregate number of shares in respect of which the Company Cash
Elections have been made or are deemed to have been made in accordance with
the proviso at the end of the first sentence of Section 2.01(b)(iv) (the
"Company Cash Election Shares") exceeds the Company Cash Number, all shares
of the Company Common Stock in respect of which the Company Stock Elections
have been made (the "Company Stock Election Shares") and all the Company
<PAGE>
13
Non-Election Shares (as defined in Section 2.01(b)(vii)) will be converted
into the right to receive the Company Stock Consideration (and cash in lieu
of fractional interests in accordance with Section 2.02(e)), and the
Company Cash Election Shares will be converted into the right to receive
the Company Cash Consideration or the Company Stock Consideration in the
following manner:
(A) all the Company Deminimis Shares will be converted into the right
to receive the Company Cash Consideration;
(B) the number of the Company Cash Election Shares, other than the
Company Deminimis Shares, covered by each Form of Election to be converted
into the Company Cash Consideration will be determined by multiplying the
number of the Company Cash Election Shares covered by such Form of Election
by a fraction, (A) the numerator of which is the Company Cash Number less
the number of the Company Deminimis Shares and (B) the denominator of which
is the aggregate number of the Company Cash Election Shares less the number
of the Company Deminimis Shares, rounded down to the nearest whole number;
provided, however, that, if as a result of such proration, any holder of
the Company Cash Election Shares would, but for this proviso, receive less
than 100 shares of Newco Common Stock in accordance with Section
2.01(b)(v)(C), all the Company Cash Election Shares held by such holders
(the "Company Non-Prorated Cash Shares") will be converted into the Company
Cash Consideration and the remaining the Company Cash Election Shares to be
converted into the Company Cash Consideration will be determined by
multiplying the number of the Company Cash Election Shares covered by such
Form of Election by a fraction, (A) the numerator of which is the Company
Cash Number less the sum of the number of the Company Deminimis Shares and
the Company Non-Prorated Cash Shares and (B) the denominator of which is
the aggregate number of the Company Cash Election Shares less the sum of
the number of the Company Deminimis Shares and the Company Non-Prorated
Cash Shares, rounded down to the nearest whole number; provided further,
however, that, if the number of the Company Non-Prorated Cash Shares
exceeds the difference between the Company Cash Number and the number of
the Company Deminimis Shares, the Company Non-Prorated Cash Shares will be
converted into the
<PAGE>
14
Company Cash Consideration by selecting, by lottery or such other method as
mutually agreed to by Parent and the Company, from among the record holders
of the Company Non-Prorated Cash Shares a sufficient number of such holders
(the "Company Cash Designees") such that the number of the Company Cash
Election Shares held by the Company Cash Designees will, when added to the
Company Deminimis Shares, be equal as closely as practicable to the Company
Cash Number, and all such the Company Cash Election Shares held by such the
Company Cash Designees will be converted into the right to receive the
Company Cash Consideration; and
(C) all Company Cash Election Shares not converted into the Company
Cash Consideration in accordance with Section 2.01(b)(v)(A) or (B) will be
converted into the right to receive the Company Stock Consideration (and
cash in lieu of fractional interests in accordance with Section 2.02(e)).
(vi) Allocation of the Company Stock Election Shares. In the event
that the aggregate number of the Company Stock Election Shares exceeds the
Company Stock Number, all the Company Cash Election Shares and all the
Company Non-Election Shares (together, the "Company Cash Shares") will be
converted into the right to receive the Company Cash Consideration, and all
the Company Stock Election Shares will be converted into the right to
receive the Company Cash Consideration or the Company Stock Consideration
in the following manner:
(A) the number of the Company Stock Election Shares covered by each
Form of Election to be converted into the Company Cash Consideration will
be determined by multiplying the number of the Company Stock Election
Shares covered by such Form of Election by a fraction, (A) the numerator of
which is the Company Cash Number less the number of the Company Cash Shares
and (B) the denominator of which is the aggregate number of the Company
Stock Election Shares, rounded down to the nearest whole number; and
(B) all the Company Stock Election Shares not converted into the
Company Cash Consideration in accordance with Section 2.01(b)(vi)(A) will
be converted into the right to receive the Company Stock
<PAGE>
15
Consideration (and cash in lieu of fractional interests in accordance with
Section 2.02(e)).
(vii) No Allocation. In the event that neither Section 2.01(b)(v)
nor Section 2.01(b)(vi) is applicable, all the Company Cash Election Shares
and deemed Company Cash Election Shares shall be converted into the right
to receive the Company Cash Consideration, all the Company Stock Election
Shares shall be converted into the right to receive the Company Stock
Consideration (and cash in lieu of fractional interests in accordance with
Section 2.02(e)), a number of Company Non-Election Shares (as hereinafter
defined) equal to the Company Cash Number minus the sum of Company Cash
Election Shares and Company Deminimis Shares will be converted into the
right to receive the Company Cash Consideration and a number of Company
Non-Election Shares equal to the Company Stock Number minus Company Stock
Election Shares will be converted into the right to receive the Company
Stock Consideration (and cash in lieu of fractional interests in accordance
with Section 2.02(e)). "Company Non-Election Shares" means, collectively,
shares of Company Common Stock in respect of which a Company Non-Election
is made or as to which no election is made, other than Company Deminimis
Shares.
(viii) Computations. The Exchange Agent, in consultation with Parent
and the Company, will make all computations to give effect to this Section
2.01(b).
(ix) Newco Common Stock. The Newco Common Stock outstanding
immediately prior to the Merger Effective Time issued as contemplated by
Section 2.01(a)(ii) shall remain outstanding, without change, after the
Merger Effective Time, and no Merger Consideration shall be delivered or
deliverable in exchange therefor.
(x) Dissent Rights. Notwithstanding anything in this Agreement to
the contrary, shares ("Company Dissent Shares") of Company Common Stock
that are outstanding immediately prior to the Merger Effective Time and
that are held by any person who is entitled to demand and properly demands
payment of the fair value of such Company Dissent Shares pursuant to, and
who complies in all respects with, Sections 11.65 and 11.70 of the IBCA
("Sections 11.65 and 11.70") shall be
<PAGE>
16
converted into the right to receive Merger Consideration as provided in
Section 2.01(b)(ii), and shall thereafter be subject to sale and purchase
rights in accordance with Sections 11.65 and 11.70.
SECTION 2.02. Exchange of Certificates. (a) Exchange Agent.
Promptly following the Merger Effective Time, Newco shall deposit with such bank
or trust company as may be designated by Newco and reasonably acceptable to
Parent and the Company (the "Exchange Agent"), for the benefit of the holders of
shares of Parent Common Stock and Company Common Stock, for exchange in
accordance with this Article II, through the Exchange Agent, cash equal to the
sum of the total aggregate Parent Cash Consideration and Company Cash
Consideration and certificates representing the shares of Newco Common Stock
issuable pursuant to Section 2.01 in exchange for outstanding Company
Certificates or Parent Certificates. Newco shall provide to the Exchange Agent
on a timely basis, as and when needed after the Merger Effective Time, cash
equal to the sum of the total aggregate Parent Cash Consideration and Company
Cash Consideration (such shares of Newco Common Stock and cash, together with
any dividends or distributions with respect thereto, being hereinafter referred
to as the "Exchange Fund"). For the purposes of such deposit, Newco shall
assume that there will not be any fractional shares of Newco Common Stock.
Newco shall make available to the Exchange Agent, for addition to the Exchange
Fund, from time to time as needed, cash sufficient to pay cash in lieu of
fractional shares in accordance with Section 2.02(e).
(b) Exchange Procedures. (i) Not more than 90 days nor fewer than
30 days prior to the Closing Date, the Exchange Agent will mail a form of
election (a "Form of Election") to holders of record of shares of Parent Common
Stock and to the holders of record of shares of Company Common Stock (as of a
record date as close as practicable to the date of mailing and mutually agreed
to by Parent and Company). In addition, the Exchange Agent will use its best
efforts to make the Form of Election available to all persons who become
shareholders of Parent or Company during the period between such record date and
the Closing Date. Any election to receive the Exchange Consideration
contemplated by Section 2.01(a)(iv) or the Merger Consideration contemplated by
Section 2.01(b)(iv) will have been properly made only if the Exchange Agent
shall have received at its designated office or offices, by 5:00 p.m., New York
City time, on the fifth business day immediately
<PAGE>
17
preceding the Closing Date or such other date as may be agreed to by Parent and
the Company (the "Election Deadline"), a Form of Election properly completed and
accompanied by a Parent Certificate (as hereinafter defined) or a Company
Certificate (as hereinafter defined), as the case may be for the shares to which
such Form of Election relates, duly endorsed in blank or otherwise acceptable
for transfer on the books of Parent or Company, as the case may be (or an
appropriate guarantee of delivery), as set forth in such Form of Election. An
election may be revoked only by written notice received by the Exchange Agent
prior to 5:00 p.m., New York City time, on the Election Deadline. A revoked
election cannot be reinstated without valid resubmission, by the Election
Deadline of a valid Election Form, and a revocation will not constitute an
election for any other consideration. Revoked elections can only be replaced by
a new Form of Election properly completed and accompanied by the applicable
Parent Certificate or a Company Certificate, duly endorsed in blank or otherwise
acceptable for transfer in accordance with the previous sentence that is
received by the Exchange Agent by the Election Deadline. All elections shall
automatically be revoked if the Exchange Agent is notified in writing by Parent
and Company that either of the First Step Exchange or the Second Step Merger has
been abandoned. If an election is so revoked, the Certificate(s) (as hereinafter
defined) (or guarantee of delivery, as appropriate) to which such election
relates will be promptly returned to the person submitting the same to the
Exchange Agent. In the case of multiple Forms of Elections are received by the
Exchange Agent in respect of the same share of Company Common Stock or Parent
Common Stock, as the case may be, the last dated (or if not dated, the last
received) will govern.
(ii) Two or more holders of Parent Common Stock or Company Common
Stock who are determined to constructively own the shares of Parent Common Stock
or Company Common Stock, as the case may be, owned by each other by virtue of
Section 318(a) of the Code, and who so certify to Parent's and Company's
satisfaction, and any single holder of shares of Parent Common Stock or Company
Common Stock who holds his shares in two or more different names and who so
certifies to Parent's and Company's satisfaction, may submit a joint Form of
Election covering the aggregate shares of Parent Common Stock or Company Common
Stock, as the case may be, owned by all such holders or by such single holder,
as the case may be. For all purposes of this Agreement, each such group of
holders that, and each such single holder who,
<PAGE>
18
submits a joint Form of Election shall be treated as a single holder of Parent
Common Stock or Company Common Stock, as the case may be.
(iii) Record holders of Parent Common Stock or Company Common Stock
who are nominees only may submit a separate Form of Election for each beneficial
owner for whom such record holder is a nominee; provided, however, that on the
request of Parent or Company, such record holder shall certify to the
satisfaction of Parent or Company that such record holder holds such Parent
Common Stock or Company Common Stock, as the case may be, as nominee for the
beneficial owner thereof. For purposes of this Agreement, each beneficial owner
for which a Form of Election is submitted will be treated as a separate holder
of Parent Common Stock or Company Common Stock, as the case may be, subject,
however, to the immediately preceding sub-paragraph (ii) dealing with joint
Forms of Election and the immediately following sub-paragraph (iii) dealing with
dividend reinvestment plans.
(iv) Any dividend reinvestment plan, employee stock ownership plan or
similar plan of the Company may be treated as a single holder of Company Common
Stock or Parent Common Stock for the purposes of Section 2.02(e).
(v) As soon as reasonably practicable after the Merger Effective
Time, the Exchange Agent shall mail to each holder of record of a certificate or
certificates that immediately prior to the Exchange Effective Time represented
outstanding shares of Parent Common Stock that were converted into the right to
receive Exchange Consideration (the "Parent Certificates") or that immediately
prior to the Merger Effective Time represented outstanding shares of Company
Common Stock that were converted into the right to receive Merger Consideration
(the "Company Certificates" and, together with the Parent Certificates, the
"Certificates"), in each case, pursuant to Section 2.01, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for Exchange Consideration or Merger Consideration, as the case may be.
<PAGE>
19
(vi) With respect to properly made elections in accordance with
Section 2.02(b)(i), upon surrender of a Certificate for cancelation to the
Exchange Agent, together with such letter of transmittal, duly executed, and
such other documents as may reasonably be required by the Exchange Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor
Parent Cash Consideration or Company Cash Consideration and a certificate
representing that number of whole shares of Newco Common Stock (together with
cash in lieu of fractional shares), in each case, that such holder has the right
to receive pursuant to the provisions of this Article II, and the Certificate so
surrendered shall forthwith be canceled. Until such time as a certificate
representing Newco Common Stock is issued to or at the direction of the holder
of a surrendered Company Certificate or Parent Certificate, such Newco Common
Stock shall be deemed not outstanding and shall not be entitled to vote on any
matter. In the event of a transfer of ownership of Parent Common Stock or
Company Common Stock that is not registered in the transfer records of Parent or
the Company, as the case may be, payment may be made and a certificate
representing the appropriate number of shares of Newco Common Stock may be
issued to a person other than the person in whose name the Certificate so
surrendered is registered, if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting such payment
shall pay any transfer or other taxes required by reason of such payment or the
issuance of shares of Newco Common Stock to a person other than the registered
holder of such Certificate or establish to the satisfaction of Newco that such
tax has been paid or is not applicable. Subject to Sections 11.65 and 11.70 of
the IBCA (in the case of a Company Certificate) or Subchapter D of Chapter 15 of
the PBCL (in the case of Parent Certificates) until surrendered as contemplated
by this Section 2.02, each Company Certificate or Parent Certificate shall be
deemed at any time after the Merger Effective Time or Exchange Effective Time,
as applicable, to represent only the right to receive upon such surrender Merger
Consideration or Exchange Consideration, as applicable, as contemplated by this
Section 2.02. No interest shall be paid or accrue on any cash payable, whether
in respect of Exchange Consideration, Merger Consideration, dividends or
otherwise, upon surrender of any Certificate.
(c) Distributions with Respect to Unexchanged Shares. No dividends
or other distributions with respect to
<PAGE>
20
Newco Common Stock with a record date after the Merger Effective Time shall be
paid to the holder of any unsurrendered Company Certificate or Parent
Certificate with respect to the shares of Newco Common Stock issuable upon
surrender thereof, and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.02(e), until the surrender of such
certificate in accordance with this Article II. Subject to Applicable Law,
following surrender of any such Certificate, there shall be paid to the holder
of the certificate representing whole shares of Newco Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of any cash payable in lieu of a fractional share of Newco Common Stock
to which such holder is entitled pursuant to Section 2.02(e) and the amount of
dividends or other distributions with a record date after the Merger Effective
Time theretofore paid with respect to such whole shares of Newco Common Stock,
and (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Merger Effective Time but prior to
such surrender and a payment date subsequent to such surrender payable with
respect to such whole shares of Newco Common Stock.
(d) No Further Ownership Rights in Parent Common Stock or Company
Common Stock. The Exchange Consideration and Merger Consideration issued (and
paid) in accordance with the terms of this Article II upon conversion and
exchange of any shares of Parent Common Stock or Company Common Stock, as the
case may be, shall be deemed to have been issued (and paid) in full satisfaction
of all rights pertaining to such shares of Parent Common Stock or Company Common
Stock, subject, however, to (i) the Surviving Corporation's obligations to pay
or provide for the rights of dissenters and (ii) the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a record
date prior to the Merger Effective Time that may have been declared or made by
the Parent on such shares of Parent Common Stock or the Company on such shares
of Company Common Stock, respectively, in accordance with the terms of this
Agreement or prior to the date of this Agreement and which remain unpaid at the
Merger Effective Time, and after the Merger Effective Time there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of shares of Parent Common Stock or Company Common Stock that were
outstanding immediately prior to the Merger Effective Time. If, after the Merger
Effective Time, any certificates
<PAGE>
21
formerly representing shares of Parent Common Stock or Company Common Stock, as
the case may be, are presented to the Surviving Corporation or the Exchange
Agent for any reason, they shall be canceled and exchanged as provided in this
Article II.
(e) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of Newco Common Stock shall be issued upon the conversion of
Company Common Stock pursuant to Section 2.01, and such fractional share
interests shall not entitle the owner thereof to vote or to any rights of a
holder of Newco Common Stock. For purposes of this Section 2.02(e), all
fractional shares to which a single record holder would be entitled shall be
aggregated and calculations shall be rounded to three decimal places.
(ii) As promptly as practicable following the Merger Effective Time,
the Exchange Agent shall determine the excess of (A) the number of shares of
Newco Common Stock delivered to the Exchange Agent by Newco pursuant to Section
2.02(a) over (B) the aggregate number of whole shares of Newco Common Stock to
be issued to holders of Company Common Stock pursuant to Section 2.02(b) (such
excess being herein called the "Excess Shares"). As soon after the Merger
Effective Time as practicable, the Exchange Agent, as agent for the holders of
Company Common Stock, shall sell the Excess Shares at then prevailing prices on
the New York Stock Exchange (the "NYSE"), all in the manner provided in Section
2.02(e)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent shall be
executed on the NYSE through one or more member firms of the NYSE and shall be
executed in round lots to the extent practicable. The proceeds from such sale
or sales available for distribution to the holders of Company Common Stock shall
be reduced by transfer taxes in connection with such sale or sales of the Excess
Shares. Until the net proceeds of such sale or sales have been distributed to
the holders of Company Common Stock entitled thereto, the Exchange Agent shall
hold such proceeds in trust for such holders of Company Common Stock (the
"Common Shares Trust"). The Exchange Agent shall determine the portion of the
Common Shares Trust to which each holder of a Certificate shall be entitled, if
any, by multiplying the amount of the aggregate net proceeds comprising the
Common Shares Trust by a fraction, the numerator of which is the amount of the
fractional share interest in a share of Newco Common Stock to which such holder
is entitled under
<PAGE>
22
Section 2.01(b)(ii) (or would be entitled but for this Section 2.02(e)) and the
denominator of which is the aggregate amount of fractional interests in a share
of Newco Common Stock to which all holders of Company Common Stock are entitled.
(iv) As soon as practicable after the determination of the amount of cash,
if any, to be paid to holders of Company Common Stock in lieu of any fractional
share interests in Newco Common Stock, the Exchange Agent shall make available
such amounts, without interest, to such holders entitled to receive such cash.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
that remains undistributed to the holders of Parent Common Stock or Company
Common Stock for six months after the Merger Effective Time shall be delivered
to Newco, upon demand, and any holder of Parent Common Stock or Company Common
Stock who has not theretofore complied with this Article II shall thereafter
look only to Newco for payment of its claim for Exchange Consideration or Merger
Consideration, as the case may be, and any dividends or distributions with
respect to Newco Common Stock as contemplated by Section 2.02(c).
(g) No Liability. None of Parent, Newco, the Company or the Exchange
Agent shall be liable to any person in respect of any shares of Newco Common
Stock (or dividends or distributions with respect thereto) or cash from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Applicable Law. If any Company
Certificate or Parent Certificate has not been surrendered prior to five years
after the Merger Effective Time (or immediately prior to such earlier date on
which Merger Consideration or Exchange Consideration or any dividends or
distributions with respect to Newco Common Stock as contemplated by Section
2.02(c)(i) in respect of such Company Certificate or Parent Certificate would
otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 3.05)), any such shares, cash, dividends or distributions in
respect of such Company Certificate shall, to the extent permitted by Applicable
Law, become the property of the Surviving Corporation, free and clear of all
claims or interest of any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund,
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23
as directed by Newco, on a daily basis. Any interest and other income resulting
from such investments shall be paid to Newco.
(i) Withholding Rights. Newco shall be entitled to deduct and
withhold from the consideration otherwise payable to any holder of Parent Common
Stock or Company Common Stock pursuant to this Agreement such amounts as may be
required to be deducted and withheld with respect to the making of such payment
under the Code, or under any provision of state, local or foreign tax law. To
the extent that amounts are so withheld and paid over to the appropriate taxing
authority, Newco will be treated as though it withheld an appropriate amount of
the type of consideration otherwise payable pursuant to this Agreement to any
holder of Parent Common Stock or Company Common Stock, sold such consideration
for an amount of cash equal to the fair market value of such consideration at
the time of such deemed sale and paid such cash proceeds to the appropriate
taxing authority.
(j) Determination of Proper Elections. Without limiting the
generality or effect of any other provision hereof, the Exchange Agent will have
discretion to determine whether or not elections have been properly made or
revoked pursuant to this Article II with respect to Parent Common Stock or
Company Common Stock and when elections and revocations were received by it. If
the Exchange Agent determines that any election was not properly made with
respect to Parent Company Stock or Company Common Stock, such Parent Company
Stock or Company Common Stock will be treated by the Exchange Agent as, and for
all purposes of this Agreement will be deemed to be, Parent Non-Election Shares
or Company Non-Election Shares, as the case may be, at the Exchange Effective
Time or the Merger Effective Time, as the case may be. The Exchange Agent will
also make computations as to the allocation and proration contemplated by this
Article II and any such computation will be conclusive and binding. The
Exchange Agent may, with the mutual agreement of Parent and the Company, make
such equitable changes in the procedures set forth herein for the implementation
of the elections provided for in this Article II as it determines to be
necessary or desirable to effect fully such elections.
Section 2.03. Certain Adjustments. (a) Parent and the Company may,
upon mutual agreement, and in order to prevent the failure of the closing
conditions set forth in
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24
Section 7.02(d) and 7.03(d) or to ensure that the Merger and the other
Transactions are treated as a purchase of the Company by Parent under GAAP,
change the Parent Cash Number and the Parent Stock Number and the Company Cash
Number and the Company Stock Number (the "Reallocation") so long as the sum of
the (i) product of the Parent Cash Number and the Parent Cash Consideration and
(ii) the product of the Company Cash Number and the Company Cash Consideration,
does not change as a result of the Reallocation.
(b) If after the date hereof and on or prior to the Closing Date, the
outstanding shares of Parent Common Stock or Company Common Stock shall be
changed into a different number of shares by reason of any reclassification,
recapitalization, split-up, combination or exchange of shares, or any dividend
payable in stock or other securities is declared thereon with a record date
within such period, or any similar event shall occur, the Exchange Consideration
and the Merger Consideration will be adjusted accordingly to provide to the
holders of Parent Common Stock and Company Common Stock, respectively, the same
economic effect as contemplated by this Agreement prior to such
reclassification, recapitalization, split-up, combination, exchange or dividend
or similar event. This provision is not intended to affect the need for either
party to obtain the other party's consent to take such an action under any other
provision of this Agreement.
<PAGE>
25
ARTICLE III
Representations and Warranties of the Company
---------------------------------------------
The Company represents and warrants to Parent and Newco as follows:
SECTION 3.01. Organization, Standing and Power. Each of the Company
and each of its subsidiaries (the "Company Subsidiaries") is duly organized,
validly existing and in good standing (with respect to jurisdictions which
recognize the concept of good standing) under the laws of the jurisdiction in
which it is organized and has full corporate power and authority and possesses
all governmental franchises, licenses, permits, authorizations and approvals
necessary to enable it to own, lease or otherwise hold its properties and assets
and to conduct its businesses as conducted as of the date of this Agreement,
other than such franchises, licenses, permits, authorizations and approvals the
lack of which, individually or in the aggregate, has not had and could not
reasonably be expected to have a Material Adverse Effect on the Company (a
"Company Material Adverse Effect"). The Company and each Company Subsidiary is
duly qualified to do business in each jurisdiction where the nature of its
business or their ownership or leasing of its properties make such qualification
necessary, other than such qualifications the lack of which, individually or in
the aggregate, has not had and could not reasonably be expected to have a
Company Material Adverse Effect. The Company has made available to Parent true
and complete copies of the articles of incorporation of the Company, as amended
to the date of this Agreement (as so amended, the "Company Charter"), and the
By-laws of the Company, as amended to the date of this Agreement (as so amended,
the "Company By-laws"), and the comparable charter or organizational documents
of each Company Subsidiary, in each case as amended through the date of this
Agreement.
SECTION 3.02. Company Subsidiaries; Equity Interests. (a) The
letter, dated as of the date of this Agreement, from the Company to Parent and
Newco (the "Company Disclosure Letter") lists each Company Subsidiary and its
jurisdiction of organization and specifies each of the Company Subsidiaries that
is (i) a "public-utility company", a "holding company", a "subsidiary company",
an "affiliate" of any public-utility company, an "exempt wholesale generator" or
a "foreign utility company" within the meaning of Section 2(a)(5), 2(a)(7),
2(a)(8), 2(a)(11),
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26
32(a)(1) or 33(a)(3) of the Public Utility Holding Company Act of 1935, as
amended ("PUHCA"), respectively, (ii) a "public utility" within the meaning of
Section 201(e) of the Federal Power Act (the "Power Act") or (iii) a "qualifying
facility" within the meaning of the Public Utility Regulatory Policies Act of
1978, as amended ("PURPA"), or that owns such a qualifying facility. All the
outstanding shares of capital stock of each Company Subsidiary have been validly
issued and are fully paid and nonassessable and, except as set forth in the
Company Disclosure Letter, are owned by the Company, by another Company
Subsidiary or by the Company and another Company Subsidiary, free and clear of
all pledges, liens, charges, mortgages, encumbrances and security interests of
any kind or nature whatsoever (collectively, "Liens").
(b) Except for its interests in the Company Subsidiaries and except
for the ownership interests set forth in the Company Disclosure Letter or
interests acquired after the date of this Agreement without violating any
covenant of this Agreement, the Company does not own, directly or indirectly,
any capital stock, membership interest, partnership interest, joint venture
interest or other equity interest with a fair market value as of the date of
this Agreement in excess of $500,000 in any person, as reasonably determined by
the Company.
SECTION 3.03. Capital Structure. (a) The authorized capital stock
of the Company consists of 400,000,000 shares of Company Common Stock. At the
close of business on August 31, 1999, (i) 217,411,003 shares of Company Common
Stock were issued and outstanding, (ii) 264,406 shares of Company Common Stock
were held by the Company in its treasury, (iii) 4,625,691 shares of Company
Common Stock were subject to outstanding Company Employee Stock Options (as
defined in Section 6.04) and 4,700,637 additional shares of Company Common Stock
were reserved for issuance pursuant to the Company Stock Plans (as defined in
Section 6.04), (iv) 368,171 shares of Company Common Stock were reserved for
issuance pursuant to the Company's Employee Stock Purchase Plan, (v) 164,845
shares of Company Common Stock were reserved for issuance pursuant to the
Company's 1996 Directors' Fee Plan, (vi) 88,526 shares of Company Common Stock
were subject to exchange for the common stock, $12.50 par value of ComEd, and
(vii) 400,000 shares of Company Common Stock were reserved for issuance in
connection with the rights (the "Company Rights") issued pursuant to the Rights
Agreement dated as of
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27
February 2, 1998 (as amended from time to time, the "Company Rights Agreement"),
between the Company and First Chicago Trust Company of New York, as Rights
Agent.
(b) Except as set forth in clause (a) of this Section 3.03 or in the
Company Disclosure Letter, at the close of business on August 31, 1999, no
shares of capital stock or other voting securities of the Company were issued,
reserved for issuance or outstanding.
(c) All outstanding shares of Company Common Stock are, and all such
shares that may be issued prior to the Merger Effective Time will be when
issued, duly authorized, validly issued, fully paid and nonassessable and not
subject to or issued in violation of any purchase option, call option, right of
first refusal, preemptive right, subscription right or any similar right under
any provision of the IBCA, the Company Charter, the Company By-laws or any
Contract (as defined in Section 3.05) to which the Company is a party or
otherwise bound.
(d) There are not any bonds, debentures, notes or other indebtedness
of the Company having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which holders of
Company Common Stock may vote ("Voting Company Debt").
(e) Except as set forth in clause (a) of this Section 3.03 or in the
Company Disclosure Letter, as of the date of this Agreement, there are not any
options, warrants, rights, convertible or exchangeable securities, "phantom"
stock rights, stock appreciation rights, stock-based performance units,
commitments, Contracts, arrangements or undertakings of any kind to which the
Company or any Company Subsidiary is a party or by which any of them is bound
(i) obligating the Company or any Company Subsidiary to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital stock or
other equity interests in, or any security convertible or exercisable for or
exchangeable into any capital stock of or other equity interest in, the Company
or of any Company Subsidiary or any Voting Company Debt or (ii) obligating the
Company or any Company Subsidiary to issue, grant, extend or enter into any such
option, warrant, call, right, security, commitment, Contract, arrangement or
undertaking.
(f) As of the date of this Agreement, except as described in the
Company Disclosure Letter, there are not
<PAGE>
28
any outstanding contractual obligations of the Company or any Company Subsidiary
to repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any Company Subsidiary.
(g) The Company has delivered to Parent a complete and correct copy
of the Company Rights Agreement, as amended to the date of this Agreement.
SECTION 3.04. Authority; Execution and Delivery; Enforceability. (a)
The Company has all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the Transactions. The execution and
delivery by the Company of this Agreement and the consummation by the Company of
the Transactions have been duly authorized by all necessary corporate action on
the part of the Company, subject, in the case of the Second Step Merger, to
receipt of the Company Shareholder Approval (as defined in Section 3.04(c)).
The Company has duly executed and delivered this Agreement, and this Agreement
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.
(b) The Board of Directors of the Company (the "Company Board"), at a
meeting duly called and held, duly and unanimously adopted resolutions (i)
approving this Agreement, the Merger and the other Transactions, (ii)
determining that the terms of the Second Step Merger and the other Transactions
are fair to and in the best interests of the Company and its shareholders and
(iii) directing that this Agreement be submitted to a vote of the Company's
shareholders and recommending that they approve this Agreement. Such
resolutions are sufficient to render inapplicable to Parent and Newco and this
Agreement, to the extent otherwise applicable, the Merger and the other
Transactions the provisions of Sections 7.85 and 11.75 of the IBCA. To the
Company's knowledge, no other state takeover statute or similar statute or
regulation applies or purports to apply to the Company with respect to this
Agreement, the Second Step Merger or any other Transaction.
(c) The only vote of holders of any class or series of Company
securities necessary to approve and adopt this Agreement and the Second Step
Merger is the approval of this Agreement by the holders of at least two-thirds
of the shares of outstanding Company Common Stock entitled to vote (the "Company
Shareholder Approval"). The affirmative vote of the holders of Company Common
Stock, or any of them, is
<PAGE>
29
not necessary to consummate any Transaction other than the Second Step Merger.
SECTION 3.05. No Conflicts; Consents. (a) Except as set forth in the
Company Disclosure Letter, the execution and delivery by the Company of this
Agreement does not, and the consummation of the Merger and the other
Transactions and compliance with the terms hereof and thereof will not, conflict
with, or result in any violation of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, consent,
approval, cancelation or acceleration of any obligation or to loss of a material
benefit under, or to increased, additional, accelerated or guaranteed rights or
entitlements of any person under, or result in the creation of any Lien upon any
of the properties or assets of the Company or any Company Subsidiary under, any
provision of (i) the Company Charter, the Company By-laws or the comparable
charter or organizational documents of any Company Subsidiary, (ii) any loan or
credit agreement, contract, lease, license, indenture, note, bond, agreement,
permit, concession, franchise or other instrument (a "Contract") to which the
Company or any Company Subsidiary is a party or by which any of their respective
properties or assets is bound or (iii) subject to the filings and other matters
referred to in Section 3.05(b), any judgment, order or decree ("Judgment") or
statute, law, ordinance, rule or regulation ("Applicable Law") or writ, permit
or license applicable to the Company or any Company Subsidiary or their
respective properties or assets (other than immaterial consents, approvals,
licenses, permits, orders, authorizations, registrations, declarations or
filings, including with respect to communications systems, zoning, name changes,
occupancy and similar routine regulatory approvals), other than, in the case of
clauses (ii) and (iii) above, any such items that, individually or in the
aggregate, have not had and could not reasonably be expected to have a Company
Material Adverse Effect.
(b) No consent, approval, license, permit, order or authorization
(other than immaterial consents, approvals, licenses, permits, orders,
authorizations, registrations, declarations or filings, including with respect
to communications systems, zoning, name changes, occupancy and similar routine
regulatory approvals) ("Consent") of, action by or in respect of, or
registration, declaration or filing with, or notice to, any Federal, state,
local or foreign government or any court of competent jurisdiction,
<PAGE>
30
administrative or regulatory agency or commission or other governmental
authority or instrumentality or any non-governmental self-regulatory agency,
commission or authority, domestic or foreign (a "Governmental Entity") is
required to be obtained or made by or with respect to the Company or any Company
Subsidiary in connection with the execution, delivery and performance of this
Agreement or the consummation of the Transactions, other than (i) compliance
with and filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), (ii) the filing with the Securities and Exchange
Commission (the "SEC") of (A) a proxy or information statement relating to the
approval of this Agreement by the Company's shareholders (the "Proxy
Statement"), and (B) such reports under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as may be required in connection with this
Agreement, the Second Step Merger and the other Transactions, (iii) the filing
of the Illinois Articles of Merger with, and the issuance of a certificate of
merger by, the Secretary of State of the State of Illinois, the filing of the
Pennsylvania Articles of Merger with the Department of State of Pennsylvania and
the filing of appropriate documents with the relevant authorities of the other
jurisdictions in which the Company is qualified to do business, (iv) notice to,
and the consent and approval of, the Federal Energy Regulatory Commission
("FERC") under the Power Act, (v) notice to, and the consent and approval of,
the Nuclear Regulatory Commission (the "NRC") under the Atomic Energy Act of
1954, as amended (the "Atomic Energy Act"), (vi) notice to the Illinois Commerce
Commission (the "ICC"), (vii) the consents, filings and approvals required under
PUHCA, (viii) compliance with and such filings as may be required under
applicable Environmental Laws (as defined in Section 3.17), (ix) such filings as
may be required in connection with the taxes described in Section 6.09 and (x)
such other items as are set forth in the Company Disclosure Letter
(collectively, whether or not legally required to be obtained, the "Company
Required Statutory Approvals").
(c) The Company and the Company Board have taken all action necessary
to (i) render the Company Rights inapplicable to this Agreement, the Merger and
the other Transactions and (ii) ensure that (A) neither Parent nor any of its
affiliates or associates is or will become an "Acquiring Person" (as defined in
the Company Rights Agreement) by reason of this Agreement, the Merger or any
other Transaction, (B) a "Distribution Date" (as defined in
<PAGE>
31
the Company Rights Agreement) shall not occur by reason of this Agreement, the
Merger or any other Transaction and (C) the Company Rights shall expire
immediately prior to the Merger Effective Time.
SECTION 3.06. SEC Documents; Undisclosed Liabilities. The Company
and the Company Subsidiaries have filed all reports, schedules, forms,
statements and other documents required to be filed by the Company or any
Company Subsidiary with the SEC since January 1, 1998 (the "Company SEC
Documents"). Each Company SEC Document complied in all material respects as of
its respective date with the requirements of the Exchange Act or the Securities
Act of 1933, as amended (the "Securities Act"), as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to such
Company SEC Document, and except to the extent that information contained in any
Company SEC Document has been revised or superseded by a later filed Company SEC
Document, does not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of the Company
included in the Company SEC Documents comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles ("GAAP") (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). Except as
set forth in the Filed Company SEC Documents (as defined in Section 3.08) or the
Company Disclosure Letter or incurred after the date hereof in the usual,
regular and ordinary course of business in substantially the same manner as
previously conducted and not prohibited by this Agreement, neither the Company
nor any Company Subsidiary has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by GAAP to be set
forth on a consolidated balance sheet of the Company and its consolidated
subsidiaries or in the notes thereto and that,
<PAGE>
32
individually or in the aggregate, could reasonably be expected to have a Company
Material Adverse Effect.
SECTION 3.07. Information Supplied. None of the information supplied
or to be supplied by the Company for inclusion or incorporation by reference in
(i) the registration statement on Form S-4 to be filed with the SEC by Newco in
connection with the Share Issuance (the "Form S-4") will, at the time the Form
S-4 is filed with the SEC, at any time it is amended or supplemented or at the
time it becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, or (ii) the
Proxy Statement will, at the date it is first mailed to the Company's
shareholders or Parent's shareholders or at the time of the Company Shareholders
Meeting (as defined in Section 6.01) or the Parent Shareholders Meeting (as
defined in Section 6.01), contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Proxy Statement will comply as to form in
all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder, except that no representation is made by the Company
with respect to statements made or incorporated by reference therein based on
information supplied by or on behalf of Parent or Newco for inclusion or
incorporation by reference in the Proxy Statement.
SECTION 3.08. Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Documents filed and publicly available prior to the
date of this Agreement (the "Filed Company SEC Documents") or in the Company
Disclosure Letter:
(a) since December 31, 1998, there has not been any event, change,
effect or development that, individually or in the aggregate, has had or could
reasonably be expected to have a Company Material Adverse Effect, other than
events, changes, effects and developments relating to the economy in general or
to the Company's industry in general and not specifically relating to the
Company or any Company Subsidiary; and
(b) from December 31, 1998 to the date of this Agreement, the Company
has conducted its business only in
<PAGE>
33
the ordinary course, and during such period there has not been:
(i) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any
Company Common Stock or any repurchase for value by the Company of any
Company Common Stock;
(ii) any split, combination or reclassification of any Company Common
Stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of
Company Common Stock; or
(iii) any change in accounting methods, principles or practices by the
Company or any Company Subsidiary materially affecting the consolidated
assets, liabilities or results of operations of the Company, except insofar
as may have been required by a change in GAAP.
SECTION 3.09. Taxes. (a) Each of the Company and each Company
Subsidiary has timely filed, or has caused to be timely filed on its behalf, all
Tax Returns required to be filed by it (or requests for extensions to file such
Tax Returns have been timely filed and granted and have not expired), and all
such Tax Returns are true, complete and accurate, except to the extent any
failure to file or any inaccuracies in any filed Tax Returns would not,
individually or in the aggregate, have a Company Material Adverse Effect. All
Taxes shown to be due on such Tax Returns, or otherwise owed by the Company or
any Company Subsidiary, have been timely paid, except to the extent that any
failure to pay, individually or in the aggregate, has not had and could not
reasonably be expected to have a Company Material Adverse Effect.
(b) Except as set forth in the Company Disclosure Letter, the most
recent financial statements contained in the Filed Company SEC Documents reflect
an adequate reserve for all current Taxes payable by the Company and the Company
Subsidiaries (in addition to any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) for all Taxable periods
and portions thereof through the date of such financial statements. Except as
set forth in the Company Disclosure Letter, no deficiency with respect to any
Taxes has, to the best knowledge of the
<PAGE>
34
Company, been proposed, asserted or assessed against the Company or any Company
Subsidiary, and no requests for waivers of the time to assess any such Taxes are
pending, except to the extent any such deficiency or request for waiver,
individually or in the aggregate, has not had and could not reasonably be
expected to have a Company Material Adverse Effect.
(c) The Federal income Tax Returns of the Company and each Company
Subsidiary consolidated in such Returns have been examined by and settled with
the United States Internal Revenue Service for all years through 1995. Except
as set forth in the Company Disclosure Letter, all material assessments for
Taxes due with respect to such completed and settled examinations or any
concluded litigation have been fully paid.
(d) There are no material Liens for Taxes (other than for current
Taxes not yet due and payable) on the assets of the Company or any Company
Subsidiary. Except as set forth in the Company Disclosure Letter, neither the
Company nor any Company Subsidiary is bound by any agreement with respect to
Taxes.
(e) The Company and each Company Subsidiary have complied with all
applicable statutes, laws, ordinances, rules and regulations relating to the
payment and withholding of taxes (including withholding of taxes pursuant to
Sections 1441, 1442, 3121 and 3402 of the Code or similar provisions under any
Federal, state or local laws, domestic and foreign) and have, within the time
and in the manner prescribed by law, withheld from and paid over to the proper
governmental authorities all amounts required to be so withheld and paid over
under applicable laws, except to the extent that any failure to withhold or to
pay, individually or in the aggregate, has not had and could not reasonably be
expected to have a Company Material Adverse Effect.
(f) The Company knows of no fact and neither the Company nor any
Company Subsidiary has taken or agreed to take any action that could reasonably
be expected to prevent (i) the Merger from constituting transactions described
in Section 351 of the Code or (ii) the Second Step Merger from constituting a
transaction described in Section 368(a) of the Code.
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35
(g) For purposes of this Agreement:
"Taxes" includes all forms of taxation, whenever created or imposed,
and whether of the United States or elsewhere, and whether imposed by a local,
municipal, state, foreign, Federal or other Governmental Entity, or in
connection with any agreement with respect to Taxes, including all interest,
penalties and additions imposed with respect to such amounts.
"Tax Return" means all Federal, state, local, provincial and foreign
Tax returns, declarations, statements, reports, schedules, forms and information
returns and any amended Tax return required to be filed with any taxing
authority with respect to Taxes.
SECTION 3.10. Absence of Changes in Benefit Plans. Except as
disclosed in the Company Disclosure Letter, from December 31, 1998 to the date
of this Agreement, there has not been any adoption or amendment in any material
respect by the Company or any Company Subsidiary of (a) any collective
bargaining agreements, (b) any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, program, policy, arrangement or
understanding (whether or not legally binding) providing benefits to any current
or former employee, officer or director of the Company or any Company Subsidiary
or any beneficiary or dependent thereof, that is sponsored or maintained by the
Company or any Company Subsidiary or to which the Company or any Company
Subsidiary contributes or is obligated to contribute (collectively, "Company
Benefit Plans") or (c) any Company Employment Arrangements (as defined herein).
Except as disclosed in the Company Disclosure Letter, as of the date of this
Agreement there are not any employment, consulting, indemnification, change-of-
control, severance or termination agreements or arrangements between the Company
or any Company Subsidiary and any current or former employee, officer or
director of the Company or any Company Subsidiary (collectively, the "Company
Employment Arrangements").
SECTION 3.11. ERISA Compliance; Excess Parachute Payments. (a) The
Company Disclosure Letter includes a complete list of all material Company
Benefit Plans and Company Employment Arrangements as of the date of this
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36
Agreement. With respect to each Company Benefit Plan (other than a multiemployer
plan within the meaning of Section 4001(a)(3) of ERISA) and Company Employment
Arrangement, the Company has delivered to Parent true, complete and correct
copies of (i) each such Company Benefit Plan or Company Employment Arrangement
(or, in the case of any unwritten plan or arrangement, a description thereof),
(ii) the most recent annual report on the applicable Form 5500 series filed with
the Internal Revenue Service (if any such report was required), including all
schedules and attachments thereto, (iii) the most recent summary plan
description (if a summary plan description is required) and all summaries of
material modifications thereto, (iv) each trust agreement, group annuity
contract or other funding vehicle relating to any such Company Benefit Plan or
Company Employment Arrangement, (v) the most recent actuarial report or
valuation relating thereto and (vi) the most recent determination letters issued
by the Internal Revenue Service with respect to Company Benefit Plans that are
intended to be qualified and exempt from Federal income taxes under Sections
401(a) and 501(a), respectively, of the Code ("Qualified Plans") and letters of
recognition of exemption with respect to any Company Benefit Plan or related
trust that is intended to meet the requirements of Section 501(c)(9) of the
Code.
(b) With respect to the Company Benefit Plans and Company Employment
Arrangements, individually and in the aggregate, no event has occurred and, to
the knowledge of the Company, there exists no condition or set of circumstances,
in connection with which the Company or any Company Subsidiary could be subject
to any liability that has had or could reasonably be expected to have a Company
Material Adverse Effect (except liability for benefits claims and funding
obligations payable in the ordinary course) under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), the Code or any other applicable
law. For purposes of this Section 3.11(b), the term "Company Benefit Plan"
shall also include any employee benefit plan within the meaning of Section 3(3)
of ERISA that, within the last six years, was sponsored or maintained by any
entity which would be treated under Section 414 of the Code as a single employer
with the Company or any Company Subsidiary or to which any such entity
contributed or was obligated to contribute.
(c) Each Company Benefit Plan and each Company Employment Arrangement
has been administered in accordance
<PAGE>
37
with its terms except for any failures so to administer any Company Benefit Plan
or Company Employment Arrangement as have not had and could not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect. The Company, all Company Subsidiaries and all the Company Benefit Plans
and Company Employment Arrangements are in compliance with the applicable
provisions of ERISA, the Code and all other applicable laws and the rules and
regulations thereunder and the terms of all applicable collective bargaining
agreements, except for any failures to be in such compliance as have not had and
could not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect. Except as disclosed in the Company Disclosure
Letter, there are no pending or, to the knowledge of the Company, threatened or
anticipated claims under or with respect to any Company Benefit Plan or Company
Employment Arrangement by or on behalf of any current or former employee,
officer or director, or dependent or beneficiary thereof, or otherwise (other
than routine claims for benefits).
(d) Except as disclosed in the Company Disclosure Letter, (i) no
current or former employee, officer or director of the Company or any Company
Subsidiary will be entitled to any additional rights or benefits or any
acceleration of the time of payment or vesting of any benefits under any Company
Benefit Plan or Company Employment Arrangement, and no trustee under any "rabbi
trust", or similar arrangement maintained in connection with any Company Benefit
Plan or Company Employment Arrangement will be entitled to any payment, as a
result (either alone or upon the occurrence of any additional or further acts or
events) of the execution of this Agreement or the consummation, announcement or
other actions relating to the Transactions and (ii) no amount payable to any
current or former employee, officer or director of the Company or any Company
Subsidiary will fail to be deductible by reason of Section 280G of the Code.
(e) Each Company Benefit Plan intended to be a Qualified Plan has
received a favorable determination letter from the Internal Revenue Service that
it is so qualified and nothing has occurred since the date of such letter that
could reasonably be expected to affect the qualified status of such Company
Benefit Plan.
(f) The aggregate accumulated benefit obligations of each Company
Benefit Plan subject to Title IV of ERISA
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38
(as of the date of the most recent actuarial valuation prepared for such Company
Benefit Plan) do not exceed the fair market value of the assets of such plan (as
of the date of such valuation).
(g) All contributions and other payments required to have been made
for any completed historical period by the Company or any Company Subsidiary to
any Company Benefit Plan or Company Employment Arrangement (or to any person
pursuant to the terms thereof) have been timely made or paid in full, or, to the
extent not required to be made or paid for such period, have been reflected in
the consolidated financial statements of the Company.
(h) Except as disclosed in the Company Disclosure Letter, no Company
Benefit Plan is a multiemployer plan within the meaning of Section 4001(a)(3) of
ERISA, and none of the Company or any Company Subsidiary has, at any time during
the last six years, contributed to or been obligated to contribute to any such
multiemployer plan. For purposes of the representations and warranties made in
the last sentence of Section 3.11(c) and in Sections 3.11(e) and (f), the term
"Company Benefit Plan" shall be deemed to exclude any such multiemployer plan.
SECTION 3.12. Litigation. Except as disclosed in the Filed Company
SEC Documents or in the Company Disclosure Letter, there is no suit, action or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any Company Subsidiary that, individually or in the aggregate, has
had or could reasonably be expected to have a Company Material Adverse Effect,
nor is there any Judgment outstanding against the Company or any Company
Subsidiary that has had or could reasonably be expected to have a Company
Material Adverse Effect.
SECTION 3.13. Compliance with Applicable Laws; Permits. (a) Except
as disclosed in the Filed Company SEC Documents or in the Company Disclosure
Letter, the Company and the Company Subsidiaries are in compliance with the
terms of all Company Permits (as defined in Section 3.13(b)) and all Applicable
Laws, except for instances of noncompliance that, individually and in the
aggregate, have not had and could not reasonably be expected to have a Company
Material Adverse Effect. This Section 3.13 does not relate to matters with
respect to Taxes, which are the subject of Section 3.09, Environmental Laws,
which are the subject of Section 3.17, benefits plans, which are the
<PAGE>
39
subject of Section 3.11 and the operation of nuclear power plants, which are the
subject of Section 3.19.
(b) Except as disclosed in the Filed Company SEC Documents or in the
Company Disclosure Letter, the Company and the Company Subsidiaries own or have
sufficient rights and consents to use under existing franchises, permits,
easements, leases, and license agreements (the "Company Permits") all
properties, rights and assets necessary for the conduct of their business and
operations as currently conducted, except where the failure to own or have
sufficient rights to such properties, rights and assets, individually or in the
aggregate, have not had and could not reasonably be expected to have a Company
Material Adverse Effect. Except as provided in the Illinois Electric Customer
Choice and Rate Relief Law of 1997, to the knowledge of the Company, no other
private corporation can commence electric public utility operations in any part
of the respective territories now served by the Company or any Company
Subsidiary, without obtaining a certificate of public convenience and necessity
from the applicable state utility commission.
SECTION 3.14. Brokers; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other person, other than Wasserstein
Perella & Co. and Goldman Sachs & Co., the fees and expenses of which will be
paid by the Company, is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the Second Step Merger and
the other Transactions based upon arrangements made by or on behalf of the
Company.
SECTION 3.15. Opinion of Financial Advisor. The Company has received
the opinion of Wasserstein Perella & Co., dated the date of this Agreement, to
the effect that, as of such date, the Company Merger Consideration is fair to
the holders of Company Common Stock from a financial point of view, a signed
copy of which opinion has been delivered to Parent.
SECTION 3.16. Year 2000. The Company SEC Documents fairly summarize
the status of the Company's computer applications and components, modification
or readiness plan, communications with suppliers and vendors, contingency plans
and estimated cost of remediation as they relate to the Year 2000 issue. The
Company has made available to Parent copies of all correspondence between the
<PAGE>
40
Company and its third party suppliers and vendors concerning their Year 2000
compliance.
SECTION 3.17. Environmental Matters. (a) Compliance. Except as set
forth in the Filed Company SEC Documents or in the Company Disclosure Letter,
the Company and each of the Company Subsidiaries is and has been in compliance
with all applicable Environmental Laws (as defined below), except where the
failure to so comply, individually or in the aggregate, has not had and could
not reasonably be expected to have a Company Material Adverse Effect.
(b) Environmental Permits. Except as set forth in the Filed Company
SEC Documents or in the Company Disclosure Letter, (i) the Company and each of
the Company Subsidiaries has obtained or has applied for all Environmental
Permits (as defined below) necessary for the construction of their facilities or
the conduct of their operations, except where the failure to so obtain,
individually or in the aggregate, has not had and could not reasonably be
expected to have a Company Material Adverse Effect and (ii) all such
Environmental Permits are in good standing or, where applicable, a renewal
application has been timely filed and is pending agency approval, except where
the failure of such Environmental Permits to be in good standing or to have
filed a renewal application on a timely basis has not had and could not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(c) Environmental Claims. Except as set forth in the Filed Company
SEC Documents or in the Company Disclosure Letter, there are no Environmental
Claims (as defined below) that have had or could reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, pending or,
to the knowledge of the Company, threatened against the Company or any of the
Company Subsidiaries.
(d) Releases. Except as set forth in the Filed Company SEC Documents
or in the Company Disclosure Letter, there have been no Releases (as defined
below) of any Hazardous Materials (as defined below) that could be reasonably
likely to form the basis of any Environmental Claim against the Company or any
of the Company Subsidiaries, except for any Environmental Claim which,
individually or in the aggregate, has not had and could not
<PAGE>
41
reasonably be expected to have a Company Material Adverse Effect.
(e) Assumed and Retained Liabilities. Except as disclosed in the
Filed Company SEC Documents or in the Company Disclosure Letter, none of the
Company or the Company Subsidiaries has retained or assumed either contractually
or by operation of law any liabilities or obligations that could reasonably be
likely to form the basis for any Environmental Claim, which has had and could
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(f) Definitions. As used in this Agreement:
(i) "Environmental Claims" means, in respect of any person, any and
all administrative, regulatory or judicial actions, suits, orders, decrees,
suits, demands, directives, claims, liens, investigations, proceedings or
notices of noncompliance or violation by any person, alleging potential
liability (including potential responsibility or liability for enforcement
costs, investigatory costs, cleanup costs, governmental response costs,
removal costs, remedial costs, mining restoration or rehabilitation costs,
natural resources damages, property damages, personal injuries or
penalties) arising out of, based on or resulting from (A) the presence or
Release of any Hazardous Materials at any location, whether or not owned,
operated, leased or managed by such person; or (B) circumstances forming
the basis of any violation or alleged violation of any Environmental Law or
(C) any and all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting
from the presence, Release of, or exposure to, any Hazardous Materials.
(ii) "Environmental Laws" means all federal, state, local and foreign
laws (including international conventions, protocols and treaties), common
law, rules, regulations, orders, decrees, judgments, binding agreements or
Environmental Permits issued, promulgated or entered into by or with any
Governmental Entity, relating to pollution or the environment (including
ambient air, surface water, groundwater, land surface or subsurface
strata), including laws and regulations relating to noise levels, nuclear
operations, Releases of Hazardous Materials, or otherwise relating to the
generation, manufacture, processing, distribution, use,
<PAGE>
42
treatment, storage, transport or handling of Hazardous Materials.
(iii) "Environmental Permits" means all permits, licenses,
registrations and other governmental authorizations required under
applicable Environmental Laws.
(iv) "Hazardous Materials" means (A) any petroleum or petroleum
products, radioactive materials or wastes, spent nuclear fuel, coal ash,
asbestos in any form that is or could become friable, urea formaldehyde
foam insulation and polychlorinated biphenyls ("PCBs"); (B) any chemicals,
materials, substances or wastes which are defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes,"
"pollutant," "toxic substances," "source," "special nuclear," and
"byproducts" or words of similar import under any Environmental Law; and
(C) any chemical, material, substance or waste that is prohibited, limited
or regulated pursuant to any Environmental Law.
(v) "Release" means any actual or threatened release, spill,
emission, leaking, dumping, injection, pouring, deposit, disposal,
discharge, dispersal, leaching or migration into the environment (including
ambient air, surface water, groundwater, land surface or subsurface strata)
or within any building, structure, facility or fixture.
SECTION 3.18. Labor and Employee Relations. (a) Except as set forth
in the Company Disclosure Letter, (i) neither the Company nor any of the
Company Subsidiaries is a party to any collective bargaining agreement or other
labor agreement with any union or labor organization and (ii) to the knowledge
of the Company, there is no current union representation question involving
employees of the Company or any of the Company Subsidiaries, nor does the
Company have knowledge of any activity or proceeding of any labor organization
(or representative thereof) or employee group to organize any such employees,
except to the extent it, individually or in the aggregate, has not had and could
not reasonably be expected to have a Company Material Adverse Effect.
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43
(b) Except as set forth in the Company Disclosure Letter, or except
to the extent the following, individually or in the aggregate, have not had and
could not reasonably be expected to have a Company Material Adverse Effect, (A)
there is no unfair labor practice, employment discrimination or other charge,
claim, suit, action or proceeding against the Company or any of the Company
Subsidiaries pending, or to the knowledge of the Company, threatened before any
court, governmental department, commission, agency, instrumentality or authority
or any arbitrator and (B) there is no strike, lockout or material dispute,
slowdown or work stoppage pending or, to the knowledge of the Company,
threatened against or involving the Company.
SECTION 3.19. Operations of Nuclear Power Plants. Except as set forth
in the Filed Company SEC Documents or in the Company Disclosure Letter, (a) the
operations of the nuclear generation stations (collectively, the "Company
Nuclear Facilities") currently or formerly owned, in whole or part, by the
Company or any of its affiliates are and have been conducted in compliance with
all Applicable Laws and Company Permits, except for such failures to comply
that, individually or in the aggregate, have not had and could not reasonably be
expected to have a Company Material Adverse Effect, (b) each of the Company
Nuclear Facilities maintains, and is in compliance with, (i) emergency plans
designed to respond to an unplanned Release therefrom of radioactive materials,
(ii) plans for the decommissioning of each of the Company Nuclear Facilities,
(iii) plans for the storage and disposal of spent nuclear fuel, and each such
plan enumerated in (i) through (iii) conform with the requirements of Applicable
Law, and (c) the Company has funded consistent with reasonable budget
projections the current or future decommissioning of each Company Nuclear
Facility and the storage and disposal of spent nuclear fuel.
SECTION 3.20. Parent Share Ownership. Neither the Company nor any
Company Subsidiary owns any shares of Parent Capital Stock or other securities
convertible into Parent Capital Stock.
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44
SECTION 3.21. Regulation as a Utility. ComEd is regulated as a
public utility by the State of Illinois. Commonwealth Edison Company of Indiana,
Inc., an Indiana corporation, is regulated as a public utility by the State of
Indiana and by no other state. Except as set forth in the previous sentence,
neither the Company nor any "subsidiary company" or "affiliate" of the Company
is subject to regulation as a public utility or public service company (or
similar designation) by any other state in the United States or any foreign
country. The Company and ComEd are public utility holding companies as defined
by PUHCA, but currently claim exemptions from registration under PUHCA under
Sections 3(a)(1) and 3(a)(2), respectively, of PUHCA pursuant to orders of the
SEC issued thereunder.
SECTION 3.22. Contracts; No Default. Except as disclosed in the
Filed Company SEC Documents or entered into after the date of this Agreement
without violating any covenant of this Agreement, there are no contracts or
agreements that are material to the business, properties, assets, condition
(financial or otherwise), results of operations or prospects of the Company and
the Company Subsidiaries taken as a whole. Neither the Company nor any of the
Company Subsidiaries is in violation of or in default under (nor does there
exist any condition which upon the passage of time or the giving of notice would
cause such a violation of or default under) any loan or credit agreement, note,
bond, mortgage, indenture, lease, permit, concession, franchise, license or any
other contract, agreement, arrangement or understanding, to which it is a party
or by which it or any of its properties or assets is bound, except for
violations or defaults that have not had and could not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect.
SECTION 3.23. Title to Properties. Except as set forth in the
Company Disclosure Letter each of the Company and each of the Company
Subsidiaries has good and sufficient title to its physical properties and
assets, or valid leasehold interests, easements or other appropriate interests
therein or thereto sufficient to conduct its business as presently conducted or
intended to be conducted, except for such as are no longer used or useful in the
conduct of its businesses or as have been disposed of in the ordinary course of
business and except for Liens, defects in title, easements, restrictive
covenants and similar encumbrances or impediments set forth in the Company
Disclosure Letter or that, in the aggregate, do not and will
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45
not materially interfere with its ability to conduct its business as currently
conducted or intended to be conducted.
SECTION 3.24. Intellectual Property. The Company and the Company
Subsidiaries own, or are validly licensed or otherwise have the right to use,
all patents, patent rights, trademarks, trademark rights, trade names, trade
name rights, service marks, service mark rights, copyrights and other
proprietary intellectual property rights and computer programs (collectively,
"Intellectual Property Rights") which are material to the conduct of the
business of the Company and the Company Subsidiaries, taken as a whole. Except
as set forth in the Company Disclosure Letter, no claims are pending or, to the
knowledge of the Company, threatened that the Company or any of the Company
Subsidiaries is infringing or otherwise adversely affecting the rights of any
person with regard to any Intellectual Property Right. To the knowledge of the
Company, except as set forth in the Company Disclosure Letter, no person is
infringing the rights of the Company or any of the Company Subsidiaries with
respect to any Intellectual Property Right except as has not had and could not
reasonably be expected to have a Company Material Adverse Effect.
Section 3.25. Hedging. Except as set forth in the Company Disclosure
Letter, none of the Company or the Company Subsidiaries engages in any natural
gas, electricity or other futures or options trading or is a party to any price
swaps, hedges, futures or similar instruments, except for transactions and
agreements entered into, or hedge contracts, for the purchase or sale of
electricity or hydrocarbons to which the Company or any Company Subsidiary is a
party that are in accordance with the general practices of other similarly
situated companies in the industry.
Section 3.26. Regulatory Proceedings. Except as set forth in the
Company Disclosure Letter, and other than fuel adjustment or purchase gas
adjustment or similar adjusting rate mechanisms, none of the Company or the
Company Subsidiaries all or part of whose rates or services are regulated by a
Governmental Entity (a) is a party to any rate proceeding before a Governmental
Entity that would reasonably be expected to result in orders having a Company
Material Adverse Effect or (b) has rates that have been or are being collected
subject to refund, pending final resolution of any rate proceeding pending
before a Governmental Entity or on appeal to a court.
<PAGE>
46
ARTICLE IV
Representations and Warranties of Parent and Newco
--------------------------------------------------
Parent and Newco, jointly and severally, represent and warrant to the
Company as follows:
SECTION 4.01. Organization, Standing and Power. Each of Parent and
each of its subsidiaries, including Newco (the "Parent Subsidiaries"), is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has full corporate power and authority
and possesses all governmental franchises, licenses, permits, authorizations and
approvals necessary to enable it to own, lease or otherwise hold its properties
and assets and to conduct its businesses as conducted as of the date of this
Agreement, other than such franchises, licenses, permits, authorizations and
approvals the lack of which, individually or in the aggregate, has not had and
could not reasonably be expected to have a Material Adverse Effect on Parent (a
"Parent Material Adverse Effect"). Parent and each Parent Subsidiary is duly
qualified to do business in each jurisdiction where the nature of its business
or their ownership or leasing of its properties make such qualification
necessary, other than such qualifications the lack of which, individually or in
the aggregate, has not had and could not reasonably be expected to have a Parent
Material Adverse Effect. Parent has made available to the Company true and
complete copies of the amended and restated articles of incorporation of Parent,
as amended to the date of this Agreement (as so amended, the "Parent Charter"),
and the By-laws of Parent, as amended to the date of this Agreement (as so
amended, the "Parent By-laws"), and the comparable charter or organizational
documents of Newco and each other Parent Subsidiary, in each case as amended
through the date of this Agreement.
SECTION 4.02. Parent Subsidiaries; Equity Interests. (a) The
letter, dated as of the date of this Agreement, from Parent to the Company (the
"Parent Disclosure Letter") lists each Parent Subsidiary and its jurisdiction of
organization and specifies each of the Parent Subsidiaries that is, and as of
the date of this Agreement AmerGen (as hereinafter defined is not), (i) a
"public-utility company", a "holding company", a "subsidiary company", an
"affiliate" of any public-utility company, an
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47
"exempt wholesale generator" or a "foreign utility company" within the meaning
of Section 2(a)(5), 2(a)(7), 2(a)(8), 2(a)(11), 32(a)(1) or 33(a)(3) of PUHCA,
respectively, (ii) a "public utility" within the meaning of Section 201(e) of
the Power Act or (iii) a "qualifying facility" within the meaning of PURPA, or
that owns such a qualifying facility. All the outstanding shares of capital
stock of each Parent Subsidiary have been validly issued and are fully paid and
nonassessable and, except as set forth in Parent Disclosure Letter, are owned by
Parent, by another Parent Subsidiary or by Parent and another Parent Subsidiary,
free and clear of all Liens.
(b) Except for its interests in Parent Subsidiaries and except for
the ownership interests set forth in Parent Disclosure Letter or interests
acquired after the date of this Agreement without violating any covenant of this
Agreement, Parent does not own, directly or indirectly, any capital stock,
membership interest, partnership interest, joint venture interest or other
equity interest with a fair market value as of the date of this Agreement in
excess of $500,000 in any person, as reasonably determined by Parent.
(c) Since the date of its incorporation, Newco has not carried on any
business or conducted any operations other than the execution of this Agreement,
the performance of its obligations hereunder and thereunder and matters
ancillary thereto. As of the date of this Agreement, Newco has no material
assets or liabilities.
SECTION 4.03. Capital Structure. (a) The authorized capital stock
of Parent consists of 500,000,000 shares of Parent Common Stock and shares of
preferred stock as set forth in the Parent Disclosure Letter (the "Parent
Preferred Stock" and, together with the Parent Common Stock, the "Parent Capital
Stock"). At the close of business on August 31, 1999, (i) 203,392,956 shares of
Parent Common Stock were issued and outstanding and shares of Parent Preferred
Stock were issued and outstanding as set forth in the Parent Disclosure Letter,
(ii) 38,721,900 shares of Parent Common Stock were held by Parent in its
treasury and (iii) 5,800,841 shares of Parent Common Stock were subject to
outstanding Parent Employee Stock Options (as defined in Section 6.04) and
5,166,533 additional shares of the Parent Common Stock were reserved for
issuance pursuant to Parent Stock Plans (as defined in Section 6.04).
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48
(b) Except as set forth in clause (a) of this Section 4.03 or in the
Parent Disclosure Letter, at the close of business on August 31, 1999, no shares
of capital stock or other voting securities of Parent were issued, reserved for
issuance or outstanding.
(c) All outstanding shares of Parent Capital Stock are, and all such
shares that may be issued prior to the Merger Effective Time will be when
issued, duly authorized, validly issued, fully paid and nonassessable and not
subject to or issued in violation of any purchase option, call option, right of
first refusal, preemptive right, subscription right or any similar right under
any provision of the PBCL, the Parent Charter, the Parent By-laws or any
Contract to which Parent is a party or otherwise bound.
(d) There are not any bonds, debentures, notes or other indebtedness
of Parent having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which holders of Parent
Common Stock may vote ("Voting Parent Debt").
(e) Except as set forth in clause (a) of this Section 4.03 or in the
Parent Disclosure Letter, as of the date of this Agreement, there are not any
options, warrants, rights, convertible or exchangeable securities, "phantom"
stock rights, stock appreciation rights, stock-based performance units,
commitments, Contracts, arrangements or undertakings of any kind to which Parent
or any Parent Subsidiary is a party or by which any of them is bound (i)
obligating Parent or any Parent Subsidiary to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock or other
equity interests in, or any security convertible or exercisable for or
exchangeable into any capital stock of or other equity interest in, Parent or of
any Parent Subsidiary or any Voting Parent Debt or (ii) obligating Parent or any
Parent Subsidiary to issue, grant, extend or enter into any such option,
warrant, call, right, security, commitment, Contract, arrangement or
undertaking.
(f) As of the date of this Agreement, except as described in the
Parent Disclosure Letter, there are not any outstanding contractual obligations
of Parent or any Parent Subsidiary to repurchase, redeem or otherwise acquire
any shares of capital stock of Parent or any Parent Subsidiary.
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49
(g) The authorized capital stock of Newco consists of 500,000,000
shares of common stock, no par value, 100,000,000 shares of preferred stock, no
par value, and 100,000,000 shares of series preference stock, no par value, of
which only 100 shares of common stock have been validly issued, are fully paid
and nonassessable and are owned by Parent free and clear of any Lien.
SECTION 4.04. Authority; Execution and Delivery; Enforceability. (a)
Each of Parent and Newco has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the Transactions. The
execution and delivery by each of Parent and Newco of this Agreement and the
consummation by it of the Transactions have been duly authorized by all
necessary corporate action on the part of Parent and Newco, subject (i) in the
case of the Merger and the Share Issuance, to receipt of the Parent Shareholder
Approval (as defined in Section 4.04(c)) and (ii) adoption by Parent, as sole
shareholder of Newco, of this Agreement. Each of Parent and Newco has duly
executed and delivered this Agreement, and this Agreement constitutes its legal,
valid and binding obligation, enforceable against it in accordance with its
terms.
(b) The Board of Directors of Parent (the "Parent Board"), at a
meeting duly called and held, duly and unanimously adopted resolutions (i)
approving this Agreement, the Merger, the Share Issuance and the other
Transactions, (ii) determining that the terms of the Merger, the Share Issuance
and the other Transactions are fair to and in the best interests of Parent and
its shareholders and (iii) directing that this Agreement be submitted to a vote
of Parent's shareholders and recommending that they adopt this Agreement and
approve the Share Issuance. Such resolutions are sufficient to render
inapplicable to this Agreement, the Merger, the Share Issuance and the other
Transactions, to the extent otherwise applicable, the provisions of Subchapters
D (Section 2538), E, F, G, H, I and J of Chapter 25 of the PBCL and (ii) the
provisions of Sections 508 and 509 of the Parent Charter. To Parent's
knowledge, no other state takeover statute or similar statute or regulation
applies or purports to apply to Parent or Newco with respect to this Agreement,
the Merger, the Share Issuance or any other Transaction.
(c) The only vote of holders of any class or series of Parent
securities necessary to approve and adopt
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50
this Agreement, the Merger, the Share Issuance and the other Transactions is the
adoption of this Agreement by the affirmative vote of a majority of the votes
cast by all holders of Parent Common Stock entitled to vote (collectively, the
"Parent Shareholder Approval"). The affirmative vote of the holders of Parent
Capital Stock, or any of them, is not necessary to consummate any Transaction
other than the Share Issuance and the Merger.
SECTION 4.05. No Conflicts; Consents. (a) Except as set forth in the
Parent Disclosure Letter, the execution and delivery by each of Parent and Newco
of this Agreement does not, and the consummation of the Merger, the Share
Issuance and the other Transactions and compliance with the terms hereof and
thereof will not, conflict with, or result in any violation of or default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, consent, approval, cancelation or acceleration of any obligation or
to loss of a material benefit under, or to increased, additional, accelerated or
guaranteed rights or entitlements of any person under, or result in the creation
of any Lien upon any of the properties or assets of Parent or any Parent
Subsidiary under, any provision of (i) Parent Charter, Parent By-laws or the
comparable charter or organizational documents of any Parent Subsidiary, (ii)
any Contract to which Parent or any Parent Subsidiary is a party or by which any
of their respective properties or assets is bound or (iii) subject to the
filings and other matters referred to in Section 4.05(b), any Judgment or
Applicable Law or writ, permit or license applicable to Parent or any Parent
Subsidiary or their respective properties or assets (other than immaterial
consents, approvals, licenses, permits, orders, authorizations, registrations,
declarations or filings, including with respect to communications systems,
zoning, name changes, occupancy and similar routine regulatory approvals), other
than, in the case of clauses (ii) and (iii) above, any such items that,
individually or in the aggregate, have not had and could not reasonably be
expected to have a Parent Material Adverse Effect.
(b) No Consent of, action by or in respect of, or registration,
declaration or filing with, or notice to, any Governmental Entity is required to
be obtained or made by or with respect to Parent or any Parent Subsidiary in
connection with the execution, delivery and performance of this Agreement or the
consummation of the Transactions, other than (i) compliance with and filings
under the HSR
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Act, (ii) the filing with the SEC of (A) the Form S-4 and the Proxy Statement
and (B) such reports under the Exchange Act, as may be required in connection
with this Agreement, the Merger and the other Transactions, (iii) the filing of
the Articles of Exchange, Pennsylvania Articles of Merger and the Charter
Amendment with the Department of State of the Commonwealth of Pennsylvania, the
filing of the Illinois Articles of Merger with, and issuance of a certificate of
merger by, the Secretary of State of the State of Illinois and the filing of
appropriate documents with the relevant authorities of the other jurisdictions
in which the Company is qualified to do business, (iv) notice to, and the
consent and approval of, FERC under the Power Act, (v) notice to, and the
consent and approval of, the NRC under the Atomic Energy Act, (vi) notice to and
the consent and approval of the Pennsylvania Public Utility Commission (the
"PPUC"), (vii) the consents, filings and approvals required under PUHCA, (viii)
compliance with and such filings as may be required under applicable
Environmental Laws, (ix) such filings as may be required in connection with the
taxes described in Section 6.09 and (x) such other items as are set forth in the
Parent Disclosure Letter (collectively, whether or not legally required to be
obtained, the "Parent Required Statutory Approvals").
SECTION 4.06. SEC Documents; Undisclosed Liabilities. Parent has
filed all reports, schedules, forms, statements and other documents required to
be filed by Parent with the SEC since January 1, 1998 (the "Parent SEC
Documents"). Each Parent SEC Document complied in all material respects as of
its respective date with the requirements of the Exchange Act or the Securities
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Parent SEC Document, and except to the extent that
information contained in any Parent SEC Document has been revised or superseded
by a later filed Parent SEC Document, does not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The consolidated financial
statements of Parent included in the Parent SEC Documents comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent
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52
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present the consolidated financial position of Parent and
its consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments).
Except as set forth in the Filed Parent SEC Documents (as defined in Section
4.08) or the Parent Disclosure Letter or incurred after the date hereof in the
usual, regular and ordinary course of business in substantially the same manner
as previously conducted and not prohibited by this Agreement, neither Parent nor
any Parent Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by GAAP to be set forth on
a consolidated balance sheet of Parent and its consolidated subsidiaries or in
the notes thereto and that, individually or in the aggregate, could reasonably
be expected to have a Parent Material Adverse Effect. None of the Parent
Subsidiaries is, or has at any time since January 1, 1998 been, subject to the
reporting requirements of Sections 13(a) and 15(d) of the Exchange Act.
SECTION 4.07. Information Supplied. None of the information supplied
or to be supplied by Parent or Newco for inclusion or incorporation by reference
in (i) the Form S-4 will, at the time the Form S-4 is filed with the SEC, at any
time it is amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) the Proxy Statement will, at the date
it is first mailed to the Company's shareholders or Parent's shareholders or at
the time of the Company Shareholders Meeting or the Parent Shareholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Form S-4 will comply as to form in all material respects with
the requirements of the Securities Act and the rules and regulations thereunder,
except that no representation is made by Parent or Newco with respect to
statements made or incorporated by reference therein based on information
supplied by or on behalf of the Company for inclusion or incorporation by
reference therein.
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53
SECTION 4.08. Absence of Certain Changes or Events. Except as
disclosed in the Parent SEC Documents filed and publicly available prior to the
date of this Agreement (the "Filed Parent SEC Documents") or in the Parent
Disclosure Letter:
(a) since December 31, 1998, there has not been any event, change,
effect or development that, individually or in the aggregate, has had or could
reasonably be expected to have a Parent Material Adverse Effect, other than
events, changes, effects and developments relating to the economy in general or
to Parent's industry in general and not specifically relating to Parent or any
Parent Subsidiary;
and
(b) from December 31, 1998 to the date of this Agreement, Parent has
conducted its business only in the ordinary course, and during such period there
has not been:
(i) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any
Parent Capital Stock or any repurchase for value by Parent of any Parent
Capital Stock;
(ii) any split, combination or reclassification of any Parent Capital
Stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of
Parent Capital Stock; or
(iii) any change in accounting methods, principles or practices by
Parent or any Parent Subsidiary materially affecting the consolidated
assets, liabilities or results of operations of Parent, except insofar as
may have been required by a change in GAAP.
SECTION 4.09. Taxes. (a) Each of Parent and each Parent Subsidiary
has timely filed, or has caused to be timely filed on its behalf, all Tax
Returns required to be filed by it (or requests for extensions to file such Tax
Returns have been timely filed and granted and have not expired), and all such
Tax Returns are true, complete and accurate, except to the extent any failure to
file or any inaccuracies in any filed Tax Returns would not, individually or in
the aggregate, have a Parent Material Adverse Effect. All Taxes shown to be due
on such Tax Returns, or otherwise owed by Parent or any Parent
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54
Subsidiary, have been timely paid, except to the extent that any failure to pay,
individually or in the aggregate, has not had and could not reasonably be
expected to have a Parent Material Adverse Effect.
(b) Except as set forth in the Parent Disclosure Letter, the most
recent financial statements contained in the Filed Parent SEC Documents reflect
an adequate reserve for all current Taxes payable by Parent and the Parent
Subsidiaries (in addition to any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) for all Taxable periods
and portions thereof through the date of such financial statements. Except as
set forth in the Parent Disclosure Letter, no deficiency with respect to any
Taxes has, to the best knowledge of Parent, been proposed, asserted or assessed
against Parent or any Parent Subsidiary, and no requests for waivers of the time
to assess any such Taxes are pending, except to the extent any such deficiency
or request for waiver, individually or in the aggregate, has not had and could
not reasonably be expected to have a Parent Material Adverse Effect.
(c) The Federal income Tax Returns of Parent and each Parent
Subsidiary consolidated in such Returns have been examined by and settled with
the United States Internal Revenue Service for all years through 1990. Except
as set forth in the Parent Disclosure Letter, all material assessments for Taxes
due with respect to such completed and settled examinations or any concluded
litigation have been fully paid.
(d) There are no material Liens for Taxes (other than for current
Taxes not yet due and payable) on the assets of Parent or any Parent Subsidiary.
Except as set forth in the Parent Disclosure Letter, neither Parent nor any
Parent Subsidiary is bound by any agreement with respect to Taxes.
(e) The Parent and each Parent Subsidiary have complied with all
applicable statutes, laws, ordinances, rules and regulations relating to the
payment and withholding of taxes (including withholding of taxes pursuant to
Sections 1441, 1442, 3121 and 3402 of the Code or similar provisions under any
Federal, state or local laws, domestic and foreign) and have, within the time
and in the manner prescribed by law, withheld from and paid over to the proper
governmental authorities all amounts required to
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55
be so withheld and paid over under applicable laws, except to the extent that
any failure to withhold or to pay, individually or in the aggregate, has not had
and could not reasonably be expected to have a Parent Material Adverse Effect.
(f) Parent knows of no fact and neither Parent nor any Parent
Subsidiary has taken or agreed to take any action that could reasonably be
expected to prevent (i) the Merger from constituting transactions described in
Section 351 of the Code or (ii) the Second Step Merger from constituting a
transaction described in Section 368(a) of the Code.
SECTION 4.10. Absence of Changes in Benefit Plans. Except as
disclosed in the Parent Disclosure Letter, from December 31, 1998 to the date of
this Agreement, there has not been any adoption or amendment in any material
respect by Parent or any Parent Subsidiary of (a) any collective bargaining
agreements, (b) any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, program, policy, arrangement or
understanding (whether or not legally binding) providing benefits to any current
or former employee, officer or director of Parent or any Parent Subsidiary or
any beneficiary or dependent thereof, that is sponsored or maintained by Parent
or any Parent Subsidiary or to which Parent or any Parent Subsidiary contributes
or is obligated to contribute (collectively, "Parent Benefit Plans") or (c) any
Parent Employment Arrangements (as defined herein). Except as disclosed in the
Parent Disclosure Letter, as of the date of this Agreement there are not any
employment, consulting, indemnification, change-of-control, severance or
termination agreements or arrangements between Parent or any Parent Subsidiary
and any current or former employee, officer or director of the Parent or any
Parent Subsidiary (collectively, the "Parent Employment Arrangements").
SECTION 4.11. ERISA Compliance; Excess Parachute Payments. (a) The
Parent Disclosure Letter includes a complete list of all material Parent Benefit
Plans and Parent Employment Arrangements as of the date of this Agreement. With
respect to each Parent Benefit Plan (other than a multiemployer plan within the
meaning of Section 4001(a)(3) of ERISA) and Parent Employment Arrangement,
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56
Parent has delivered to the Company true, complete and correct copies of (i)
each such Parent Benefit Plan or Parent Employment Arrangement (or, in the case
of any unwritten plan or arrangement, a description thereof), (ii) the most
recent annual report on the applicable Form 5500 series filed with the Internal
Revenue Service (if any such report was required), including all schedules and
attachments thereto, (iii) the most recent summary plan description (if a
summary plan description is required) and all summaries of material
modifications thereto, (iv) each trust agreement, group annuity contract or
other funding vehicle relating to any such Parent Benefit Plan or Parent
Employment Arrangement, (v) the most recent actuarial report or valuation
relating thereto and (vi) the most recent determination letters issued by the
Internal Revenue Service with respect to Parent Benefit Plans that are intended
to be Qualified Plans and letters of recognition of exemption with respect to
any Parent Benefit Plan or related trust that is intended to meet the
requirements of Section 501(c)(9) of the Code.
(b) With respect to the Parent Benefit Plans and Parent Employment
Arrangements, individually and in the aggregate, no event has occurred and, to
the knowledge of Parent, there exists no condition or set of circumstances, in
connection with which Parent or any Parent Subsidiary could be subject to any
liability that has had or could reasonably be expected to have a Parent Material
Adverse Effect (except liability for benefits claims and funding obligations
payable in the ordinary course) under ERISA, the Code or any other applicable
law. For purposes of this Section 4.11(b), the term "Parent Benefit Plan" shall
also include any employee benefit plan within the meaning of Section 3(3) of
ERISA that, within the last six years, was sponsored or maintained by any entity
which would be treated under Section 414 of the Code as a single employer with
Parent or any Parent Subsidiary or to which any such entity contributed or was
obligated to contribute.
(c) Each Parent Benefit Plan and each Parent Employment Arrangement
has been administered in accordance with its terms except for any failures so to
administer any Parent Benefit Plan or Parent Employment Arrangement as have not
had and could not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect. Parent, all Parent Subsidiaries
and all the Parent Benefit Plans and Parent Employment Arrangements are in
compliance with the applicable provisions of ERISA, the Code
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57
and all other applicable laws and the rules and regulations thereunder and the
terms of all applicable collective bargaining agreements, except for any
failures to be in such compliance as have not had and could not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect. Except as disclosed in the Parent Disclosure Letter, there are no
pending or, to the knowledge of Parent, threatened or anticipated claims under
or with respect to any Parent Benefit Plan or Parent Employment Arrangement by
or on behalf of any current or former employee, officer or director, or
dependent or beneficiary thereof, or otherwise (other than routine claims for
benefits).
(d) Except as disclosed in the Parent Disclosure Letter, (i) no
current or former employee, officer or director of Parent or any Parent
Subsidiary will be entitled to any additional rights or benefits or any
acceleration of the time of payment or vesting of any benefits under any Parent
Benefit Plan or Parent Employment Arrangement, and no trustee under any "rabbi
trust", or similar arrangement maintained in connection with any Parent Benefit
Plan or Parent Employment Arrangement will be entitled to any payment, as a
result (either alone or upon the occurrence of any additional or further acts or
events) of the execution of this Agreement or the consummation, announcement or
other actions relating to the Transactions and (ii) no amount payable to any
current or former employee, officer or director of Parent or any Parent
Subsidiary will fail to be deductible by reason of Section 280G of the Code.
(e) Each Parent Benefit Plan intended to be a Qualified Plan has
received a favorable determination letter from the Internal Revenue Service that
it is so qualified and nothing has occurred since the date of such letter that
could reasonably be expected to affect the qualified status of such Parent
Benefit Plan.
(f) The aggregate accumulated benefit obligations of each Parent
Benefit Plan subject to Title IV of ERISA (as of the date of the most recent
actuarial valuation prepared for such Parent Benefit Plan) do not exceed the
fair market value of the assets of such plan (as of the date of such valuation).
(g) All contributions and other payments required to have been made
for any completed historical period by Parent or any Parent Subsidiary to any
Parent Benefit Plan
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or Parent Employment Arrangement (or to any person pursuant to the terms
thereof) have been timely made or paid in full, or, to the extent not required
to be made or paid for such period, have been reflected in the consolidated
financial statements of Parent.
(h) Except as disclosed in the Parent Disclosure Letter, no Parent
Benefit Plan is a multiemployer plan within the meaning of Section 4001(a)(3) of
ERISA, and none of Parent or any Parent Subsidiary has, at any time during the
last six years, contributed to or been obligated to contribute to any such
multiemployer plan. For purposes of the representations and warranties made in
the last sentence of Section 4.11(c) and in Sections 4.11 (e) and (f), the term
"Parent Benefit Plan" shall be deemed to exclude any such multiemployer plan.
SECTION 4.12. Litigation. Except as disclosed in the Filed Parent
SEC Documents or in the Parent Disclosure Letter, there is no suit, action or
proceeding pending or, to the knowledge of Parent, threatened against Parent or
any Parent Subsidiary that, individually or in the aggregate, has had or could
reasonably be expected to have a Parent Material Adverse Effect, nor is there
any Judgment outstanding against Parent or any Parent Subsidiary that has had or
could reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.13. Compliance with Applicable Laws; Permits. (a) Except
as disclosed in the Filed Parent SEC Documents or in the Parent Disclosure
Letter, Parent and Parent Subsidiaries are in compliance with the terms of all
applicable Parent Permits (as defined in Section 4.13(b)) and all Applicable
Laws, except for instances of noncompliance that, individually and in the
aggregate, have not had and could not reasonably be expected to have a Parent
Material Adverse Effect. This Section 4.13 does not relate to matters with
respect to Taxes, which are the subject of Section 4.09, Environmental Laws,
which are the subject of Section 4.17, benefits plans, which are the subject of
Section 4.11 and the operation of nuclear power plants which are the subject of
Section 4.19.
(b) Except as disclosed in the Filed Parent SEC Documents or in the
Parent Disclosure Letter, Parent and the Parent Subsidiaries own or have
sufficient rights and consents to use under existing franchises, permits,
easements, leases, and license agreements (the "Parent
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59
Permits") all properties, rights and assets necessary for the conduct of their
business and operations as currently conducted, except where the failure to own
or have sufficient rights to such properties, rights and assets, individually or
in the aggregate, have not had and could not reasonably be expected to have a
Parent Material Adverse Effect. Except as provided in the Pennsylvania
Electricity Generation Customer Choice and Competition Act of 1996, to the
knowledge of Parent, no other private corporation can commence electric public
utility operations in any part of the respective territories now served by
Parent or any Parent Subsidiary, without obtaining a certificate of public
convenience and necessity from the applicable state utility commission.
SECTION 4.14. Brokers; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other person, other than Salomon Smith
Barney Inc. and Morgan Stanley & Company Incorporated, the fees and expenses of
which will be paid by Parent, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the Merger and
the other Transactions based upon arrangements made by or on behalf of Parent or
Newco.
SECTION 4.15. Opinions of Financial Advisors. Parent has received the
opinions of Salomon Smith Barney Inc. and Morgan Stanley & Company Incorporated,
dated the date of this Agreement, to the effect that, as of such date, the
Exchange Consideration is fair to the holders of Parent Common Stock from a
financial point of view, signed copies of which opinions have been delivered to
the Company.
SECTION 4.16. Year 2000. The Parent SEC Documents fairly summarize
the status of Parent's computer applications and components, modification or
readiness plan, communications with suppliers and vendors, contingency plans and
estimated cost of remediation as they relate to the Year 2000 issue. Parent has
made available to the Company copies of all correspondence between Parent and
its third party suppliers and vendors concerning their Year 2000 compliance.
SECTION 4.17. Environmental Matters. (a) Compliance. Except as set
forth in the Filed Parent SEC Documents or in the Parent Disclosure Letter,
Parent and each of the Parent Subsidiaries is and has been in compliance with
all applicable Environmental Laws, except where the failure to so comply,
individually or in the
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aggregate, has not had and could not reasonably be expected to have a Parent
Material Adverse Effect.
(b) Environmental Permits. Except as set forth in the Filed Parent
SEC Documents or in the Parent Disclosure Letter, (i) Parent and each of the
Parent Subsidiaries has obtained or has applied for all Environmental Permits
necessary for the construction of their facilities or the conduct of their
operations, except where the failure to so obtain, individually or in the
aggregate, has not had and could not reasonably be expected to have a Parent
Material Adverse Effect, and (ii) all such Environmental Permits are in good
standing or, where applicable, a renewal application has been timely filed and
is pending agency approval, except where the failure of such Environmental
Permits to be in good standing or to have filed a renewal application on a
timely basis has not had and could not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
(c) Environmental Claims. Except as set forth in the Filed Parent
SEC Documents or in the Parent Disclosure Letter, there are no Environmental
Claims that have had or could reasonably be expected to have, individually or in
the aggregate, a Parent Material Adverse Effect, pending or, to the knowledge of
Parent, threatened against Parent or any of the Parent Subsidiaries.
(d) Releases. Except as set forth in the Filed Parent SEC Documents
or in the Parent Disclosure Letter, there have been no Releases of any Hazardous
Materials that could be reasonably likely to form the basis of any Environmental
Claim against Parent or any of the Parent Subsidiaries, except for any
Environmental Claim which, individually or in the aggregate, has not had and
could not reasonably be expected to have a Parent Material Adverse Effect.
(e) Assumed and Retained Liabilities. Except as disclosed in the
Filed Parent SEC Documents or in the Parent Disclosure Letter, none of Parent or
the Parent Subsidiaries has retained or assumed either contractually or by
operation of law any liabilities or obligations that could reasonably be likely
to form the basis for any Environmental Claim, which has had and could
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.
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SECTION 4.18. Labor and Employee Relations. (a) Except as set forth
in the Parent Disclosure Letter, (i) neither Parent nor any of the Parent
Subsidiaries is a party to any collective bargaining agreement or other labor
agreement with any union or labor organization and (ii) to the knowledge of
Parent, there is no current union representation question involving employees of
Parent or any of the Parent Subsidiaries, nor does Parent have knowledge of any
activity or proceeding of any labor organization (or representative thereof) or
employee group to organize any such employees, except to the extent it,
individually or in the aggregate, has not had and could not reasonably be
expected to have a Parent Material Adverse Effect.
(b) Except as set forth in the Parent Disclosure Letter, or except to
the extent the following, individually or in the aggregate, have not had and
could not reasonably be expected to have a Parent Material Adverse Effect, (A)
there is no unfair labor practice, employment discrimination or other charge,
claim, suit, action or proceeding against Parent or any of the Parent
Subsidiaries pending, or to the knowledge of Parent, threatened before any
court, governmental department, commission, agency, instrumentality or authority
or any arbitrator and (B) there is no strike, lockout or material dispute,
slowdown or work stoppage pending or, to the knowledge of Parent, threatened
against or involving Parent.
SECTION 4.19. Operations of Nuclear Power Plants. (a) Except as set
forth in the Filed Parent SEC Documents or in the Parent Disclosure Letter, (a)
the operations of the nuclear generation stations (collectively, the "Parent
Nuclear Facilities") currently or formerly owned, in whole or part, by Parent or
any of its affiliates are and have been conducted in compliance with all
Applicable Laws and Parent Permits, except for such failures to comply that,
individually or in the aggregate, have not had and could not reasonably be
expected to have a Parent Material Adverse Effect, (b) each of the Parent
Nuclear Facilities maintains, and is in compliance with, (i) emergency plans
designed to respond to an unplanned Release therefrom of radioactive materials,
(ii) plans for the decommissioning of each of the Parent Nuclear Facilities,
(iii) plans for the storage and disposal of spent nuclear fuel, and each such
plan enumerated in (i) through (iii) conform with the requirements of Applicable
Law, and (c) Parent has funded consistent with reasonable budget projections the
current or
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future decommissioning of each Parent Nuclear Facility and the storage and
disposal of spent nuclear fuel.
(b) To the best knowledge of Parent, recognizing that AmerGen does
not as of the date of this Agreement, own, or hold any operating licenses for,
nuclear generating stations, (i) the operations of the nuclear generation
stations which are the subject of an existing purchase, operating or similar
agreement by AmerGen or any of its affiliates or assignees (the "AmerGen Nuclear
Facilities") are and have been conducted in compliance with all Applicable Laws
and necessary permits of Governmental Entities, except for such failures to
comply that, individually or in the aggregate, have not had and could not
reasonably be expected to have a Parent Material Adverse Effect, (ii) each of
the AmerGen Nuclear Facilities maintains, and is in compliance with, (A)
emergency plans designed to respond to an unplanned Release therefrom of
radioactive materials, (B) plans for the decommissioning of each of the AmerGen
Nuclear Facilities and (C) plans for the storage and disposal of spent nuclear
fuel, and each such plan enumerated in (A) through (C) conform with the
requirements of Applicable Law, and (iii) the current owner has funded
consistent with reasonable budget projections the current or future
decommissioning of each AmerGen Nuclear Facility and the storage and disposal of
spent nuclear fuel.
(c) Parent hereby makes each of the representations and warranties
contained in Sections 4.05(a), 4.05(b), 4.12, 4.13 and 4.17 with respect to
AmerGen, as if AmerGen were a Parent Subsidiary as defined in this Agreement, it
being understood that the Company acknowledges and agrees that as of the date
hereof AmerGen is not a subsidiary and therefore no representation or warranty
is made concerning AmerGen or its business or operations except as expressly set
forth in this Section 4.19(c) and the first sentence of Section 4.02(a) and
Section 4.19(b), and each such representation and warranty pertaining to AmerGen
is qualified to the best knowledge of Parent recognizing that AmerGen does not
as of the date of this Agreement, own, or hold any operating licenses for,
nuclear generating stations.
SECTION 4.20. Company Share Ownership. Neither Parent nor any Parent
Subsidiary owns any shares of Company Common Stock or other securities
convertible into Company Common Stock.
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SECTION 4.21. Regulation as a Utility. Parent is regulated as a
public utility by the Commonwealth of Pennsylvania and by no other state.
Except as set forth in the previous sentence, neither Parent nor any "subsidiary
company" or "affiliate" of Parent is subject to regulation as a public utility
or public service company (or similar designation) by any other state in the
United States or any foreign country. Parent is a public utility holding
company as defined by PUHCA, but currently claims exemption under Section
3(a)(2) of PUHCA pursuant to orders of the SEC thereunder.
SECTION 4.22. Contracts; No Default. Except as disclosed in the
Filed Parent SEC Documents or entered into after the date of this Agreement
without violating any covenant of this Agreement, there are no contracts or
agreements that are material to the business, properties, assets, condition
(financial or otherwise), results of operations or prospects of Parent and the
Parent Subsidiaries taken as a whole. Neither Parent nor any of the Parent
Subsidiaries is in violation of or in default under (nor does there exist any
condition which upon the passage of time or the giving of notice would cause
such a violation of or default under) any loan or credit agreement, note, bond,
mortgage, indenture, lease, permit, concession, franchise, license or any other
contract, agreement, arrangement or understanding, to which it is a party or by
which it or any of its properties or assets is bound, except for violations or
defaults that have not had and could not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
SECTION 4.23. Title to Properties. Except as set forth in the Parent
Disclosure Letter each of Parent and each of the Parent Subsidiaries has good
and sufficient title to its physical properties and assets, or valid leasehold
interests, easements or other appropriate interests therein or thereto
sufficient to conduct its business as presently conducted or intended to be
conducted, except for such as are no longer used or useful in the conduct of its
businesses or as have been disposed of in the ordinary course of business and
except for defects in title, easements, restrictive covenants and similar
encumbrances or impediments set forth in the Parent Disclosure Letter or that,
in the aggregate, do not and will not materially interfere with its ability to
conduct its business as currently conducted or intended to be conducted.
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SECTION 4.24. Intellectual Property. Parent and the Parent
Subsidiaries own, or are validly licensed or otherwise have the right to use,
all Intellectual Property Rights which are material to the conduct of the
business of Parent and the Parent Subsidiaries taken as a whole. Except as set
forth in the Parent Disclosure Letter, no claims are pending or, to the
knowledge of Parent, threatened that Parent or any of the Parent Subsidiaries is
infringing or otherwise adversely affecting the rights of any person with regard
to any Intellectual Property Right. To the knowledge of Parent, except as set
forth in the Parent Disclosure Letter, no person is infringing the rights of
Parent or any of the Parent Subsidiaries with respect to any Intellectual
Property Right except as has not had and could not reasonably be expected to
have a Parent Material Adverse Effect.
SECTION 4.25. Hedging. Except as set forth in the Parent Disclosure
Letter, none of Parent or the Parent Subsidiaries engages in any natural gas,
electricity or other futures or options trading or is a party to any price
swaps, hedges, futures or similar instruments, except for transactions and
agreements entered into, or hedge contracts, for the purchase or sale of
electricity or hydrocarbons to which Parent or any Parent Subsidiary is a party
that are in accordance with the general practices of other similarly situated
companies in the industry.
SECTION 4.26. Regulatory Proceedings. Except as set forth in the
Parent Disclosure Letter and other than fuel adjustment or purchase gas
adjustment or similar adjusting rate mechanisms, none of Parent or the Parent
Subsidiaries all or part of whose rates or services are regulated by a
Governmental Entity (a) is a party to any rate proceeding before a Governmental
Entity that would reasonably be expected to result in orders having a Parent
Material Adverse Effect or (b) has rates that have been or are being collected
subject to refund, pending final resolution of any rate proceeding pending
before a Governmental Entity or on appeal to a court.
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ARTICLE V
Covenants Relating to Conduct of Business
-----------------------------------------
SECTION 5.01. Conduct of Business. (a) Conduct of Business by the
Company. Except for matters set forth in the Company Disclosure Letter or
otherwise expressly contemplated by this Agreement, from the date of this
Agreement to the Merger Effective Time the Company shall, and shall cause each
Company Subsidiary to, conduct its business in all material respects in the
usual, regular and ordinary course substantially the same manner as previously
conducted and use reasonable best efforts to preserve intact its current
business organization in all material respects, subject to prudent management of
work force and business needs, keep available the services of its current
officers and key employees and keep its relationships with Governmental
Entities, customers, suppliers, licensors, licensees, distributors and others
having business dealings with them to the end that its goodwill and ongoing
business shall be unimpaired in all material respects at the Merger Effective
Time. In addition, and without limiting the generality of the foregoing, except
for matters set forth in the Company Disclosure Letter or otherwise expressly
contemplated by this Agreement, from the date of this Agreement to the Merger
Effective Time, the Company shall not, and shall not permit any Company
Subsidiary to, do any of the following without the prior written consent of
Parent:
(i) (A) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than (1)
dividends and distributions by a direct or indirect wholly owned subsidiary
of the Company to its parent, (2) regular quarterly cash dividends with
respect to the Company Common Stock, not in excess of $0.40 per share, in
accordance with the Company's past dividend policy, and (3) regular cash
dividends with respect to preferred stock of the Company or its
subsidiaries in accordance with the current terms thereof, (B) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (C) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any Company
Subsidiary or any other securities thereof or any
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rights, warrants or options to acquire any such shares or other securities;
(ii) issue, deliver, sell or grant (A) any shares of its capital
stock, (B) any Voting Company Debt or other voting securities, (C) any
securities convertible into or exchangeable for, or any options, warrants
or rights to acquire, any such shares, Voting Company Debt, voting
securities or convertible or exchangeable securities or (D) any "phantom"
stock, "phantom" stock rights, stock appreciation rights or stock-based
performance units, other than (1) the issuance of Company Common Stock (and
associated Company Rights) upon the exercise of Company Employee Stock
Options outstanding on the date of this Agreement and in accordance with
their present terms or pursuant to the terms of any Company Benefit Plan or
Company Employment Arrangement as in effect on the date of this Agreement
or as amended in accordance with or as permitted by its Agreement, (2) the
issuance, subject to Section 5.01(a)(v), of up to an additional 5,000,000
Company Employee Stock Options pursuant to the Company Stock Plans in
accordance with their present terms and the terms of the Company stock
options issued in the ordinary course prior to the date of this Agreement
and the issuance of Company Common Stock (and associated Company Rights)
upon the exercise of such Company Employee Stock Options and (3) the
issuance of "phantom" stock or "phantom" stock rights or, subject to
Section 5.01(a)(v), stock appreciation rights or stock-based performance
units, pursuant to the terms of any Company Benefit Plan or Company
Employment Arrangement in effect on the date of this Agreement or as
amended in accordance with or as permitted by this Agreement, and (4) the
issuance of Company Common Stock upon the exercise of Company Rights;
(iii) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents, except for such amendments
to its certificate of incorporation, by-laws and other comparable charter
or organizational documents that do not have an adverse affect on the
Merger and the other Transactions;
(iv) acquire or agree to acquire (A) by merging or consolidating with,
or by purchasing a substantial equity interest in or portion of the assets
of, or by
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any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof or
(B) any assets that in either case are material, individually or in the
aggregate, to the Company and the Company Subsidiaries, taken as a whole;
(v) except to the extent required by Applicable Law or by the terms of
any Company Benefit Plan, Company Employment Arrangement or collective
bargaining agreement in effect as of the date of this Agreement, (A) grant
to any current or former employee, officer or director of the Company or
any Company Subsidiary any increase in compensation or benefits or new
incentive compensation grants, except in the ordinary course of business
consistent with prior practice, (B) grant to any current or former
employee, officer or director of the Company or any Company Subsidiary any
increase in severance, pay to stay or termination pay, except to the extent
consistent with past practice and that, in the aggregate, does not result
in a material increase in benefits or compensation expenses, (C) enter into
or amend any Company Employment Arrangement with any such current or former
employee, officer or director, except to the extent permitted in subsection
(B) above, (D) establish, adopt, enter into or amend in any material
respect any collective bargaining agreement or Company Benefit Plan,
except, with respect to any Company Benefit Plan that is a Qualified Plan,
as may be required to facilitate or obtain a determination from the
Internal Revenue Service that such Company Benefit Plan is a Qualified Plan
or (E) take or permit to be taken any action to accelerate any rights or
benefits or the funding thereof, or make or permit to be made any material
determinations not in the ordinary course of business consistent with prior
practice, under any collective bargaining agreement, Company Benefit Plan
or Company Employment Arrangement; provided, however, that notwithstanding
anything herein to the contrary, the foregoing shall not restrict the
Company or the Company Subsidiaries from (1) entering into or making
available to newly hired officers and employees or to officers and
employees in the context of promotions based on job performance or
workplace requirements in the ordinary course of business consistent with
past practice, plans, agreements, benefits and compensation arrangements
(including incentive grants) that have, consistent with past practice, been
made available to newly hired or
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promoted officers and employees, or (2) entering into or amending
collective bargaining agreements with existing collective bargaining
representatives so as to increase compensation or benefits in a manner that
does not materially increase the benefits or compensation expenses of the
Company and the Company Subsidiaries;
(vi) make any change in accounting methods, principles or practices
materially affecting the reported consolidated assets, liabilities or
results of operations of the Company, except as required by a change in
GAAP;
(vii) sell, lease (as lessor), license or otherwise dispose of or
subject to any Lien any properties or assets that are material,
individually or in the aggregate, to the Company and the Company
Subsidiaries, taken as a whole, except sales of inventory and excess or
obsolete assets in the ordinary course of business consistent with past
practice;
(viii) except in the ordinary course of business consistent with prior
practice, (A) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any Company Subsidiary, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having
the economic effect of any of the foregoing, in each case, other than in
connection with a refinancing on commercially reasonable terms, or (B) make
any loans, advances or capital contributions to, or investments in, any
other person, other than to or in the Company or any direct or indirect
wholly owned subsidiary of the Company;
(ix) make or agree to make any new capital expenditure or expenditures
other than as permitted under Section 5.01(a)(iv) that, individually, is in
excess of $50,000,000 or, in the aggregate during such period, are in
excess of $250,000,000, except to the extent made or agreed to be made in
order to ensure compliance with the rules and regulations or an order of
the NRC or any other Governmental Entity or to ensure compliance with the
terms of any Permit;
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(x) make any material Tax election or settle or compromise any
material Tax liability or refund;
(xi) engage in any activities which would cause a change in its status
under PUHCA, or that would impair the ability of the Company or ComEd to
claim an exemption as of right under Rule 2 of PUHCA prior to the Merger,
other than the application to the SEC under PUHCA contemplated by this
Agreement;
(xii) enter into or commit to any agreement for the purchase of
capacity and/or energy ("Power Purchase Agreement") except for any Power
Purchase Agreement that, in the ordinary course of business, can be entered
into without the prior approval of the Board of Directors or a committee
thereof of the Company (the threshold for requiring submission to the board
or a committee not to be made substantially higher than that in effect on
the date hereof) unless the Company consults with Parent regarding such
Power Purchase Agreement and the Company has obtained the prior written
consent of Parent to such Power Purchase Agreement or such Power Purchase
Agreement is fully compliant with criteria to which Parent has previously
given a generic consent, in each case, which consent shall not be
unreasonably withheld, it being understood that in such consultation
process the Company and Parent shall comply with all Applicable Law and any
applicable confidentiality or similar third party agreement; or
(xiii) authorize any of, or commit or agree to take any of, the
foregoing actions.
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(b) Conduct of Business by Parent. Except for matters set forth in
Parent Disclosure Letter or otherwise expressly contemplated by this Agreement,
from the date of this Agreement to the Merger Effective Time Parent shall, and
shall cause each Parent Subsidiary to, conduct its business in all material
respects in the usual, regular and ordinary substantially the same manner as
previously conducted and use all reasonable efforts to preserve intact its
current business organization in all material respects, subject to prudent
management of work force and business needs, keep available the services of its
current officers and employees and keep its relationships with Governmental
Entities, customers, suppliers, licensors, licensees, distributors and others
having business dealings with them to the end that its goodwill and ongoing
business shall be unimpaired in all material respects at the Merger Effective
Time. In addition, and without limiting the generality of the foregoing, except
for matters set forth in the Parent Disclosure Letter or otherwise expressly
contemplated by this Agreement, from the date of this Agreement to the Merger
Effective Time, Parent shall not, and shall not permit any Parent Subsidiary to,
do any of the following without the prior written consent of the Company:
(i) (A) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than (1)
dividends and distributions by a direct or indirect wholly owned subsidiary
of Parent to its parent, (2) regular quarterly cash dividends with respect
to the Parent Common Stock, not in excess of $0.25 per share, in accordance
with Parent's past dividend policy and (3) regular cash dividends with
respect to preferred stock of Parent or its subsidiaries in accordance with
the current terms thereof, (B) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
or (C) purchase, redeem or otherwise acquire any shares of capital stock of
Parent or any Parent Subsidiary or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities;
(ii) issue, deliver, sell or grant (A) any shares of its capital
stock, (B) any Voting Parent Debt or other voting securities, (C) any
securities convertible into or exchangeable for, or any options, warrants
or
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rights to acquire, any such shares, Voting Parent Debt, voting
securities or convertible or exchangeable securities or (D) any "phantom"
stock, "phantom" stock rights, stock appreciation rights or stock-based
performance units, other than (1) the issuance of Parent Common Stock upon
the exercise of Parent Employee Stock Options outstanding on the date of
this Agreement and in accordance with their present terms or pursuant to
the terms of any Parent Benefit Plan or Parent Employment Arrangement as in
effect on the date of this Agreement or as amended in accordance with or as
permitted by this Agreement, (2) the issuance, subject to Section
5.01(b)(v), of up to an additional 4,900,000 Parent Employee Stock Options
and 100,000 shares of restricted stock pursuant to the Parent Stock Plans
in accordance with their present terms and the terms of the Parent stock
options issued in the ordinary course prior to the date of this Agreement
and the issuance of Parent Common Stock upon the exercise of such Parent
Employee Stock Options and (3) the issuance of "phantom" stock or "phantom"
stock rights or, subject to Section 5.01 (b)(v), stock appreciation rights
or stock-based performance units, pursuant to the terms of any Parent
Benefit Plan or Parent Employment Arrangement in effect on the date of this
Agreement or as amended in accordance with or as permitted by this
Agreement;
(iii) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents, except for such amendments
to its certificate of incorporation, by-laws and other comparable charter
or organizational documents that do not have an adverse affect on the
Merger and the other Transactions;
(iv) acquire or agree to acquire (A) by merging or consolidating with,
or by purchasing a substantial equity interest in or portion of the assets
of, or by any other manner, any business or any corporation, partnership,
joint venture, association or other business organization or division
thereof, (B) any assets that are material, individually or in the
aggregate, to Parent and the Parent Subsidiaries, taken as a whole, except
Parent or a Parent Subsidiary may acquire or otherwise invest in any
assets, other than nuclear plants, so long as Parent consults with the
Company concerning any acquisition or investment that
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72
is not listed in the Parent Disclosure Letter and involves an expenditure
that, individually, is the excess of $50,000,000, or in the aggregate
during such period, are in excess of $250,000,000 or (C) any nuclear plants
(whether through AmerGen Energy Company, LLC, a limited liability company
organized under the laws of Delaware ("AmerGen"), or otherwise) other than
those nuclear plants in respect of which Parent or AmerGen has made written
offers or has signed agreements as of the date of this Agreement unless (1)
Parent involves the Company in any review or consideration of such
acquisition of additional nuclear plants, which involvement shall be for
the purpose of ensuring that any such acquisition will be consistent with a
rate of nuclear generation acquisitions and growth that will not impair
Newco's ability to provide and maintain adequate resources and performance
focus for the entire Newco fleet and (2) Parent has obtained the express
written consent of the Company, which consent shall not be unreasonably
withheld, prior to entering into, or permitting any Parent Subsidiary or
AmerGen to enter into, the binding contract to acquire any such additional
nuclear plant, or otherwise expanding its, or permitting any Parent
Subsidiary or AmerGen to expand their, nuclear capacity;
(v) except to the extent required by Applicable Law or by the terms of
any Parent Benefit Plan, Parent Employment Arrangement or collective
bargaining agreement in effect as of the date of this Agreement, (A) grant
to any current or former employee, officer or director of Parent or any
Parent Subsidiary any increase in compensation or benefits or new incentive
compensation grants, except in the ordinary course of business consistent
with prior practice, (B) grant to any current or former employee, officer
or director of Parent or any Parent Subsidiary any increase in severance,
pay to stay or termination pay, except to the extent consistent with past
practice and that, in the aggregate, does not result in a material increase
in benefits or compensation expenses, (C) enter into or amend any Parent
Employment Arrangement with any such current or former employee, officer or
director, except to the extent permitted in subsection (B) above, (D)
establish, adopt, enter into or amend in any material respect any
collective bargaining agreement or Parent Benefit Plan, except, with
respect to any Parent Benefit Plan that is a Qualified Plan, as may be
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73
required to facilitate or obtain a determination from the Internal Revenue
Service that such Parent Benefit Plan is a Qualified Plan or (E) take or
permit to be taken any action to accelerate any rights or benefits or the
funding thereof, or make or permit to be made any material determinations
not in the ordinary course of business consistent with prior practice,
under any collective bargaining agreement, Parent Benefit Plan or Parent
Employment Arrangement; provided, however, that notwithstanding anything
herein to the contrary, the foregoing shall not restrict Parent or the
Parent Subsidiaries from (1) entering into or making available to newly
hired officers and employees or to officers and employees in the context of
promotions based on job performance or workplace requirements in the
ordinary course of business consistent with past practice, plans,
agreements, benefits and compensation arrangements (including incentive
grants) that have, consistent with past practice, been made available to
newly hired or promoted officers and employees, or (2) entering into or
amending collective bargaining agreements with existing collective
bargaining representatives so as to increase compensation or benefits in a
manner that does not materially increase the benefits or compensation
expenses of Parent and the Parent Subsidiaries;
(vi) make any change in accounting methods, principles or practices
materially affecting the reported consolidated assets, liabilities or
results of operations of Parent, except as required by a change in GAAP;
(vii) sell, lease (as lessor), license or otherwise dispose of or
subject to any Lien any properties or assets that are material,
individually or in the aggregate, to Parent and the Parent Subsidiaries,
taken as a whole, except sales of inventory and excess or obsolete assets
in the ordinary course of business consistent with past practice;
(viii) except in the ordinary course of business consistent with prior
practice, (A) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of Parent or any
Parent Subsidiary, guarantee any debt securities of another person, enter
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into any "keep well" or other agreement to maintain any financial statement
condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, in each case, other than in
connection with a refinancing on commercially reasonable terms, or (B) make
any loans, advances or capital contributions to, or investments in, any
other person, other than to or in Parent or any direct or indirect wholly
owned subsidiary of Parent;
(ix) make or agree to make any new capital expenditure or expenditures
other than as permitted by Section 5.01(b)(iv) that, individually, is in
excess of $50,000,000 or, in the aggregate, are in excess of $250,000,000,
except to the extent made or agreed to be made in order to ensure
compliance with the rules and regulations or an order of the NRC or any
other Governmental Entity or to ensure compliance with the terms of any
Permit;
(x) make any material Tax election or settle or compromise any
material Tax liability or refund;
(xi) engage in any activities which would cause a change in its status
under PUHCA, or that would impair the ability of Parent to claim an
exemption as of right under Rule 2 of PUHCA prior to the Merger, other than
the application to the SEC under PUHCA contemplated by this Agreement;
(xii) enter into or commit to any Power Purchase Agreement except for
any Power Purchase Agreement that, in the ordinary course of business, can
be entered into without the prior approval of the Board of Directors or a
committee thereof of Parent (the threshold for requiring submission to the
board or a committee not to be made substantially higher than that in
effect on the date hereof) unless Parent consults with the Company
regarding such Power Purchase Agreement and Parent has obtained the prior
written consent of the Company to such Power Purchase Agreement or such
Power Purchase Agreement is fully compliant with criteria to which the
Company has previously given a generic consent, in each case, which consent
shall not be unreasonably withheld, it being understood that in such
consultation process Parent and the Company shall comply with all
Applicable Law and any applicable confidentiality or similar third party
agreement; or
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(xiii) authorize any of, or commit or agree to take any of, the
foregoing actions.
(c) Conduct of Business by Newco. Parent shall cause Newco to
perform its obligations under this Agreement and shall not permit Newco to take
any action other than in furtherance of this Agreement and the Transactions.
(d) Other Actions. The Company and Parent shall not, and shall not
permit any of their respective subsidiaries to, take any action that would, or
that could reasonably be expected to, result in (i) any of the representations
and warranties of such party set forth in this Agreement that is qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that is not so qualified becoming untrue in any material respect or (iii) except
as otherwise permitted by Section 5.02 or 5.03, any condition to the Merger set
forth in Article VII not being satisfied.
(e) Advice of Changes. The Company and Parent shall promptly advise
the other orally and in writing of any change or event that has or could
reasonably be expected to have a Company Material Adverse Effect or Parent
Material Adverse Effect, as the case may be.
(f) Coordination of Dividends. Each of Parent and the Company shall
coordinate with the other regarding the declaration and payment of dividends in
respect of Parent Common Stock and Company Common Stock and the record dates and
payment dates relating thereto, it being the intention of Parent and the Company
that no holder of Parent Common Stock, Company Common Stock or Newco Common
Stock shall receive two dividends, or fail to receive one dividend, for any
single calendar quarter with respect to its shares of Parent Common Stock or
Company Common Stock, as the case may be, and/or any shares of Newco Common
Stock any such holder receives in exchange therefor pursuant to the Merger.
(g) Reorganizations. The parties hereto agree that this Agreement
shall not in any manner restrict (i) Parent from forming a holding company and
such subsidiaries as Parent considers appropriate to separate its regulated and
unregulated businesses (the "Parent Reorganization") and (ii) the Company from
forming such subsidiaries as the Company considers appropriate to
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separate its regulated and unregulated businesses (the "Company
Reorganization"). The parties to this Agreement acknowledge and agree that
implementation by Parent of the Parent Reorganization or by the Company of the
Company Reorganization shall not constitute (x) a breach of or failure to
perform any of the representations, warranties or covenants in this Agreement or
(y) otherwise result in the failure of any condition to the obligation of the
Company or Parent, as applicable, to consummate the Merger to be satisfied.
SECTION 5.02. No Solicitation by Company. (a) The Company agrees
that, during the term of this Agreement, it shall not, and shall not authorize
or permit any of its subsidiaries or any director, officer, employee, agent or
representative (collectively, "Representatives") of the Company or any of its
subsidiaries, directly or indirectly, to (i) solicit, initiate, encourage or
facilitate, or furnish or disclose non-public information in furtherance of, any
inquiries or the making of any proposal with respect to a Company Competing
Transaction (as defined herein) or (ii) negotiate, explore or otherwise engage
in discussions with any person (other than Parent or Newco or their respective
Representatives) with respect to any Company Competing Transaction. The term
"Company Competing Transaction" means any recapitalization, merger,
consolidation or other business combination involving the Company, or
acquisition of any material portion of the capital stock or assets (except for
(A) acquisitions of assets in the ordinary course of business, (B) acquisitions
by the Company that do not and could not reasonably be expected to impede the
consummation of the Merger and do not violate any other covenant in this
Agreement, (C) transactions disclosed in the Company Disclosure Letter and (D)
the Transactions) of the Company, or any combination of the foregoing. The
Company will immediately cease all existing activities, discussions and
negotiations with any parties conducted heretofore with respect to any of the
foregoing and shall use its reasonable best efforts to enforce any
confidentiality or similar agreement relating to a Company Competing
Transaction. From and after the execution of this Agreement, the Company shall
immediately advise Parent in writing of the receipt, directly or indirectly, of
any inquiries, discussions, negotiations, or proposals relating to a Company
Competing Transaction (including the specific terms thereof), and promptly
furnish to Parent a copy of any such proposal or inquiry in addition to any
information provided to or by any third party
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relating thereto and if such proposal or inquiry is not in writing, the identity
of the person making such proposal or inquiry. Notwithstanding the foregoing,
prior to receipt of the Company Shareholder Approval, the Company may, but only
to the extent that the Board of Directors of the Company shall conclude in good
faith, based upon the advice of its outside counsel, that failure to take such
action could reasonably be expected to constitute a breach of the fiduciary
obligations of such Board of Directors under Applicable Law, in response to a
proposal for a Company Competing Transaction that constitutes a Qualifying
Company Proposal (as defined in Section 5.02(d)) that did not result from the
breach or a deemed breach of this Section 5.02, and subject to compliance with
the notification provisions of this Section 5.02, (A) furnish non-public
information with respect to the Company to the person proposing such Company
Competing Transaction and its Representatives pursuant to a confidentiality
agreement with terms no less restrictive of such person than those set forth in
the Confidentiality Agreement (as defined in Section 6.02) and (B) participate
in discussions or negotiations with such person and its Representatives
regarding such Company Competing Transaction. Without limiting the foregoing, it
is agreed that any violation of the restrictions set forth in this Section
5.02(a) by any Representative or affiliate of the Company or any Company
Subsidiary, whether or not such person is purporting to act on behalf of the
Company or any Company Subsidiary or otherwise, shall be deemed to be a breach
of this Section 5.02(a) by the Company.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Parent, the approval or recommendation by the Board of
Directors of the Company of this Agreement and the Transactions, (ii) approve,
or permit or cause the Company to enter into, any definitive agreement providing
for the implementation of any Company Competing Transaction (each a "Company
Acquisition Agreement") or (iii) approve or recommend, or propose to approve or
recommend, any Company Competing Transaction. Notwithstanding the foregoing,
prior to receipt of the Company Shareholder Approval, and only to the extent
that the Board of Directors of the Company shall conclude in good faith, based
upon the advice of its outside counsel, that failure to take such action could
reasonably be expected to constitute a breach of the fiduciary obligations of
such Board of Directors under Applicable Law in response to a proposal for a
Company Competing
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Transaction that constitutes a Qualifying Company Proposal that did not result
from the breach or a deemed breach of this Section 5.02, (A) the Board of
Directors of the Company may withdraw or modify its approval or recommendation
of this Agreement and the Transactions and, in connection therewith, approve or
recommend such Qualifying Company Proposal and (B) the Board of Directors of the
Company may approve and the Company may enter into a Company Acquisition
Agreement contemporaneously with its termination of this Agreement pursuant to
Section 8.01(f).
(c) Nothing contained in this Section 5.02 shall prohibit the Company
from taking and disclosing to its shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to its
shareholders if, in the good faith judgment of the Board of Directors of the
Company after consultation with outside counsel, failure to so disclose would be
inconsistent with its obligations under Applicable Law.
(d) For purposes of this Agreement, "Qualifying Company Proposal"
means any proposal made by a third party to acquire all of the equity securities
or all or substantially all of the assets of the Company, pursuant to a tender
offer, a merger, a consolidation, a recapitalization, a sale of its assets or
otherwise, that is (A) for consideration that is comprised solely of cash or
marketable securities, or a combination thereof, and not conditioned on
financing, (B) on terms which the Board of Directors of the Company determines
in its good faith judgment (based on the advice of a nationally recognized
independent investment banking firm) to be superior from a financial point of
view to the holders of Company Common Stock to the Transactions (taking into
account all of the terms of any proposal by Parent to amend or modify the terms
of the Transactions) and to be more favorable generally to the Company's
shareholders than the Transactions (taking into account all financial and
strategic considerations, including relevant legal, financial, regulatory and
other aspects of such proposal and the third party making such proposal and the
conditions and prospects for completion of such proposal, the strategic
direction of and benefits sought by the Company and all of the terms of any
proposal by Parent to amend or modify the terms of the Transactions) and (C)
reasonably capable of being completed within 18 months of the termination of
this Agreement or by the Outside Date, whichever is later, taking into account
all
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legal, financial, regulatory and other aspects of such proposal and the third
party making such proposal.
SECTION 5.03. No Solicitation by Parent. (a) Parent agrees that,
during the term of this Agreement, it shall not, and shall not authorize or
permit any of its subsidiaries or any of its or its subsidiaries'
Representatives, directly or indirectly, to (i) solicit, initiate, encourage or
facilitate, or furnish or disclose non-public information in furtherance of, any
inquiries or the making of any proposal with respect to a Parent Competing
Transaction (as defined herein) or (ii) negotiate, explore or otherwise engage
in discussions with any person (other than Company or Newco or their respective
Representatives) with respect to any Parent Competing Transaction. The term
"Parent Competing Transaction" means any recapitalization, merger, consolidation
or other business combination involving Parent, or acquisition of any material
portion of the capital stock or assets (except for (A) acquisitions of assets in
the ordinary course of business, (B) acquisitions by Parent that do not and
could not reasonably be expected to impede the consummation of the Merger and do
not violate any other covenant in this Agreement, (C) transactions disclosed in
the Parent Disclosure Letter and (D) the Transactions) of Parent, or any
combination of the foregoing. Parent will immediately cease all existing
activities, discussions and negotiations with any parties conducted heretofore
with respect to any of the foregoing and shall use its reasonable best efforts
to enforce any confidentiality or similar agreement relating to a Parent
Competing Transaction. From and after the execution of this Agreement, Parent
shall immediately advise the Company in writing of the receipt, directly or
indirectly, of any inquiries, discussions, negotiations, or proposals relating
to a Parent Competing Transaction (including the specific terms thereof), and
promptly furnish to the Company a copy of any such proposal or inquiry in
addition to any information provided to or by any third party relating thereto
and if such proposal or inquiry is not in writing, the identity of the person
making such proposal or inquiry. Notwithstanding the foregoing, prior to
receipt of the Parent Shareholder Approval, Parent may, but only to the extent
that the Board of Directors of Parent shall conclude in good faith, based upon
the advice of its outside counsel, that failure to take such action could
reasonably be expected to constitute a breach of the fiduciary obligations of
such Board of Directors under Applicable Law, in response to a proposal for a
Parent
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Competing Transaction that constitutes a Qualifying Parent Proposal (as
defined in Section 5.03(d)) that did not result from the breach or a deemed
breach of this Section 5.03, and subject to compliance with the notification
provisions of this Section 5.03, (A) furnish non-public information with respect
to Parent to the person proposing such Parent Competing Transaction and its
Representatives pursuant to a confidentiality agreement with terms no less
restrictive of such person than those set forth in the Confidentiality Agreement
(as defined in Section 6.02) and (B) participate in discussions or negotiations
with such person and its Representatives regarding such Parent Competing
Transaction. Without limiting the foregoing, it is agreed that any violation of
the restrictions set forth in this Section 5.03(a) by any Representative or
affiliate of Parent or any Parent Subsidiary, whether or not such person is
purporting to act on behalf of Parent or any Parent Subsidiary or otherwise,
shall be deemed to be a breach of this Section 5.03(a) by Parent.
(b) Neither the Board of Directors of Parent nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to the Company, the approval or recommendation by the Board of
Directors of Parent of this Agreement and the Transactions, (ii) approve, or
permit or cause Parent to enter into, any definitive agreement providing for the
implementation of any Parent Competing Transaction (each a "Parent Acquisition
Agreement") or (iii) approve or recommend, or propose to approve or recommend,
any Parent Competing Transaction. Notwithstanding the foregoing, prior to
receipt of the Parent Shareholder Approval, and only to the extent that the
Board of Directors of Parent shall conclude in good faith, based upon the advice
of its outside counsel, that failure to take such action could reasonably be
expected to constitute a breach of the fiduciary obligations of such Board of
Directors under Applicable Law in response to a proposal for a Parent Competing
Transaction that constitutes a Qualifying Parent Proposal that did not result
from the breach or a deemed breach of this Section 5.03, (A) the Board of
Directors of Parent may withdraw or modify its approval or recommendation of
this Agreement and the Transactions and, in connection therewith, approve or
recommend such Qualifying Parent Proposal and (B) the Board of Directors of
Parent may approve and Parent may enter into a Parent Acquisition Agreement
contemporaneously with its termination of this Agreement pursuant to Section
8.01(h).
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(c) Nothing contained in this Section 5.03 shall prohibit Parent from
taking and disclosing to its shareholders a position contemplated by Rule 14e-
2(a) promulgated under the Exchange Act or from making any disclosure to its
shareholders if, in the good faith judgment of the Board of Directors of Parent
after consultation with outside counsel, failure to so disclose would be
inconsistent with its obligations under Applicable Law.
(d) For purposes of this Agreement, "Qualifying Parent Proposal"
means any proposal made by a third party to acquire all of the equity securities
or all or substantially all of the assets of Parent, pursuant to a tender offer,
a merger, a consolidation, a recapitalization, a sale of its assets of
otherwise, that is (A) for consideration that is comprised solely of cash or
marketable securities, or a combination thereof, and not conditioned on
financing, (B) on terms which the Board of Directors of Parent determines in its
good faith judgment (based on the advice of a nationally recognized independent
investment banking firm) to be superior from a financial point of view to the
holders of Parent Common Stock to the Transactions (taking into account all of
the terms of any proposal by Company to amend or modify the terms of the
Transactions) and to be more favorable generally to Parent's shareholders than
the Transactions (taking into account all financial and strategic
considerations, including relevant legal, financial, regulatory and other
aspects of such proposal and the third party making such proposal and the
conditions and prospects for completion of such proposal, the strategic
direction of and benefits sought by Parent and all of the terms of any proposal
by the Company to amend or modify the terms of the Transactions) and (C)
reasonably capable of being completed within 18 months of the termination of
this Agreement or by the Outside Date, whichever is later, taking into account
all legal, financial, regulatory and other aspects of such proposal and the
third party making such proposal.
ARTICLE VI
Additional Agreements
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SECTION 6.01. Preparation of the Form S-4 and the Proxy Statement;
Shareholders Meetings; Adoption by Sole Shareholder. (a) As soon as
practicable following the date of this Agreement, the Company, Parent and Newco
shall prepare and file with the SEC the Proxy Statement in preliminary form and
Parent, the Company and Newco shall prepare and file with the SEC the Form S-4,
in which the Proxy Statement will be included as a prospectus. Each of the
Company, Parent and Newco shall use its reasonable best efforts to have the Form
S-4 declared effective under the Securities Act as promptly as practicable after
such filing. Each of the Company, Parent and Newco shall use its reasonable best
efforts to cause the Proxy Statement to be mailed to its respective shareholders
as promptly as practicable after the Form S-4 is declared effective under the
Securities Act. Newco shall also take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified) required to be
taken under any applicable state securities laws in connection with the issuance
of Newco Common Stock in the Merger and under the Company Stock Plans and the
Parent Stock Plans, and the Company and Parent shall furnish all information
concerning the Company or Parent, as applicable, and the holders of the Company
Common Stock or Parent Common Stock and rights to acquire Company Common Stock
or Parent Common Stock pursuant to the Company Stock Plans or the Parent Stock
Plans as may be reasonably requested in connection with any such action. The
parties shall notify each other promptly of the receipt of any comments from the
SEC or its staff and of any request by the SEC or its staff for amendments or
supplements to the Proxy Statement or the Form S-4 or for additional information
and shall supply each other with copies of all correspondence between such party
or any of its Representatives, on the one hand, and the SEC or its staff, on the
other hand, with respect to the Proxy Statement, the Form S-4 or the Merger.
(b) If prior to the Merger Effective Time any event occurs with
respect to the Company or any Company Subsidiary or any change occurs with
respect to information supplied by or on behalf of the Company for inclusion in
the Proxy Statement or the Form S-4 which, in each case, is required to be
described in an amendment of, or a supplement to, the Proxy Statement or the
Form S-4, the Company shall promptly notify Parent of such event, and the
Company shall cooperate with Parent and Newco in the prompt filing with the SEC
of any necessary amendment or supplement to the Proxy Statement and Form S-4
and, as required by law, in
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disseminating the information contained in such amendment or supplement to the
Company's shareholders and to Parent's shareholders.
(c) If prior to the Merger Effective Time any event occurs with
respect to Parent or any Parent Subsidiary or any change occurs with respect to
information supplied by or on behalf of Parent for inclusion in the Proxy
Statement or the Form S-4 which, in each case, is required to be described in an
amendment of, or a supplement to, the Proxy Statement or the Form S-4, Parent
shall promptly notify the Company of such event, and Parent shall cooperate with
Company in the prompt filing with the SEC of any necessary amendment or
supplement to the Proxy Statement and the Form S-4 and, as required by law, in
disseminating the information contained in such amendment or supplement to the
Company's shareholders and to Parent's shareholders.
(d) The Company shall, as soon as practicable following effectiveness
of the Form S-4, duly call, give notice of, convene and hold a meeting of its
shareholders (the "Company Shareholders Meeting") for the purpose of seeking the
Company Shareholder Approval. The Company shall use its reasonable best efforts
to cause the Proxy Statement to be mailed to the Company's shareholders as
promptly as practicable after the Form S-4 is declared effective under the
Securities Act. Subject to Section 5.02(b), the Company shall, through its
Board of Directors, recommend to its shareholders that they give the Company
Shareholder Approval. Without limiting the generality of the foregoing, the
Company agrees that its obligations pursuant to the first two sentences of this
Section 6.01(d) shall not be affected by the commencement, public proposal,
public disclosure or communication to the Company of any Company Competing
Transaction.
(e) Parent shall, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
shareholders (the "Parent Shareholders Meeting") for the purpose of seeking the
Parent Shareholder Approval. The Parent shall use its reasonable best efforts
to cause the Proxy Statement to be mailed to the Parent's shareholders as
promptly as practicable after the Form S-4 is declared effective under the
Securities Act. Subject to Section 5.03(b), Parent shall, through its Board of
Directors, recommend to its shareholders that they give the Parent Shareholder
Approval. Without limiting the generality of the foregoing, Parent
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agrees that its obligations pursuant to the first two sentences of this Section
6.01(e) shall not be affected by the commencement, public proposal, public
disclosure or communication to Parent of any Parent Competing Transaction.
(f) The Company shall use its reasonable best efforts to cause to be
delivered to Parent a letter of Arthur Andersen LLP, the Company's independent
public accountants, dated a date within two business days before the date on
which the Form S-4 shall become effective and addressed to Parent, in form and
substance reasonably satisfactory to Parent and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
(g) Parent shall use its reasonable best efforts to cause to be
delivered to the Company a letter of PricewaterhouseCoopers LLP, Parent's
independent public accountants, dated a date within two business days before the
date on which the Form S-4 shall become effective and addressed to the Company,
in form and substance reasonably satisfactory to the Company and customary in
scope and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
(h) Parent, as sole shareholder of Newco, shall adopt this Agreement.
SECTION 6.02. Access to Information; Confidentiality. Each of the
Company and Parent after reasonable notice shall, and shall cause each of its
respective subsidiaries to, afford to the other party and to the officers,
employees, accountants, counsel, financial advisors and other representatives of
such other party, reasonable access during normal business hours during the
period prior to the Merger Effective Time to all their respective properties,
books, contracts, commitments, personnel and records and, during such period,
each of the Company and Parent shall, and shall cause each of its respective
subsidiaries to, furnish promptly to the other party (a) a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of Federal or state securities laws and (b)
all other information concerning its business, properties and personnel as such
other party may reasonably request. Without limiting the generality of the
foregoing,
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each of the Company and Parent shall, within two business days of request
therefor, provide to the other the information (x) described in Rule 14a-
7(a)(2)(ii) under the Exchange Act, (y) to which a holder of Company Common
Stock would be entitled under Section 7.75 of the IBCA (assuming such holder met
the requirements of such Section) and (z) to which a holder of Parent Common
Stock would be entitled under Section 1508 of the PBCL (assuming such holder met
the requirements of such Section). All information exchanged pursuant to this
Section 6.02 shall be subject to the confidentiality agreement dated July 15,
1999, between the Company and Parent (the "Confidentiality Agreement"), and this
Agreement constitutes a Definitive Agreement as defined therein.
SECTION 6.03. Regulatory Matters; Reasonable Best Efforts. (a)
Regulatory Approvals. Upon the terms and subject to the conditions set forth in
this Agreement, and subject to actions taken in compliance with Section 5.02(b)
or 5.03(b), as the case may be, each of the parties hereto shall cooperate and
promptly prepare and file all necessary documentation, to effect all necessary
applications, notices, petitions, filings and other documents, and shall use
reasonable best efforts to obtain all necessary Consents of all Governmental
Entities necessary or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other Transactions, including
the Parent Required Statutory Approvals and the Company Required Statutory
Approvals. Parent shall have the right to review and approve in advance all
characterizations of the information relating to the Company, on the one hand,
and the Company shall have the right to review and approve in advance all
characterizations of the information relating to Parent, on the other hand, in
either case, which appear in any filing made in connection with the Merger or
the other Transactions. Parent and the Company agree that they will consult
with each other with respect to the obtaining of all such necessary Consents of
Governmental Entities.
(b) Further Actions. Upon the terms and subject to the conditions
set forth in this Agreement, each of the parties agrees to use reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other Transactions, including
(i) the obtaining of all necessary consents,
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approvals or waivers from third parties, (ii) the defending of any lawsuits or
other legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the Transactions, including seeking to have any
stay or temporary restraining order entered by any court or other Governmental
Entity vacated or reversed, and (iii) the execution and delivery of any
additional instruments necessary to consummate the Transactions and to fully
carry out the purposes of this Agreement. Notwithstanding the foregoing, the
Company and its Representatives and Parent and its Representatives shall not be
prohibited under this Section 6.03(b) from taking any actions in compliance with
Section 5.02(b) or 5.03(b), respectively.
(c) State Anti-Takeover Statutes. In connection with and without
limiting the generality of Section 6.03(b), Parent and the Company shall (i)
take all action necessary to ensure that no state anti-takeover statute or
similar statute or regulation is or becomes applicable to any Transaction or
this Agreement and (ii) if any state anti-takeover statute or similar statute or
regulation becomes applicable to any Transaction or this Agreement, take all
action necessary to ensure that the Merger and the other Transactions may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Merger and the other Transactions. Notwithstanding the foregoing, the
Company and its Representatives and Parent and its Representatives shall not be
prohibited under this Section 6.03(c) from taking any action permitted by
Section 5.02(b) or 5.03(b), respectively.
(d) Notices. The Company shall give prompt notice to Parent, and
Parent or Newco shall give prompt notice to the Company, of (i) any
representation or warranty made by it contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (ii) the failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided, however, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
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SECTION 6.04. Company and Parent Stock Options and Other Stock Plans.
(a) Prior to the Merger Effective Time, the Company Board (or, if appropriate,
any committee administering the Company Stock Plans) shall adopt such
resolutions or take such other actions as may be required to effect the
following:
(i) adjust the terms of all outstanding Company Employee Stock Options
to provide that, at the Merger Effective Time, each Company Employee Stock
Option outstanding immediately prior to the Merger Effective Time shall be
deemed to constitute an option to acquire, on the same terms and conditions
as were applicable under such Company Employee Stock Option, the same
number of shares of Newco Common Stock as the holder of such Company
Employee Stock Option would have been entitled to receive pursuant to the
Merger had such holder exercised such Company Employee Stock Option in full
immediately prior to the Merger Effective Time, at a price per share equal
to (A) the aggregate exercise price for the shares of Company Common Stock
otherwise purchasable pursuant to such Company Employee Stock Option
immediately prior to the Merger Effective Time (whether or not exercisable)
divided by (B) the number of shares of Newco Common Stock deemed
purchasable pursuant to such Company Employee Stock Option; provided,
however, that in the case of any qualified stock options under Sections
422-424 of the Code, the option price, the number of shares purchasable
pursuant to such option and the terms and conditions of exercise of such
option shall be determined in order to comply with Section 424(a) of the
Code;
(ii) make such other changes to the Company Stock Plans and the terms
of any Company Employee Stock Options as it deems appropriate to give
effect to the Merger (subject to the approval of Parent, which shall not be
unreasonably withheld); and
(iii) ensure that, after the Merger Effective Time, no Company
Employee Stock Options may be granted under any Company Stock Plan.
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(b) Prior to the Exchange Effective Time, the Parent Board (or, if
appropriate, any committee administering the Parent Stock Plans) shall adopt
such resolutions or take such other actions as may be required to effect the
following:
(i) adjust the terms of all outstanding Parent Employee Stock Options
to provide that, at the Exchange Effective Time, each Parent Employee Stock
Option outstanding immediately prior to the Exchange Effective Time shall
be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Parent Employee Stock Option, the
same number of shares of Newco Common Stock as the holder of such Parent
Employee Stock Option would have been entitled to receive pursuant to the
Merger had such holder exercised such Parent Employee Stock Option in full
immediately prior to the Exchange Effective Time, at a price per share
equal to (A) the aggregate exercise price for the shares of Parent Common
Stock otherwise purchasable pursuant to such Parent Employee Stock Option
immediately prior to the Exchange Effective Time (whether or not
exercisable) divided by (B) the number of shares of Newco Common Stock
deemed purchasable pursuant to such Parent Employee Stock Option; provided,
however, that in the case of any qualified stock options under Sections
422-424 of the Code, the option price, the number of shares purchasable
pursuant to such option and the terms and conditions of exercise of such
option shall be determined in order to comply with Section 424(a) of the
Code;
(ii) make such other changes to the Parent Stock Plans and the terms
of outstanding Parent Employee Stock Options as it deems appropriate to
give effect to the Merger (subject to the approval of the Company, which
shall not be unreasonably withheld); and
(iii) ensure that, after the Exchange Effective Time, no Parent
Employee Stock Options may be granted under any Parent Stock Plan.
(c) At the Merger Effective Time, and subject to compliance by the
Company with Section 6.04(a), Newco shall assume all the obligations of the
Company under the Company Stock Plans, each outstanding Company Employee Stock
Option and the agreements evidencing the grants thereof. As soon as practicable
after the Merger Effective Time, Newco shall
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deliver to the holders of Company Employee Stock Options appropriate notices
setting forth such holders' rights pursuant to the respective Company Stock
Plans, and the agreements evidencing the grants of such Company Employee Stock
Options shall continue in effect on the same terms and conditions (subject to
the adjustments required by this Section 6.04 after giving effect to the
Merger). Newco shall comply with the terms of the Company Stock Plans and
ensure, to the extent required by, and subject to the provisions of, such
Company Stock Plans, that the Company Employee Stock Options that qualified as
qualified stock options prior to the Merger Effective Time continue to qualify
as qualified stock options after the Merger Effective Time.
(d) At the Exchange Effective Time, and subject to compliance by
Parent with Section 6.04(b), Newco shall assume all the obligations of Parent
under the Parent Stock Plans, each outstanding Parent Employee Stock Option and
Parent SAR the agreements evidencing the grants thereof. As soon as practicable
after the Exchange Effective Time, Newco shall deliver to the holders of Parent
Employee Stock Options and Parent SARs appropriate notices setting forth such
holders' rights pursuant to the respective Parent Stock Plans, and the
agreements evidencing the grants of such Parent Employee Stock Options and
Parent SARs shall continue in effect on the same terms and conditions (subject
to the adjustments required by this Section 6.04 after giving effect to the
Merger). Newco shall comply with the terms of the Parent Stock Plans and
ensure, to the extent required by, and subject to the provisions of, such Parent
Stock Plans, that the Parent Employee Stock Options that qualified as qualified
stock options prior to the Exchange Effective Time continue to qualify as
qualified stock options after the Exchange Effective Time.
(e) With respect to each employee or director benefit or compensation
plan, program or arrangement, other than the Company Stock Plans and the Parent
Stock Plans, under which Company Common Stock or Parent Common Stock is required
to be used for purposes of the payment of benefits, grant of awards or exercise
of options (each, a "Stock Plan"), (i) the Company and the Parent shall take
such action as may be necessary so that, after the Merger Effective Time, such
Stock Plan shall provide for issuance or purchase in the open market only of
Newco Common Stock rather than Company Common Stock or Parent Common Stock, as
the case may be, and otherwise to amend such Stock Plans to
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reflect this Agreement and the Merger, and (ii) Newco shall take all corporate
action necessary or appropriate to obtain shareholder approval with respect to
such Stock Plan to the extent such approval is required for purposes of the Code
or other Applicable Law. Newco shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Newco Common Stock for
delivery upon exercise of the Company Employee Stock Options and Parent Employee
Stock Options assumed in accordance with this Section 6.04 or the payment of
benefits, grant of awards or exercise of options under such Stock Plans. As soon
as reasonably practicable after the Merger Effective Time, Newco shall file one
or more registration statements on Form S-8 (or any successor or other
appropriate form) with respect to the shares of Newco Common Stock subject to
such Company Employee Stock Options and Parent Employee Stock Options or to such
Stock Plans and shall use its reasonable best efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein
or related thereto) for so long as such Company Employee Stock Options and
Parent Employee Stock Options or such benefits or grants of awards remain
payable or such options remain outstanding. With respect to those individuals
who subsequent to the Merger will be subject to the reporting requirements under
Section 16(a) of the Exchange Act, where applicable, Newco shall administer the
Company Stock Plans and Parent Stock Plans assumed pursuant to this Section 6.04
and the Stock Plans in a manner that complies with Rule 16b-3 of the SEC to the
extent the applicable plan complied with such rule prior to the Merger. Prior to
the Merger Effective Time, Parent and Newco shall take all actions as may be
reasonably required to cause the acquisition of equity securities of Newco, as
contemplated by this Section 6.04, by any person who is or will become a
director or officer of Newco to be eligible for exemption under Rule 16b-3(d) of
the SEC.
(f) In this Agreement:
"Company Employee Stock Option" means any option to purchase Company
Common Stock granted under any Company Stock Plan.
"Company Stock Plans" means the Long-Term Incentive Plan of the
Company as amended from time to time.
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"Parent Employee Stock Option" means any option to purchase Parent
Common Stock granted under any Parent Stock Plan.
"Parent Stock Plans" means the PECO Energy Company 1989 Long-Term
Incentive Plan and the PECO Energy Company 1998 Stock Option Plan.
"Parent SAR" means any stock appreciation right linked to the price of
Parent Common Stock and granted under any Parent Stock Plan.
SECTION 6.05. Benefit Plans; Workforce Matters. (a) From and after
the Merger Effective Time, Newco and its subsidiaries shall honor and perform in
accordance with their respective terms (as in effect on the date of this
Agreement or as amended in accordance with or as permitted by this Agreement),
all the collective bargaining agreements of the Company, Parent or any of their
respective subsidiaries disclosed in the Company Disclosure Letter or the Parent
Disclosure Letter, respectively; provided, however, that this Section 6.05(a) is
not intended to prevent Newco from enforcing such agreements in accordance with
their respective terms, including enforcement of any reserved right to amend,
modify, suspend, revoke or terminate any such agreement.
(b) Subject to Applicable Law and obligations under applicable
collective bargaining agreements, it is the current intention of Parent and the
Company that any reductions in workforce following the Merger Effective Time in
respect of employees of Newco and its subsidiaries shall be made on a fair and
equitable basis, in light of the circumstances and the objectives to be
achieved, as determined by Newco, without regard to whether employment was with
the Company or the Company Subsidiaries or Parent or the Parent Subsidiaries and
with due consideration to the applicable employee's previous work history, prior
experience and skills and Newco's business needs, and any employee whose
employment is terminated or job is eliminated shall be entitled to participate
on a fair and equitable basis as determined by Newco in the job opportunity and
employment placement programs offered by Newco or any of its subsidiaries.
(c) Subject to Applicable Law and obligations under applicable
collective bargaining agreements, each
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Company Benefit Plan, Parent Benefit Plan, Company Employment Arrangement and
Parent Employment Arrangement in effect on the date of this Agreement (or as
amended or established in accordance with or as permitted by this Agreement)
shall be maintained in effect by Newco and its subsidiaries, except as provided
in Section 6.04, with respect to their current and former employees, officers or
directors of the Company and Company Subsidiaries and Parent and Parent
Subsidiaries, respectively, who are covered by such plans or arrangements
immediately prior to the Merger Effective Time until Newco determines otherwise
on or after the Merger Effective Time. Newco and its subsidiaries shall honor,
perform and, with respect to each Company Benefit Plan and Parent Benefit Plan
and Company Employment Arrangement and Parent Employment Arrangement that is not
a multiemployer benefit plan within the meaning of Section 4001(a)(3) of ERISA,
sponsor and administer, each such Company Benefit Plan and Parent Benefit Plan
and Company Employment Arrangement and Parent Employment Arrangement in
accordance with their respective terms (as in effect on the date of this
Agreement or as amended in accordance with or as permitted by this Agreement),
and Newco shall (i) assume as of the Merger Effective Time each Company Benefit
Plan and Company Employment Arrangement maintained by the Company immediately
prior to the Merger Effective Time and as of the Exchange Effective Time each
Parent Benefit Plan and Parent Employment Arrangement maintained by Parent
immediately prior to the Exchange Effective Time and (ii) perform the
obligations under, sponsor and administer such plan or arrangement in the same
manner and to the same extent that the Company or Parent, as the case may be,
would be required to perform, sponsor and administer thereunder; provided,
however, that nothing contained herein shall limit any reserved right contained
in any such Company Benefit Plan, Company Employment Arrangement, Parent Benefit
Plan or Parent Employment Arrangement to amend, modify, suspend, revoke or
terminate any such plan or arrangement. Without limiting the foregoing, (i) each
participant in any Company Benefit Plan or Parent Benefit Plan shall receive
credit for purposes of eligibility to participate, vesting and eligibility to
receive benefits (but specifically excluding for benefit accrual purposes or
where such crediting would result in a duplication of benefits) under any
benefit plan of Newco or any of its subsidiaries or affiliates for service
credited for the corresponding purpose under any such benefit plan; provided,
however, that such crediting of service shall not operate to cause any such plan
or arrangement to fail to
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comply with the applicable provisions of the Code or ERISA, (ii) each benefit
plan of Newco or its subsidiaries which is a medical, dental or health benefit
plan shall take into account for purposes of determining a participant's
deductibles and out-of-pocket limits thereunder expenses previously incurred by
the participant during the same year while participating in any other such
Company Benefit Plan or Parent Benefit Plan and shall waive any restrictions and
limitations for pre-existing conditions provided therein for any participant to
the extent not applicable to the participant in any other such Company Benefit
Plan or Parent Benefit Plan in which the participant participated immediately
prior to participating in that benefit plan, and (iii) each benefit plan of
Newco or its subsidiaries which is a cafeteria plan under Section 125 of the
Code shall cause credits and debits in respect of any participant in any
flexible spending account thereunder for a plan year to be transferred to and
maintained in any such corresponding Company Benefit Plan or Parent Benefit Plan
in which such participant may subsequently participate during the same year. The
Company and the Parent will cooperate on and after the date hereof to develop
appropriate employee benefit plans, programs and arrangements, including but not
limited to, executive and incentive compensation, stock option and supplemental
executive retirement plans for employees and directors of Newco and its
subsidiaries from and after the Merger Effective Time. However, no provision
contained in this Section 6.05(c) shall be deemed to constitute an employment
contract between Newco and any individual, or a waiver of Newco's right to
discharge any employee at any time, with or without cause.
SECTION 6.06. Indemnification. (a) Newco shall, to the fullest
extent permitted by Applicable Law, honor all the Company's and Parent's
respective obligations to indemnify (including any obligations to advance funds
for expenses) the current and former directors and officers of the Company or
Parent, as the case may be, for acts or omissions by such directors and officers
occurring prior to the Merger Effective Time to the extent that such obligations
to indemnify exist on the date of this Agreement, whether pursuant to the
Company Charter or the Parent Charter, as the case may be, the Company By-laws
or the Parent By-laws, as the case may be, individual indemnity agreements or
otherwise, and such obligations shall survive the Merger and shall continue in
full force and effect in accordance with the terms of the Company Charter or the
Parent Charter, as the case may be, the Company By-laws or
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the Parent By-laws, as the case may be, and such individual indemnity agreements
from the Merger Effective Time.
(b) For a period of six years after the Merger Effective Time, Newco
shall cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by the Company or Parent or such
substantially comparable policies as in effect on the Closing Date, as the case
may be, (provided that Newco may substitute therefor policies with reputable and
financially sound carriers of at least the same coverage and amounts containing
terms and conditions which are no less advantageous) with respect to claims
arising from or related to facts or events which occurred at or before the
Merger Effective Time. If such insurance coverage cannot be obtained at all,
Newco shall maintain the most advantageous policies of directors' and officers'
insurance reasonably obtainable.
(c) From and after the Merger Effective Time, to the fullest extent
permitted by Applicable Law, Newco shall indemnify, defend and hold harmless the
present and former officers and directors of the Company and Parent, as the case
may be, and their respective subsidiaries and any of their respective employees
who act as a fiduciary under any Company Benefit Plan (each an "Indemnified
Party") against all losses, claims, damages, liabilities, fees and expenses
(including attorneys' fees and disbursements), judgments, fines and amounts paid
in settlement (in the case of settlements, with the approval of the indemnifying
party (which approval shall not be unreasonably withheld)) (collectively,
"Losses"), as incurred (payable monthly upon written request which request shall
include reasonable evidence of the Losses set forth therein) to the extent
arising from, relating to, or otherwise in respect of, any actual or threatened
action, suit, proceeding or investigation, in respect of actions or omissions
occurring at or prior to the Merger Effective Time in connection with such
Indemnified Party's duties as an officer, director or employee as aforesaid, in
each case, of the Company or Parent or any of their respective subsidiaries,
including in respect of this Agreement, the Merger and the other Transactions.
SECTION 6.07. Fees and Expenses. (a) Except as provided below, all
fees and expenses incurred in connection with the Merger and the other
Transactions shall be paid by the party incurring such fees or expenses, whether
or not
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the Merger is consummated, except that expenses incurred in connection with
filing, printing and mailing the Proxy Statement and the Form S-4 shall be
shared equally by Parent and the Company.
(b) The Company shall pay to Parent a fee of $250,000,000 if: (i)
the Company terminates this Agreement pursuant to Section 8.01(f); (ii) Parent
terminates this Agreement pursuant to Section 8.01(d); or (iii) any Company
Competing Transaction was proposed to the Company or publicly disclosed and
thereafter the Company terminates this Agreement pursuant to Section 8.01(b)(i)
or either the Company or Parent terminates this Agreement pursuant to Section
8.01(b)(iv) or Parent terminates this Agreement pursuant to Section 8.01(c) (but
in the case of termination pursuant to Section 8.01(c), only in the event of
termination for a wilful breach of this Agreement or failure to perform this
Agreement by the Company) and, in each case, within 18 months of such
termination the Company enters into a definitive agreement to consummate or
consummates any Company Competing Transaction. Any fee due under this Section
6.07(b) shall be paid by wire transfer of same-day funds on the date of
termination of this Agreement (except that in the case of termination pursuant
to clause (iii) above such payment shall be made on the date of execution of
such definitive agreement or, if earlier, consummation of such transaction or
another transaction with the same party or its affiliates).
(c) Parent shall pay to the Company a fee of $250,000,000 if: (i)
Parent terminates this Agreement pursuant to Section 8.01(h); (ii) the Company
terminates this Agreement pursuant to Section 8.01(g); (iii) any Parent
Competing Transaction was proposed to Parent or publicly disclosed and
thereafter the Parent terminates this Agreement pursuant to Section 8.01(b)(i)
or either Parent or the Company terminates this Agreement pursuant to Section
8.01(b)(v) or the Company terminates this Agreement pursuant to Section 8.01(e)
(but in the case of termination pursuant to Section 8.01(e), only in the event
of termination for a wilful breach of this Agreement or failure to perform this
Agreement by Parent) and, in each case, within 18 months of such termination
Parent enters into a definitive agreement to consummate or consummates any
Parent Competing Transaction. Any fee due under this Section 6.07(c) shall be
paid by wire transfer of same-day funds on the date of termination of this
Agreement (except that in the case of termination pursuant to clause (iii)
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above such payment shall be made on the date of execution of such definitive
agreement or, if earlier, consummation of such transaction or another
transaction with the same party or its affiliates).
(d) The Company shall reimburse Parent and Newco for all its out-of-
pocket expenses actually incurred in connection with this Agreement, the Merger
and the other Transactions, up to a limit of $15,000,000, if a fee becomes
payable pursuant to Section 6.07(b) or if this Agreement is otherwise terminated
pursuant to Section 8.01(b)(iv) or 8.01(c). Such reimbursement shall be paid
upon demand following such termination.
(e) Parent shall reimburse the Company for all its out-of-pocket
expenses actually incurred in connection with this Agreement, the Merger and the
other Transactions, up to a limit of $15,000,000, if a fee becomes payable
pursuant to Section 6.07(c) or if this Agreement is otherwise terminated
pursuant to Section 8.01(b)(v) or 8.01(e). Such reimbursement shall be paid
upon demand following such termination.
SECTION 6.08. Public Announcements. Parent and Newco, on the one
hand, and the Company, on the other hand, shall consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
press release or other public statements with respect to this Agreement, the
Merger and the other Transactions and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by Applicable Law, court process or by obligations pursuant to any
listing agreement with any national securities exchange.
SECTION 6.09. Transfer Taxes. All stock transfer, real estate
transfer, documentary, stamp, recording and other similar Taxes (including
interest, penalties and additions to any such Taxes) ("Transfer Taxes") incurred
in connection with the Transactions shall be paid by the party incurring the
Transfer Tax, and the parties hereto shall cooperate with each other in
preparing, executing and filing any Tax Returns with respect to such Transfer
Taxes.
SECTION 6.10. Affiliates. (a) Promptly following the date of
execution of this Agreement, the Company shall deliver to Parent and Newco a
letter identify-
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ing all persons who are expected by the Company to be on the Closing Date, or
were as of the date of this Agreement, "affiliates" of the Company for purposes
of Rule 145 under the Securities Act. The Company shall use its reasonable best
efforts to cause each such person to deliver to Parent on or prior to the date
of mailing of Proxy Statement a written agreement substantially in the form
attached as Exhibit C.
(b) Promptly following the date of execution of this Agreement,
Parent shall deliver to the Company a letter indemnifying all persons who are
expected by Parent to be, on the Closing Date, or were as of the date of this
Agreement, "affiliates" of Parent for purposes of Rule 145 under the Securities
Act. Parent shall use its reasonable best efforts to cause each such person to
deliver to the Company on or prior to the date of mailing of the Proxy Statement
a written agreement substantially in the form of Exhibit D.
SECTION 6.11. Stock Exchange Listing. Parent and the Company shall
use all reasonable efforts to cause the shares of Newco Common Stock to be
issued in the Merger and under the Company Stock Plans and Parent Stock Plans to
be approved for listing on the NYSE, subject to official notice of issuance,
prior to the Closing Date.
SECTION 6.12. Rights Agreements; Consequences if Rights Triggered.
The Company Board shall take all action requested in writing by Parent in order
to render the Company Rights inapplicable to the Merger and the other
Transactions. Except as approved in writing by Parent or as set forth in the
Company Disclosure Letter, the Company Board shall not (i) amend the Company
Rights Agreement, (ii) redeem the Company Rights or (iii) take any action with
respect to, or make any determination under, the Company Rights Agreement. If
any Distribution Date, Stock Acquisition Date or Triggering Event occurs under
the Company Rights Agreement at any time during the period from the date of this
Agreement to the Merger Effective Time, the Company and Parent shall make such
adjustment to the Company Exchange Ratio and the Parent Exchange Ratio as the
Company and Parent shall mutually agree so as to preserve the economic benefits
that the Company and Parent each reasonably expected on the date of this
Agreement to receive as a result of the consummation of the Merger and the other
Transactions.
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SECTION 6.13. Tax Treatment. The parties intend (a) the Merger to
constitute transactions described in Section 351 of the Code and (b) the Second
Step Merger to constitute a transaction described in Section 368(a) of the Code.
Each party and its affiliates shall use reasonable efforts to cause the Merger
to so qualify and to obtain (i) the opinion of Cravath, Swaine & Moore to the
effect that (A) the Merger will constitute transactions described in Section 351
of the Code and (B) the Second Step Merger will constitute a transaction
described in Section 368(a) of the Code and (ii) the opinion of Jones, Day,
Reavis & Pogue to the effect that the Second Step Merger will constitute a
transaction described in Section 368(a) of the Code. For purposes of the tax
opinions described in Sections 7.02(d) and 7.03(d) of this Agreement, each of
Parent, Newco and the Company shall provide customary representation letters
substantially in the form of Exhibits E, F and G, respectively, each dated on or
about the date that is two business days prior to the date the Proxy Statement
is mailed to the shareholders of Parent and the Company and reissued as of the
Closing Date. Each of Parent, Newco and the Company and each of their
respective affiliates shall not take any action and shall not fail to take any
action or suffer to exist any condition which action or failure to act or
condition would prevent, or would be reasonably likely to prevent, (i) the
Merger from constituting transactions described in Section 351 of the Code or
(ii) the Second Step Merger from constituting a transaction described in Section
368(a) of the Code.
SECTION 6.14. Reorganization and Amendment. The parties to this
Agreement acknowledge and agree that in the event Parent implements the Parent
Reorganization prior to the Exchange Effective Time, certain changes to the
structure of the Merger and the other Transactions will be necessary in order
for the Merger and the other Transactions to be consummated as contemplated
hereby and for Newco and its subsidiaries to have, following the Merger
Effective Time, the corporate structure as contemplated hereby, and the parties
to this Agreement agree to negotiate in good faith and enter into an amendment
to this Agreement to implement such necessary changes.
SECTION 6.15. Company Common Stock Repurchase. Prior to the Merger
Effective Time, the Company shall purchase, at prevailing market prices to the
extent possible, the minimum number of shares of Company Common Stock necessary
in order that the Merger and the other
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Transactions are treated as a purchase of
the Company by Parent under GAAP (in any such determination taking into account
the number of shares of Parent Common Stock in respect of which a notice of
intention to dissent was filed with Parent in accordance with the PBCL).
SECTION 6.16. Parity of Compensation. At any time during the period
from the Merger Effective Time until December 31, 2003 (the "Transition Period")
when the Chairman of the Board of Directors, Chief Executive Officer and
President of Parent as of the date of this Agreement (the "Parent Chairman") and
the Chairman of the Board of Directors, Chief Executive Officer and President of
the Company (the "Company Chairman") as of the date of this Agreement are Co-
Chief Executive Officers of Newco, each such Co-Chief Executive Officer shall
receive the same salary, bonus and other compensation (including option grants
and other incentive awards and all other forms of compensation) and enjoy the
same other benefits and the same employment security arrangements as the other
Co-Chief Executive Officer.
SECTION 6.17. Board Seats. The Parent Chairman will retire as an
executive of Newco at the end of the Transition Period and shall no longer serve
as chairman of the executive committee of the Newco Board, but shall continue as
a member of the Newco Board. The Company Chairman shall become the sole Chief
Executive Officer of Newco immediately prior to the end of the Transition
Period, and at such time shall be the Chairman of the Board of Directors of
Newco, if immediately prior to such time he holds the position of Co-Chief
Executive Officer. The Newco Board or the nominating committee thereof, as
applicable, shall nominate for election the Parent Chairman and the Company
Chairman as part of management's slate of candidates at each meeting of the
shareholders (if at the time of such meeting the Parent Chairman or the Company
Chairman, as applicable, is a member of the Newco Board) at which members of the
Newco Board shall be elected as shall be necessary in order that the Parent
Chairman or the Company Chairman, as applicable, serve as a director of Newco
from the end of the Transition Period until the election of directors first
following December 31, 2005.
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ARTICLE VII
Conditions Precedent
--------------------
SECTION 7.01. Conditions to Each Party's Obligation To Effect The
Merger. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Shareholder Approval. The Company shall have obtained the
Company Shareholder Approval, and Parent shall have obtained the Parent
Shareholder Approval.
(b) Listing. The shares of Newco Company Stock issuable to the
Company's and Parent's respective shareholders pursuant to this Agreement and
under the Company Stock Plans and Parent Stock Plans shall have been approved
for listing on the NYSE, subject to official notice of issuance.
(c) Statutory Approvals. The Parent Required Statutory Approvals
and the Company Required Statutory Approvals shall have been obtained
(including, in each case, the expiration or termination of the waiting periods
(and any extensions thereof) under the HSR Act applicable to the Merger and the
Transactions at or prior to the Merger Effective Time, such approvals shall have
become Final Orders (as defined below) and such Final Orders shall not impose
terms or conditions which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on Newco and its prospective
subsidiaries taken as a whole or which would be materially inconsistent with the
agreements of the parties contained herein. A "Final Order" means action by the
relevant Governmental Entity which has not been reversed, stayed, enjoined, set
aside, annulled or suspended, with respect to which any waiting period
prescribed by law before the transactions contemplated hereby may be consummated
has expired, and as to which all conditions to the consummation of such
transactions prescribed by law, regulation or order have been satisfied.
(d) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided,
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however, that prior to asserting this condition, subject to Section 6.03, each
of the parties shall have used all reasonable efforts to prevent the entry of
any such injunction or other order and to appeal as promptly as possible any
such injunction or other order that may be entered.
(e) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order, and Newco shall have received all state securities or
"blue sky" authorizations necessary to issue Newco Common Stock pursuant to the
Merger.
(f) Other Consents and Approvals. The consent or approval (other
than Parent Required Statutory Approvals and Company Required Statutory
Approvals) of each person whose consent or approval is required in order to
consummate the Merger and the other Transactions shall have been obtained,
except for those consents and approvals which, if not obtained, could not
reasonably be expected to have a Material Adverse Effect on Newco and its
prospective subsidiaries taken as a whole or on the ability of Parent or the
Company to consummate the Merger and the other Transactions.
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SECTION 7.02. Conditions to Obligations of Parent and Newco. The
obligations of Parent and Newco to effect the Merger are further subject to the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company in this Agreement shall be true and correct as of the
date of this Agreement and as of the Closing Date as though made on the Closing
Date, except to the extent such representations and warranties expressly relate
to an earlier date (in which case such representations and warranties shall be
true and correct on and as of such earlier date), other than for such failures
to be true and correct that, individually and in the aggregate, have not had and
could not reasonably be expected to have a Company Material Adverse Effect.
Parent shall have received a certificate signed on behalf of the Company by the
chief executive officer or the chief financial officer of the Company to such
effect. For purposes of determining the satisfaction of this condition, the
representations and warranties of the Company shall be deemed not qualified by
any references therein to materiality generally or to whether or not any breach
results or may result in a Company Material Adverse Effect.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent shall
have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such effect.
(c) Letters from Company Affiliates. Parent shall have received from
each person named in the letter referred to in Section 6.10(a) an executed copy
of an agreement substantially in the form of Exhibit C.
(d) Tax Opinion. Parent shall have received a written opinion, dated
as of the Closing Date, from Cravath, Swaine & Moore, counsel to Parent, to the
effect that (i) the Merger will constitute transactions described in Section 351
of the Code and (ii) the Second Step Merger will constitute a transaction
described in Section 368(a) of the Code; it being understood that in rendering
such opinion, such tax counsel shall be entitled to rely upon customary
representations provided by the parties hereto substantially in the form of
Exhibits E, F and G.
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SECTION 7.03. Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is further subject to the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Newco in this Agreement shall be true and correct as of
the date of this Agreement and on the Closing Date as though made on the Closing
Date, except to the extent such representations and warranties expressly relate
to an earlier date (in which case such representations and warranties shall be
true and correct on and as of such earlier date), other than for such failures
to be true and correct that, individually and in the aggregate, have not had and
could not reasonably be expected to have a Parent Material Adverse Effect. The
Company shall have received a certificate signed on behalf of Parent by the
chief executive officer or the chief financial officer of Parent to such effect.
For purposes of determining the satisfaction of this condition, the
representations and warranties of Parent and Newco shall be deemed not qualified
by any references therein to materiality generally or to whether or not any
breach results or may result in a Parent Material Adverse Effect.
(b) Performance of Obligations of Parent and Newco. Parent and Newco
shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and the
Company shall have received a certificate signed on behalf of Parent by the
chief executive officer and the chief financial officer of Parent to such
effect.
(c) Letters from Parent Affiliates. The Company shall have received
from each person named in the letter referred to in Section 6.10(b) an executed
copy of an agreement substantially in the form of Exhibit D.
(d) Tax Opinion. The Company shall have received a written opinion,
dated as of the Closing Date, from Jones, Day, Reavis & Pogue, counsel to the
Company, to the effect that the Second Step Merger will constitute a transaction
described in Section 368(a) of the Code; it being understood that in rendering
such opinion, such tax counsel shall be entitled to rely upon customary
representations provided by the parties hereto substantially in the form of
Exhibits E, F and G.
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(e) First Step Exchange. The First Step Exchange shall have been
consummated.
ARTICLE VIII
Termination, Amendment and Waiver
---------------------------------
SECTION 8.01. Termination. This Agreement may be terminated at any
time prior to the Exchange Effective Time, whether before or after receipt of
the Company Shareholder Approval or the Parent Shareholder Approval:
(a) by mutual written consent of Parent, Newco and the Company;
(b) by either Parent or the Company:
(i) if the Second Step Merger is not consummated on or before
March 31, 2001 (the "Outside Date"), unless the failure to consummate
the Merger is the result of a breach of this Agreement by the party
seeking to terminate this Agreement; provided, however, that the
passage of such period shall be tolled for any part thereof during
which any party shall be subject to a nonfinal order, decree, ruling
or action restraining, enjoining or otherwise prohibiting the
consummation of the Merger;
(ii) if any Governmental Entity issues an order, decree or ruling
or takes any other action permanently enjoining, restraining or
otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and nonappealable;
(iii) if any condition to the obligation of such party to
consummate the Merger set forth in Section 7.02 (in the case of
Parent) or 7.03 (in the case of the Company) becomes incapable of
satisfaction prior to the Outside Date; provided, however, that the
failure of such condition to be met is not the result of a material
breach of this Agreement by the party seeking to terminate this
Agreement;
(iv) if, upon a vote at a duly held meeting to obtain the Company
Shareholder Approval, the Company Shareholder Approval is not
obtained; or
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(v) if, upon a vote at a duly held meeting of Parent to obtain
the Parent Shareholder Approval, the Parent Shareholder Approval is
not obtained;
(c) by Parent, if the Company breaches or fails to perform in any
material respect any of its representations, warranties or covenants
contained in this Agreement, which breach or failure to perform (i) would
give rise to the failure of a condition set forth in Section 7.02(a) or
7.02(b), and (ii) cannot be or has not been cured within 30 days after the
giving of written notice to the Company of such breach (provided that
Parent is not then in breach of any representation, warranty or covenant
contained in this Agreement);
(d) by Parent, if (i) the Company Board or any committee thereof
withdraws or modifies, or publicly proposes to withdraw or modify, in a
manner adverse to Parent or Newco, its approval or recommendation of this
Agreement or the Transactions or approves or recommends, or publicly
proposes to approve or recommend, any Company Competing Transaction or (ii)
the Company otherwise breaches, or is deemed to be in breach of, any of its
covenants in Section 5.02 in any material respect;
(e) by the Company, if Parent breaches or fails to perform in any
material respect of any of its representations, warranties or covenants
contained in this Agreement, which breach or failure to perform (i) would
give rise to the failure of a condition set forth in Section 7.03(a) or
7.03(b), and (ii) cannot be or has not been cured within 30 days after the
giving of written notice to Parent of such breach (provided that the
Company is not then in breach of any representation, warranty or covenant
in this Agreement);
(f) by the Company, if prior to receipt of the Company Shareholder
Approval, (i) the Company has received a proposal for a Company Competing
Transaction that constitutes a Qualifying Company Proposal that was not
solicited or encouraged by the Company or its Representatives and that did
not otherwise result from the breach or a deemed breach of Section 5.02,
(ii) the Board of Directors of the Company has determined in good faith,
based upon the advice of its outside
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counsel that failure to take such action could reasonably be expected to
constitute a breach of the fiduciary obligations of such Board of Directors
under Applicable Law, that it is necessary to (A) withdraw or modify its
approval or recommendation of this Agreement and the Transactions, (B)
terminate this Agreement pursuant hereto and (C) enter into a Company
Acquisition Agreement in connection with such Company Competing Transaction
in order to comply with its fiduciary obligations under Applicable Law,
(iii) the Company has notified Parent in writing of the determination
described in clause (ii) above, (iv) at least ten business days following
receipt by Parent of the notice referred to in clause (iii) above, and
taking into account any proposal made by Parent since receipt of such
notice to amend or modify the terms of the Transactions, such Qualifying
Company Proposal remains a Qualifying Company Proposal and the Board of
Directors of the Company has again made the determination referred to in
clause (ii) above, (v) the Company is in compliance with Section 5.02, (vi)
the Company has paid in advance the fee due under Section 6.07(b) to
Parent, and (vii) the Board of Directors of the Company concurrently
approves, and the Company concurrently enters into, a Company Acquisition
Agreement providing for the implementation of such Qualifying Company
Proposal;
(g) by the Company, if (i) the Parent Board or any committee thereof
withdraws or modifies, or publicly proposes to withdraw or modify, in a
manner adverse to the Company, its approval of this Agreement or the
Transactions or approves or recommends, or publicly proposes to approve or
recommend, any Parent Competing Transaction or (ii) Parent otherwise
breaches, or is deemed to be in breach of, any of its covenants in Section
5.03 in any material respect; or
(h) by Parent, if prior to receipt of the Parent Shareholder
Approval, (i) Parent has received a proposal for a Parent Competing
Transaction that constitutes a Qualifying Parent Proposal that was not
solicited or encouraged by Parent or its Representatives and that did not
otherwise result from the breach or a deemed breach of the Section 5.03,
(ii) the Board of Directors of Parent has determined in good faith, based
upon the advice of its outside counsel that failure to take such action
could
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reasonably be expected to constitute a breach of the fiduciary obligations
of such Board of Directors under Applicable Law, that it is necessary to
(A) withdraw or modify its approval or recommendation of this Agreement and
the Transactions, (B) terminate this Agreement pursuant hereto and (C)
enter into a Parent Acquisition Agreement in connection with such Parent
Competing Transaction in order to comply with its fiduciary obligations
under Applicable Law, (iii) Parent has notified the Company in writing of
the determination described in clause (ii) above, (iv) at least ten
business days following receipt by the Company of the notice referred to in
clause (iii) above, and taking into account any proposal made by the
Company since receipt of such notice to amend or modify the terms of the
Transactions, such Qualifying Parent Proposal remains a Qualifying Parent
Proposal and the Board of Directors of Parent has again made the
determination referred to in clause (ii) above, (v) Parent is in compliance
with Section 5.03, (vi) Parent has paid in advance the fee due under
Section 6.07(c) to the Company, and (vii) the Board of Directors of Parent
concurrently approves, and Parent concurrently enters into, a Parent
Acquisition Agreement providing for the implementation of such Qualifying
Parent Proposal.
SECTION 8.02. Effect of Termination. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 8.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Newco or the Company, other than Section
3.14, Section 4.14, the last two sentences of Section 6.02, Section 6.07, this
Section 8.02 and Article IX, which provisions shall survive such termination,
and except to the extent that such termination results from the wilful breach by
a party of any representation, warranty or covenant set forth in this Agreement,
in which case such termination shall not relieve any party of any liability or
damages resulting from its wilful breach of this Agreement (including any such
case in which a fee is payable by such party pursuant to Section 6.07(b) or (c),
or any expenses of the other party are reimbursed by such party pursuant to
Section 6.07(d) or (e), to the extent any such liability or damage suffered by
such other party exceeds such amounts payable pursuant to Section 6.07(b), (c),
(d) or (e)). The Confidentiality Agreement shall, in accordance with its terms,
survive termination of this Agreement.
<PAGE>
108
SECTION 8.03. Amendment. This Agreement may be amended by the
parties at any time before or after receipt of the Company Shareholder Approval
or the Parent Shareholder Approval; provided, however, that after receipt of the
Company Shareholder Approval or the Parent Shareholder Approval, there shall be
made no amendment that by Applicable Law requires further approval by the
shareholders of the Company or Parent without the further approval of such
shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
SECTION 8.04. Extension; Waiver. At any time prior to the Merger
Effective Time, the parties may (a) extend the time for the performance of any
of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 8.03, waive compliance with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
SECTION 8.05. Procedure for Termination, Amendment, Extension or
Waiver. A termination of this Agreement pursuant to Section 8.01, an amendment
of this Agreement pursuant to Section 8.03 or an extension or waiver pursuant to
Section 8.04 shall, in order to be effective, require in the case of Parent,
Newco or the Company, action by its Board of Directors or the duly authorized
designee of its Board of Directors.
ARTICLE IX
General Provisions
------------------
SECTION 9.01. Nonsurvival of Representations and Warranties. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Merger Effective Time.
This Section 9.01 shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Merger Effective Time.
<PAGE>
109
SECTION 9.02. Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given upon receipt by the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Parent or Newco, to
PECO Energy Company
2301 Market Street
P.O. Box 8699
Philadelphia, PA 19101-8699
Telecopy No: (215) 841-4282
Attention: General Counsel
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Telecopy No: (212) 474-3700
Attention: Philip A. Gelston
(b) if to the Company, to
Unicom Corporation
10 S. Dearborn, 37th Floor
Chicago, IL 60603
Telecopy No: (312) 394-4488
Attention: General Counsel
with a copy to:
Jones, Day, Reavis & Pogue
77 West Walker Drive
Chicago, Illinois 60001
Telecopy No: (312) 782-8585
Attention: Paul T. Ruxin
Robert A. Yolles
<PAGE>
110
SECTION 9.03. Definitions. For purposes of this Agreement:
An "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person.
A "Material Adverse Effect" means, in respect of any person, a
material adverse effect on (a) the business, assets, condition (financial or
otherwise), prospects or results of operations of such person and its
subsidiaries, taken as a whole or (b) the ability of such person to perform its
obligations under this Agreement or on the ability of such person to consummate
the Merger and the other Transactions.
"Newholdco Corporation" means PECO Energy Corporation, a Pennsylvania
corporation, which shall change its name as soon as reasonably possible to
"Newholdco Corporation".
A "person" means any individual, firm, corporation, partnership,
company, limited liability company, trust, joint venture, association,
Governmental Entity or other entity.
A "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, more than 50% of the
equity interests of which) is owned directly or indirectly by such first person.
SECTION 9.04. Interpretation; Disclosure Letters. When a reference
is made in this Agreement to a Section, such reference shall be to a Section of
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation". Any matter disclosed
in any section of either the Company Disclosure Letter or the Parent Disclosure
Letter shall be deemed disclosed for all purposes and all sections of the
Company Disclosure Letter or Parent Disclosure Letter, as applicable to the
extent that it is
<PAGE>
111
reasonably apparent from a reading of such disclosure item that it would qualify
or apply to such other sections, and otherwise shall be deemed disclosed only
for the purposes of the specific Sections of this Agreement to which such
section relates.
SECTION 9.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or
Applicable Law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
SECTION 9.06. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries. This
Agreement, taken together with the Company Disclosure Letter, the Parent
Disclosure Letter and the Confidentiality Agreement, (a) constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the Transactions and (b) except for
the provisions of Article II and Sections 6.06, 6.16 and 6.17 are not intended
to confer upon any person other than the parties any rights or remedies.
SECTION 9.08. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof, except to the extent the laws of Pennsylvania or Illinois are
mandatorily applicable to the Merger.
<PAGE>
112
SECTION 9.09. Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, except that Newco may assign, in
its sole discretion, any of or all its rights, interests and obligations under
this Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Newco of any of its obligations
under this Agreement. Any purported assignment without such consent shall be
void. Subject to the preceding sentences, this Agreement will be binding upon,
inure to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
SECTION 9.10. Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any New York state court or any
Federal court located in the State of New York, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (a) consents to submit itself to the personal jurisdiction
of any New York state court or any Federal court located in the State of New
York in the event any dispute arises out of this Agreement or any Transaction,
(b) agrees that it will not attempt to deny or defeat such personal jurisdiction
by motion or other request for leave from any such court, (c) agrees that it
will not bring any action relating to this Agreement or any Transaction in any
court other than any New York state court or any Federal court sitting in the
State of New York and (d) waives any right to trial by jury with respect to any
action related to or arising out of this Agreement or any Transaction.
SECTION 9.11. Newco Obligations. Parent and the Company hereby agree
to take such actions as shall be necessary in order that Newco shall assume any
obligation under this Agreement that by its terms is to be performed by Newco
after the Closing.
<PAGE>
IN WITNESS WHEREOF, Parent, Newco and the Company have duly executed
this Agreement, all as of the date first written above.
PECO ENERGY COMPANY,
by
/s/ Corbin A. McNeill, Jr.
-----------------------------------------------
Name: Corbin A. McNeill, Jr.
Title: Chairman of the Board, President, and
Chief Executive Officer
PECO ENERGY CORPORATION,
by
/s/ Corbin A. McNeill, Jr.
-----------------------------------------------
Name: Corbin A. McNeill, Jr.
Title: Chairman of the Board, President, and
Chief Executive Officer
UNICOM CORPORATION,
by
/s/ John W. Rowe
-----------------------------------------------
Name: John W. Rowe
Title: Chairman of the Board, President, and
Chief Executive Officer
<PAGE>
EXHIBIT A
ARTICLE X
Governance of the Corporation
-----------------------------
During the Transition Period
----------------------------
Section 10.01. Definitions. For purposes of this Article:
(1) "PECO CEO" means Corbin A. McNeill, Jr.
(2) "PECO Directors" means (i) those directors of the corporation
designated by PECO Energy pursuant to Section 1.06(b) of the Merger Agreement
and (ii) any Replacement PECO Director (as defined in Section 10.03(b) of these
by-laws).
(3) "PECO Energy" means PECO Energy Company, a Pennsylvania
corporation and a subsidiary of the corporation.
(4) "Independent Director" means a disinterested, independent person
(determined in accordance with customary standards for independent directors
applicable to U.S. public companies).
(5) "Merger Agreement" means the Agreement and Plan of Exchange and
Merger dated as of September 22, 1999, among PECO Energy, the corporation and
Unicom.
(6) "Merger Effective Time" shall have the meaning assigned to such
term in the Merger Agreement.
(7) "Transition Period" means the period from the Merger Effective
Time until December 31, 2003.
(8) "Unicom" means Unicom Corporation, an Illinois corporation.
(9) "Unicom CEO" means John W. Rowe.
(10) "Unicom Directors" means (i) those directors of the corporation
designated by Unicom pursuant to Section 1.06(b) of the Merger Agreement and
(ii) any Replacement Unicom Director (as defined in Section 10.03(b) of these
by-laws).
<PAGE>
(11) "ComEd" means Commonwealth Edison Company, an Illinois
corporation and a subsidiary of the corporation.
SECTION 10.02. Corporate Offices. At least for the duration of the
Transition Period, the corporation shall maintain (a) in Chicago, Illinois
offices serving as its corporate headquarters, (b) in southeastern Pennsylvania
offices serving as the headquarters of the generation and power marketing
businesses of the corporation and its subsidiaries, and (c) offices in Chicago,
Illinois and southeastern Pennsylvania as the headquarters of ComEd and PECO
Energy, respectively.
SECTION 10.03. Board of Directors.
(a) Effective immediately at the Merger Effective Time and during the
Transition Period, the board of directors shall consist of sixteen (16)
directors. At the Merger Effective Time, 8 directors shall be PECO Directors
and 8 directors shall be Unicom Directors. The term of a class of the board of
directors comprised of 6 directors shall expire at the first annual meeting of
shareholders following the Merger Effective Time, a second class comprised of 5
directors shall expire at the second annual meeting of shareholders following
the Merger Effective Time and a third class comprised of 5 directors shall
expire at the third annual meeting of shareholders following the Merger
Effective Time, and representation of PECO Directors and Unicom Directors in
each class shall be as nearly equal in numbers as possible.
(b)(i) During the Transition Period the board of directors of the
corporation shall consist of equal numbers of PECO Directors and Unicom
Directors.
(ii) During the Transition Period, the board of directors (subject to
the fiduciary duties of the directors in the case of approval of any individual)
shall take all action necessary to ensure that any vacancy of a position on the
board of directors to be filled by the Board (A) that was held by an PECO
Director is filled promptly by a person designated to fill such seat by a
majority of the PECO Directors remaining on the board of directors (a
"Replacement PECO Director") and (B) that was held by a Unicom Director is
filled promptly by a person designated to fill such seat by a majority of the
Unicom Directors remaining on the board of directors (a "Replacement Unicom
Director").
(iii) With respect to each election of directors by shareholders
during the Transition Period, the board of directors or the applicable committee
thereof shall nominate for election (subject to the fiduciary duties of the
<PAGE>
3
directors in the case of approval of any individual), a PECO Director to fill
any position held prior to such election by a PECO Director and a Unicom
Director to fill any position held prior to such election by a Unicom Director.
(c) During the Transition Period, the executive committee of the
board of directors shall have 6 members, 2 of which will be the Co-Chief
Executive Officers of the corporation (or if either Co-Chief Executive Officer
ceases to serve as such, another officer of the corporation selected by the PECO
Directors in the case of a replacement for the PECO CEO or by the Unicom
Directors in the case of a replacement for the Unicom CEO), 2 of which shall be
Independent Directors who are PECO Directors and 2 of which shall be Independent
Directors who are Unicom Directors. For the duration of the first half of the
Transition Period so long as he is a Co-Chief Executive Officer, the Unicom CEO
shall be the chairman of the executive committee of the board of directors, and
as of the first day of the second half of the Transition Period, the PECO CEO,
if he is a Co-Chief Executive Officer at such time, shall succeed to such
position and hold it for the duration of the Transition Period. If at any time
during the Transition Period either the Unicom CEO or the PECO CEO, whichever is
at such time the chairman of the executive committee, is unwilling or unable to
hold such office, the other shall succeed to such office for the duration of the
Transition Period if he continues at such time to hold the office of Co-Chief
Executive Officer or Chief Executive Officer of the corporation.
(d) During the Transition Period, each other committee of the Board
shall consist of equal numbers of PECO Directors and Unicom Directors and the
chairmen of the committees of the board of directors (other than the executive
committee) shall be PECO Directors and Unicom Directors in as nearly equal
numbers as possible.
(e) During the Transition Period, the board of directors shall hold
between 6 and 8 regular meetings each fiscal year, with no less than 2 of such
meetings each year to be held in the Philadelphia, Pennsylvania area and no less
than 2 of such meetings each year to be held in the Chicago, Illinois area.
SECTION 10.04. Chairman of the Board of Directors.
<PAGE>
4
(a) As of the Merger Effective Time and for the duration of the first
half of the Transition Period so long as he is a Co-Chief Executive Officer or
Chief Executive Officer at such time, the PECO CEO shall hold the position of
Chairman of the board of directors, and so long as he is a Co-Chief Executive
Officer or the Chief Executive Officer at such time, the Unicom CEO shall
succeed to the position of Chairman of the board of directors and hold it for
the duration of the Transition Period. If at any time during the Transition
Period either the PECO CEO or the Unicom CEO, whichever is at such time the
Chairman of the board of directors, is unwilling or unable to hold such office,
the board of directors shall elect the other to such office if he continues to
hold the office of Co-Chief Executive Officer of the Corporation at such time.
(b) The Chairman shall chair all meetings of the board of directors
and stockholders at which he is present.
SECTION 10.05. Co-Chief Executive Officers; President.
(a) (i) As of the Merger Effective Time and for the duration of the
Transition Period, each of the PECO CEO and the Unicom CEO shall hold the
position of Co-Chief Executive Officers of the corporation and (ii) as of the
Merger Effective Date and for the duration of the first half of the Transition
Period, the Unicom CEO shall hold the position of President of the corporation.
If at any time during the Transition Period either of the Co-Chief Executive
Officers is unable or unwilling to hold such office, the other Co-Chief
Executive Officer, if he is either the PECO CEO or the Unicom CEO, shall become
the sole Chief Executive Officer of the corporation. The Unicom CEO shall
become the sole Chief Executive Officer immediately prior to the end of the
Transition Period if immediately prior to such time he holds the position of Co-
Chief Executive Officer.
(b) The corporation's generation and wholesale marketing and trading
businesses shall report to the PECO CEO in his capacity as a Co-Chief Executive
Officer, and the corporation's transmission and distribution and unregulated
ventures businesses shall report to the Unicom CEO in his capacity as a Co-Chief
Executive Officer. The corporation's financial, legal, human resources and
other staff functions shall report to the office of the Co-Chief Executive
Officers.
<PAGE>
5
(c) The Co-Chief Executive Officers shall each maintain offices in
both southeastern Pennsylvania and Chicago, Illinois.
SECTION 10.06. Management Changes.
(a) Until the expiration of the Transition Period, so long as either
the PECO CEO or the Unicom CEO is a Co-Chief Executive Officer or the Chief
Executive Officer of the corporation, (i) the election of any other person to
the position of Chairman of the board of directors, chairman of the executive
committee of the board of directors, Co-Chief Executive Officer or Chief
Executive Officer or, as to the first half of the Transition Period, President
or (ii) the removal, replacement or demotion of the PECO CEO or the Unicom CEO
from one or more of such positions, in each case, shall require the affirmative
vote of at least two-thirds of the members of the board of directors(except as
expressly provided in this Article X).
(b) Until the expiration of the Transition Period, none of the senior
officers of the corporation specified in Exhibit D of the Merger Agreement shall
be removed, replaced or demoted without either (i) the consent of both Co-Chief
Executive Officers or (ii) the affirmative vote of two-thirds of the members of
the Newco Board.
SECTION 10.07. Amendment. Until the end of the Transition Period (a)
the provisions of this Article X may not be amended, altered, repealed or waived
in any respect, and the board of directors or the corporation shall not
otherwise take any action or fail to take any action which would have the effect
of eliminating, limiting, restricting, avoiding or otherwise modifying the
effect of, or waiving compliance with the provisions of this Article X (e.g., by
creating a holding company structure if the certificate of incorporation, by-
laws or similar document of such holding company does not contain equivalent
provisions), without the affirmative vote of at least two-thirds of the
directors or (b) in the case of any amendment proposed by shareholders without
such vote of directors, the affirmative vote of holders of shares representing
at least two-thirds of the votes eligible to be cast in a general election of
directors.
SECTION 10.08. Successors. For the duration of the Transition
Period, the provisions of this Article shall be applicable to (i) any successor
to the corporation as the result of a merger, consolidation or other business
<PAGE>
6
combination, whether or not the corporation is the surviving company in such
transaction, or otherwise and (ii) any corporation or other entity with respect
to which the corporation or its successor is or becomes a direct or indirect
subsidiary, and, in each case, the board of directors shall not permit the
corporation to be a party to any transaction which would not comply with the
foregoing without the affirmative vote of at least two-thirds of the directors.
SECTION 10.09. Effectiveness of this Article X. The provisions of
this Article X shall become null and void and be of no further effect after the
Transition Period.
<PAGE>
EXHIBIT B
Senior Officers of Newco
------------------------
Co-Chief Executive Officer: Corbin A. McNeill, Jr.
Co-Chief Executive Officer: John W. Rowe
Chief Financial Officer: Michael J. Egan
Chief Transition/ Integration Officer: Michael J. Egan
Senior Vice President,
Finance: Ruth Ann M. Gillis
General Counsel: Pamela B. Strobel
Chief Nuclear Officer: Oliver D. Kingsley, Jr.
Nuclear Operations
President: Gerald R. Rainey
PECO Distribution President: K. Lawrence
Commonwealth Edison Distribution
President: Carl J. Croskey
Unregulated Retail/
New Business President: Paul A. Elbert
Senior Vice President,
Human Resources: S. Gary Snodgrass
<PAGE>
EXHIBIT C
PECO Energy Company
P.O. Box 8699
2301 Market Street
Philadelphia, PA 19101
Form of Company Affiliate Letter
--------------------------------
Dear Sirs:
The undersigned refers to the Agreement and Plan of Exchange and
Merger (the "Merger Agreement") dated as of September 22, 1999, among PECO
Energy Company, a Pennsylvania corporation, PECO Energy Corporation, a
Pennsylvania corporation, and Unicom Corporation, an Illinois corporation.
Capitalized terms used but not defined in this letter have the meanings give
such terms in the Merger Agreement.
The undersigned, a holder of shares of Company Common Stock, is
entitled to receive in connection with the Merger shares of Newco Common Stock.
The undersigned acknowledges that the undersigned may be deemed an "affiliate"
of the Company within the meaning of Rule 145 ("Rule 145") promulgated under the
Securities Act, although nothing contained herein should be construed as an
admission of such fact.
If in fact the undersigned were an affiliate under the Act, the
undersigned's ability to sell, assign or transfer the Newco Common Stock
received by the undersigned in exchange for any shares of Company Common Stock
pursuant to the Merger may be restricted unless much transaction is registered
under the Act or an exemption from such registration is available. The
undersigned (i) understands that such exemptions are limited and that Newco is
not under any obligation to effect any such registration and (ii) has obtained
advice of counsel as to the nature and conditions of such exemptions, including
information with respect to the applicability to the sale of such securities of
Rules 144 and 145(d) promulgated under the Securities Act.
The undersigned hereby represents to and covenants with Parent and
Newco that the undersigned will not sell,
<PAGE>
3
assign or transfer any of the Newco Common Stock received by the undersigned in
exchange for shares of Company Common Stock pursuant to the Merger except (i)
pursuant to an effective registration statement under the Securities Act or (ii)
in a transaction that, in the opinion of counsel reasonably satisfactory to
Newco or as described in a "no-action" or interpretive letter from the Staff of
the SEC, is not required to be registered under the Securities Act.
In the event of a sale or other disposition by the undersigned
pursuant to Rule 145, of Newco Common Stock received by the undersigned in the
Merger, the undersigned will supply Newco with evidence of compliance with such
Rule, in the form of a letter in the form of Annex I hereto and the opinion of
counsel or no-action letter referred to above. The undersigned understands that
Newco may instruct its transfer agent to withhold the transfer of any Parent
securities disposed of by the undersigned, but that upon receipt of such
evidence of compliance the transfer agent shall effectuate the transfer of the
Newco Common Stock sold as indicated in the letter.
The undersigned acknowledges and agrees that (i) the Newco Common
Stock issued to the undersigned will all be in certificated form and (ii)
appropriate legends will be placed on certificates representing Newco Common
Stock received by the undersigned in the Merger or held by a transferee thereof,
which legends will be removed by delivery of substitute certificates upon
receipt of an opinion in form and substance reasonably satisfactory to Newco
from counsel reasonably satisfactory to Newco to the effect that such legends
are no longer required for purposes of the Securities Act.
The undersigned acknowledges that (i) the undersigned has carefully
read this letter and understands the requirements hereof and the limitations
imposed upon the distribution, sale, transfer or other disposition of Newco
Common Stock and (ii) the receipt by Parent and Newco of this letter is an
inducement and a condition to Parent's and Newco's respective obligations to
consummate the Merger.
Very truly yours,
Dated:
<PAGE>
ANNEX I
TO EXHIBIT C
[NAME AND ADDRESS OF NEWCO]
On , the undersigned sold the securities of NEW HOLDCO
("Newco") described below in the space provided for that purpose (the
"Securities"). The Securities were received by the undersigned in connection
with the merger of WEST CO. with and into Newco.
Based upon the most recent report or statement filed by Parent with
the Securities and Exchange Commission, the Securities sold by the undersigned
were within the prescribed limitations set forth in Rule 144(e) promulgated
under the Securities Act of 1933, as amended (the "Securities Act").
The undersigned hereby represents that the Securities were sold in
"brokers' transactions" within the meaning of Section 4(4) of the Securities Act
or in transactions directly with a "market maker" as that term is defined in
Section 3(a)(38) of the Securities Exchange Act of 1934, as amended. The
undersigned further represents that the undersigned has not solicited or
arranged for the solicitation of orders to buy the Securities, and that the
undersigned has not made any payment in connection with the offer or sale of the
Securities to any person other than to the broker who executed the order in
respect of such sale.
Very truly yours,
Dated:
[Space to be provided for description of securities.]
<PAGE>
EXHIBIT D
Unicom Corporation
37th Floor
10 South Dearborn Street
Post Office Box A-3005
Chicago, IL 60690-3005
Form of Parent Affiliate Letter
-------------------------------
Dear Sirs:
The undersigned refers to the Agreement and Plan of Exchange and
Merger (the "Merger Agreement") dated as of September 22, 1999, among PECO
Energy Company, a Pennsylvania corporation, PECO Energy Corporation, a
Pennsylvania corporation, and Unicom Corporation, an Illinois corporation.
Capitalized terms used but not defined in this letter have the meanings give
such terms in the Merger Agreement.
The undersigned, a holder of shares of Parent Common Stock, is
entitled to receive in connection with the Merger shares of Newco Common Stock.
The undersigned acknowledges that the undersigned may be deemed an "affiliate"
of Parent within the meaning of Rule 145 ("Rule 145") promulgated under the
Securities Act, although nothing contained herein should be construed as an
admission of such fact.
If in fact the undersigned were an affiliate under the Act, the
undersigned's ability to sell, assign or transfer the Newco Common Stock
received by the undersigned in exchange for any shares of Parent Common Stock
pursuant to the Merger may be restricted unless much transaction is registered
under the Act or an exemption from such registration is available. The
undersigned (i) understands that such exemptions are limited and that Newco is
not under any obligation to effect any such registration and (ii) has obtained
advice of counsel as to the nature and conditions of such exemptions, including
information with respect to the applicability to the sale of such securities of
Rules 144 and 145(d) promulgated under the Securities Act.
The undersigned hereby represents to and covenants with the Company
and Newco that the undersigned will not sell, assign or transfer any of the
Newco Common Stock
<PAGE>
2
received by the undersigned in exchange for shares of Parent Common Stock
pursuant to the Merger except (i) pursuant to an effective registration
statement under the Securities Act or (ii) in a transaction that, in the opinion
of counsel reasonably satisfactory to Newco or as described in a "no-action" or
interpretive letter from the Staff of the SEC, is not required to be registered
under the Securities Act.
In the event of a sale or other disposition by the undersigned
pursuant to Rule 145, of Newco Common Stock received by the undersigned in the
Merger, the undersigned will supply Newco with evidence of compliance with such
Rule, in the form of a letter in the form of Annex I hereto and the opinion of
counsel or no-action letter referred to above. The undersigned understands that
Newco may instruct its transfer agent to withhold the transfer of any Parent
securities disposed of by the undersigned, but that upon receipt of such
evidence of compliance the transfer agent shall effectuate the transfer of the
Newco Common Stock sold as indicated in the letter.
The undersigned acknowledges and agrees that (i) the Newco Common
Stock issued to the undersigned will all be in certificated form and (ii)
appropriate legends will be placed on certificates representing Newco Common
Stock received by the undersigned in the Merger or held by a transferee thereof,
which legends will be removed by delivery of substitute certificates upon
receipt of an opinion in form and substance reasonably satisfactory to Newco
from counsel reasonably satisfactory to Newco to the effect that such legends
are no longer required for purposes of the Securities Act.
The undersigned acknowledges that (i) the undersigned has carefully
read this letter and understands the requirements hereof and the limitations
imposed upon the distribution, sale, transfer or other disposition of Parent
Common Stock and (ii) the receipt by the Company and Newco of this letter is an
inducement and a condition to Company's obligations to consummate the Merger.
Very truly yours,
Dated:
<PAGE>
ANNEX I
TO EXHIBIT D
[NAME AND ADDRESS OF NEWCO]
On , the undersigned sold the securities of NEW HOLDCO
("Newco") described below in the space provided for that purpose (the
"Securities"). The Securities were received by the undersigned in connection
with the mandatory share exchange between EAST CO. and Newco.
Based upon the most recent report or statement filed by Parent with
the Securities and Exchange Commission, the Securities sold by the undersigned
were within the prescribed limitations set forth in Rule 144(e) promulgated
under the Securities Act of 1933, as amended (the "Securities Act").
The undersigned hereby represents that the Securities were sold in
"brokers' transactions" within the meaning of Section 4(4) of the Securities Act
or in transactions directly with a "market maker" as that term is defined in
Section 3(a)(38) of the Securities Exchange Act of 1934, as amended. The
undersigned further represents that the undersigned has not solicited or
arranged for the solicitation of orders to buy the Securities, and that the
undersigned has not made any payment in connection with the offer or sale of the
Securities to any person other than to the broker who executed the order in
respect of such sale.
Very truly yours,
Dated:
[Space to be provided for description of securities.]
<PAGE>
EXHIBIT E
[Letterhead of Parent]
[Date]
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Jones, Day, Reavis & Pogue
77 West Walker Drive
Chicago, Illinois 60001
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to Sections
7.02(d) and 7.03(d) of the Agreement and Plan of Exchange and Merger (the
"Exchange and Merger Agreement") dated as of September 22, 1999, among PECO
ENERGY COMPANY, a Pennsylvania corporation ("Parent"), PECO ENERGY CORPORATION,
a Pennsylvania corporation and a wholly owned subsidiary of Parent ("Newco") and
UNICOM CORPORATION, an Illinois corporation (the "Company"), and in connection
with the filing with the Securities and Exchange Commission (the "SEC") of the
registration statement on Form S-4 (the "Registration Statement"), which
includes the proxy statement/prospectus of Parent and the Company, each as
amended and supplemented through the date hereof, the undersigned certifies and
represents on behalf of Parent and as to Parent, after due inquiry and
investigation, as follows (any capitalized term used but not defined herein
having the meaning given to such term in the Exchange and Merger Agreement):
1. The Merger will be consummated in accordance with the Exchange and
Merger Agreement and as described in the Registration Statement. The facts
relating to the Merger as described in the Registration Statement and the
documents referenced in the Registration Statement are, insofar as such facts
relate to Parent, true, correct and complete in all material respects.
<PAGE>
2. The formula set forth in the Exchange and Merger Agreement
pursuant to which each issued and outstanding share of common stock, no par
value, of Parent (the "Parent Common Stock") will be converted into common
shares, no par value, of Newco (the "Newco Common Stock") or cash is the result
of arm's length bargaining. The aggregate fair market value of the Newco Common
Stock and/or cash to be received by each holder of Parent Common Stock in the
First Step Exchange will be approximately equal to the fair market value of the
Parent Common Stock surrendered in exchange therefor.
3. Parent has not made and does not have any present plan or
intention to make any distributions to holders of Parent Common Stock (other
than dividends in the ordinary course of business) prior to, in contemplation
of, or otherwise in connection with, the Merger.
4. Newco has not acquired, nor, except as a result of the First Step
Exchange will it acquire, nor has it owned in the past five years, any Parent
Common Stock.
5. Parent, Newco and the holders of Parent Common Stock will each pay
their respective expenses, if any, incurred in connection with the First Step
Exchange. Parent has not agreed to assume, nor will it directly or indirectly
assume, any expense or other liability, whether fixed or contingent, of any
holder of Parent Common Stock. Parent has not entered into any arrangement
pursuant to which Newco has agreed to assume, directly or indirectly, any
expense or other liability, whether fixed or contingent, incurred or to be
incurred by Parent or any holder of Parent Common Stock in connection with or as
part of the First Step Exchange or any related transactions, nor will any of the
Parent Common Stock that is acquired by Newco in connection with the First Step
Exchange be subject to any liabilities.
6. Parent is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code of 1986, as amended (the
"Code"), Section 351(e)(1) of the Code or Treasury Regulation Section 1.351-
1(c)(1)(ii).
7. Parent will not take, and, to the best knowledge of the management
of Parent there is no present plan or intention of any holders of Parent Common
Stock to take, any position on any Federal, state or local income or franchise
tax return, or take any other tax reporting position, that is inconsistent (i)
with the treatment of the Merger as transactions described in Section 351 of the
Code or (ii) with the treatment of the Second Step Merger as a reorganization
within the meaning of Section 368(a) of the Code, in each case unless otherwise
required by a "determination" (as defined in Section 1313(a)(1) of the Code) or
by applicable state or local tax law (and then only to the extent required by
such applicable state or local tax law).
8. None of the compensation received by any stockholder-employee of
Parent in respect of periods ending on or prior to the Exchange Effective Time
<PAGE>
3
represents separate consideration for any of his or her Parent Common Stock.
None of the Newco Common Stock that will be received by any stockholder-employee
of Parent in the Merger represents separately bargained for consideration which
is allocable to any employment agreement or arrangement. The compensation paid
to any stockholder-employees will be for services actually rendered and will be
determined by bargaining at arm's-length.
9. There is no intercorporate indebtedness existing between Newco and
Parent.
10. Parent is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
11. On the date of the First Step Exchange, the fair market value of
the assets of Parent will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which such assets are subject.
12. To the best knowledge of the management of Parent, there is no
present plan or intention on the part of the holders of Parent Common Stock to
sell, exchange or otherwise dispose of, or to enter into any contract or other
arrangement with respect to, any interest in the shares of Newco Common Stock
received in the First Step Exchange in exchange for such Parent Common Stock
such that the former holders of Company Common Stock and the former holders of
Parent Common Stock, in the aggregate, would not own (i) Newco Common Stock
having at least 80% of the total combined voting power of all classes of Newco
stock entitled to vote and (ii) at least 80% of the total number of shares of
each other class of Newco Stock.
13. None of the holders of Parent Common Stock will retain any rights
in the Parent Common Stock transferred to Newco pursuant to the First Step
Exchange.
14. Newco will not receive any accounts receivable in the First Step
Exchange.
15. To the best knowledge of the management of Parent and taking into
account any issuance of additional shares of Newco Common Stock, any issuance of
Newco Common Stock for services, the exercise of any Newco stock rights,
options, warrants or subscriptions, any public offerings of Newco stock, and the
sale, exchange, transfer by gift or other disposition of any Newco Common Stock
received by holders of Parent Common Stock in the Merger, the holders of Parent
Common Stock and Company Common Stock will collectively be in "control" of Newco
immediately after the Merger. For purposes of this representation letter,
"control" shall mean the ownership of (i) stock
<PAGE>
4
possessing at least 80% of the total combined voting power of all classes of
Newco stock entitled to vote and (ii) at least 80% of the total number of shares
of each other class of Newco stock.
16. The Exchange and Merger Agreement, the Registration Statement and
the other documents described in the Registration Statement represent the entire
understanding of Parent with respect to the Merger and there are no other
written or oral agreements regarding the Merger.
17. The Merger is being undertaken for purposes of enhancing the
business of Parent and for other good and valid business purposes of Parent as
described in the proxy statement/prospectus of Parent and the Company included
in the Registration Statement.
18. The undersigned is authorized to make all the representations set
forth herein on behalf of Parent.
The undersigned acknowledges that (i) the opinions to be delivered
pursuant to Sections 7.02(d) and 7.03(d) of the Exchange and Merger Agreement
will be based on the accuracy of the representations set forth herein and on the
accuracy of the representations and warranties and the satisfaction of the
covenants and obligations contained in the Exchange and Merger Agreement and the
various other documents related thereto, and (ii) such opinions will be subject
to certain limitations and qualifications including that they may not be relied
upon if any such representations or warranties are not accurate or if any such
covenants or obligations are not satisfied in all material respects.
The undersigned acknowledges that such opinions will not address any
tax consequences of the Merger or any action taken in connection therewith
except as expressly set forth in such opinions.
Very truly yours,
PECO ENERGY COMPANY,
by
--------------------------------------
Name: Corbin A. McNeill, Jr.
Title: Chairman of the Board,
President, and Chief
Executive Officer
<PAGE>
EXHIBIT F
[Letterhead of NEWCO]
[Date]
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Jones, Day, Reavis & Pogue
77 West Walker Drive
Chicago, Illinois 60001
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to Sections
7.02(d) and 7.03(d) of the Agreement and Plan of Exchange and Merger (the
"Exchange and Merger Agreement") dated as of September 22, 1999, among PECO
ENERGY COMPANY, a Pennsylvania corporation ("Parent"), PECO ENERGY CORPORATION,
a Pennsylvania corporation and a wholly owned subsidiary of Parent ("Newco") and
UNICOM CORPORATION, an Illinois corporation (the "Company"), and in connection
with the filing with the Securities and Exchange Commission (the "SEC") of the
registration statement on Form S-4 (the "Registration Statement"), which
includes the proxy statement/prospectus of Parent and the Company, each as
amended and supplemented through the date hereof, the undersigned certifies and
represents on behalf of Newco and as to Newco, after due inquiry and
investigation, as follows (any capitalized term used but not defined herein
having the meaning given to such term in the Exchange and Merger Agreement):
1. The Merger will be consummated in accordance with the Exchange
and Merger Agreement and as described in the Registration Statement. The facts
relating to the Merger as described in the Registration Statement and the
documents referenced in the Registration Statement are, insofar as such facts
relate to Newco, true, correct and complete in all material respects.
<PAGE>
2
2. The formulae set forth in the Exchange and Merger Agreement
pursuant to which each issued and outstanding share of common stock, no par
value, of Parent (the "Parent Common Stock") will be converted into common
shares, no par value, of Newco (the "Newco Common Stock") or cash and each
issued and outstanding share of common stock, no par value, of the Company (the
"Company Common Stock") will be converted into Newco Common Stock or cash are
the result of arm's length bargaining. The aggregate fair market value of the
Newco Common Stock and/or cash to be received by holders of Parent Common Stock
and Company Common Stock in the Merger will be approximately equal to the fair
market value of the Parent Common Stock or the Company Common Stock, as the case
may be, surrendered in exchange therefor.
3. Cash payments to be made to holders of Company Common Stock in
lieu of fractional shares of Newco Common Stock that would otherwise be issued
to such holders in the Second Step Merger will be made for the purpose of saving
Newco the expense and inconvenience of issuing and transferring fractional
shares of Newco Common Stock, and do not represent separately bargained for
consideration. The total cash consideration that will be paid in the Second
Step Merger to holders of Company Common Stock in lieu of fractional shares of
Newco Common Stock is not expected to exceed one percent of the total
consideration that will be issued in the Second Step Merger to such holders in
exchange for their shares of Company Common Stock.
4. (i) Newco has no present plan or intention, following the Merger,
to reacquire, or to cause any corporation that is related to Newco to acquire,
directly or indirectly, any Newco Common Stock issued in the Merger, except for
repurchases of Newco Common Stock by Newco in connection with [describe specific
parameters of any repurchase program to be adopted by Newco]. No corporation
that is related to Newco has a plan or intention to purchase any of the Newco
Common Stock issued in the Merger.
(ii) For purposes of this representation letter, a corporation shall
be treated as related to Newco if such corporation is related to Newco within
the meaning of Treasury Regulation Section 1.368-1(e)(3).
5. Newco has not acquired, nor, except as a result of the First Step
Exchange will it acquire, nor has it owned in the past five years, any Parent
Common Stock. Newco has not acquired, nor, except as a result of the Second
Step Merger will it acquire, nor has it owned in the past five years, any
Company Common Stock.
6. Newco has no present plan or intention to make any distributions
after the Merger to holders of Newco Common Stock (other than dividends made in
the ordinary course of business).
<PAGE>
3
7. At the Merger Effective Time, the value of the Newco Common Stock
to be issued to holders of Company Common Stock in the Second Step Merger will
represent at least 50% of the value of the total consideration to be issued to
such holders in the Second Step Merger in exchange for their shares of Company
Common Stock. Further, no liabilities of Parent or any of the holders of Parent
Common Stock and no liabilities of any of the holders of Company Common Stock
will be assumed by Newco, nor will any of the Parent Common Stock or Company
Common Stock acquired by Newco in connection with the Merger be subject to any
liabilities.
8. Parent, Newco, the Company and holders of Parent Common Stock and
Company Common Stock will each pay their respective expenses, if any, incurred
in connection with the Merger. Newco has not paid, directly or indirectly, nor
has it agreed to assume any expense or other liability, whether fixed or
contingent, incurred or to be incurred by Parent, any holder of Parent Common
Stock or any holder of Company Common Stock in connection with or as part of the
Merger or any related transactions.
9. Following the Second Step Merger, Newco or Newco's "qualified
group" of corporations (as defined in Treasury Regulation Section 1.368-
1(d)(4)(ii)) will continue the "historic business" of the Company or use a
significant portion of the Company's "historic business assets" in a business
(as such terms are defined in Treasury Regulation Section 1.368-1(d)).
Following the First Step Exchange, Newco will cause Parent to continue its
historic business or to use a significant portion of its historic business
assets in a trade or business.
10. Newco is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code, Section 351(e)(1) of the Code or
Treasury Regulation Section 1.351-1(c)(1)(ii).
11. Newco will not take any position on any Federal, state or local
income or franchise tax return, or take any other tax reporting position, that
is inconsistent (i) with the treatment of the Merger as transactions described
in Section 351 of the Code or (ii) with the treatment of the Second Step Merger
as a reorganization within the meaning of Section 368(a) of the Code, in each
case unless otherwise required by a "determination" (as defined in Section
1313(a)(1) of the Code) or by applicable state or local tax law (and then only
to the extent required by such applicable state or local tax law).
12. None of the compensation received by any stockholder-employee of
Parent in respect of periods ending on or prior to the Exchange Effective Time
represents separate consideration for any of his or her Parent Common Stock.
None of the compensation received by any stockholder-employee of the Company in
respect of periods ending on or prior to the Merger Effective Time represents
separate consideration for any
<PAGE>
4
of his or her Company Common Stock. None of the Newco Common Stock that will be
received by any stockholder-employee of Parent or the Company in the Merger
represents separately bargained for consideration which is allocable to any
employment agreement or arrangement. The compensation paid to any stockholder-
employees will be for services actually rendered and will be determined by
bargaining at arm's-length.
13. There is no intercorporate indebtedness existing between (i)
Newco and Parent or (ii) Newco (or any of its subsidiaries) and the Company (or
any of its subsidiaries).
14. Newco is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
15. To the best knowledge of the management of Newco and taking into
account any issuance of additional shares of Newco Common Stock, any issuance of
Newco Common Stock for services, the exercise of any Newco stock rights,
options, warrants or subscriptions, any public offerings of Newco stock, and the
sale, exchange, transfer by gift or other disposition of any Newco Common Stock
received in the Merger, the holders of Parent Common Stock and Company Common
Stock will collectively be in "control" of Newco immediately after the Merger.
For purposes of this representation letter, "control" shall mean the ownership
of (i) stock possessing at least 80% of the total combined voting power of all
classes of Newco stock entitled to vote and (ii) at least 80% of the total
number of shares of each other class of Newco stock.
16. Newco has no present plan or intention to, or to cause any of its
affiliates to, (i) liquidate Newco or Parent, (ii) merge (other than in
connection with the Second Step Merger), liquidate or consolidate Newco or
Parent with or into any other entity (including, without limitation, any
affiliate), (iii) sell, transfer, distribute or otherwise dispose of the Parent
Common Stock or interests in any of its material affiliates or (iv) sell,
transfer, distribute or otherwise dispose of any of the material assets of
Parent, the Company or their affiliates acquired in the Merger (other than in
the ordinary course of business or transfers described in Section 368(a)(2)(C)
of the Code or Treasury Regulation Section 1.368-2(k) that also qualify as
transactions described in Section 351 of the Code).
17. The Newco Common Stock issued in the Merger will constitute all
of Newco's outstanding stock immediately after the Merger. Except as
specifically set forth in the Exchange and Merger Agreement, Newco will not
issue any Newco Common Stock in connection with the Merger in consideration for
services rendered to or for the benefit of Newco or any of its affiliates, or in
consideration for the transfer of any property other than Parent Common Stock or
Company assets.
<PAGE>
5
18. The Exchange and Merger Agreement, the Registration Statement and
the other documents described in the Registration Statement represent the entire
understanding of Newco with respect to the Merger and there are no other written
or oral agreements regarding the Merger.
19. The Merger is being undertaken for purposes of enhancing the
business of Newco and for other good and valid business purposes of Newco as
described in the proxy statement/prospectus of Parent and the Company included
in the Registration Statement.
20. Newco is not a personal service corporation within the meaning of
Section 269A of the Code.
21. The undersigned is authorized to make all the representations set
forth herein on behalf of Newco.
The undersigned acknowledges that (i) the opinions to be delivered
pursuant to Sections 7.02(d) and 7.03(d) of the Exchange and Merger Agreement
will be based on the accuracy of the representations set forth herein and on the
accuracy of the representations and warranties and the satisfaction of the
covenants and obligations contained in the Exchange and Merger Agreement and the
various other documents related thereto, and (ii) such opinions will be subject
to certain limitations and qualifications including that they may not be relied
upon if any such representations or warranties are not accurate or if any such
covenants or obligations are not satisfied in all material respects.
The undersigned acknowledges that such opinions will not address any
tax consequences of the Merger or any action taken in connection therewith
except as expressly set forth in such opinions.
Very truly yours,
PECO ENERGY CORPORATION,
by
--------------------------------------
Name: Corbin A. McNeill
Title: Chairman of the Board,
President, and Chief
Executive Officer
<PAGE>
EXHIBIT G
[Letterhead of the Company]
[Date]
Jones, Day, Reavis & Pogue
77 West Walker Drive
Chicago, Illinois 60001
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to Sections
7.02(d) and 7.03(d) of the Agreement and Plan of Exchange and Merger (the
"Exchange and Merger Agreement") dated as of September 22, 1999, among PECO
ENERGY COMPANY, a Pennsylvania corporation ("Parent"), PECO ENERGY CORPORATION,
a Pennsylvania corporation and a wholly owned subsidiary of Parent ("Newco") and
UNICOM CORPORATION, an Illinois corporation (the "Company"), and in connection
with the filing with the Securities and Exchange Commission (the "SEC") of the
registration statement on Form S-4 (the "Registration Statement"), which
includes the proxy statement/prospectus of Parent and the Company, each as
amended and supplemented through the date hereof, the undersigned certifies and
represents on behalf of the Company and as to the Company, after due inquiry and
investigation, as follows (any capitalized term used but not defined herein
having the meaning given to such term in the Exchange and Merger Agreement):
1. The Merger will be consummated in accordance with the Exchange and
Merger Agreement and as described in the Registration Statement. The facts
relating to the Merger as described in the Registration Statement and the
documents referenced in the
<PAGE>
Registration Statement are, insofar as such facts relate to the Company, true,
correct and complete in all material respects.
2. The formula set forth in the Exchange and Merger Agreement
pursuant to which each issued and outstanding share of common stock, no par
value, of the Company (the "Company Common Stock") will be converted into common
shares, no par value, of Newco (the "Newco Common Stock") or cash is the result
of arm's length bargaining. The aggregate fair market value of the Newco Common
Stock and/or cash to be received by each holder of Company Common Stock in the
Second Step Merger will be approximately equal to the fair market value of the
Company Common Stock surrendered in exchange therefor.
3. Cash payments to be made to holders of Company Common Stock in
lieu of fractional shares of Newco Common Stock that would otherwise be issued
to such holders in the Second Step Merger will be made for the purpose of saving
Newco the expense and inconvenience of issuing and transferring fractional
shares of Newco Common Stock, and do not represent separately bargained for
consideration. The total cash consideration that will be paid in the Second
Step Merger to holders of Company Common Stock in lieu of fractional shares of
Newco Common Stock is not expected to exceed one percent of the total
consideration that will be issued in the Second Step Merger to such holders in
exchange for their shares of Company Common Stock.
4. (i) Except to the extent specifically contemplated under the
Exchange and Merger Agreement, neither the Company nor any corporation related
to the Company has acquired or has any present plan or intention to acquire,
directly or indirectly, any Company Common Stock in contemplation of the Merger,
or otherwise as part of a plan of which the Merger is a part.
(ii) For purposes of this representation letter, a corporation
shall be treated as related to the Company if such corporation is related to the
Company within the meaning of Treasury Regulation Section 1.368-1(e)(3)
(determined without regard to Treasury Regulation Section 1.368-1(e)(3)(i)(A)).
5. The Company has not made and does not have any present plan or
intention to make any distributions (other than dividends made in the ordinary
course of business) to holders of Company Common Stock prior to, in
contemplation of, or otherwise in connection with, the Merger.
6. Newco, the Company and holders of Company Common Stock will each
pay their respective expenses, if any, incurred in connection with the Second
Step Merger. The Company has not agreed to assume, nor will it directly or
indirectly assume, any expense or other liability, whether fixed or contingent,
of any holder of Company Common Stock. Further, no liabilities of any of the
holders of Company Common Stock will be assumed by Newco, nor will any of the
Company Common Stock acquired by Newco in connection with the Merger be subject
to any liabilities.
<PAGE>
3
7. Any liabilities of the Company that will be assumed by Newco
pursuant to the Merger, and any liabilities to which the assets of the Company
that will be transferred to Newco pursuant to the Merger are subject, were
incurred in the ordinary course of business and are associated with the assets
of the Company.
8. At the Merger Effective Time, the value of the Newco Common Stock
issued to the holders of Company Common Stock in the Second Step Merger will
represent at least 50% of the value of the total consideration issued to such
holders in the Second Step Merger in exchange for their shares of Company Common
Stock.
9. The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code of 1986, as amended (the
"Code"), Section 351(e)(1) of the Code or Treasury Regulation Section 1.351-
1(c)(1)(ii).
10. The Company will not take, and to the best knowledge of the
management of the Company there is no present plan or intention by holders of
Company Common Stock to take, any position on any Federal, state or local income
or franchise tax return, or to take any other tax reporting position, that is
inconsistent (i) with the treatment of the Merger as transactions described in
Section 351 of the Code or (ii) with the treatment of the Second Step Merger as
a reorganization within the meaning of Section 368(a) of the Code, in each case
unless otherwise required by a "determination" (as defined in Section 1313(a)(1)
of the Code) or by applicable state or local tax law (and then only to the
extent required by such applicable state or local tax law).
11. None of the compensation received by any stockholder-employee of
the Company in respect of periods ending on or prior to the Merger Effective
Time represents separate consideration for any of his or her Company Common
Stock. None of the Newco Common Stock that will be received by any stockholder-
employee of the Company in the Merger represents separately bargained for
consideration which is allocable to any employment agreement or arrangement.
The compensation paid to any stockholder-employees will be for services actually
rendered and will be determined by bargaining at arm's-length.
12. There is no intercorporate indebtedness existing between Newco
(or any of its subsidiaries, including Parent) and the Company (or any of its
subsidiaries).
13. The Company is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
14. No assets of the Company have been sold, transferred or otherwise
disposed of which would prevent Newco or Newco's "qualified group" of
corporations (as
<PAGE>
4
defined in Treasury Regulation Section 1.368-1(d)(4)(ii)) from continuing the
"historic business" of the Company or from using a significant portion of the
"historic business assets" of the Company in a business following the Merger (as
such terms are defined in Treasury Regulation Section 1.368-1(d)).
15. At the Merger Effective Time, the fair market value of the assets
of the Company transferred to Newco pursuant to the Second Step Merger will
exceed the sum of its liabilities assumed by Newco pursuant to the Second Step
Merger, plus the amount of liabilities, if any, to which such assets are
subject.
16. To the best knowledge of the management of the Company, there is
no present plan or intention on the part of the holders of Company Common Stock
to sell, exchange or otherwise dispose of, or to enter into any contract or
other arrangement with respect to, any interest in the shares of Newco Common
Stock received in the Second Step Merger in exchange for such Company Common
Stock such that the former holders of Company Common Stock and the former
holders of Parent Common Stock, in the aggregate, would not own (i) Newco Common
Stock having at least 80% of the total combined voting power of all classes of
Newco stock entitled to vote and (ii) at least 80% of the total number of shares
of each other class of Newco Stock.
17. The Company will not retain any rights in the Company assets
transferred to Newco pursuant to the Second Step Merger.
18. None of the stock of any Company Subsidiary being transferred in
the Second Step Merger is Section 306 stock within the meaning of Section 306(c)
of the Code.
19. Neither the Company nor any Company Subsidiary has been a
"distributing corporation" or a "controlled corporation" in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (i) at any
time during the two-year period prior to the date of the Exchange and Merger
Agreement, (ii) at any time during the period commencing on the date of the
Exchange and Merger Agreement and ending on the date hereof or (iii) which could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with and
including the Merger.
20. To the best knowledge of the management of the Company and taking
into account any issuance of additional shares of Newco Common Stock, any
issuance of Newco Common Stock for services, the exercise of any Newco stock
rights, options, warrants or subscriptions, any public offerings of Newco stock,
and the sale, exchange, transfer by gift or other disposition of any Newco
Common Stock received by holders of
<PAGE>
5
Company Common Stock in the Merger, the holders of Parent Common Stock and
Company Common Stock will collectively be in "control" of Newco immediately
after the Merger. For purposes of this representation letter, "control" shall
mean the ownership of (i) stock possessing at least 80% of the total combined
voting power of all classes of Newco stock entitled to vote and (ii) at least
80% of the total number of shares of each other class of Newco stock.
21. The Merger is being undertaken for purposes of enhancing the
business of the Company and for other good and valid business purposes of the
Company as described in the proxy statement/prospectus of Parent and the Company
included in the Registration Statement.
22. The Exchange and Merger Agreement, the Registration Statement and
the other documents described in the Registration Statement represent the entire
understanding of the Company with respect to the Merger and there are no other
written or oral agreements regarding the Merger.
23. The undersigned is authorized to make all the representations set
forth herein on behalf of the Company.
The undersigned acknowledges that (i) the opinions to be delivered
pursuant to Sections 7.02(d) and 7.03(d) of the Exchange and Merger Agreement
will be based on the accuracy of the representations set forth herein and on the
accuracy of the representations and warranties and the satisfaction of the
covenants and obligations contained in the Exchange and Merger Agreement and the
various other documents related thereto, and (ii) such opinions will be subject
to certain limitations and qualifications including that they may not be relied
upon if any such representations or warranties are not accurate or if any of
such covenants or obligations are not satisfied in all material respects.
<PAGE>
6
The undersigned acknowledges that such opinions will not address any
tax consequences of the Merger or any action taken in connection therewith
except as expressly set forth in such opinions.
Very truly yours,
UNICOM CORPORATION
by
--------------------------------------
Name: John W. Rowe
Title: Chairman of the Board,
President, and Chief
Executive Officer
<PAGE>
Exhibit (4)-1
Unicom Corporation
Form 8-K File No. 1-11375
AMENDMENT TO RIGHTS AGREEMENT
Amendment (this "Amendment"), dated as of September 22, 1999, to the
Rights Agreement, dated as of February 2, 1998 (the "Rights Agreement"), between
Unicom Corporation, an Illinois corporation (the "Company"), and First Chicago
Trust Company of New York (the "Rights Agent"). Each capitalized term not
otherwise defined herein shall have the meaning ascribed to such term in the
Rights Agreement.
WHEREAS, the Company, PECO Energy Company ("Parent"), and Newholdco
Corporation, a Pennsylvania corporation and a wholly owned subsidiary of Parent
("Newco"), have proposed to enter into an Agreement and Plan of Exchange and
Merger (the "Merger Agreement") pursuant to which, among other things, the
Company will merge with and into Newco (the "Merger") and each outstanding share
of common stock of the Company will be converted into the right to receive
shares of common stock of Newco, subject to the terms and conditions of the
Merger Agreement;
WHEREAS, the Company and the Rights Agent desire to amend the Rights
Agreement to render the Rights inapplicable to the Merger and the other
transactions contemplated by the Merger Agreement;
WHEREAS, the Company deems the following amendments to the Rights
Agreement to be necessary and desirable and in the best interests of the holders
of Rights; and
WHEREAS, Section 27 of the Rights Agreement permits the Company and
the Rights Agent from time to time to supplement and amend the Rights Agreement.
NOW, THEREFORE, in consideration of the foregoing and the agreements,
provisions and covenants herein contained, the parties agree as follows:
1. Section 1 of the Rights Agreement is hereby amended by adding a new
Section (n) as follows:
(n) "Merger Agreement" means the Agreement and Plan of Exchange and
Merger, dated as of September 22, 1999, including any amendment or
supplement thereto, among PECO Energy Company ("Parent"), Newholdco
Corporation, a Pennsylvania corporation ("Newco") and the Company.
2. Section 1 of the Rights Agreement is hereby supplemented by adding the
following new paragraph at the end thereof:
"Notwithstanding anything in this Agreement that might otherwise be
deemed to the contrary, none of Parent, Newco, any of their Affiliates or
Associates or any of their permitted assignees or transferees shall be
deemed an Acquiring Person and none of a Distribution Date, a Stock
Acquisition Date, a Section 11 (a) (ii) Event, a Section 13
<PAGE>
Event or a Triggering Event shall be deemed to occur or to have occurred,
in each such case, by reason of the approval, execution or delivery of the
Merger Agreement, the consummation of the Merger (as defined in the Merger
Agreement) or the consummation of the other transactions contemplated by
the Merger Agreement including the Transactions (as defined in the Merger
Agreement)."
3. Section 7(a) of the Rights Agreement is hereby amended by deleting
clauses (i), (ii) and (iii) in their entirety and replacing such clauses as
follows:
(i) the Close of Business on February 2, 2008 (the "Final Expiration
Date"), (ii) the time at which the Rights are redeemed as provided in
Section 23, (iii) the time at which such Rights are exchanged pursuant to
Section 24, and (iv) immediately prior to the Merger Effective Time (as
defined in the Merger Agreement) (the earliest of (i), (ii), (iii), and
(iv) being herein referred to as the "Expiration Date").
4. The Rights Agreement shall not otherwise be supplemented or amended by
virtue of this Amendment, but shall remain in full force and effect. This
Amendment may be executed in one or more counterparts, all of which shall be
considered one and the same amendment and each of which shall be deemed an
original.
5. This Amendment shall be effective as of, and immediately prior to, the
execution and delivery of the Merger Agreement, and all references to the Rights
Agreement shall, from and after such time, be deemed to be references to the
Rights Agreement as amended hereby.
6. This Amendment shall be deemed to be a contract under the laws of the
State of Illinois and for all purposes shall be governed by and construed in
accordance with laws of the State of Illinois applicable to contracts made and
to be entirely performed entirely within such State.
7. Exhibit B to the Rights Agreement shall be deemed to be amended in a
manner consistent with this Amendment.
[Signature page follows]
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives executed this Amendment as of the day and year first
above written.
UNICOM CORPORATION.
By /s/ John C. Bukovski
-------------------------------
Name: John C. Bukovski
Title: Senior Vice President
FIRST CHICAGO TRUST COMPANY OF
NEW YORK
By /s/ Joanne Gorostiola
-------------------------------
Name: Joanne Gorostiola
Title: Assistant Vice President
3
