<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
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(as permitted by Rule 14c-5(d)(2))
[X] Definitive Information Statement
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
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<PAGE>
Commonwealth Edison
Company
P.O. Box 767
Chicago, Illinois 60690-
0767
[LOGO OF COMED]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, JUNE 28, 2000 AT 10:30 A.M. (Local Time)
The annual meeting of shareholders of Commonwealth Edison Company ("ComEd"
or the "Company") will be held at the Hyatt Regency Chicago, 151 East Wacker
Drive, Chicago, Illinois. At the meeting, shareholders will be asked to
consider and act upon the following matters, and to transact such other
business as may properly be brought before the meeting:
Item A:The election of nine Directors.
Item B:The appointment of Arthur Andersen LLP, independent public
accountants, as Auditors for 2000.
Only shareholders of record on the books of ComEd at 4:00 P.M., Chicago
time, on May 12, 2000, will be entitled to vote at the meeting.
John P. McGarrity
Secretary
June 15, 2000
<PAGE>
[COMED LOGO]
INFORMATION STATEMENT
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
June 15, 2000
This Information Statement is being sent to you in connection with the
annual meeting of shareholders of ComEd to be held on June 28, 2000.
A ticket is not required for attendance at the annual meeting; however,
confirmation of stock ownership will be made prior to admission to the
meeting.
As of May 12, 2000, ComEd had outstanding 183,745,079 shares of Common
Stock, par value $12.50 per share (of which Unicom Corporation ("Unicom")
beneficially owned 183,737,262 shares), 52,462 shares of $1.425 Convertible
Preferred Stock, without par value, and 700,000 shares of Cumulative
Preference Stock, without par value. Unicom intends to vote its shares of
ComEd Common Stock for the election of the nominees named in Item A and for
the matter discussed in Item B. Consequently, such matters are expected to be
approved.
Unicom's 1999 Annual Report and this Information Statement are first being
mailed to shareholders on or about June 15, 2000.
<PAGE>
ITEM A: ELECTION OF DIRECTORS
NOMINEES
Elizabeth Anne Moler resigned from the Unicom and ComEd boards of directors
on December 31, 1999, to become a Senior Vice President of Unicom and ComEd.
Donald P. Jacobs is retiring as a director of Unicom and ComEd after serving
as a director of ComEd since 1979 and as a director of Unicom since its
incorporation in 1994. His contributions to Unicom and ComEd have been many
and are gratefully appreciated. The vacancies created by Ms. Moler's
resignation and Mr. Jacob's retirement are not being filled, and the number of
directors is being reduced to nine.
Nine Directors are to be elected at the annual meeting to serve terms of one
year and until their respective successors have been elected. The nominees for
Director, all of whom are now serving as Directors of the Company and Unicom,
are listed below together with certain biographical information. Except as
otherwise indicated, each nominee for Director has been engaged in his or her
present principal occupation for at least the past five years.
EDWARD A. BRENNAN, age 66. Director of Unicom and ComEd since
[Photo of 1995. Retired. Chairman and CEO of Sears, Roebuck and Co.
Edward A. (retail merchandiser) for more than five years prior to his
Brennan] retirement in August 1995. Chairman of Compensation Committee
and Nuclear Oversight Committee. Other directorships: The
Allstate Corporation, AMR Corporation, Dean Foods Company,
Minnesota Mining and Manufacturing Company, Morgan Stanley Dean
Witter & Co. and The SABRE Group Holdings, Inc.
CARLOS H. CANTU, age 66. Director of Unicom and ComEd since
[Photo of 1998. Retired. President and Chief Executive Officer of The
Carlos H. ServiceMaster Company (service businesses) from January 1,
Cantu] 1994 through October 1, 1999. Other directorships: The
ServiceMaster Company, First Tennessee National Corporation.
JAMES W. COMPTON, age 62. Director of Unicom since 1994 and
[Photo of ComEd since 1989. President and Chief Executive Officer of the
James W. Chicago Urban League (a non-profit agency). Chairman of Audit
Compton] and Compliance Committee and member of Compensation Committee.
Other directorships: Ariel Mutual Funds and Highland Community
Bank.
BRUCE DeMARS, age 64. Director of Unicom and ComEd since 1996.
[Photo of Vice President and Secretary of DeMars, Inc. (consulting firm)
Bruce since May 1997 and Partner, Trident Merchant Group since May,
DeMars] 1998. Admiral, United States Navy and Director, Naval Nuclear
Propulsion Program for more than five years prior to his
retirement in October 1996. Member of Audit and Compliance
Committee and Nuclear Oversight Committee. Other directorship:
McDermott International.
SUE L. GIN, age 58. Director of Unicom since 1994 and ComEd
[Photo of since 1993. Founder, Owner, Chairman and Chief Executive Officer
Sue L. of Flying Food Group, Inc. (in-flight catering company). Member
Gin] of Audit and Compliance and Governance and Nominating
Committees.
2
<PAGE>
EDGAR D. JANNOTTA, age 68. Director of Unicom and ComEd since
[Photo of 1994. Senior Director of William Blair & Company, L.L.C.
Edgar D (investment banking and brokerage company) since January 1996.
Jannotta] For more than five years prior thereto, Managing Partner of
William Blair & Company and Senior Partner during 1995. Chairman
of Governance and Nominating Committee and member of Nuclear
Oversight Committee. Other directorships: AAR Corp., AON
Corporation, Bandag, Incorporated and Molex Incorporated.
JOHN W. ROGERS, JR., age 42. Director of Unicom and ComEd
[Photo of Since 1999. President of Ariel Capital Management, Inc., an
John W. institutional money management firm which he founded in 1983.
Rogers, Jr.] Ariel Capital Management also serves as the investment advisor,
administrator and distributor for Ariel Mutual Funds. Member of
Governance and Nominating Committee. Other directorships: AON
Corporation, Bank One Corporation, Burrell Communications Group,
Inc. and GATX Corporation.
JOHN W. ROWE, age 54. Director, Chairman, President and Chief
[Photo of Executive Officer of Unicom and ComEd since March 16, 1998.
John W. Rowe] President and Chief Executive Officer of New England Electric
System from February 1989 to March 1998. Other directorships:
FleetBoston Financial, UNUM Provident Corporation and Wisconsin
Central Transportation Corporation.
RICHARD L. THOMAS, age 69. Director of Unicom and ComEd since
[Photo of 1998. Retired. Chairman of First Chicago NBD Corporation
Richard L. (banking and financial services) from 1995 to 1996 and of The
Thomas] First National Bank of Chicago from 1992 to 1996. Member of the
Audit and Compliance and Compensation Committees. Other
directorships: IMC Global Inc., The PMI Group, Inc., The SABRE
Group Holdings, Inc., and Sara Lee Corporation.
ADDITIONAL INFORMATION CONCERNING BOARD OF DIRECTORS
Compensation of Directors--Directors who are not employees of Unicom, ComEd
or any of their subsidiaries receive an annual fee of $36,200 payable in
shares of Unicom Common Stock under the Unicom Corporation 1996 Directors' Fee
Plan. Such Directors also receive a fee of $1,500 for each Board and Committee
meeting they attend and an additional annual fee of $2,500 for each Committee
of the Board that they chair, which meeting and chair fees may, at the
election of the Director, be paid in shares of Unicom Common Stock under the
1996 Directors' Fee Plan. Any non-employee Director who is also a member of
the Nuclear Oversight Committee receives an additional annual fee of $5,000.
In the event that Directors also serve as directors of Unicom, or as chairs of
corresponding committees of Unicom, the aggregate fees paid to such Directors
in respect of such service to Unicom and ComEd do not exceed the foregoing
amounts, so that Directors do not receive duplicate fees. Directors who are
full-time employees of Unicom, ComEd or any of their subsidiaries receive no
fees for service on the Board of Directors. Directors may defer their fees.
Prior to 1997, Directors who had never been an officer or an employee of
Unicom, ComEd or any of their subsidiaries, and who had attained at least age
65 and completed the required period of Board service (3 to 5 years as
applicable, including service as a director of Unicom), became eligible for
retirement benefits upon retirement. Such benefits were to be paid to the
retired Director or a surviving spouse for a period equal to such Director's
years of service (including service as a director of Unicom) in an amount per
year equal to the annual retainer for Board members as in effect at the time
of payment. Effective January 1, 1997, the Board of Directors terminated the
further accrual of retirement benefits and
3
<PAGE>
offered each Director the option to irrevocably elect, in lieu of amounts
otherwise payable, a lump sum amount payable upon retirement, either by
delivery of shares of Unicom Common Stock or in cash. In lieu of further
accrual of retirement benefits, non-employee Directors received a $6,200
increase in their annual fee (from $30,000 to $36,200), effective June 1, 1997
and payable in shares of Unicom Common Stock.
Other Information--Ariel Capital Management, Inc. has acted as investment
manager with respect to a portion of the assets of an employee benefit plan of
ComEd since 1994. During 1999, such firm received approximately $170,499 in
fees. In 2000, it is estimated that such firm will receive approximately
$163,000 in fees. Mr. Rogers is President of Ariel Capital Management, Inc. In
both cases, the Company believes the fees paid or payable are equivalent to
the fees that would have been paid to an unaffiliated third party for similar
services.
Audit and Compliance Committee--The Audit and Compliance Committee consists
of four Directors who are not employees or former employees of Unicom, ComEd
or any of their subsidiaries. Members serve three-year staggered terms. The
Audit and Compliance Committee acts as the principal agent of the Board of
Directors in fulfilling its responsibilities relating to corporate financial
accounting and disclosure practices, in overseeing the establishment and
maintenance of an appropriate system of internal controls and internal audit
functions, and in monitoring and promoting compliance with applicable laws,
regulations and the Company's policies. The Audit and Compliance Committee met
four times in 1999. Members of the Committee are James W. Compton (Chairman),
Bruce DeMars, Sue L. Gin and Richard L. Thomas.
Compensation Committee--The Compensation Committee consists of four
Directors who are not and have never been employees of Unicom, ComEd or any of
their subsidiaries. Members serve one-year terms. The Compensation Committee
oversees general compensation policy of the Company, establishes and
administers compensation programs applicable to the principal officers of the
Company, and administers awards under the Commonwealth Edison Company Deferred
Compensation Plan. The Compensation Committee met seven times in 1999. Members
of the Committee are Edward A. Brennan (Chairman), James W. Compton, Donald P.
Jacobs and Richard L. Thomas.
Governance and Nominating Committee--The Governance and Nominating Committee
consists of four Directors who are not employees or former employees of
Unicom, ComEd or their subsidiaries. Members serve one-year terms. The
Governance and Nominating Committee oversees corporate governance policies,
practices and procedures of the Company and makes such recommendations as it
may deem appropriate to the full Board of Directors, acts as the executive
committee of the Board of Directors when the Board of Directors is not in
session, and recommends to the Board of Directors candidates for election to
the Board of Directors. The Committee will consider nominees recommended by
shareholders if such recommendations are submitted in writing, accompanied by
a description of the proposed nominee's qualifications and other relevant
biographical information and evidence of the consent of the proposed nominee.
The recommendations should be addressed to the Governance and Nominating
Committee, in care of the Secretary of ComEd. Nominations also may be
presented by shareholders at the annual meeting of shareholders. The
Governance and Nominating Committee met two times in 1999. Members of the
Committee are Edgar D. Jannotta (Chairman), Sue L. Gin, Donald P. Jacobs and
John W. Rogers, Jr.
Nuclear Oversight Committee--The Nuclear Oversight Committee consists of
four directors who are not employees of Unicom, ComEd or any of their
subsidiaries. Members serve one-year terms. The Committee advises and assists
the Board of Directors by monitoring the performance and safety of ComEd's
nuclear facilities. The Committee met five times during 1999. Members of the
Committee are Edward A. Brennan (Chairman), Bruce DeMars, Donald P. Jacobs,
and Edgar D. Jannotta.
4
<PAGE>
Attendance at Meetings--During 1999, there were fourteen meetings of ComEd's
Board of Directors. The average attendance of all incumbent Directors,
expressed as a percent of the aggregate total of Board and Board Committee
meetings in 1999, was 97%. Each incumbent Director attended at least 80% of
the meetings of ComEd's Board and Board Committees of which the Director was a
member, except Mr. Cantu, who attended 57% of the meetings of ComEd's Board of
Directors. Mr. Cantu missed several meetings as a result of illness.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of January 31, 2000, Unicom beneficially owned 187,179,351 shares of
ComEd Common Stock, representing more than 99% of the total ComEd Common Stock
outstanding, and there was no other person known to ComEd to be the beneficial
owner of more than five percent of any class of ComEd voting securities. No
person is known to Unicom to be the beneficial owner of more than five percent
of Unicom common stock. The following table lists the beneficial ownership, as
defined under the rules of the Securities and Exchange Commission (the "SEC"),
as of March 31, 2000, of Unicom Common Stock held by each of the Directors,
each of the executive officers named in the Summary Compensation Table on page
7 and Unicom's Directors and executive officers as a group. In addition, the
table includes two columns describing securities held by such persons that are
not considered to be "beneficially owned" under the rules of the SEC. The
column headed "Other Stock Options" includes stock options held by such
persons that are not exercisable within 60 days of January 31, 2000. The
column headed "Deferred Share Equivalents" includes shares deferred by such
persons under the Unicom Corporation Stock Bonus Deferral Plan or the Unicom
Corporation 1996 Directors' Fee Plan or share equivalents held in the Unicom
Corporation Retirement Plan for Directors.
<TABLE>
<CAPTION>
Beneficial Ownership
of Common Stock
------------------------------
Other
Amount Percent Stock Deferred Share
Name and Nature of Class Options(5) Equivalents(7)
---- ------------ --------- ---------- --------------
<S> <C> <C> <C> <C>
Edward A. Brennan....... 4,438 * -- 1,250
Carlos H. Cantu......... 2,425 * -- --
James W. Compton........ 5,105 * -- 3,751
Bruce DeMars............ 4,064 * -- 510
Sue L. Gin.............. 12,873 * -- 1,181
Donald P. Jacobs........ 10,202 * -- 10,632
Edgar D. Jannotta....... 7,567 * -- 4,667
John W. Rogers, Jr...... 1,000 * -- 985
Richard L. Thomas....... 10,616 * -- 2,771
John W. Rowe............ 222,278(1)(2) * 281,666 39,258
Oliver D. Kingsley,
Jr..................... 53,064(1) * 133,332 61,696
Robert J. Manning....... 79,328(1)(3) * 68,197(6) 24,823(8)
Pamela B. Strobel....... 52,490(1) * 74,166 15,548
David R. Helwig......... 31,001(1) * 52,999 16,663
Directors and executive
officers as a group (22
persons)............... 679,984(1)(4) * 1,019,855 213,224
</TABLE>
* Less than one percent
(1) The numbers and percentages of shares shown in the table above include
shares as to which the indicated person(s) had the right to acquire within
60 days of March 31, 2000 upon the exercise of outstanding stock options,
as follows: Mr. Rowe 216,334; Mr. Kingsley 41,668; Mr. Manning 72,103
(includes 12,935 options owned by spouse); Ms. Strobel 40,334; Mr. Helwig
19,001; and all executive officers and directors as a group (including
such individuals) 487,445. Such persons disclaim any beneficial ownership
of the shares subject to such options.
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<PAGE>
(2) Includes 2,000 shares owned by spouse, beneficial ownership of which is
disclaimed.
(3) Includes 14,910 shares owned by spouse, beneficial ownership of which is
disclaimed.
(4) Includes 16,910 shares owned by spouses. The directors and executive
officers to whom such beneficial ownership is attributed disclaim any
beneficial ownership of the shares held by such persons.
(5) Includes stock options which are not considered to be "beneficially owned"
under SEC rules because they cannot be exercised within 60 days of March
31, 2000.
(6) Includes 9,865 stock options held by spouse, beneficial ownership of which
is disclaimed.
(7) Includes share equivalents that are not considered to be "beneficially
owned" under SEC rules because they are deferred under the Unicom
Corporation Stock Bonus Deferral Plan, the Unicom 1996 Directors' Fee
Plan, or the Unicom Corporation Retirement Plan for Directors. Under the
Unicom Corporation Stock Bonus Deferral Plan and the Unicom 1996
Directors' Fee Plan, executives and directors, respectively, may defer the
receipt of the stock portion of certain awards made pursuant to the Unicom
Corporation Long-Term Incentive Plan or certain fees, respectively.
Deferred amounts are only required to be kept in Unicom's books of account
as deferred stock accounts, which are for bookkeeping purposes only.
Unicom has no obligation to set aside or segregate any actual shares of
Unicom common stock or other assets in respect of such accounts. Unicom
has elected to issue the deferred shares to trusts having an institutional
trustee, which has sole voting rights with respect to such shares. At the
end of the deferral period (in the case of the Unicom Stock Bonus Deferral
Plan) or upon leaving the board of directors (in the case of the Unicom
1996 Directors' Fee Plan), the share equivalents are distributed in whole
shares of Unicom common stock and cash in lieu of any fractional share.
Dividends paid with respect to deferred shares under the Unicom Stock
Bonus Deferral Plan are either reinvested in Unicom common stock and held
by such Trustee or are paid to the executive officer making the deferral.
Dividends paid with respect to deferred shares under the Unicom 1996
Directors' Fee Plan are reinvested in Unicom common stock and held by such
Trustee. Under the Unicom Corporation Retirement Plan for Directors,
effective January 1, 1997, the accrual of further benefits was terminated
and directors could elect to have benefits accrued through such date
deferred into share equivalents to be paid in shares of Unicom common
stock upon retirement. Accounts under such Plan are credited with an
additional number of share equivalents determined by assuming the
reinvestment of dividend equivalents on share equivalents in such
accounts.
(8) Includes 3,721 deferred share equivalents held by spouse.
ITEM B: APPROVAL OF AUDITORS
Subject to shareholder approval, the Board of Directors of ComEd has
appointed Arthur Andersen LLP, independent public accountants, as Auditors to
examine the annual and quarterly consolidated financial statements of ComEd
and its subsidiary companies for 2000. The shareholders will be asked at the
annual meeting to approve such appointment. The firm of Arthur Andersen LLP
has audited the accounts of Unicom since its inception in 1994, and ComEd
since 1932. A representative of Arthur Andersen LLP will be present at the
meeting to make a statement if such representative so desires, and to respond
to shareholders' questions.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information relating to the
compensation during the past three calendar years of the person who served as
the Chief Executive Officer during 1999 and the other four most highly
compensated executive officers of Unicom or ComEd at December 31, 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------------- --------------------------------------
Bonus Awards Payouts
---------------- --------------------- ----------------
LTIP Payouts
----------------
Other Securities
Annual Underlying All Other
Stock- Compen- Restricted Options/ Stock- Compen-
Name and Salary Cash Based(1) sation(2) Stock(3) SARs Cash Based(1) sation(4)
Principal Position Year $ $ $ $ $ # $ $ $
------------------ ---- ------- ------- -------- --------- ---------- ---------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
John W. Rowe(5)........ 1999 957,692 529,125 529,125* 55,112 -- 123,000 475,246 203,677* 42,478
Chairman (Chief 1998 726,923 484,209 484,209* 215,117 -- 250,000 343,219 52,537* 2,728,076
Executive Officer) 1997 -- -- -- -- -- -- -- -- --
Unicom and ComEd
Oliver D. Kingsley,
Jr.(6)................ 1999 544,385 -- 594,000* 175,502 231,562 40,000 -- 322,488* 24,139
Executive Vice
President 1998 475,000 -- 383,332* 220,713 -- 35,000 -- 187,984* 20,994
Unicom and ComEd 1997 82,212 -- -- 202,828 560,000 25,000 182,712 10,777* 378,395
Robert J. Manning...... 1999 401,931 210,456 70,152* -- -- 40,000 102,229 102,229* 18,327
Executive Vice
President 1998 375,035 184,958 61,653* -- -- 35,000 43,469 43,469* 22,132
Unicom and ComEd 1997 312,802 86,319 28,773* -- 291,250 25,000 42,153 42,153* 19,894
Pamela B. Strobel...... 1999 375,131 208,961 69,654* -- -- 30,000 84,410 84,410* 16,483
Executive Vice
President 1998 341,000 137,341 58,861* -- -- 20,000 42,528 42,528* 20,347
and General Counsel 1997 304,970 41,742 13,914* -- 291,250 17,500 33,605 33,605* 19,247
Unicom and ComEd
David R. Helwig(7)..... 1999 355,115 177,071 177,071* -- 479,256 25,000 -- 144,206* 15,702
Senior Vice President 1998 312,500 -- 196,727* -- -- 22,000 -- 85,747* 285,875
Unicom and ComEd 1997 -- -- -- -- -- -- -- -- --
</TABLE>
-------------------
(1) All of the amounts shown under "Bonus--Stock-Based" and "LTIP Payouts--
Stock-Based" were either paid in shares of Unicom common stock or were
deferred and are deemed to be invested in shares of Unicom's common
stock, and thus fully "at risk" until the end of the deferral period.
Deferred amounts are noted with an asterisk. See note 7 to the "Security
Ownership of Certain Beneficial Owners and Management" table on page 5.
(2) Excludes perquisites and other benefits, unless the aggregate amount of
such compensation is at least the lesser of either $50,000 or 10% of the
total annual salary and bonus reported for the named executive officer.
For 1999, includes $13,276 and $66,345 paid to Messrs. Rowe and Kingsley
for the payment of taxes and $75,000 paid to Mr. Kingsley as a living
cost allowance and $15,395 paid for financial and legal services for Mr.
Rowe. For 1998, includes $89,381 and $132,077 paid to Messrs. Rowe and
Kingsley, respectively, for reimbursements for the payment of taxes,
$108,340 paid to Mr. Rowe for moving expenses and $75,000 paid to Mr.
Kingsley as a living cost allowance. For 1997, includes payments to Mr.
Kingsley of $74,065 for moving expenses, $75,000 as a living cost
allowance and $53,251 for reimbursement of taxes.
(3) The value shown is as of the date of grant. Dividends are paid or accrued
on restricted stock awards at the same rate as paid to all shareholders.
As of December 31, 1999, Mr. Manning had an aggregate of 5,000 shares of
restricted stock worth $167,500, Ms. Strobel had an aggregate of 10,000
shares of restricted stock worth $335,000, Mr. Helwig had an aggregate of
12,000 shares of restricted stock worth $402,000 and Mr. Kingsley had an
aggregate of 16,500 shares of restricted stock worth $552,750.
(4) Amounts shown include matching contributions made by ComEd pursuant to the
ComEd Employee Savings and Investment Plan ("ESIP"), matching
contributions made by ComEd pursuant to the ComEd Excess
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Benefit Savings Plan and premiums and administrative service fees paid by
ComEd on behalf of the named individuals under various group life insurance
plans. For the year 1999, contributions made to the ESIP amounted to
$6,960, $6,960, $4,184, $4,518 and $4,547 on behalf of Mr. Rowe, Mr.
Kingsley, Mr. Manning, Ms. Strobel and Mr. Helwig, respectively.
Contributions made to the ComEd Excess Benefit Savings Plan during 1999
totaled $34,700, $16,720, $12,311, $11,104 and $10,901 on behalf of Mr.
Rowe, Mr. Kingsley, Mr. Manning, Ms. Strobel and Mr. Helwig, respectively.
Premiums and administrative service fees paid during 1999 for Split Dollar
Life, Accidental Death and Travel Accident insurance policies for Mr. Rowe,
Mr. Kingsley, Mr. Manning, Ms. Strobel and Mr. Helwig, respectively, are as
follows: $818, $459, $1,832, $861 and $254. For the year 1998,
contributions made to the ESIP amounted to $7,287, $4,246, $4,350 and
$1,915 on behalf of Mr. Kingsley, Mr. Manning, Ms. Strobel and Mr. Helwig,
respectively. Contributions made to the ComEd Excess Benefit Savings Plan
during 1998 totaled $31,621, $13,375, $11,079, $9,787 and $8,960 on behalf
of Mr. Rowe, Mr. Kingsley, Mr. Manning, Ms. Strobel and Mr. Helwig,
respectively. Premiums and administrative service fees paid during 1998 for
Split Dollar Life, Accidental Death and Travel Accident insurance policies
for Mr. Rowe, Mr. Kingsley, Mr. Manning and Ms. Strobel, respectively, are
as follows: $96,455, $332, $6,807 and $6,210. ComEd is entitled to recover
the premiums and administrative service fees from any amounts paid by the
insurer on such Split Dollar Life policies and has retained a collateral
interest on each policy to the extent of the premiums and administrative
service fees paid with respect to such policy. Includes a $2,000,000 lump
sum payment to Mr. Rowe in 1998 as partial compensation for actual
compensation, benefits and programs which Mr. Rowe was, or was reasonably
expected to become, entitled to receive from his previous employer, and a
payment of $600,000 as an inducement to enter into his employment
agreement. For 1997, includes $375,000 paid to Mr. Kingsley as an
inducement to enter into his employment agreement. For 1998, includes
$275,000 paid to Mr. Helwig as an inducement to enter into his employment
agreement.
(5) Mr. Rowe commenced employment on March 16, 1998.
(6) Mr. Kingsley commenced employment on November 1, 1997.
(7) Mr. Helwig commenced employment on January 19, 1998.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------
Number of
Securities % of Total
Underlying Options/SARs Exercise Grant Date
Options/SARs Granted to or Base Present
Granted(1) Employees in Price Expiration Value(2)
Name # Fiscal Year $/Share Date $
---- ------------ ------------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
John W. Rowe (CEO)...... 110,000 5.99 35.75 1/24/09 $712,250
John W. Rowe (CEO)...... 13,000(3) 0.71 35.563 3/03/09 84,175
Oliver D. Kingsley,
Jr..................... 40,000 2.18 35.75 1/24/09 259,000
Robert J. Manning....... 40,000 2.18 35.75 1/24/09 259,000
Pamela B. Strobel....... 30,000 1.63 35.75 1/24/09 194,250
David R. Helwig......... 25,000 1.36 35.75 1/24/09 161,875
</TABLE>
--------------------
(1) Except as noted in note 3 below, each option becomes exercisable in equal
annual increments on the first, second and third anniversaries of the
grant date, subject to acceleration in the event that termination after a
change in control of Unicom occurs. The options do not include any stock
appreciation rights.
(2) The "grant date present value" is based upon the Black-Scholes option-
pricing model. The actual value, if any, an executive may realize upon
exercise of the option will depend on the excess of the stock price over
the exercise price on the date the option is exercised. Consequently,
there is no assurance the value realized by an executive will be at or
near the value estimated by the Black-Scholes model. The principal
assumptions incorporated into the valuation model by
8
<PAGE>
Unicom for the options expiring 1/24/09 and 3/03/09 are as follows: (i)
expected time to exercise of seven years, (ii) dividend yield rate of 4.5%,
(iii) risk-free interest rate of 4.83% and (iv) expected volatility of
23.02%.
(3) Mr. Rowe received this grant of options as a premium for deferring half
of his 1998 Annual Incentive Award. Half of this grant vested immediately
and the balance vested on the first anniversary of the grant date.
Aggregated Option Exercises in 1999 and 1999 Year-End Option Value
<TABLE>
<CAPTION>
Underlying Unexercised Value of Unexercised
Shares Options at In-The-Money Options at
Acquired December 31, 1999 December 31, 1999(1)
on Value ------------------------- -------------------------
Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
Name # $ # # $ $
---- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John W. Rowe (CEO)...... 0 0 89,834 283,166 5,167 10,333
Oliver D. Kingsley,
Jr..................... 0 0 28,334 71,666 91,669 45,838
Robert J. Manning....... 0 0 45,834 71,666 326,454 93,221
Pamela B. Strobel....... 0 0 30,334 49,166 226,519 65,254
David R. Helwig......... 0 0 7,334 39,666 13,747 13,745
</TABLE>
--------------------
(1) Market value less exercise price, before payment of applicable income
taxes.
Long-term Incentive Plans--Awards in Last Fiscal Year
<TABLE>
<CAPTION>
Estimated Future Payouts Under
Number of Performance or Other Non-Stock Price-Based Plans
Shares, Units Period Until --------------------------------
or Other Maturation Threshold Target Maximum
Name Rights(1) or Payout(2) Number Number Number
---- ------------- -------------------- --------------------- ----------
(Number of Performance Units)
<S> <C> <C> <C> <C> <C>
John W. Rowe (CEO)...... 12,694.32 3 years 6,347.16 12,694.32 25,388.64
Oliver D. Kingsley,
Jr..................... 6,093.27 3 years 3,046.64 6,093.27 12,186.55
Robert J. Manning....... 4,804.31 3 years 2,402.16 4,804.31 9,608.62
Pamela B. Strobel....... 3,905.94 3 years 1,952.97 3,905.94 7,811.89
David R. Helwig......... 3,235.42 3 years 1,617.71 3,235.42 6,470.85
</TABLE>
--------------------
(1) Long-term performance unit awards were established in 1994 for executive
and group level employees under the Unicom Corporation Long-Term Incentive
Plan. The awards are based on a three-year performance period. For the
awards described in the table, the number of units initially awarded to a
participant is determined by dividing a percentage of base salary
(including income from current compensation units under Unicom's and
ComEd's Deferred Compensation Unit Plans) by $38.403. The applicable
percentages for the individuals shown in the table are: 50% for Mr. Rowe;
45% for Mr. Kingsley; 45% for Mr. Manning; 40% for Ms. Strobel; and 35%
for Mr. Helwig. If a promotion changes the applicable percentage of
salary, awards are pro-rated accordingly. Payouts are based on achievement
of corporate shareholder value added and customer satisfaction goals as
well as specific business unit strategic initiatives. The dollar value of
a payout will be determined by multiplying (a) the number of units
applicable by (b) the average closing price of Unicom Common Stock as
reported in the Wall Street Journal as New York Stock Exchange Composite
Transactions during the calendar quarter ending on December 31, 2001 by
(c) the level of performance achieved. Payments will be made half in cash
and half in the form of unrestricted shares of Unicom Common Stock. A
participant may elect to defer
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<PAGE>
receipt of up to 100% of the total award (net of applicable taxes) under
the Unicom Corporation Stock Bonus Deferral Plan and receive, after such
deferral, the deferred amount in the form of unrestricted shares of Unicom
Common Stock.
(2) Three-year period ending December 31, 2001.
SERVICE ANNUITY SYSTEM
The following table sets forth the annual retirement benefits payable under
ComEd's Service Annuity System (including payments under a supplemental
management retirement plan) to employees who retire at age 65 at stated levels
of compensation and years of service at retirement (in 1999).
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Highest
4-Year
Average Annual Normal Retirement Benefits After Specified Years of
Earnings Service*
-------- ----------------------------------------------------------
15 20 25 30 35 40
-- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 31,936 $ 42,472 $ 52,368 $ 61,784 $ 70,842 $ 79,633
200,000 63,872 84,945 104,735 123,568 141,684 159,266
300,000 95,808 127,417 157,103 185,351 212,526 238,899
400,000 127,744 169,889 209,470 247,135 283,368 318,532
500,000 159,681 212,362 261,838 308,919 354,211 398,165
600,000 191,617 254,834 314,206 370,703 425,053 477,798
700,000 223,553 297,307 366,573 432,487 495,895 557,431
800,000 255,489 339,779 418,941 494,271 566,737 637,064
900,000 287,425 382,251 471,308 556,054 637,579 716,696
1,000,000 319,361 424,724 523,676 617,838 708,421 796,329
1,100,000 351,297 467,196 576,044 679,622 779,263 875,962
1,200,000 383,233 509,668 628,411 741,406 850,105 955,595
1,300,000 415,169 552,141 680,779 803,190 920,948 1,035,228
1,400,000 447,106 594,613 733,146 864,974 991,790 1,114,861
1,500,000 479,042 637,085 785,514 926,757 1,062,632 1,194,494
1,600,000 510,978 679,558 837,882 988,541 1,133,474 1,274,127
1,700,000 542,914 722,030 890,249 1,050,325 1,204,316 1,353,760
1,800,000 574,850 764,503 942,617 1,112,109 1,275,158 1,433,393
1,900,000 606,786 806,975 994,984 1,173,893 1,346,000 1,513,026
2,000,000 638,722 849,447 1,047,352 1,235,677 1,416,842 1,592,659
</TABLE>
--------------------
* An employee may elect a marital annuity for a surviving spouse which
would reduce the employee's normal retirement benefits. The amounts shown
reflect certain assumptions as to total earnings, but do not reflect any
reduction for Social Security benefits.
Service Annuity System--ComEd maintains a non-contributory pension plan, the
Service Annuity System, for all regular employees of ComEd. The Service
Annuity System ("Plan") provides benefits upon retirement at age 65 which are
based upon years of credited service and percentages of the employee's highest
consecutive four-year average annual base pay, which includes basic
compensation and certain incentive pay. An employee with at least 10 years of
service may retire prior to attaining age 65 (but not prior to age 50) and
will receive reduced benefits if retirement is prior to age 60. A non-
executive employee may work beyond age 65 with additional benefits accruing
for earnings and service after age 65. Contributions to the Plan by ComEd are
based upon actuarial determinations that take into account the amount
deductible for income tax purposes and the minimum contribution required under
the Employee Retirement Income Security Act of 1974, as
10
<PAGE>
amended. Compensation used in the computation of annual retirement benefits
under the Plan is substantially equivalent to the amounts shown in the
"Salary" and "Bonus" columns under the "Annual Compensation" heading of the
Summary Compensation Table. The compensation used in the computation of annual
retirement benefits under the Plan is limited by the Internal Revenue Code as
of January 1, 2000 to $170,000 (which number is subject to adjustment for
increases in the cost of living) for any one employee. Any reduction in the
annual retirement benefits payable to management employees under the Plan as a
result of any limitations imposed by the Internal Revenue Code is restored
under a supplemental management retirement plan maintained by ComEd, which
also provides retirement benefits granted under employment agreements or other
arrangements. Thus, annual retirement benefits, as set forth in the Pension
Plan Table above, are based on the sum of the amounts shown in the "Salary"
and "Bonus" columns under the "Annual Compensation" heading of the Summary
Compensation Table, without limitation as a result of the application of the
provisions of the Internal Revenue Code. The approximate number of years of
credited service under the Plan or, if applicable, under the supplemental
management retirement plan, for the persons named in the Summary Compensation
Table are as follows: John W. Rowe, 22 years; Robert J. Manning, 36 years;
Oliver D. Kingsley, 17 years; Pamela B. Strobel, 7 years; and David R. Helwig,
2 years. Ms. Strobel will be credited with an additional nine years upon
attaining age 50.
EMPLOYMENT AGREEMENTS
John W. Rowe
Unicom and ComEd have an employment agreement with John W. Rowe, pursuant to
which he became Chairman, President and Chief Executive Officer of each
company on March 16, 1998. The agreement provides that Mr. Rowe will be paid
an annual base salary of at least $900,000. Unicom also granted Mr. Rowe an
option to purchase 250,000 shares of Unicom Common Stock with an option price
equal to the fair market value of the Unicom Common Stock as of March 16,
1998. Such options become exercisable in equal installments on March 16 of
1999, 2000, and 2001, and expire on March 15, 2008. In accordance with the
terms of his employment agreement, Mr. Rowe was not entitled to any additional
grants of stock options during 1998.
The employment agreement with Mr. Rowe further provides that Mr. Rowe will
participate in Unicom's Annual Incentive Award Program and will receive an
annual incentive award for 1998 and 1999 that shall equal at least $600,000.
The employment agreement was amended to provide that Mr. Rowe's annual
incentive awards for 1998 and 1999 would be paid half in cash and half in
Unicom Common Stock, and that the guaranteed portion of Mr. Rowe's annual
incentive award for 1998 and 1999 would be paid 50% in cash and 50% as a grant
of shares of Unicom Common Stock, half of which vested on the date the annual
incentive would otherwise be paid (the "Grant Date") and half of which vested
on the anniversary of the Grant Date. In connection with this grant of shares,
Mr. Rowe also received, on the Grant Date, an option to purchase 13,000 shares
of Unicom Common Stock, which was the number of shares of Unicom Common Stock
with a value as of the Grant Date of $90,000 (determined using the pricing
models used by the Compensation Committee). Such option became exercisable 50%
on the Grant Date and 50% on the first anniversary thereof.
Mr. Rowe participates in the Unicom Long-Term Performance Unit Award
Program, and any award payable under such Program with respect to the three-
year performance periods ending on December 31, 1998, 1999, or 2000 will be
made as though he had participated in the Program throughout such performance
periods (except in the case of a termination of employment). Mr. Rowe agreed
to defer receipt of the stock portion of any incentive award under the Unicom
Corporation Stock Bonus Deferral Plan. As partial compensation for actual
compensation, benefits and programs that Mr. Rowe was, or was reasonably
expected to become entitled to receive from his previous employer, he received
a lump-sum payment of $2,000,000. In addition, Mr. Rowe received $600,000 as
an inducement to enter into the employment agreement.
11
<PAGE>
Mr. Rowe's employment agreement provides for a retirement benefit equal to
the amount that would have been payable under the Service Annuity System (plus
amounts payable under the ComEd Supplemental Management Retirement Plan) for
an employee who retires at age 60 (or such greater age if Mr. Rowe should
become eligible for the retirement benefit after attaining the age of 60)
calculated based on the assumption that Mr. Rowe had completed 20 years of
credited service as well as his actual years of credited service.
The employment agreement with Mr. Rowe further provides for severance
payments to Mr. Rowe if he should be terminated without cause or if he should
terminate the employment agreement for good reason (as defined in the
agreement) equal to his base salary at the time of such termination, together
with a formula annual incentive award (as defined in the agreement), until the
later of March 16, 2001 or one year after termination (if such termination
should occur before March 16, 2001), or one year after the date of termination
(if such termination should occur after March 16, 2001), and a continuation of
health and life insurance benefits during such period, plus retirement
benefits. In addition, any unvested options shall continue to become
exercisable during such period, except that any unvested portion of the
deferred shares and additional option granted to Mr. Rowe pursuant to the
amendment to his employment agreement described above will immediately become
fully exercisable upon any such termination of employment. If the termination
occurs within 24 months following a change in control of the Company, such
benefits will be paid for three years after the date of termination.
Mr. Rowe agreed not to use for his own benefit or disclose any confidential
information of Unicom or ComEd during or after the term of his employment, and
not to compete with Unicom or ComEd or solicit any key employee or interfere
with the relationship with any material customer or supplier of either company
until two years after the term of his employment with the companies.
Unicom has entered into an amended employment agreement with Mr. Rowe, which
will be effective only upon the completion of the proposed merger between
Unicom and PECO Energy Company, with the surviving company to be known as
Exelon Corporation ("Exelon"). The amended employment agreement will be
binding on Exelon at that time. Under this agreement, Mr. Rowe will serve as:
. co-chief executive officer and president of Exelon, chairman of the
executive committee of the Exelon board of directors and a member of the
Exelon board of directors during the first half of the transition
period,
. co-chief executive officer of Exelon, chairman of the Exelon board of
directors and a member of the Exelon board of directors during the
second half of the transition period, and
. chief executive officer of Exelon, chairman of the Exelon board of
directors and a member of the Exelon board of directors after the
transition period.
Mr. Rowe will succeed to the position of sole chief executive officer of
Exelon or chairman of the Exelon board of directors if:
. prior to the end of the transition period, Mr. Corbin McNeill should
cease to be a co-chief executive officer of Exelon or the chairman of
the Exelon board of directors, and
. Mr. Rowe is still a co-chief executive officer of Exelon at that time.
Mr. Rowe will receive an annual base salary of:
. at least $900,000 through March 15, 2001, but not less than his base
salary immediately prior to the completion of the merger (currently
$975,000), or
. Mr. McNeill's base salary, whichever is higher.
12
<PAGE>
After March 15, 2001, Mr. Rowe's base salary will be determined by Exelon's
compensation committee. Mr. Rowe will be eligible to participate in annual
incentive award programs, long-term incentive plans and stock option plans on
the same basis as other senior executives of Exelon. A grant of options will
be considered for the co-chief executive officers at the time of the
completion of the merger. Mr. Rowe will be entitled to participate in all
savings, deferred compensation, retirement and other employee benefit plans
generally available to other senior executives of Exelon. During the
transition period, Mr. Rowe's base salary and participation in the plans and
awards described in this paragraph will be on a basis that is not less than
that of Mr. McNeill's or on which Mr. McNeill participates.
Under his amended employment agreement, Mr. Rowe will receive a special
supplemental executive retirement plan, or SERP, benefit if:
. he terminates due to normal retirement, early retirement, termination
without cause, termination for good reason, death or disability, or
. he voluntarily terminates on or after the first anniversary of the
completion of the merger for any other reason.
The term "good reason" includes the failure to appoint Mr. Rowe to the
management and Exelon board of director positions described above. The special
SERP benefit will equal the SERP benefit that Mr. Rowe would have received:
. if he had attained age 60 (or his actual age, if greater), and
. if he had earned 20 years of service on March 16, 1998 and one
additional year of service on each anniversary after that date and prior
to termination.
Except as provided in the next paragraph, if Exelon terminates Mr. Rowe's
employment for reasons other than cause, death or disability or if he should
terminate employment for good reason, he would be entitled to the following
benefits:
. a prorated annual incentive award for the year in which termination
occurs,
. severance payments equal to his base salary for two years after
termination, and for each year during such period an amount equal to the
average of the annual incentive awards paid to him with respect to the
three years preceding the year of termination or, if greater, his annual
incentive award for the year before termination,
. for the two-year period, continuation of his life, disability, accident,
health and other welfare benefits, plus the retirement benefits
described above and post-retirement health care coverage,
. all of his exercisable options would remain exercisable until the
applicable option expiration date,
. unvested options would continue to become exercisable during the two-
year continuation period and thereafter remain exercisable until the
applicable option expiration date, and
. all compensation earned through the date of termination and coverage and
benefits under all benefit plans to which he is entitled.
Mr. Rowe will receive the termination benefits described in "Severance
Plans" below, rather than the benefits described in the previous paragraph, if
Exelon terminates Mr. Rowe without cause or he terminates with good reason and
. the termination is within 24 months after a change in control of Exelon,
or
. the termination is at any other time prior to the earlier of normal
retirement or December 31, 2004, or
13
<PAGE>
. the termination is for good reason at any other time on or after the
completion of the merger and before normal retirement because of the
failure to appoint or elect Mr. Rowe to the management or Exelon board
of director positions described above.
Oliver D. Kingsley, Jr.
ComEd entered into an employment agreement with Oliver D. Kingsley, Jr.
pursuant to which he became Executive Vice President and President and Chief
Nuclear Officer--Nuclear Generation Group, effective November 1, 1997. The
agreement provides for an annual base salary for 1997 and 1998 equal to
$475,000, and further provides for a guaranteed increase of at least 4% per
year, beginning in 1999.
Mr. Kingsley received an option to purchase 25,000 shares of Unicom Common
Stock with an option price equal to the fair market value of the Unicom Common
Stock as of November 1, 1997. Such options become exercisable in equal
installments on November 1 of 1998, 1999 and 2000, and expire on October 31,
2007. Mr. Kingsley also received a grant of 20,000 shares of restricted stock
that vests in equal installments on November 1 of 1998, 1999 and 2000.
The employment agreement with Mr. Kingsley further provides that Mr.
Kingsley will participate in Unicom's Annual Incentive Award Program and will
receive an annual incentive award for 1998 and 1999 at least equal to the
target award of $213,750.
Mr. Kingsley participates in the Unicom Long-Term Performance Unit Award
Program, and any award payable under such Program with respect to the three-
year performance periods ending on December 31, 1997, 1998, or 1999 will be
made as though he had participated in the Program throughout such performance
periods (except in the case of a termination of employment). In addition, Mr.
Kingsley received $375,000 as an inducement to enter into the employment
agreement, and an annual living cost allowance equal to $75,000 (increased by
the amount of applicable taxes on such amount as so increased) for the first
three years of the agreement term.
Mr. Kingsley's employment agreement provides for a retirement benefit equal
to the amount that would have been payable under the Service Annuity System
(plus amounts payable under the ComEd Supplemental Management Retirement Plan)
for an employee who retires at age 60 calculated based on the assumption that
Mr. Kingsley had completed 15 years of credited service beginning with the
third year of his employment and that such credited service increased by five
years during each of the next two years, in addition to his actual years of
credited service after five years of employment.
The employment agreement with Mr. Kingsley further provides for a lump sum
severance payment to Mr. Kingsley if he should be terminated without cause
equal to two times his base salary at the time of such termination, and a
continuation of health and life insurance benefits for two years after the
date of termination, plus retirement benefits (calculated as though he had
completed at least 15 years of credited service if such termination occurs
during the first two years of employment) and retiree health care coverage. In
addition, any unvested portion of the restricted stock granted under the
agreement will immediately become fully vested and nonforfeitable.
Mr. Kingsley agreed not to use for his own benefit or disclose any
confidential information of Unicom or ComEd during or after the term of his
employment, and not to solicit any employee of ComEd for one year after the
term of his employment with ComEd.
SEVERANCE PLANS
Unicom established the Key Management Severance Plan in 1998 to provide key
employees, including the named executive officers, certain benefits in the
event their employment is terminated by their employer without cause, or in
the event they resign for good reason (both terms as defined
14
<PAGE>
in the Plan). Benefits under the Plan include severance pay equal to the sum
of a terminated executive's current annual base salary plus the average of his
annual incentive awards for the two years preceding the termination, annual
incentive awards and long-term incentive awards (with respect to any
performance cycle for which the executive has completed 24 months) prorated
through the date of termination, continuation of health care coverage, life
insurance and long-term disability coverage, and outplacement services.
Payment of severance pay and continuation of the benefits described above is
made over two years, and the amount of the severance pay and incentive and the
payment period is included for purposes of calculating retirement benefits
under the supplemental management retirement plan and determining eligibility
for retiree health care coverage. As a condition of receiving plan benefits,
an executive must agree not to use for his own benefit or disclose any
confidential information of Unicom or ComEd during or after the term of his
employment, and not to compete with Unicom or ComEd or solicit any key
employee or interfere with the relationship with any material customer or
supplier of either company until two years after the term of his employment
with the companies, and must release the Company from all claims arising out
of his employment as of the date of termination. In the case of Mr. Rowe and
Mr. Kingsley, the severance benefits provided under the terms of their
employment agreements will control, to the extent they exceed the benefits
provided under the Plan.
The Boards of Directors of Unicom and ComEd approved a change in control
policy (the "Policy") in 1998 pursuant to which Mr. Rowe and the other named
executive officers will receive benefits in the event their employment is
terminated without cause or if they resign for good reason (as such terms are
defined under the Policy) within 24 months following a change in control of
the Company. The change in control benefits will be provided in the form of
individual agreements for the named executives, and Mr. Rowe's employment
agreement was amended, effective March 8, 1999, to reflect the Policy
provisions.
These agreements, and the Key Management Severance Plan, provide severance
payments and benefits in the event of termination of these executives for
reasons other than cause, or in the event of their resignation for good
reason, within 24 months following a change in control of Unicom.
Approval of the merger by Unicom shareholders will constitute a change in
control of Unicom for purposes of the agreements and Key Management Severance
Plan. Mr. Rowe's amended employment agreement described above will replace his
current employment agreement at the completion of the merger. Thus, if the
merger is completed and his employment is later terminated, Mr. Rowe will not
be entitled to payments and benefits provided under his current employment
agreement and will be entitled to payments and benefits only under his amended
employment agreement.
The severance payments and benefits provided under the agreements and Key
Management Severance Plan include:
. A lump sum severance payment equal to either three, two or one and one-
half, depending on the executive's position with Unicom, multiplied by
the sum of:
. the executive's annual base salary, plus
. an amount equal to the average of the annual incentive awards paid to
the executive for the two years preceding the year of termination or,
if greater, the target award under the annual incentive award program
in which the executive participates for the year in which termination
occurs or, for Mr. Rowe, a benefit calculated based on a formula
incentive award amount as defined in his agreement.
. A prorated annual incentive award for the year in which termination
occurs.
15
<PAGE>
. Continuation of life, disability, accident, health and other welfare
benefit coverage. For each executive, the benefits will continue for a
number of years equal to the multiple of base salary and annual
incentive award (i.e., three, two or one and one-half) applicable to
that executive's severance payment described above.
. Outplacement services.
. All of a terminated executive's exercisable options would remain
exercisable until the applicable option expiration date, and all
unvested options would become fully exercisable and remain so until the
applicable option expiration date.
. Any deferred stock units, restricted stock, or restricted share units
would become fully vested and any other long-term incentive plan award
which is unvested would vest.
. For purposes of determining benefits under the supplemental retirement
plan or arrangement, if any, in which the executive participates, the
executive will be credited with additional years of credited service,
age and compensation. The additional years will be equal to the multiple
of base salary and annual incentive award (i.e., three, two or one and
one-half) applicable to that executive's severance payment described
above.
. For purposes of determining eligibility for retiree welfare benefits,
the executive will be deemed to have additional years of service and
age. The additional years will be equal to the multiple of base salary
and annual incentive award applicable to that executive's severance
payment described above.
. All compensation earned through the date of termination as well as all
coverage and benefits under all benefit plans to which the executive is
entitled.
Pursuant to the terms of offers of employment or employment agreements,
certain executives are also entitled to additional service credits for
purposes of retiree health care eligibility and for determining benefits under
the supplemental retirement plan or arrangement in which they participate.
In connection with the severance benefits described above, a participating
executive does not have a duty to mitigate the amounts due from the company.
However, continued welfare benefit coverage would be offset during the
applicable continuation period by comparable coverage provided under welfare
plans of another employer.
Officers will receive an additional payment to cover excise taxes imposed
under Section 4999 of the Internal Revenue Code on "excess parachute payments"
or under similar state or local law if the after-tax amount of payments and
benefits subject to these taxes exceeds 110% of the "safe harbor" amount that
would not subject the executive to these excise taxes. If the after-tax
amount, however, is less than 110% of the safe harbor amount, payments and
benefits subject to these taxes would be reduced or eliminated to equal the
safe harbor amount. Benefits payable to other executives subject to the excise
taxes imposed under Section 4999 of the Code will be reduced to the
executive's safe harbor amount.
Stock options and certain shares of restricted stock granted to eligible
executives, including executive officers, under the Unicom Corporation Long-
Term Incentive Plan contain provisions relating to change in control.
Outstanding options granted prior to July 22, 1998 provide that on the
occurrence of a change in control such options become fully exercisable. Most
of these options will have, in any event, become fully exercisable through the
passage of time by January 1, 2001. Options granted under the Long-Term
Incentive Plan on or after July 22, 1998 provide that if within 24 months
following a change in control the optionee's employment is terminated other
than for cause, or the optionee resigns for good reason, the optionee's
options would become fully exercisable. Grants of approximately 55,000 shares
of restricted stock made under the Long-Term Incentive Plan to certain
16
<PAGE>
executive officers provide that upon the occurrence of a change in control
restrictions on such shares will lapse. Approval of the merger by Unicom
shareholders will constitute a change in control for purposes of these
provisions.
Unicom estimates that, if all executives, including executive officers,
covered under the agreements and plans described above, were terminated
immediately after the consummation of the merger, based on currently effective
compensation levels, valuation factors, interest rates and a Unicom common
stock price of $43.75, the aggregate after-tax cost of additional benefits
payable to executive officers under the plans and agreements as a result of
the merger and subsequent termination would be approximately $110.5 million.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of Unicom and ComEd has
furnished the following report on executive compensation:
Introduction. The Committee is responsible for the Company's executive
compensation philosophy and policies, which form the basis for the Committee's
decisions. The overall objectives of the executive compensation programs are
to drive and reinforce achievement of financial objectives and strategic
initiatives, to provide compensation opportunities that are competitive with
top performing energy services companies and general industry firms, and to
ensure that compensation is linked to performance and increasing shareholder
value.
It is the policy of the Committee to compensate executive officers based on
fulfillment of their responsibilities and their achievement of established
corporate and business unit goals. The business challenges resulting from the
restructuring of the utility industry make it critical that the Company's
compensation programs drive and reinforce achievement of financial,
operational and strategic goals. A study of management compensation programs
was commissioned by the Committee in the fall of 1998. This study was
conducted by a leading external management compensation consulting firm and
included an assessment of business plans and strategic and competitive
compensation levels compared with the external market.
While overall, the Company's total compensation levels were found to be
generally competitive, the study results indicated that the Company's mix of
compensation components (i. e., salary, annual and long term incentives and
stock options) could be more effectively aligned with the competitive market.
Based on those results, the Company's pay-for-performance philosophy was
refined to have an increased emphasis on pay-at-risk. When excellent
performance is achieved, pay will exceed market levels. Failure to achieve
target goals will result in below-market pay. In addition, other compensation
changes were made to achieve a more effective use of shareholder value as a
determinant of compensation and to encourage officers and other employees to
act like owners of the business.
The Committee believes that compensation paid should be appropriate in
relation to the financial performance of the Company and should be sufficient
to enable the Company to attract and retain individuals possessing the talents
required for ensuring the Company's long-term successful performance. The
Committee also believes that incentive compensation performance goals for
executive management should be based on factors over which management has
significant control and which are important to the Company's long-term
success.
In 1999, the major components of executive officer compensation were base
salary, consisting of cash salary and current compensation unit income, non-
qualified stock options, and incentive compensation (both annual and longer-
term) related to awards under the Unicom Corporation Long-Term Incentive Plan.
Base Salary. The process of determining the officers' base salaries began
with a review of the salary levels for various comparable executive positions
at a group of peer companies identified by
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the Committee. The Committee also used compensation survey information from
several executive compensation-consulting firms. The Committee then considered
differences from other companies in the Company's organizational structure and
the responsibilities of its executive officers, in the size, scope and
complexity of the Company's operations, and in the regulatory environment and
competitive challenges faced by the Company. Salary range increases and salary
adjustment budgets are established annually for non-officer employees based on
business and economic conditions of the Company as well as on competitive
practices. Beginning in 1999, the Company initiated a two-year scheduled
review cycle for officer level executives to make the rewards more meaningful
and to cover a longer performance period. Salaries are adjusted based upon
each executive's performance impact and overall contributions to the Company.
The Chairman reviewed the base salary of each officer and recommended an
adjustment after assessing particular responsibilities and performance. The
Chairman's recommendations were reviewed and approved by the Committee.
Percentage increases for individual officers varied and were structured to
recognize changes in industry compensation levels; to reflect the impact,
performance and contributions of individual officers; and to reflect strategic
changes in job responsibilities and assignments.
In 1999, four executive officers held current compensation units. Each such
unit entitles the holder to receive current income equal to the dividends paid
on one share of Unicom Common Stock. During 1999, no additional units were
awarded by the Committee.
Incentive Compensation Awards. Another component of executive compensation
is incentive compensation earned under awards made by the Committee under the
Unicom Corporation Long-Term Incentive Plan. Such incentives are designed to
drive and enforce achievement of established financial, operational and
strategic goals that are critical to the Company's success, including
increasing shareholder value. Incentive opportunities include an annual
incentive target, a long-term performance unit target covering a three-year
performance period and non-qualified stock options.
The Unicom Corporation 1999 Annual Incentive Award for Management Employees
under the Unicom Corporation Long-Term Incentive Plan was established to
reward the achievement of certain corporate and business unit goals during
1999. The annual incentive program placed increased emphasis on financial
performance, strategic direction and results that will increase shareholder
value. A significant portion of the 1999 annual incentive for executive
officers was tied to a Shareholder Value Added measure.
The award is variable and is designed to encourage achievement of short-term
goals. Employees receive incentive awards only if their business units and the
Company meet or exceed the established performance targets for the year. The
amount of the individual awards is based upon the individual and collective
accomplishments of employees and varies based upon the degree to which the
financial and strategic goals are met or exceeded and upon the Committee's
assessment of individual performance. For key management employees, the annual
incentive award is payable 75% in cash and 25% in Unicom Common Stock.
For management employees other than those in selected sales-related
positions, the 1999 corporate financial goal was "Shareholder Value Added".
Shareholder Value Added was defined as revenues (ComEd, Off System and
Subsidiaries) less Costs (operations and maintenance expenditures, fuel,
depreciation and taxes), minus capital charge (debt and equity costs). Staff
executive officers' annual incentive awards were tied to the corporate
Shareholder Value Added goals whereas line executive officers were tied to
both the corporate Shareholder Value Added goal and his or her business unit's
Shareholder Value Added goal. The 1999 Unicom Corporate Shareholder Value
Added achieved was 138.95% of the target level. In addition to the Shareholder
Value Added goal tie, the remaining portion of executive officers' annual
incentive award was comprised of a
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combination of corporate and business unit strategic initiatives and key
performance indicators. Quantitative goals (for example, nuclear capacity)
were measured on a scale of performance ranging from "threshold" to "maximum."
Other strategic goals were assessed and approved by the Committee.
For Mr. Rowe and other executive officers, the final determination of the
annual incentive award was based on the accomplishment of Shareholder Value
Added, strategic goals, and an individual performance assessment by the
Committee.
A long term performance unit award program was established in 1994 to focus
employees on long range performance by linking certain incentive payments to
specific performance measures. Incentive opportunities are expressed as a
percentage of base salary and increase with the executive's management level.
The awards payable in 2000 and in 2001 are based on the total return of Unicom
Common Stock relative to that of the other companies constituting the Dow
Jones Utility Stock Index over three-year performance periods. The Dow Jones
Utility Stock Index includes Unicom and fourteen other large energy services
companies. To better support improved business performance and the creation of
Unicom shareholder value, the award payable in 2002 places a significant
emphasis on Business Unit performance as well as corporate profitability as
measured by Corporate Cumulative Shareholder Value Added and a Customer
Satisfaction Index.
Awards for the performance period 1997-1999 resulted in a payment that was
115.5% of the target award. Payments to certain executive officers are
included in the "Payouts" column under the "Long-Term Compensation" heading in
the Summary Compensation Table. Unicom's shareholder return increased by 44.3%
during that same performance period.
Stock Option Grants in 1999. Unicom grants non-qualified stock options to
reward and motivate the Company's management to increase long-term shareholder
value. Option grants are made generally to key employees who are expected to
contribute materially to Unicom's success. The option awards permit grantees
to purchase shares of Unicom's Common Stock at an exercise price equal to the
market value on the date of grant, and become exercisable in equal increments
over a three-year period. The options have a maximum term of ten years.
Committee decisions regarding the size of option grants were based on an
evaluation of competitive data drawn from companies in a study conducted in
fall 1998 for Unicom by a leading executive compensation consulting firm, as
well as the option recipient's base salary, target mix of other compensation
components, management level, performance and potential.
Compensation of the Chief Executive Officer. In considering the compensation
for 1999 of Mr. Rowe, the Compensation Committee evaluated Unicom's 1998
performance, compensation for other chief executive officers, and Unicom's
strategic direction. Under his employment agreement, Mr. Rowe is paid an
annual base salary of at least $900,000, is guaranteed an annual incentive
award for 1998 and 1999 of at least $600,000, and participates in the Long-
Term Performance Unit Award Programs with respect to the three-year
performance periods ending December 31, 1998, 1999 and 2000 as though he had
participated in the Program throughout the performance periods.
Salary. The Committee's assessment of the personal performance of Mr. Rowe
was based upon an evaluation of his leadership, achievements and contributions
to Unicom during 1998, as well as an assessment of competitive practices and
market comparisons of chief executive officers for comparable companies. Mr.
Rowe's total annual salary in 1999 was increased $75,000 to a rate of $975,000
per year.
Incentive Compensation Plans
Annual Incentive Program. Mr. Rowe participated in the annual incentive
program described earlier in this report. Mr. Rowe's target award was 70% of
his base salary. The actual award paid was
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155.1% of his target level based on the achievement of Shareholder Value
Added, strategic goals and an individual performance assessment by the
Committee. The Committee approved payment of the award 50% in cash and 50% in
Unicom Common Stock. Mr. Rowe deferred the portion of his incentive that was
payable in Unicom Common Stock under the Unicom Corporation Stock Bonus
Deferral Plan.
Long Term Performance Unit Award. Mr. Rowe's award opportunity for the 1997-
1999 performance cycle was at a target level of 50% of his then-current base
salary. The actual award paid was 115.5% of his target level based on the
total return of Unicom Common Stock relative to the other companies
constituting the Dow Jones Utility Stock Index over the performance period.
Stock Option Award. Mr. Rowe was granted 110,000 non-qualified stock options
as part of the normal annual grant cycle. In addition, as Mr. Rowe voluntarily
deferred one-half of his guaranteed annual awards for 1998 and 1999, the
Committee awarded him a premium of an additional 13,000 options on March 4,
1999. One-half of this premium grant vested immediately and the remaining
portion will vest on March 4, 2000.
Internal Revenue Code Section 162(m) Considerations. Under Section 162(m) of
the Internal Revenue Code, executive compensation in excess of $1 million is
generally not deductible for purposes of corporate income taxes. However,
"qualified performance-based compensation" which is paid pursuant to a plan
meeting certain requirements of the Code and applicable regulations remains
deductible. As noted in previous reports, the Committee intends to continue
reliance on performance-based compensation programs, consistent with sound
executive compensation policy. Such programs will be designed to fulfill, in
the best possible manner, future corporate business objectives. The
Committee's policy has been to seek to cause executive incentive compensation
to qualify as "performance-based" in order to preserve its deductibility for
federal income tax purposes to the extent possible without sacrificing
flexibility in designing appropriate compensation programs. In 1997 and 1999,
the Company obtained shareholder approval of performance-based incentives in
Long-Term Performance Unit Awards in order to qualify such compensation as
"performance-based." However, in order to provide executives with appropriate
incentives, the Committee may also determine, in light of all applicable
circumstances, that it would be in the best interests of the Company for
awards to be paid under certain of its incentive compensation programs or
otherwise in a manner that would not satisfy the requirements to qualify as
performance-based compensation under Code Section 162(m). The portion of Mr.
Rowe's incentive compensation that was guaranteed under his employment
agreement does not qualify as performance-based compensation under Code
Section 162(m), and accordingly, to the extent receipt of such compensation is
not deferred, the amount of such incentive compensation and salary in excess
of $1 million will not be deductible by the Company for purposes of corporate
income taxes. Mr. Rowe deferred the portion of his incentive that was payable
in Unicom Common Stock under the Unicom Corporation Stock Bonus Deferral Plan.
Compensation Committee
Edward A. Brennan, Chairman
James W. Compton
Donald P. Jacobs
Richard L. Thomas
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SHAREHOLDER RETURN PERFORMANCE
Set forth below is a line graph comparing the quarterly percentage change in
the cumulative total shareholder return on Unicom common stock ("UCM") against
the cumulative total return of the S&P 500 Composite Stock Index and the Dow
Jones Utility Stock Index for the five-year period ending December 31, 1999.
CUMULATIVE PERFORMANCE SINCE JANUARY 1, 1995
ASSUMING REINVESTMENT OF DIVIDENDS
(JANUARY 1, 1995 = $100)
[GRAPH]
<TABLE>
<CAPTION>
December 31
-------------------------------------------
1994 1995 1996 1997 1998 1999
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Unicom Corporation................ $100.00 144 127 154 202 183
S&P 500 Stock Index............... $100.00 137 169 225 289 350
Dow Jones Utility Average......... $100.00 132 144 177 210 198
</TABLE>
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VOTING
Shareholders of record on the books of ComEd at 4:00 p.m., Chicago time, on
May 12, 2000, will be entitled to vote at the annual meeting. As of May 12,
2000, there were outstanding 183,745,079 shares of Common Stock, par value
$12.50 per share (of which Unicom beneficially owned 183,737,262 shares),
52,462 shares of $1.425 Convertible Preferred Stock, without par value, and
700,000 shares of Cumulative Preference Stock, without par value. Each share
entitles the holder to one vote on each matter submitted to a vote at the
meeting, except that in the election of Directors each shareholder has the
right to vote the number of shares owned by such shareholder for as many
persons as there are Directors to be elected, or to cumulate such votes and
give one candidate as many votes as shall equal the number of Directors to be
elected multiplied by the number of such shares or to distribute such
cumulative votes in any proportion among any number of candidates. The holders
of a majority of the outstanding shares entitled to vote on a particular
matter and represented in person or by proxy will constitute a quorum for the
consideration of such matter at the meeting.
The nine persons receiving the greatest number of votes shall be elected as
Directors. Abstaining for a Director nominee will not prevent such Director
nominee from being elected. The affirmative vote of a majority of the shares
of stock represented at the meeting and entitled to vote on such matter is
required for approval of Item B (the appointment of Auditors). Abstaining with
respect to this matter will have the legal effect of voting against such
matter. Unicom intends to vote its shares of ComEd Common Stock for the
election of the nominees named in this Information Statement and for approval
of the other item as described above and, consequently, such matters are
expected to be approved.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Any shareholder proposal intended to be presented at the 2001 annual meeting
of ComEd's shareholders is requested to be received at the principal executive
offices of ComEd by the close of business February 24, 2001, 60 days before
the anticipated date of the 2001 Annual Meeting, in order to be considered for
inclusion in ComEd's Information Statement relating to that meeting. Any such
proposal should be directed to the Secretary of ComEd at the 37th Floor, Bank
One Plaza, 10 South Dearborn Street, Chicago, Illinois. If mailed, it should
be sent to Secretary, Commonwealth Edison Company, Post Office Box 767,
Chicago, Illinois 60690-0767.
OTHER MATTERS
As of the date of this Information Statement, management knows of no matters
to be brought before the annual meeting other than the matters referred to in
this Information Statement.
By order of the Board of Directors.
John P. McGarrity
Secretary
June 15, 2000
A copy of ComEd's Annual Report on Form 10-K to the Securities and Exchange
Commission may be obtained without charge by writing to John P. McGarrity,
Secretary, Commonwealth Edison Company, Post Office Box 767, Chicago, Illinois
60690-0767.
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