SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 9, 1998
-------------
DELMARVA POWER & LIGHT COMPANY
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware and Virginia I-1405 51-0084283
- ---------------------------- ------------ -------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
800 King Street, P.O. Box 231, Wilmington, Delaware 19899
--------------------------------------------------- ---------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 302-429-3114
------------
None
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On August 12, 1996, Delmarva Power & Light Company (Delmarva) and Atlantic
Energy, Inc. (Atlantic) announced plans to merge. Final regulatory approvals
were obtained on February 27, 1998, and the merger became effective
March 1, 1998.
Prior to the merger, Atlantic was an investor-owned holding company which owned
Atlantic City Electric Company (ACE), an electric utility, and subsidiaries
engaged in nonutility businesses. ACE serves approximately 481,000 customers
in a 2,700 square mile area in southern New Jersey. Atlantic's 1997 operating
revenues and net income were $1,102.4 million and $74.4 million, respectively,
and its total assets were $2,723.9 million as of December 31, 1997. Atlantic's
assets consist principally of electric generating, transmission, and
distribution plant and those assets will continue to be used in the electric
business.
Conectiv, a corporation formed to accomplish the merger, holds the common stock
of Delmarva and ACE, and is a registered holding company under the Public
Utility Holding Company Act of 1935 as of March 1, 1998. Each outstanding
share of Delmarva's common stock, par value $2.25 per share, is being exchanged
for one share of Conectiv's common stock, par value $0.01 per share. Each
share of Atlantic's common stock, no par value per share, is being exchanged
for 0.75 of one share of Conectiv's common stock and 0.125 of one share of
Conectiv's Class A common stock, par value $0.01 per share. Class A common
stock gives holders of Atlantic common stock a proportionately greater
opportunity to share in the growth prospects of, and a proportionately greater
exposure to the uncertainties associated with the electric utility business of
ACE. Earnings applicable to Class A common stock will be equal to 30% of the
net of (1) earnings attributable to ACE's regulated electric utility business,
as the business existed on August 9, 1996, less (2) $40 million per year.
Earnings applicable to Conectiv common stock will be the consolidated earnings
of Conectiv less earnings applicable to Class A common stock.
The merger will be accounted for under the purchase method of accounting, with
Delmarva as the acquirer. The total consideration being paid to Atlantic's
common stockholders (in the form of Conectiv common stock and Class A common
stock), as measured by the average daily closing market price of Atlantic's
common stock for the three trading days immediately preceding and the three
trading days immediately following the public announcement of the merger, is
$921.0 million. The consideration paid plus estimated acquisition costs and
liabilities assumed in connection with the merger are expected to exceed the
net book value of Atlantic's net assets by approximately $200.5 million, which
will be recorded as goodwill. The actual amount of goodwill recorded will be
based on Atlantic's net assets as of the merger date and, accordingly, will
vary from the preceding estimate which is based on Atlantic's net assets as of
December 31, 1997. The goodwill will be amortized over 40 years.
2
<PAGE>
Item 5. Pursuant to the Merger and Reorganization of Delmarva Power & Light
Company and Atlantic City Electric Company which was completed on
March 1, 1998, the Board of Directors of The Company have been changed.
The following individuals have been elected as directors of the Company to
serve until his or her successor is appointed or his or her earlier resignation
or removal.
Directors:
- ----------
Delmarva Power & Light Company
Howard E. Cosgrove Director/Chairman
Meredith I. Harlacher, Jr. Director
Thomas S. Shaw Director
Barry R. Elson Director
Barbara S. Graham Director
Audrey K. Doberstein Director
Jerrold L. Jacobs Director
The following individuals have been elected by the Directors of the Company to
the offices set forth opposite their respective names.
OFFICERS:
- ---------
Delmarva Power & Light Company
Howard E. Cosgrove Chief Executive Officer
Meredith I. Harlacher, Jr. President and Chief Operating
Officer
Barbara S. Graham Senior Vice President and Chief
Financial Officer
Barry R. Elson Executive Vice President
Thomas S. Shaw Executive Vice President
Louis M. Walters Treasurer and Assistant Secretary
James E. Franklin II Chief Legal Officer and Secretary
3
<PAGE>
Item 7. Financial Statements and Exhibits
Listed below are the financial statements, pro forma financial information and
exhibits filed as a part of this report.
(a) Financial statements of businesses acquired
Atlantic's consolidated financial statements listed below were filed with
Atlantic's Form 8-K dated March 3, 1998, and are incorporated herein by
reference.
Consolidated Statements of Income for the three years ended December 31, 1997
Consolidated Statements of Cash Flows for the three years ended
December 31, 1997
Consolidated Balance Sheets as of December 31, 1997 and 1996
(b) Pro forma financial information
The following unaudited pro forma financial information is included in this
report on Form 8-K:
Pro Forma Combined Conectiv Balance Sheet as of December 31, 1997
Pro Forma Combined Conectiv Statement of Income for the year ended
December 31, 1997
Notes to Pro Forma Combined Conectiv Financial Statements
Delmarva Power & Light Company Adjusted Consolidated Balance Sheet as of
December 31, 1997
Atlantic Energy, Inc. Adjusted Consolidated Balance Sheet as of
December 31, 1997
Delmarva Power & Light Company Adjusted Income Statement for the year ended
December 31, 1997
Atlantic Energy, Inc. Adjusted Income Statement for the year ended
December 31, 1997
Notes to Adjusted Consolidated Financial Statements
Unaudited Pro Forma Combined Financial Statements
The following unaudited pro forma combined financial statements combine the
historical balance sheets and statements of operations of Delmarva and Atlantic
to give effect to the merger discussed in Item 2 under the purchase method of
accounting and the assumptions set forth in the notes thereto. The unaudited
pro forma combined balance sheet as of December 31, 1997, assumes that the
merger was consummated on December 31, 1997. The unaudited pro forma combined
statement of income for the year ended December 31, 1997, assumes that the
merger was consummated on January 1, 1997. The pro forma statement of income
excludes an expected one-time charge of approximately $55 million to $60
million ($33 million to $36 million after taxes) related to the merger for an
enhanced retirement offer, other employee separation costs, and other
merger-related costs. In addition, a $23.6 million ($15.6 million after taxes)
charge for the termination of employee benefit plans (due to the merger)
recorded by Atlantic in December 1997 has been excluded from the pro forma
statement of income. The pro forma financial statements also do not reflect
any cost savings or other synergies anticipated as a result of the merger. The
pro forma information is not necessarily indicative of the results that would
have occurred in 1997, or that will occur in the future. In the opinion of
management, all adjustments necessary to present pro forma financial statements
have been made.
4
<PAGE>
<TABLE>
<CAPTION>
CONECTIV
PRO FORMA COMBINED BALANCE SHEETS
DECEMBER 31, 1997
(Dollars in Thousands)
(Unaudited)
ASSETS
Delmarva Atlantic Pro Forma Conectiv
As Adjusted As Adjusted Adjustments Pro Forma
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Utility Plant and Nonutility Property, At Cost
Electric utility plant $3,008,442 $2,590,890 $ - $5,599,332
Gas utility plant 241,580 - - 241,580
Common utility plant 152,232 - - 152,232
---------- ---------- ----------- ----------
3,402,254 2,590,890 - 5,993,144
Less: Accumulated depreciation 1,370,726 934,235 - 2,304,961
---------- ---------- ----------- ----------
Net utility plant in service 2,031,528 1,656,655 - 3,688,183
Construction work-in-progress 93,017 95,120 - 188,137
Leased property, net 32,258 39,730 - 71,988
Nonutility property, net 74,811 105,356 - 180,167
Goodwill, net 92,602 - 200,535 (f) 293,137
---------- ---------- ----------- ----------
2,324,216 1,896,861 200,535 4,421,612
---------- ---------- ----------- ----------
Investments
Investment in leveraged leases 46,375 80,448 - 126,823
Funds held by trustee 48,086 92,613 - 140,699
Other investments 9,500 42,896 - 52,396
---------- ---------- ----------- ----------
103,961 215,957 - 319,918
---------- ---------- ----------- ----------
Current Assets
Cash and cash equivalents 35,339 17,638 - 52,977
Accounts receivable 197,561 139,960 - 337,521
Deferred energy costs 18,017 27,424 - 45,441
Inventories, at average cost:
Fuel (coal, oil, and gas) 37,425 29,242 - 66,667
Materials and supplies 40,518 35,605 - 76,123
Prepayments 11,255 3,804 - 15,059
Other - 5,959 - 5,959
---------- ---------- ----------- ----------
340,115 259,632 - 599,747
---------- ---------- ----------- ----------
Deferred Charges and Other Assets
Unrecovered purchased power costs - 66,264 - 66,264
Deferred recoverable income taxes 88,683 85,858 - 174,541
Unrecovered state excise taxes - 45,154 - 45,154
Deferred debt refinancing costs 18,760 30,002 - 48,762
Deferred other post employee benefit costs - 37,476 - 37,476
Other regulatory assets 31,004 24,637 - 55,641
Prepaid employee benefit costs 58,111 8,390 12,110 (g) 78,611
Unamortized debt expense 12,911 14,945 - 27,856
Other 36,944 38,708 (21,800) (i) 53,852
---------- ---------- ----------- ----------
246,413 351,434 (9,690) 588,157
---------- ---------- ----------- ----------
Total Assets $3,014,705 $2,723,884 $ 190,845 $5,929,434
========== ========== =========== ==========
</TABLE>
The accompanying notes to the unaudited pro forma combined balance sheet and
statements of income are an integral part of this statement.
5
<PAGE>
<TABLE>
<CAPTION>
CONECTIV
PRO FORMA COMBINED BALANCE SHEETS
DECEMBER 31, 1997
(Dollars in Thousands)
(Unaudited)
CAPITALIZATION AND LIABILITIES
Delmarva Atlantic Pro Forma Conectiv
As Adjusted As Adjusted Adjustments Pro Forma
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Capitalization
Common stock $ 139,116 $ 563,460 $ (701,570) (a) $ 1,006
Class A common stock - - 66 (a) 66
Additional paid-in capital - common stock 526,812 - 936,256 (b) 1,463,068
Additional paid-in capital - Class A common stock - - 107,135 (b) 107,135
Retained earnings 300,757 221,623 (255,431) (d) 266,949
----------- ----------- ----------- -----------
966,685 785,083 86,456 1,838,224
Treasury shares, at cost (11,687) - 11,687 (e) -
Unearned compensation (502) - 502 (k) -
----------- ----------- ----------- -----------
Total common stockholders' equity 954,496 785,083 98,645 1,838,224
Preferred stock not subject to mandatory redemption 89,703 - (89,703) (p) -
Preferred stock of subsidiaries:
Not subject to mandatory redemption - 30,000 89,703 (p) 119,703
Subject to mandatory redemption 70,000 93,950 - 163,950
Long-term debt 983,672 889,744 - 1,873,416
----------- ----------- ------------ -----------
2,097,871 1,798,777 98,645 3,995,293
----------- ----------- ------------ -----------
Current Liabilities
Short-term debt 23,254 55,675 - 78,929
Long-term debt due within one year 33,318 147,566 - 180,884
Variable rate demand bonds 71,500 - - 71,500
Accounts payable 103,607 65,369 - 168,976
Taxes accrued 10,723 6,049 (206) (k) 16,566
Interest accrued 19,902 20,116 - 40,018
Dividends declared 23,775 21,215 - 44,990
Current capital lease obligation 12,516 653 - 13,169
Deferred income taxes, net (776) 1,888 - 1,112
Other 35,819 23,995 98,500 (h)(i) 158,314
----------- ----------- ------------ -----------
333,638 342,526 98,294 774,458
----------- ----------- ------------ -----------
Deferred Credits and Other Liabilities
Deferred income taxes, net 492,792 439,267 (52,342) (l) 879,717
Deferred investment tax credits 39,942 44,043 - 83,985
Long-term capital lease obligations 19,877 39,077 - 58,954
Postretirement obligations - 37,476 46,248 (g) 83,724
Other 30,585 22,718 - 53,303
----------- ----------- ------------ -----------
583,196 582,581 (6,094) 1,159,683
----------- ----------- ------------ -----------
Total Capitalization and Liabilities $3,014,705 $2,723,884 $ 190,845 $5,929,434
=========== =========== ============ ===========
</TABLE>
The accompanying notes to the unaudited pro forma combined balance sheet and
statements of income are an integral part of this statement.
6
<PAGE>
<TABLE>
<CAPTION>
CONECTIV
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Delmarva Atlantic Pro Forma Conectiv
As Adjusted As Adjusted Adjustments Pro Forma
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Operating Revenues
Electric $1,092,144 $1,061,986 $ - $2,154,130
Gas 204,057 - - 204,057
Other services 127,301 40,374 - 167,675
----------- ----------- ----------- ----------
1,423,502 1,102,360 - 2,525,862
----------- ----------- ----------- ----------
Operating Expenses
Electric fuel and purchased energy 416,640 293,457 - 710,097
Gas purchased 153,027 - - 153,027
Other services' cost of sales 85,192 - - 85,192
Purchased electric capacity 28,470 197,386 - 225,856
Termination of employee benefit plans due to merger - 23,559 (23,559) (q) -
Operation and maintenance 331,770 197,246 - 529,016
Depreciation and amortization 136,340 94,480 5,013 (j) 235,833
State excise taxes - 103,991 - 103,991
Other taxes 37,634 3,038 - 40,672
----------- ----------- ----------- -----------
1,189,073 913,157 (18,546) 2,083,684
----------- ----------- ----------- -----------
Operating Income 234,429 189,203 18,546 442,178
----------- ----------- ----------- -----------
Other Income
Allowance for equity funds used
during construction 1,337 815 - 2,152
Other income 28,187 14,598 - 42,785
---------- ----------- ----------- -----------
29,524 15,413 - 44,937
---------- ----------- ----------- -----------
Interest Expense
Interest charges 83,398 70,619 - 154,017
Allowance for borrowed funds used
during construction and capitalized interest (2,996) (1,003) - (3,999)
----------- ----------- ----------- -----------
80,402 69,616 - 150,018
----------- ----------- ----------- -----------
Preferred Stock Dividend
Requirements of Subsidiaries 5,687 10,596 4,491 (p) 20,774
----------- ----------- ----------- -----------
Income Before Income Taxes 177,864 124,404 14,055 316,323
Income Taxes 72,155 49,999 8,246 (q) 130,400
----------- ----------- ----------- -----------
Net Income 105,709 74,405 5,809 185,923
Dividends on Preferred Stock 4,491 - (4,491) (p) -
----------- ----------- ----------- -----------
Earnings Applicable to Common Stock:
Common stock 101,218 74,405 (5,618) 170,005
Class A common stock - - 15,918 (m) 15,918
----------- ----------- ----------- -----------
$ 101,218 $ 74,405 $ 10,300 $ 185,923
=========== =========== =========== ===========
Average common shares outstanding (000):
Common stock 61,122 52,280 (12,902) (n) 100,500
Class A common stock - - 6,563 (n) 6,563
Basic and diluted earnings per average share
outstanding of:
Common stock $ 1.66 $ 1.42 $ - $ 1.69
Class A common stock $ - $ - $ - $ 2.43
Dividends declared per share of:
Common stock $ 1.54 $ 1.54 $ - $ 1.54
Class A common stock $ - $ - $ - $ 3.20
</TABLE>
The accompanying notes to the unaudited pro forma combined balance sheet and
statements of income are an integral part of this statement.
7
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) Adjustments to record the estimated par value at $0.01 per share of
Conectiv Common Stock and Conectiv Class A Common Stock to be issued and
outstanding. The number of shares of Conectiv stock was estimated using
the number of Delmarva and Atlantic Common Stock shares outstanding as of
December 31, 1997. Each outstanding share of Delmarva Common Stock was
converted into one share of Conectiv Common Stock and each outstanding
share of Atlantic Common Stock was converted into 0.75 of one share of
Conectiv Common Stock plus 0.125 of one share of Conectiv Class A Common
Stock. The adjustments are summarized below.
<TABLE>
<CAPTION>
As of December 31, 1997
-----------------------
Common Stock:
- -------------
<S> <C>
Number of Atlantic Common Stock shares outstanding 52,504,479
Conversion Ratio 0.75
------------
Number of Common Stock shares to be issued to
Atlantic Common Stockholders 39,378,359
Number of Common Stock shares to be issued to
Delmarva Common Stockholders (Equal to the
number of Delmarva Common Stock shares outstanding) 61,210,262
------------
Total number of Common Stock shares to be issued 100,588,621
Par value per share $0.01
------------
(In Thousands of Dollars)
Adjusted par value of total number of Common Stock shares
to be issued $1,006
Delmarva's Common Stock, as previously reported (139,116)
Atlantic's Common Stock, as previously reported (563,460)
------------
Adjustment to Common Stock $(701,570)
============
Class A Common Stock:
- ---------------------
Number of Atlantic Common Stock shares outstanding 52,504,479
Conversion Ratio 0.125
------------
Number of Class A Common Stock shares to be issued to
Atlantic Common Stockholders 6,563,060
Par value per share $0.01
------------
Par value (In Thousands of Dollars) $66
============
</TABLE>
8
<PAGE>
(b) Adjustments to record additional paid-in-capital to reflect the following:
<TABLE>
<CAPTION>
As of December 31, 1997
-----------------------
<S> <C>
Additional Paid-In-Capital--Common Stock:
Cancellation of the Delmarva Treasury Stock cost
in excess of par value $(10,294)
Adjustment to par value of Delmarva Common Stock outstanding 137,111
Consideration to be paid to Atlantic's Common Stockholders in
the form of Conectiv Common Stock in excess of par value 813,439
Estimated registration and issuance costs (4,000)
---------
$936,256
=========
Additional Paid-In-Capital--Class A Common Stock:
Consideration to be paid to Atlantic's Common Stockholders in the
form of Conectiv Class A Common Stock in excess of par value $107,135
=========
</TABLE>
(c) The total consideration to be paid to the Atlantic Common Stockholders was
measured by the average daily closing market price of Atlantic's Common
Stock for the three trading days immediately preceding and following the
public announcement of the Merger Agreement on August 12, 1996.
Delmarva's Common Stockholders will receive one share of Conectiv Common
Stock for each share of Delmarva Common Stock. Therefore, the average
daily market price of Delmarva's Common Stock for the same period was used
to measure the market value of Conectiv Common Stock to be paid to
Atlantic's Common Stockholders. Delmarva's average market price per share
was multiplied by the Atlantic conversion ratio for Conectiv Common Stock
to determine the estimated market value per share of Atlantic Common Stock
attributed to Conectiv Common Stock. This market value per share was
multiplied by the number of Atlantic Common Stock shares outstanding at
December 31, 1997 to estimate the consideration to be paid to Atlantic
Common Stockholders in the form of Conectiv Common Stock.
The difference between the total compensation to be paid to Atlantic's
Common Stockholders and the portion attributed to Conectiv Common Stock
was attributed to Conectiv Class A Common Stock.
The schedules below show the calculation of the total consideration to be
paid to Atlantic's Common Stockholders and the allocation of the total
consideration to be paid between Conectiv Common Stock and Conectiv Class A
Common Stock:
<TABLE>
<CAPTION>
Amounts
--------
<S> <C>
Average market price per share of Atlantic Common Stock used
to determine consideration to be paid $17.542
Number of Atlantic Common Stock shares outstanding as of
December 31, 1997 52,504,479
----------
Total consideration to be paid to Atlantic Common Stockholders
(In Thousands of Dollars) $921,034
==========
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Amounts
-------
<S> <C>
Average market price per share of Delmarva Common Stock
for the same period $20.667
Conversion ratio of Conectiv Common Stock for each share of
Atlantic Common Stock 0.75
----------
Estimated market value per share of Atlantic Common Stock
attributed to Conectiv Common Stock $15.50025
Number of Atlantic Common Stock shares outstanding as of
December 31, 1997 52,504,479
----------
Consideration to be paid to Atlantic's Common Stockholders in
the form of Conectiv Common Stock (In Thousands of Dollars) $813,833
----------
(In Thousands of Dollars)
-------------------------
Total consideration to be paid to Atlantic Common Stockholders $921,034
Portion of total consideration attributed to Conectiv
Common Stock 813,833
----------
Portion of total consideration attributed to Conectiv Class A
Common Stock $107,201
==========
</TABLE>
(d) Adjustments to retained earnings as follows:
<TABLE>
<CAPTION>
Amounts
---------------------
(Dollars in Thousands)
<S> <C>
Eliminate retained earnings of Atlantic $(221,623)
Charges to expense of $56.8 million ($33.5 million
after tax) principally for nonrecurring employee
separation costs related to Delmarva employees
[see note (h)] (33,512)
Charge to expense to eliminate unearned income [see Note (k)] (296)
----------
Total adjustment $(255,431)
==========
</TABLE>
(e) Adjustment to reflect the cancellation of the Delmarva treasury stock as a
condition of the merger.
10
<PAGE>
(f) The schedule below shows the calculation of the cost of acquiring Atlantic
and the allocation of the total acquisition cost to identifiable tangible
and intangible assets and liabilities.
<TABLE>
<CAPTION>
Cost of Acquiring Atlantic Amounts
-------------------------- ----------------------
(Dollars in Thousands)
<S> <C>
Consideration to be paid to Atlantic's Common
Stockholders [see Note (c)] $921,034
Add: Estimated direct costs of acquisition to be
incurred by Delmarva 24,700
Less: Registration and issuance costs (4,000)
-----------
Total acquisition cost $941,734
===========
Less assets acquired:
Electric utility plant - net $1,791,505
Investments and nonutility property 321,313
Current assets 259,632
Deferred debits 351,434
-----------
Total assets acquired $2,723,884
===========
Add liabilities acquired:
Preferred stock of subsidiaries $123,950
Long-term debt 889,744
Current liabilities 342,526
Deferred credits and other liabilities 582,581
-----------
Total liabilities acquired $1,938,801
===========
Costs incurred and liabilities assumed in connection with
the merger $ 43,884
-----------
Cost in excess of net assets acquired $200,535
===========
</TABLE>
The fair value of the utility assets of Atlantic is their book value due to
the ratemaking process. Utility assets are recognized for ratemaking
purposes at their book values in determining utility revenue requirements.
Accordingly, the economic substance is that fair value of the utility
assets is their book value.
(g) Adjustments to record additional pension prepayment ($12.1 million) and
postretirement benefit liabilities ($46.3 million), assumed in the
acquisition of Atlantic in accordance with Statements of Financial
Accounting Standards (SFAS) Nos. 87 and 106.
(h) Adjustment to record an estimated liability of $38.8 million for employee
separation and relocation costs and facilities integration costs related to
Atlantic's employees and facilities and an estimated liability of $56.8
million, which will be expensed, principally for employee separation costs
related to Delmarva. The Unaudited Pro Forma Combined Statement of Income
for the year ended December 31, 1997 does not reflect expected nonrecurring
estimated expenses of $56.8 million before taxes ($33.5 million after
taxes), principally for employee separation costs related to Delmarva.
11
<PAGE>
(i) Adjustment to record the estimated direct costs of the merger of $24.7
million. These costs are included in the cost to acquire Atlantic.
<TABLE>
<CAPTION>
As of December 31, 1997
-----------------------
(Dollars in Thousands)
<S> <C>
Other current liabilities $2,900
Deferred debits $(21,800)
</TABLE>
(j) Adjustment to reflect the amortization of goodwill acquired over forty (40)
years.
(k) Adjustment to recognize a pretax expense of $0.5 million to eliminate
unearned and deferred compensation costs payable under employee incentive
plans at the time of the merger. The adjustment is summarized below:
<TABLE>
<CAPTION>
As of December 31, 1997
-----------------------
(Dollars in Thousands)
<S> <C>
Decrease in retained earnings:
Delmarva $(296)
Accrued tax benefit:
Delmarva (206)
------
Eliminate unearned and deferred compensation $502
======
</TABLE>
The Unaudited Pro Forma Combined Statement of Income for the year ended
December 31, 1997 does not reflect the nonrecurring estimated expense of
$0.5 million before taxes ($0.3 million after taxes).
(l) Adjustment to record additional deferred income taxes for the following
temporary differences:
<TABLE>
<CAPTION>
(Dollars in Thousands)
Temporary Deferred
Differences Income Taxes
----------- ------------
<S> <C> <C>
Additional pension prepayment [see note (g)] 12,110 (4,238)
Additional postretirement benefit liabilities
[see Note (g)] 46,248 16,187
Liabilities for employee separation,
relocation, and retraining costs and
facilities integration cost s[see Note (h)] 95,600 36,867
Liability for a portion of DP&L direct
acquisition costs that are deemed to be tax
deductible [see Note (i)] 8,600 3,526
--------
Total deferred income taxes $52,342
========
</TABLE>
In accordance with SFAS No. 109, deferred income taxes were not recorded
on goodwill for which the amortization is not deductible for tax purposes.
12
<PAGE>
(m) Adjustment to present earnings applicable to the Class A Common Stock.
The Class A Common Stock is intended to reflect the growth prospects and
regulatory environment of Atlantic's regulated electric utility business.
The shares of Class A Common Stock to be received by holders of Atlantic
Common Stockholders represent, in aggregate, a 30% interest in any earnings
of Atlantic's regulated electric utility business in excess of $40 million
per year.
The calculation of the pro forma earnings applicable to the Class A Common
Stock for the year ended December 31, 1997 is shown below (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Atlantic City Electric Company (ACE) and
Subsidiary Income Available for Common
Stockholders $80,926
Add: Termination of employee benefit plans due to merger 15,600
Less: Net Earnings of Nonutility Activities Specifically
Excluded (3,466)
Less: Fixed Amount of $40 Million per Year (40,000)
--------
Subtotal 53,060
Percentage Applicable to Class A Common Stock 30%
--------
Earnings Applicable to Class A Common Stock $15,918
========
</TABLE>
(n) Adjustments to decrease the weighted average number of Common Stock shares
outstanding based on the conversion ratio of 0.75 to 1 of Conectiv Common
Stock to be issued to holders of Atlantic Common Stock and reflect the
issuance of Class A Common Stock shares to holders of Atlantic Common
Stock. The number of shares of Conectiv Common Stock and Class A Common
Stock estimated to be issued to holders of Atlantic Common Stock for the
acquisition were deemed to be issued and outstanding for the entire period.
(o) The Merger Agreement provides, subject to certain conditions, that the
dividends declared and paid on the Class A Common Stock will be maintained
at a level of $3.20 per share per annum from the Effective Date until the
earlier of July 1, 2001 or the end of the twelfth calendar quarter
following the calendar quarter in which the Effective Date occurs.
Thereafter, it is the intention of Conectiv, subject to certain conditions,
to pay annual dividends on the Class A Common Stock in an aggregate amount
(including the amount credited to the Intergroup Interest as provided in
the Conectiv Charter) equal to 90% of Conectiv Net Income Attributable to
the Atlantic Utility Group. The Merger Agreement further provides that if
and to the extent that the annual dividends paid on the Class A Common
Stock during the Initial Period (including the aforesaid amount) shall have
exceeded 100% of Conectiv Net Income Attributable to the Atlantic Utility
Group during such period, the Conectiv Board may consider such fact in
determining the appropriate annual dividend rate on the Class A Common
Stock following the Initial Period.
The pro forma Class A Common Stock dividends per share exceed the pro forma
Class A Common Stock earnings per share for the year ended December 31,
1997.
(p) Adjustment to reflect Delmarva's preferred stock as preferred stock
of a subsidiary.
13
<PAGE>
(q) Adjustment to eliminate nonrecurring charge for "Termination of employee
benefit plans due to merger."
(r) As necessary for fair presentation of the pro forma financial statements,
amounts previously reported by Atlantic and Delmarva have been reclassified
for consistency of presentation. The following schedules show the amounts
reclassified.
14
<PAGE>
<TABLE>
<CAPTION>
DELMARVA POWER & LIGHT COMPANY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(Dollars in Thousands)
(Unaudited)
ASSETS
Reported Reclass Adjusted
Amount Adjustments Amount
----------- ----------- -----------
<S> <C> <C> <C>
Utility Plant and Nonutility Property, At Cost
Electric utility plant $3,010,060 $ (1,618) (1) $3,008,442
Gas utility plant 241,580 - 241,580
Common utility plant 154,791 (2,559) (1) 152,232
----------- ----------- ----------
3,406,431 (4,177) 3,402,254
Less: Accumulated depreciation 1,373,676 (2,950) (1) 1,370,726
----------- ----------- ----------
Net utility plant in service 2,032,755 (1,227) 2,031,528
Construction work-in-progress 93,017 - 93,017
Leased property, net 31,031 1,227 (1) 32,258
Nonutility property, net 74,811 - 74,811
Goodwill, net 92,602 - 92,602
----------- ----------- ----------
2,324,216 - 2,324,216
Investments ----------- ----------- ----------
Investment in leveraged leases 46,375 - 46,375
Funds held by trustee 48,086 - 48,086
Other investments 9,500 - 9,500
----------- ----------- ----------
103,961 - 103,961
----------- ----------- ----------
Current Assets
Cash and cash equivalents 35,339 - 35,339
Accounts receivable 197,561 - 197,561
Deferred energy costs 18,017 - 18,017
Inventories, at average cost:
Fuel (coal, oil, and gas) 37,425 - 37,425
Materials and supplies 40,518 - 40,518
Prepayments 11,255 - 11,255
Deferred income taxes, net 776 (776) (3) -
----------- ----------- ----------
340,891 (776) 340,115
----------- ----------- ----------
Deferred Charges and Other Assets
Deferred recoverable income taxes 88,683 - 88,683
Deferred debt refinancing costs 18,760 - 18,760
Other regulatory assets - 31,004 (2) 31,004
Prepaid employee benefit costs 58,111 - 58,111
Unamortized debt expense 12,911 - 12,911
Other 67,948 (31,004) (2) 36,944
----------- ----------- ----------
246,413 - 246,413
----------- ----------- ----------
Total Assets $3,015,481 $ (776) $3,014,705
=========== =========== ==========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of this statement.
15
<PAGE>
<TABLE>
<CAPTION>
DELMARVA POWER & LIGHT COMPANY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(Dollars in Thousands)
(Unaudited)
CAPITALIZATION AND LIABILITIES
Reported Reclass Adjusted
Amount Adjustments Amount
------------ ----------- -----------
<S> <C> <C> <C>
Capitalization
Common stock $ 139,116 $ - $ 139,116
Additional paid-in capital - common stock 526,812 - 526,812
Retained earnings 300,757 - 300,757
----------- ----------- -----------
966,685 - 966,685
Treasury shares, at cost (11,687) - (11,687)
Unearned compensation (502) - (502)
----------- ----------- -----------
Total common stockholders' equity 954,496 - 954,496
Preferred stock not subject to mandatory redemption 89,703 - 89,703
Preferred stock of subsidiaries:
Subject to mandatory redemption 70,000 - 70,000
Long-term debt 983,672 - 983,672
----------- ----------- -----------
2,097,871 - 2,097,871
----------- ----------- -----------
Current Liabilities
Short-term debt 23,254 - 23,254
Long-term debt due within one year 33,318 - 33,318
Variable rate demand bonds 71,500 - 71,500
Accounts payable 103,607 - 103,607
Taxes accrued 10,723 - 10,723
Interest accrued 19,902 - 19,902
Dividends declared 23,775 - 23,775
Current capital lease obligation 12,516 - 12,516
Deferred income taxes, net - (776) (3) (776)
Other 35,819 - 35,819
----------- ----------- -----------
334,414 (776) 333,638
----------- ----------- -----------
Deferred Credits and Other Liabilities
Deferred income taxes, net 492,792 - 492,792
Deferred investment tax credits 39,942 - 39,942
Long-term capital lease obligations 19,877 - 19,877
Other 30,585 - 30,585
----------- ----------- -----------
583,196 - 583,196
----------- ----------- -----------
Total Capitalization and Liabilities $3,015,481 $ (776) $3,014,705
=========== =========== ===========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of this statement.
16
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC ENERGY, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(Dollars in Thousands)
(Unaudited)
ASSETS
Reported Reclass Adjusted
Amount Adjustments Amount
---------- ----------- -----------
<S> <C> <C> <C>
Utility Plant and Nonutility Property, At Cost
Electric utility plant in service $2,585,286 $ 5,604 (4) $2,590,890
---------- ----------- -----------
2,585,286 5,604 2,590,890
Less: Accumulated depreciation 934,235 - 934,235
---------- ----------- -----------
Net electric utility plant in service 1,651,051 5,604 1,656,655
Construction work-in-progress 95,120 - 95,120
Land Held for Future Use 5,604 (5,604) (4) -
Nonutility property, net 105,356 - 105,356
Leased property, net 39,730 - 39,730
---------- ----------- -----------
1,896,861 - 1,896,861
---------- ----------- -----------
Investments
Investment in leveraged leases 80,448 - 80,448
Funds held by trustee 81,650 10,963 (5) 92,613
Other investments 53,859 (10,963) (5) 42,896
---------- ----------- -----------
215,957 - 215,957
---------- ----------- -----------
Current Assets
Cash and cash equivalents 17,224 414 (6) 17,638
Accounts receivable 103,045 36,915 (7) 139,960
Unbilled revenues 36,915 (36,915) (7) -
Deferred energy costs 27,424 - 27,424
Inventories, at average cost:
Fuel (coal, oil, and gas) 29,242 - 29,242
Materials and supplies 20,893 14,712 (6) 35,605
Working funds 15,126 (15,126) (6) -
Prepayments 3,804 - 3,804
Deferred income taxes, net - - -
Other 14,349 (8,390) (8) 5,959
---------- ----------- -----------
268,022 (8,390) 259,632
---------- ----------- -----------
Deferred Charges and Other Assets
Unrecovered purchased power costs 66,264 - 66,264
Deferred recoverable income taxes 85,858 - 85,858
Unrecovered state excise taxes 45,154 - 45,154
Deferred debt refinancing costs 44,947 (14,945) (9) 30,002
Deferred other post employee benefit costs 37,476 - 37,476
Other regulatory assets 24,637 - 24,637
Prepaid employee benefit costs - 8,390 (8) 8,390
Unamortized debt expense - 14,945 (9) 14,945
Other 38,708 - 38,708
---------- ----------- -----------
343,044 8,390 351,434
---------- ----------- -----------
Total Assets $2,723,884 $ - $2,723,884
========== =========== ==========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are
an integral part of this statement.
17
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC ENERGY, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(Dollars in Thousands)
(Unaudited)
CAPITALIZATION AND LIABILITIES
Reported Reclass Adjusted
Amount Adjustments Amount
---------- ----------- -----------
<S> <C> <C> <C>
Capitalization
Common stock $ 563,460 $ - $ 563,460
Retained earnings 221,623 - 221,623
---------- ----------- ----------
785,083 - 785,083
Unearned compensation - - -
---------- ----------- ---------
Total common stockholders' equity 785,083 - 785,083
Preferred stock of subsidiaries:
Not subject to mandatory redemption 30,000 - 30,000
Subject to mandatory redemption 103,950 (10,000) (10) 93,950
Long-term debt 879,744 10,000 (10) 889,744
---------- ----------- ----------
1,798,777 - 1,798,777
---------- ----------- ----------
Current Liabilities
Short-term debt 55,675 - 55,675
Long-term debt due within one year 147,566 - 147,566
Accounts payable 65,369 - 65,369
Taxes accrued 6,049 - 6,049
Interest accrued 20,116 - 20,116
Dividends declared 21,215 - 21,215
Current capital lease obligation 653 - 653
Deferred income taxes, net 1,888 - 1,888
Other 23,995 - 23,995
---------- ----------- ----------
342,526 - 342,526
---------- ----------- ----------
Deferred Credits and Other Liabilities
Deferred income taxes, net 439,267 - 439,267
Deferred investment tax credits 44,043 - 44,043
Long-term capital lease obligations 39,077 - 39,077
Postretirement obligations 37,476 - 37,476
Other 22,718 - 22,718
---------- ----------- ----------
582,581 - 582,581
---------- ----------- ----------
Total Capitalization and Liabilities $2,723,884 $ - $2,723,884
========== =========== ==========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of this statement.
18
<PAGE>
<TABLE>
<CAPTION>
DELMARVA POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Reported Reclass Adjusted
Amount Adjustments Amount
----------- ----------- -----------
<S>
Operating Revenues <C> <C> <C>
Electric $1,092,144 $ - $1,092,144
Gas 204,057 - 204,057
Other services 127,301 - 127,301
----------- ----------- -----------
1,423,502 - 1,423,502
----------- ----------- -----------
Operating Expenses
Electric fuel and purchased energy 416,640 - 416,640
Gas purchased 153,027 - 153,027
Other services' cost of sales 85,192 - 85,192
Purchased electric capacity 28,470 - 28,470
Operation and maintenance 331,770 - 331,770
Depreciation and amortization 136,340 - 136,340
Other taxes 37,634 - 37,634
----------- ----------- -----------
1,189,073 - 1,189,073
----------- ----------- -----------
Operating Income 234,429 - 234,429
----------- ----------- -----------
Other Income
Allowance for equity funds used
during construction 1,337 - 1,337
Other income 28,187 - 28,187
----------- ----------- -----------
29,524 - 29,524
----------- ----------- -----------
Interest Expense
Interest charges 83,398 - 83,398
Allowance for borrowed funds used
during construction and capitalized interest (2,996) - (2,996)
----------- ----------- -----------
80,402 - 80,402
Preferred Stock Dividend ----------- ----------- -----------
Requirements of Subsidiaries 5,687 - 5,687
----------- ----------- -----------
Income Before Income Taxes 177,864 - 177,864
Income Taxes 72,155 - 72,155
----------- ----------- -----------
Net Income 105,709 - 105,709
Dividends on Preferred Stock 4,491 - 4,491
----------- ----------- -----------
Earnings Applicable to Common Stock $ 101,218 $ - $ 101,218
=========== =========== ===========
Average shares outstanding (000): 61,122 61,122
Basic and diluted earnings per average share $ 1.66 $ - $ 1.66
Dividends declared $ 1.54 $ - $ 1.54
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of this statement.
19
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC ENERGY, INC.
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Reported Reclass Adjusted
Amount Adjustments Amount
----------- ----------- -----------
<S> <C> <C> <C>
Operating Revenues
Electric $1,061,986 $ - $1,061,986
Other services 40,374 - 40,374
----------- ----------- -----------
1,102,360 - 1,102,360
----------- ----------- -----------
Operating Expenses
Electric fuel and purchased energy 293,457 - 293,457
Other services' cost of sales - - -
Purchased electric capacity 197,386 - 197,386
Termination of employee benefit plans due to merger 23,559 - 23,559
Operation and maintenance 203,198 (5,952) (11,12) 197,246
Depreciation and amortization 83,950 10,530 (12) 94,480
State excise taxes 103,991 - 103,991
Other taxes 7,616 (4,578) (11) 3,038
----------- ----------- -----------
913,157 - 913,157
----------- ----------- -----------
Operating Income 189,203 - 189,203
----------- ----------- -----------
Other Income
Allowance for equity funds used
during construction 815 - 815
Other income 14,598 - 14,598
----------- ----------- -----------
15,413 - 15,413
----------- ----------- -----------
Interest Expense
Interest charges 70,619 - 70,619
Allowance for borrowed funds used
during construction and capitalized interest (1,003) - (1,003)
----------- ----------- -----------
69,616 - 69,616
----------- ----------- -----------
Preferred Stock Dividend
Requirements of Subsidiaries 10,596 - 10,596
----------- ----------- -----------
Income Before Income Taxes 124,404 - 124,404
Income Taxes 49,999 - 49,999
----------- ----------- -----------
Net Income $ 74,405 $ - $ 74,405
=========== =========== ===========
Average shares outstanding (000) 52,280 - 52,280
Basic and diluted earnings per average share $ 1.42 $ - $ 1.42
Dividends declared $ 1.54 $ - $ 1.54
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of this statement.
20
<PAGE>
NOTES TO ADJUSTED CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands)
(1) Transfer capital leases, net to "Leased property, net."
(2) Transfer regulatory assets from "Other" to "Other regulatory assets."
(3) Transfer "Deferred income taxes, net" to current liabilities.
(4) Transfer "Land held for future use" to "Electric utility plant in
service."
(5) Transfer $10,963 for Investment in Bond Escrow Trust from "Other
investments" to "Funds held by trustee."
(6) Transfer "Working funds" to "Cash" and to "Materials and supplies",
as appropriate.
(7) Transfer "Unbilled revenues" to "Accounts receivable."
(8) Transfer prepaid pension cost to "Deferred Charges and Other Assets."
(9) Transfer unamortized debt costs from "Deferred debt refinancing
costs" to "Unamortized debt expense."
(10) Reclassification to reflect post-balance sheet refinancings in
accordance with SFAS No. 6.
(11) Transfer payroll taxes from "Other taxes" to "Operation and
maintenance".
(12) Transfer nuclear decommissioning costs from "Operation and
maintenance" to "Depreciation and amortization".
21
<PAGE>
Exhibits
- ---------
Exhibit 3(a) Restated Certificate of Incorporation.
Exhibit 3(b) Revised Bylaws.
Exhibit 3(c) Certificate of Merger of DS Sub into Delmarva Power & Light
Company
Exhibit 99(a) Letter to the Financial Community.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Delmarva Power & Light Company
------------------------------
(Registrant)
Date: March 4, 1998 /s/ Barbara S. Graham
---------------------
Barbara S. Graham
Senior Vice President and
Chief Financial Officer
22
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Delmarva Power & Light Company
------------------------------
(Registrant)
Date: March 9, 1998 /s/ Barbara S. Graham
---------------------
Barbara S. Graham
Senior Vice President and
Chief Financial Officer
23
CERTIFICATE AND ARTICLES OF AMENDMENT
OF
RESTATED CERTIFICATE AND ARTICLES OF INCORPORATION
OF
DELMARVA POWER & LIGHT COMPANY
Delmarva Power & Light Company ("Delmarva" or the "Company"), a
corporation organized and existing under and by virtue of the General
Corporation Law ("GCLD") and the Stock Corporation Act of the Commonwealth
of Virginia ("SCAV"),
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of Delmarva duly adopted
resolutions setting forth a proposed amendment of the Restated Certificate
of Incorporation of the Company, declaring said amendment to be advisable,
and submitting it to the stockholders of the Company for consideration
thereof. The resolutions setting forth the proposed amendment are as
follows:
RESOLVED: That the Restated Certificate and Articles of
Incorporation of the Company be amended by (a) deleting all of
the remaining sentences in the first full paragraph of Article
SIXTH after the sentence "The number of authorized directors may
not be greater than fifteen or less than three without an
amendment to this Article SIXTH adopted by the holders of more
than two-thirds of the shares entitled to vote." and (b)
inserting in lieu thereof the following: "There shall be one
class of directors. A director shall hold office until his or
her successor shall be elected and shall qualify, subject
however, to prior death, resignation, retirement,
disqualification, or removal from office."
FURTHER RESOLVED: That the Restated Certificate and
Articles of Incorporation of the Company be amended by deleting
the following sentence from the second full paragraph of Article
SIXTH: "Unless otherwise provided by law, directors so chosen by
the stockholders shall hold office for a term expiring at the
annual meeting of stockholders at which the term of the class to
which they have been elected expires."
<PAGE>
FURTHER RESOLVED: That the Restated Certificate and
Articles of Incorporation of the Company be amended by (a)
deleting the following phrase from the only sentence in the third
full paragraph of Article SIXTH: "and such directors so elected
shall not be divided into classes pursuant to this Article SIXTH
unless expressly provided by such terms." and (b) inserting in
lieu thereof a period after the word "thereto".
FURTHER RESOLVED: That the Restated Certificate and
Articles of Incorporation of the Company be amended by deleting
the last full sentence of Article SIXTH and inserting in lieu
thereof the following: "Subject to the provisions of the
preceding paragraph, Directors of the Company may be removed by
the stockholders of the Company with or without cause."
FURTHER RESOLVED: That the Restated Certificate and
Articles of Incorporation of the Company be amended by deleting
the first full paragraph of Article FOURTH in its entirety and
inserting in lieu thereof the following:
"The total number of shares of all classes of capital stock
which the Company shall have authority to issue is fifteen
million eight hundred thousand (15,800,000) shares, of which
one million eight hundred thousand (1,800,000) shares, of
the par value of One Hundred Dollars ($100) per share, shall
be of a class designated Preferred Stock; three million
(3,000,000) shares, of the par value of Twenty-Five Dollars
($25) per share, shall be of a class designated Preferred
Stock -- $25 Par; ten million (10,000,000) shares, of the
par value of One Dollar ($1) per share, shall be of a class
designated Preferred Stock - $1.00 Par, and one million
(1,000,000) shares of the par value of Two Dollars and
Twenty-Five Cents ($2.25) per share, shall be of a class
designated Common Stock."
FURTHER RESOLVED: That the Restated Certificate of
Incorporation of the Company be amended by deleting the first two
full paragraphs of Article EIGHTH in their entirety and inserting
in lieu thereof the following:
2
<PAGE>
"EIGHTH: Each person who was or is a party or is threatened
to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative, or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or the
person of whom he or she is the legal representative, is or
was a director or officer of the Company or is or was
serving at the request of the Company, as a director,
officer, employee, or agent of another corporation or of a
partnership, joint venture, trust, or other enterprise,
including service with respect to employee benefit plans,
shall be indemnified and held harmless by the Company to the
fullest extent authorized by applicable law, as the same
exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment
permits the Company to provide broader indemnification
rights than said law permitted the Company to provide prior
to such amendment), against all expenses, liability, and
loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties, and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit
of his or her heirs, executors, and administrators;
provided, however, that, except as provided in this Article
EIGHTH, the Company shall indemnify any such person seeking
indemnification in connection with a proceeding (or part
thereof) initiated by such person only if authorized by the
Board of Directors of the Company. Any indemnification
under this Article EIGHTH (unless ordered by a court) shall
be made by the Company only as authorized in the specific
case upon a determination that indemnification of the
director, officer, employee, or agent is proper in the
circumstances because he or she has met the standard
required by applicable law. Such a determination shall be
made (a) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less
than a quorum; (b) by a committee of such directors
designated by majority vote of such directors, even though
less than a quorum; (c) by independent legal counsel
3
<PAGE>
(compensated by the Company) in a written opinion; (d) by
the stockholders; or (e) in any other manner permitted by
applicable law. In addition to the right to indemnification
conferred in this Article EIGHTH, each of the above persons
shall have the right to be paid by the Company the
reasonable expenses incurred in defending any such
proceeding in advance of its final disposition; provided,
however, that, if applicable law requires, the payment of
such expenses incurred by a present director or officer in
his or her capacity as a director or officer of the
corporation (and not in any other capacity in which service
was or is rendered by such person while a director or
officer, including, without limitation, service to an
employee benefit plan) in advance of the final disposition
of a proceeding, shall be made only upon delivery to the
Company of an undertaking, by or on behalf of such present
director or officer, to repay all amounts so advanced if it
shall ultimately be determined that such director or officer
is not entitled to be indemnified under this Article EIGHTH
or otherwise. The Company may, by any manner permitted by
applicable law, provide indemnification and advancement of
expenses to employees and agents of the Company with the
same scope and effect as the foregoing indemnification of
directors and officers. The right to indemnification and to
an advancement of expenses conferred in this Article EIGHTH
shall be a contract right.
If a claim under this Article EIGHTH is not paid in full by
the Company within 30 days after a written claim has been
received by the Company, the claimant may at any time
thereafter bring suit against the Company to recover the
unpaid amount of the claim and, if successful in whole or in
part, the claimant shall be entitled to be paid also the
expense of prosecuting such claim (including attorneys'
fees). It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses incurred
in defending any proceeding in advance of its final
disposition where the required undertaking, if any is
required, has been tendered to the Company) that the
claimant has not met the standard of conduct which makes it
4
<PAGE>
permissible under applicable law for the Company to
indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the Company.
Neither the failure of the Company (including its Board of
Directors, a committee thereof, independent legal counsel,
or its stockholders) to have made a determination prior to
the commencement of such action that indemnification of the
claimant is proper in the circumstances because he or she
has met the standard of conduct required by applicable law,
nor an actual determination by the Company (including its
Board of Directors, a committee thereof, independent legal
counsel, or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not
met the applicable standard of conduct. In any suit brought
by the claimant to enforce a right to indemnification or to
an advancement of expenses hereunder, or brought by the
Company to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the
claimant is not entitled to be indemnified, or to such
advancement of expenses, under this Article EIGHTH or
otherwise shall be on the Company.
The rights to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final
disposition conferred in this Article EIGHTH, shall not be
exclusive of any other right that any person may have or
hereafter acquire under any statute, provision of the
certificate of incorporation of the Company, the bylaws of
the Company, agreement, vote of stockholders or
disinterested directors, or otherwise.
The Company may maintain insurance, at its expense, to
protect itself and any director, officer, employee, or agent
of the Company or another corporation, partnership, joint
venture, trust, or other enterprise against any such
expense, liability, or loss, whether or not the Company
would have the power to indemnify such person against such
expense, liability, or loss under applicable law.
5
<PAGE>
The Company may enter into an indemnity agreement with any
director, officer, employee, or agent of the Company, or of
another corporation, partnership, joint venture, trust, or
other enterprise, upon terms and conditions that the Board
of Directors deems appropriate, as long as the provisions of
the agreement are not impermissible under applicable law.
The Company may, by action of the Board of Directors,
authorize one or more officers to grant rights to
indemnification and advancement of expenses to former
directors and officers or to other employees or agents of
the Company on such terms and conditions as such officer or
officers deem appropriate under the circumstances."
FURTHER RESOLVED: That the Restated Certificate and
Articles of Incorporation of the Company be amended by inserting
the following two paragraphs as the last two full paragraphs of
Article EIGHTH:
"Any amendment or repeal of this Article EIGHTH shall not be
retroactive in effect.
In case any provision in this Article EIGHTH shall be
determined at any time to be unenforceable in any respect,
the other provisions shall not in any way be affected or
impaired thereby, and the affected provision shall be given
the fullest possible enforcement in the circumstances, it
being the intention of the Company to afford indemnification
and advancement of expenses to the persons indemnified
hereby to the fullest extent permitted by law."
SECOND: That thereafter, the holder of all of the issued and
outstanding shares of Common Stock of the Company approved the amendments
by written consent in accordance with Section 228 of the GCLD and Section
13.1-657 of the SCAV.
6
<PAGE>
THIRD: That said amendment was duly adopted in accordance with
the provisions of Sections 242 and 228 of the GCLD and Sections 13.1-707
and 13.1-657 of the SCAV.
7
<PAGE>
IN WITNESS WHEREOF, said Delmarva Power & Light Company has
caused this certificate to be signed by its authorized officer, this 2nd
day of March, 1998.
DELMARVA POWER & LIGHT COMPANY
By: /s/ Barbara S. Graham
----------------------
Senior Vice President
and Chief Financial
Officer
8
B Y L A W S
OF
DELMARVA POWER & LIGHT COMPANY
1 . OFFICES.
--------
1.1 Offices. In addition to its registered office in the State
of Delaware, Delmarva Power & Light Company (the "Corporation") shall have
such other offices, either within or without the State of Delaware, at such
locations as the Board of Directors may from time to time determine or the
business of the Corporation may require.
2 . MEETINGS OF STOCKHOLDERS.
-------------------------
2.1 Annual Meetings. (a) The annual meeting of stockholders of
the Corporation shall be held on such date, at such time and at such place
within or without the State of Delaware as shall be determined by the Board
of Directors from time to time.
(b) To be properly brought before the annual meeting,
business must be either (i) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board, or (ii)
otherwise properly brought before the meeting by or at the direction of the
Board, or (iii) otherwise properly brought before the meeting by a
stockholder. In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a stockholder,
the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of
the Corporation, not less than fifty (50) days nor more than seventy-five
(75) days prior to the meeting; provided, however, that in the event that
less than sixty-five (65) days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the fifteenth (15th) day following the day on which such notice
of the date of the annual meeting was mailed or such public disclosure was
made, whichever first occurs. A stockholder's notice to the secretary
shall set forth as to each matter the stockholder proposes to bring before
the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and record address of the
stockholder proposing such business, (iii) the class and number of shares
of the Corporation which are beneficially owned by the stockholder, and
(iv) any material interest of the stockholder in such business.
<PAGE>
2.2 Special Meetings. Special meetings of the stockholders of
-----------------
the Corporation shall be held on such date, at such time and at such place
within or without the State of Delaware as may be designated by the
Chairman of the Board or by the Board of Directors.
2.3 Notice of Meetings. (a) Notices of meetings of
-------------------
stockholders shall be in writing and shall state the place, date, and hour
of the meeting, and, in the case of a special meeting, the purpose or
purposes for which a meeting is called. No business other than that
specified in the notice thereof shall be transacted at any special meeting.
(a) Such notice shall either be delivered personally or
mailed, postage prepaid, to each stockholder entitled to vote at such
meeting not less than 10 nor more than 60 days before the date of the
meeting. If mailed, the notice shall be directed to the stockholder at his
or her address as it appears on the records of the Corporation. Personal
delivery of any such notice to any officer of a corporation or association
or to any member of a partnership shall constitute delivery of such notice
to such corporation, association, or partnership.
(b) Notice of any meeting of stockholders need not be given
to any stockholder if waived by such stockholder in writing, whether before
or after such meeting is held, or if such stockholder shall sign the
minutes or attend the meeting, except that if such stockholder attends a
meeting for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not
lawfully called or convened, such stockholder shall not be deemed to have
waived notice of such meeting.
2.4 Adjourned Meetings. When a meeting is adjourned to another
-------------------
time or place, unless otherwise provided by these Bylaws, notice need not
be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the
adjourned meeting, the stockholders may transact any business that might
have been transacted at the original meeting. If an adjournment is for
more than 30 days, or if after an adjournment, a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given
to each stockholder entitled to vote at the meeting.
2.5 Quorum and Adjournment. Except as otherwise provided by
-----------------------
law, by the Restated Certificate and Articles of Incorporation of the
Corporation, or by these Bylaws, the presence, in person or by proxy, of
the holders of a majority of the aggregate voting power of the stock issued
and outstanding, entitled to vote thereat, shall constitute a quorum for
the transaction of business at all meetings of stockholders. If such
majority shall not be present or represented at any meeting of
2
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stockholders, the stockholders present, although less than a quorum, shall
have the power to adjourn the meeting.
2.6 Vote Required. Except as otherwise provided by law or by
--------------
the Restated Certificate and Articles of Incorporation:
(a) Directors shall be elected by a plurality of the votes
present in person or represented by proxy at a meeting of stockholders and
entitled to vote in the election of directors; and
(b) whenever any corporate action other than the election
of Directors is to be taken, it shall be authorized by a majority in voting
power of the shares present in person or by proxy at a meeting of
stockholders and entitled to vote on the subject matter.
2.7 Manner of Voting. At each meeting of stockholders, each
-----------------
stockholder having the right to vote shall be entitled to vote in person or
by proxy. Proxies need not be filed with the Secretary of the Corporation
until the meeting is called to order, but shall be filed before being
voted. Each stockholder shall be entitled to vote each share of stock
having voting power registered in his or her name on the books of the
Corporation on the record date fixed for determination of stockholders
entitled to vote at such meeting.
2.8 Stockholder Action Without a Meeting. Except as otherwise
-------------------------------------
provided by law or by the Restated Certificate and Articles of
Incorporation, any action required to be taken at any meeting of
stockholders of the corporation, or any action that may be taken at any
annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice, and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of the
requisite number of shares of capital stock of the Corporation entitled to
vote on such matter as required by the Restated Certificate and Articles of
Incorporation and applicable law. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing and
who, if the action had been taken at a meeting, would have been entitled to
notice of the meeting if the record date for such meeting had been the date
that written consents signed by a sufficient number of the holders to take
the action were delivered to the Corporation.
2.9 Proxies. (a) At any meeting of stockholders, any
--------
stockholder may be represented and vote by proxy or proxies appointed by a
written form of proxy. In the event that any form of proxy shall designate
two or more persons to act as proxies, a majority of such persons present
3
<PAGE>
at the meeting or, if only one shall be present, then that one shall have
and may exercise all of the powers conferred by the form of proxy upon all
of the persons so designated unless the form of proxy shall otherwise
provide.
(a) The Board of Directors may, in advance of any annual or
special meeting of the stockholders, prescribe additional regulations
concerning the manner of execution and filing of proxies and the validation
of the same, which are intended to be voted at any such meeting.
2.10 Presiding Officer and Secretary. The Chairman of the Board
--------------------------------
shall act as chairman of all meetings of the stockholders. In the absence
of the Chairman of the Board, the Vice Chairman of the Board or, in his or
her absence, the Chief Executive Officer or, in his or her absence, the
President or, in his or her absence, any Vice President designated by the
Board of Directors shall act as chairman of the meeting.
The Secretary of the Corporation shall act as secretary of all
meetings of the stockholders, but, in the absence of the Secretary, the
Assistant Secretary designated in accordance with Section 4.11(b) of these
Bylaws shall act as secretary of all meetings of the stockholders, but in
the absence of a designated Assistant Secretary, the chairman of the
meeting may appoint any person to act as secretary of the meeting.
2.11 Procedure. At each meeting of stockholders, the chairman of
----------
the meeting shall fix and announce the date and time of the opening and the
closing of the polls for each matter upon which the stockholders will vote
at the meeting and shall determine the order of business and all other
matters of procedure. Except to the extent inconsistent with any such
rules and regulations as adopted by the Board of Directors, the chairman of
the meeting may establish rules, which need not be in writing, to maintain
order and safety and for the conduct of the meeting. Without limiting the
foregoing, he or she may:
(a) restrict attendance at any time to bona fide
stockholders of record and their proxies and other persons in attendance at
the invitation of the chairman;
(b) restrict dissemination of solicitation materials and
use of audio or visual recording devices at the meeting;
(c) adjourn the meeting without a vote of the stockholders,
whether or not there is a quorum present; and
(d) make rules governing speeches and debate, including
time limits and access to microphones.
4
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The chairman of the meeting shall be entitled to act in his or her absolute
discretion and his or her rulings shall not be subject to appeal.
3 . DIRECTORS.
----------
3.1 The Board of Directors. The business and affairs of the
-----------------------
Corporation shall be managed under the direction of a Board of Directors
consisting of not less than three (3) nor more than fifteen (15) directors,
the exact number of directors to be determined from time to time by
resolution adopted by the affirmative vote of a majority of the directors
then in office or two-thirds of the shares, represented by proxy or in
person, entitled to vote at a meeting at which a quorum is present.
3.2 Powers. The Board of Directors shall exercise all of the
-------
powers of the Corporation except such as are by law, or by the Restated
Certificate and Articles of Incorporation of this Corporation or by these
Bylaws conferred upon or reserved to the stockholders of any class or
classes.
3.3 Resignations. Any Director may resign at any time by giving
-------------
written notice to the Board of Directors or the Secretary. Such
resignation shall take effect at the date of receipt of such notice or at
any later time specified therein. Acceptance of such resignation shall not
be necessary to make it effective.
3.4 Nominations. Only persons who are nominated in accordance
------------
with the following procedures shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders by the Board of
Directors, at the direction of the Board by any nominating committee or
person appointed by the Board, or by any stockholder of the Corporation
entitled to vote for the election of Directors at the meeting who complies
with the notice procedures set forth in this Section 3. Such nominations,
other than those made by or at the direction of the Board, shall be made
pursuant to timely notice in writing to the Secretary of the Corporation.
To be timely, a stockholder's notice shall be delivered to or mailed and
received at the principal executive offices of the Corporation not less
than fifty (50) days nor more than ninety (90) days prior to the meeting;
provided, however, that in the event that less than sixty-five (65) days'
notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the fifteenth (15th) day
following the day on which such notice of the date of the meeting was
mailed or such public disclosure was made, whichever first occurs. Such
stockholders' notice to the Secretary shall set forth (a) as to each person
5
<PAGE>
whom the stockholder proposes to nominate for election or re-election as a
director, (i) the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the person, (iii)
the class and number of shares of capital stock of the Corporation which
are beneficially owned by the person and (iv) any other information
relating to the person that is required to be disclosed in solicitations
for proxies for election of directors pursuant to Rule 14A under the
Securities Exchange Act of 1934, as amended; and (b) as to the stockholder
giving the notice (i) the name and record address of such stockholder and
(ii) the class and number of shares of capital stock of the Corporation
which are beneficially owned by such stockholder. The Corporation may
require any proposed nominee to furnish such other information as may
reasonably be required by the Corporation to determine the eligibility of
such proposed nominee to serve as a director of the Corporation. No
persons shall be eligible for election as a director of the Corporation
unless nominated in accordance with the procedures set forth herein.
The Chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure and if he/she should so determine,
he/she shall so declare to the meeting, and the defective nomination shall
be disregarded.
3.5 Presiding Officer and Secretary. The Chairman of the Board
--------------------------------
shall act as chairman of all meetings of the Board of Directors. In the
absence of the Chairman of the Board, the Vice Chairman of the Board, or in
his absence, the Chief Executive Officer or other person designated by the
Board of Directors shall act as chairman of the meeting.
The Secretary of the Corporation shall act as secretary of
all meetings of the Board of Directors, but, in the absence of the
Secretary, the Assistant Secretary designated in accordance with Section
4.11(b) of these Bylaws shall act as secretary of all meetings of the Board
of Directors, but in the absence of a designated Assistant Secretary, the
chairman of the meeting may appoint any person to act as secretary of the
meeting.
3.6 Annual Meetings. The Board of Directors shall meet each
----------------
year immediately following the annual meeting of stockholders, at the place
where such meeting of stockholders has been held, or at such other place as
shall be fixed by the person presiding over the meeting of the
stockholders, for the purpose of election of officers and consideration of
such other business as the Board of Directors considers relevant to the
management of the Corporation. In the event that in any year Directors are
elected by written consent in lieu of an annual meeting of stockholders,
the Board of Directors shall meet in such year as soon as practicable after
receipt of such written consent by the Corporation at such time and place
6
<PAGE>
as shall be fixed by the Chairman of the Board, for the purpose of election
of officers and consideration of such other business as the Board of
Directors considers relevant to the management of the Corporation.
3.7 Regular Meetings. Regular meetings of the Board of
-----------------
Directors shall be held on such dates and at such times and places, within
or without the state of Delaware, as shall from time to time be determined
by the Board of Directors. In the absence of any such determination, such
meetings shall be held at such times and places, within or without the
State of Delaware, as shall be designated by the Chairman of the Board on
not less than twelve hours notice to each Director, given verbally or in
writing, whether personally, by telephone (including by message or
recording device), by facsimile transmission, by telegram, or by telex, or
on not less than three (3) calendar days' notice to each Director given by
mail.
3.8 Special Meetings. Special meetings of the Board of
-----------------
Directors shall be held at the call of the Chairman of the Board at such
times and places, within or without the State of Delaware, as he or she
shall designate, on not less than twelve hours notice to each Director,
given verbally or in writing, whether personally, by telephone (including
by message or recording device), by facsimile transmission, by telegram, or
by telex, or on not less than three (3) calendar days' notice to each
Director given by mail. Special meetings shall be called by the Secretary
on like notice at the written request of a majority of the Directors then
in office.
3.9 Quorum and Powers of a Majority. At all meetings of the
--------------------------------
Board of Directors and of each committee thereof, a majority of the members
shall be necessary and sufficient to constitute a quorum for the
transaction of business, and the act of a majority of the members present
at any meeting at which a quorum is present shall be the act of the Board
of Directors or such committee, unless by express provision of law, of the
Restated Certificate and Articles of Incorporation, or of these Bylaws, a
different vote is required, in which case such express provision shall
govern and control. In the absence of a quorum, a majority of the members
present at any meeting may, without notice other than announcement at the
meeting, adjourn such meeting from time to time until a quorum is present.
3.10 Waiver of Notice. Notice of any meeting of the Board of
-----------------
Directors, or any committee thereof, need not be given to any member if
waived by him or her in writing, whether before or after such meeting is
held, or if he or she shall sign the minutes or attend the meeting, except
that if such Director attends a meeting for the express purpose of
objecting at the beginning of the meeting to the transaction of any
business because the meeting is not lawfully called or convened, then such
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<PAGE>
Director shall not be deemed to have waived notice of such meeting.
3.11 Manner of Acting. (a) Members of the Board of Directors,
-----------------
or any committee thereof, may participate in any meeting of the Board of
Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating
therein can hear each other, and participation in a meeting by such means
shall constitute presence in person at such meeting.
(a) Any action required or permitted to be taken at any
meeting of the Board of Directors or any committee thereof may be taken
without a meeting if all members of the Board of Directors or such
committee, as the case may be, consent thereto in writing, and the writings
are filed with the minutes of proceedings of the Board of Directors or such
committee.
3.12 Compensation. (a) The Board of Directors, by a resolution
-------------
or resolutions, may fix, and from time to time change, the compensation of
Directors.
(a) Each Director shall be entitled to reimbursement from
the Corporation for his or her reasonable expenses incurred with respect to
duties as a member of the Board of Directors or any committee thereof.
(b) Nothing contained in these Bylaws shall be construed to
preclude any Director from serving the Corporation in any other capacity
and from receiving compensation from the Corporation for service rendered
to it in such other capacity.
3.13 Committees. The Board of Directors (or any committee
-----------
thereof having the power and authority to do so) may designate one or more
committees, each committee to consist of two or more Directors, which to
the extent provided in said resolution or resolutions shall have and may
exercise the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation; provided,
however, that no such committee shall have the power or authority in
reference to the following matters: (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required
by the General Corporation Law of Delaware (the "GCLD") or the Stock
Corporation Act of the Commonwealth of Virginia ("SCAV") to be submitted to
stockholders for approval, (ii) adopting, amending, or repealing any bylaw
of the Corporation, or (iii) any other matter that may not be delegated to
a committee of the Board of Directors pursuant to applicable law. The
Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member of the
committee. A majority of the Committee shall be necessary to constitute a
quorum for the transaction of business. In the absence or disqualification
8
<PAGE>
of a member of a committee, the member or members present at any meeting of
such committee and not disqualified from voting, whether or not such member
or members constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in place of such absent or
disqualified director.
3.14 Committee Procedure, Limitations of Committee Powers. (a)
-----------------------------------------------------
Except as otherwise provided by these Bylaws, each committee shall adopt
its own rules governing the time, place and method of holding its meetings
and the conduct of its proceedings and shall meet as provided by such rules
or by resolution of the Board of Directors. Unless otherwise provided by
these Bylaws or any such rules or resolutions, notice of the time and place
of each meeting of a committee shall be given to each member of such
committee as provided in Section 3.8 of these Bylaws with respect to
notices of special meetings of the Board of Directors.
(a) Each committee shall keep regular minutes of its
proceedings and report the same to the Board of Directors when required.
(b) Any member of any committee may be removed from such
committee either with or without cause, at any time, by the Board of
Directors at any meeting thereof. Any vacancy in any committee shall be
filled by the Board of Directors in the manner prescribed by the Restated
Certificate and Articles of Incorporation or these Bylaws for the original
appointment of the members of such committee.
3.15 Vacancies. Newly created directorships resulting from any
----------
increase in the number of directors and any vacancies in the Board of
Directors resulting from death, resignation, disqualification, removal or
other cause shall be filled by the Board of Directors or at an annual
meeting of stockholders by the stockholders entitled to vote on the
election of directors. If the directors remaining in office constitute
fewer than a quorum of the Board, they may fill the vacancy by the
affirmative vote of a majority of the directors remaining in office.
9
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4 . OFFICERS.
---------
4.1 Number. (a) The officers of the Corporation shall include
-------
a Chief Executive Officer, a President, one or more Vice Presidents
(including one or more Executive Vice Presidents and one or more Senior
Vice Presidents if deemed appropriate by the Board of Directors), a
Secretary, a Treasurer, and a Controller. The Board of Directors shall
also elect a Chairman of the Board and may elect a Vice Chairman of the
Board. The Board of Directors may also elect such other officers as the
Board of Directors may from time to time deem appropriate or necessary.
Except for the Chairman of the Board, the Vice Chairman of the Board, and
the Chief Executive Officer, none of the officers of the Corporation needs
to be a director of the Corporation. Any two or more offices may be held
by the same person to the extent permitted by the GCLD and the SCAV.
(a) The Board of Directors may delegate to the Chief
Executive Officer or President the power to appoint one or more employees
of the Corporation as divisional or departmental vice presidents and fix
the duties of such appointees. However, no such divisional or departmental
vice president shall be considered as an officer of the Corporation, the
officers of the Corporation being limited to those officers elected by the
Board of Directors.
4.2 Election of Officers, Qualification and Term. The officers
---------------------------------------------
of the Corporation shall be elected from time to time by the Board of
Directors and, except as may otherwise be expressly provided in a contract
of employment duly authorized by the Board of Directors, shall hold office
at the pleasure of the Board of Directors.
4.3 Removal. Any officer elected by the Board of Directors may
--------
be removed, either with or without cause, by the Board of Directors at any
meeting thereof, or to the extent delegated to the Chairman of the Board or
the Chief Executive Officer, by the Chairman of the Board or the Chief
Executive Officer.
4.4 Resignations. Any officer of the Corporation may resign at
-------------
any time by giving written notice to the Board of Directors or to the
Chairman of the Board or to the Chief Executive Officer. Such resignation
shall take effect at the date of the receipt of such notice or at any later
time specified therein and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
4.5 Salaries. The salaries of all officers of the Corporation
---------
shall be fixed by the Board of Directors from time to time, and no officer
shall be prevented from receiving such salary by reason of the fact that he
10
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or she is also a Director of the Corporation.
4.6 The Chairman of the Board. The Chairman of the Board shall
--------------------------
have the powers and duties customarily and usually associated with the
office of the Chairman of the Board. The Chairman of the Board shall
preside at meetings of the stockholders and of the Board of Directors.
4.7 Vice Chairman of the Board. The Vice Chairman of the Board
---------------------------
shall have the powers and duties customarily and usually associated with
the office of the Vice Chairman of the Board.
4.8 Chief Executive Officer. The Chief Executive Officer shall
------------------------
have, subject to the supervision, direction and control of the Board of
Directors, the general powers and duties of supervision, direction and
management of the affairs and business of the Corporation usually vested in
the chief executive officer of a corporation, including, without
limitation, all powers necessary to direct and control the organizational
and reporting relationships within the Corporation. If at any time the
office of the Chairman of the Board and the Vice Chairman of the Board
shall not be filled, or in the event of the temporary absence or disability
of the Chairman of the Board and the Vice Chairman of the Board, the Chief
Executive Officer shall have the powers and duties of the Chairman of the
Board.
4.9 The President. The President shall serve as chief operating
--------------
officer and shall have such other powers and perform such other duties as
may be delegated to him or her from time to time by the Board of Directors
or the Chief Executive Officer.
4.10 The Vice Presidents. Each Vice President shall have such
--------------------
powers and perform such duties as may from time to time be assigned to him
or her by the Board of Directors, the Chief Executive Officer, or the
President.
4.11 The Secretary and the Assistant Secretary. (a) The
------------------------------------------
Secretary shall attend meetings of the Board of Directors and meetings of
the stockholders and record all votes and minutes of all such proceedings
in a book kept for such purpose. He or she shall have all such further
powers and duties as generally are incident to the position of Secretary or
as may from time to time be assigned to him or her by the Board of
Directors, the Chief Executive Officer, or the President.
(a) Each Assistant Secretary shall have such powers and
perform such duties as may from time to time be assigned to him or her by
the Board of Directors, the Chief Executive Officer, the President, or the
Secretary. In case of the absence or disability of the Secretary, the
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Assistant Secretary designated by the Chief Executive Officer (or, in the
absence of such designation, by the Secretary) shall perform the duties and
exercise the powers of the Secretary.
4.12 The Treasurer and the Assistant Treasurer. (a) The
------------------------------------------
Treasurer shall have custody of the Corporation's funds and securities and
shall keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation and shall deposit or cause to be
deposited moneys or other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall also maintain adequate records of all
assets, liabilities, and transactions of the Corporation and shall see that
adequate audits thereof are currently and regularly made. The Treasurer
shall have such other powers and perform such other duties that generally
are incident to the position of Treasurer or as may from time to time be
assigned to him or her by the Board of Directors, the Chief Executive
Officer, or the President.
(a) Each Assistant Treasurer shall have such powers and
perform such duties as may from time to time be assigned to him or her by
the Board of Directors, the Chief Executive Officer, the President, or the
Treasurer. In case of the absence or disability of the Treasurer, the
Assistant Treasurer designated by the Chief Executive Officer (or, in the
absence of such designation, by the Treasurer) shall perform the duties and
exercise the powers of the Treasurer.
4.13 Controller. The Controller shall be responsible for
-----------
maintaining the accounting records and statements, and shall properly
account for all monies and obligations due the Corporation and all
properties, assets, and liabilities of the Corporation. The Controller
shall render to the Chairman of the Board or the President such periodic
reports covering the results of operations of the Corporation as may be
required by either of them or by law.
5 . STOCK
-----
5.1 Certificates. Certificates for shares of stock of the
-------------
Corporation shall be issued under the seal of the Corporation, or a
facsimile thereof, and shall be numbered and shall be entered in the books
of the Corporation as they are issued. Each certificate shall bear a
serial number, shall exhibit the holder's name and the number of shares
evidenced thereby, and shall be signed by the Chairman of the Board or a
Vice Chairman, if any, or the Chief Executive Officer or the President or
any Vice President, and by the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon
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a certificate shall have ceased to be such officer, transfer agent, or
registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if such person or entity were such
officer, transfer agent, or registrar at the date of issue.
5.2 Transfers. Transfers of stock of the Corporation shall be
----------
made on the books of the Corporation only upon surrender to the Corporation
of a certificate (if any) for the shares duly endorsed or accompanied by
proper evidence of succession, assignment, or authority to transfer,
provided such succession, assignment, or transfer is not prohibited by the
Restated Certificate and Articles of Incorporation, these Bylaws,
applicable law or contract. Thereupon, the Corporation shall issue a new
certificate (if requested) to the person entitled thereto, cancel the old
certificate (if any), and record the transaction upon its books.
5.3 Lost, Stolen, or Destroyed Certificates. Any person
----------------------------------------
claiming a certificate of stock to be lost, stolen, or destroyed shall make
an affidavit or an affirmation of that fact, and shall give the Corporation
a bond of indemnity in satisfactory form and with one or more satisfactory
sureties, whereupon a new certificate (if requested) may be issued of the
same tenor and for the same number of shares as the one alleged to be lost,
stolen, or destroyed.
5.4 Registered Stockholders. The Corporation shall be entitled
------------------------
to recognize the exclusive right of a person registered on its books as the
owner of shares as the person entitled to exercise the rights of a
stockholder and shall not be bound to recognize any equitable or other
claim to or interest in any such shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by the GCLD or the SCAV.
5.5 Additional Powers of the Board. (a) In addition to those
-------------------------------
powers set forth in Section 4.1, the Board of Directors shall have power
and authority to make all such rules and regulations as it shall deem
expedient concerning the issue, transfer, and registration of certificates
for shares of stock of the Corporation, including the use of uncertificated
shares of stock subject to the provisions of the GCLD or the SCAV.
(a) The Board of Directors may appoint and remove transfer
agents and registrars of transfers, and may require all stock certificates
to bear the signature of any such transfer agent and/or any such registrar
of transfers.
6 . MISCELLANEOUS
-------------
6.1 Place and Inspection of Books. (a) The books of the
------------------------------
Corporation other than such books as are required by law to be kept within
13
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the State of Delaware shall be kept in such place or places either within
or without the State of Delaware as the Board of Directors may from time to
time determine.
(a) At least ten days before each meeting of stockholders,
the officer in charge of the stock ledger of the Corporation shall prepare
a complete list of the stockholders entitled to vote at the meeting,
arranged in alphabetical order and showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such
list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at
least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by
any stockholder who is present.
(b) The Board of Directors shall determine from time to
time whether and, if allowed, when and under what conditions and
regulations the accounts and books of the Corporation (except such as may
be by law specifically open to inspection or as otherwise provided by these
Bylaws) or any of them shall be open to the inspection of the stockholders
and the stockholders' rights in respect thereof.
6.2 Voting Shares in Other Corporations. The Chief Executive
------------------------------------
Officer, the President, or any other officer of the Corporation designated
by the Board of Directors may vote any and all shares held by the
Corporation in any other corporation.
6.3 Fiscal Year. The fiscal year of the Corporation shall be
------------
the calendar year.
6.4 Gender/Number. As used in these Bylaws, the masculine,
--------------
feminine, or neuter gender, and the singular or plural number, shall each
include the others whenever the context so indicates.
6.5 Paragraph Titles. The titles of the paragraphs have been
-----------------
inserted as a matter of reference only and shall not control or affect the
meaning or construction of any of the terms and provisions hereof.
6.6 Amendment. These Bylaws may be altered, amended, or
----------
repealed by (a) the affirmative vote of 80% or more of the aggregate number
of votes that the holders of the then outstanding shares of common stock
are entitled to cast on the amendment, or (b) by resolution adopted by the
affirmative vote of not less than a majority of the Directors in office, at
14
<PAGE>
any annual or regular meeting of the Board of Directors or at any special
meeting of the Board of Directors if notice of the proposed alteration,
amendment, or repeal be contained in written notice of such special
meeting. Notwithstanding the foregoing, the amendment of any provision of
these Bylaws that requires an affirmative vote in excess of a majority of
the Directors in office shall require the affirmative vote of at least the
number of directors the affirmative vote of whom is required by such
provision.
6.7 Restated Certificate and Articles of Incorporation.
---------------------------------------------------
Notwithstanding anything to the contrary contained herein, if any provision
contained in these Bylaws is inconsistent with or conflicts with a
provision of the Restated Certificate and Articles of Incorporation, such
provision of these Bylaws shall be superseded by the inconsistent provision
in the Restated Certificate and Articles of Incorporation to the extent
necessary to give effect to such provision in the Restated Certificate and
Articles of Incorporation.
CERTIFICATE OF MERGER
of
DS Sub, Inc.
a Delaware Corporation,
with and into
Delmarva Power & Light Company
a Delaware and Virginia Corporation
DELMARVA POWER & LIGHT COMPANY, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, and the Virginia Stock Corporation Act,
DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the
constituent corporations of the merger are as follows:
NAME STATE OF INCORPORATION
---- ----------------------
DS Sub, Inc. Delaware
Delmarva Power & Light Company Delaware and Virginia
SECOND: That an agreement of merger among the parties to the
merger has been approved, adopted, certified, executed and acknowledged by
each of the constituent corporations and their respective stockholders in
accordance with the requirements of subsection (c) of Section 251 of the
General Corporation Law of the State of Delaware and the applicable
provisions of the Virginia Stock Corporation Act.
<PAGE>
THIRD: That the surviving corporation shall be Delmarva Power
& Light Company, a Delaware and Virginia corporation (the "Surviving
Corporation"), and the name of the Surviving Corporation shall be "Delmarva
Power & Light Company".
FOURTH: That the certificate of incorporation and bylaws of
Delmarva Power & Light Company as in effect immediately prior to the
effective time of the merger shall be the certificate of incorporation and
bylaws of the Surviving Corporation.
FIFTH: That the executed agreement of merger is on file at an
office of the Surviving Corporation. The address of the office of the
Surviving Corporation at which a copy of the executed agreement of merger
is on file is 800 King Street, Wilmington, Delaware, 19899.
SIXTH: That a copy of the agreement of merger will be
furnished by the Surviving Corporation, on request and without cost, to any
stockholder of any constituent corporation.
SEVENTH: That the effective date and time of the merger shall be
12:01 a.m. on March 1, 1998.
Delmarva Power & Light Company
By: /s/ Barbara S. Graham
Barbara S. Graham
Senior Vice President and
Chief Financial Officer
2
(..continued)
March 5, 1998
To Members of the Financial Community:
Effective March 1, 1998, Delmarva Power & Light Company and Atlantic
Energy Inc. formed Conectiv, a new kind of power company.
With the receipt of SEC approval under the Public Utility Holding
Company Act last week, we are now one family of companies under Conectiv.
We will have a market capitalization of over $2.3 billion, and will serve
over 1 million electric customers and 100,000 gas customers in Delaware,
New Jersey, Maryland and Virginia. Our regional focus will extend beyond
into those neighboring states in the northeast where we can capitalize on
competitive opportunities for energy, HVAC services, and telecommunications
and continue to provide the excellent customer care both Atlantic and
Delmarva have been long noted for.
We commenced trading on the New York Stock Exchange on March 2, 1998
under the ticker symbols CIV (Common Stock) and CIV A (Class A). As we
begin our new company, we plan to meet with the financial community to
outline Conectiv's strategic objectives and the progress we've made to
date. Included below are some key areas which we plan to cover.
Strategic Focus
Conectiv is committed to creating shareholder value, measured in terms
of top quartile total shareholder return, with a minimum 5% growth in
annual earnings and an overall total return of at least 12%. We will
differentiate ourselves based upon a focused, competency based strategy; a
manageable level of capital investment required to produce those returns,
of which almost all funds are generated internally; and a management team
with the breadth and depth of experience to manage the portfolio of
Conectiv business assets.
Conectiv will manage its portfolio using three strategic business
groups, which are led by executives with broad experience: Conectiv Energy
Supply, led by Tom Shaw, Executive Vice President of Conectiv; Conectiv
Energy Delivery, led by Meredith I. Harlacher, Jr., President of Conectiv,
and Conectiv Enterprises, led by Barry Elson, Executive Vice President of
Conectiv. Our regulated delivery and energy supply businesses generate
strong cash flow, and provide more than adequate coverage of our dividend.
<PAGE>
The Enterprises business group includes five retail business lines:
Conectiv Communications (telecommunications); Conectiv Services (HVAC);
Conectiv Energy (retail energy); Conectiv Thermal Systems (district
heating/cooling); and Conectiv Solutions (energy services). With the
exception of retail energy, these businesses will have higher gross
margins, slightly different measures of value than the utility industry and
are expected to produce revenues of over $750 million by 2000, with a
cumulative capital investment by that time of between $300 million and
$400 million.
1997 Successes
During the last year, we have worked in both companies to bring two
organizations together, obtain the needed regulatory approvals, investing
in new processes for competing in deregulating markets, while achieving
significant progress in forging ahead with our strategy of bringing new
products and services to serve the regional marketplace. 1997 saw
significant progress attained in the Conectiv brand awareness campaign,
increased market share in regional retail pilot electric and gas programs,
the launch of Conectiv Communications as the only facilities-based local
service alternative on the Delmarva peninsula, and dramatic revenue growth
(from $33 million to $95 million on an annual basis) from Conectiv Services
through the acquisition and integration of several additional regional HVAC
contractors.
Looking ahead, we plan to continue to make investments in these
business lines, as well as the Supply and Delivery groups, with expected
consolidated capital and acquisition expenditures of over $1.5 billion
during the five year period. We plan to fund that growth internally, and
will issue new debt securities primarily to cover scheduled redemptions
during that time.
1998 will be a watershed year and contain several key events which
will help mark the beginning of Conectiv. We are committed to achieving
the merger synergies which have been identified. We truly expect that
additional savings can be gained, and have developed a "100 day plan" to
drive the staffing levels where they should be and achieve our vision of
producing value for our investors.
Critical to Conectiv's future success is the outcome of the
restructuring proceedings now pending in New Jersey, to be followed by
proceedings in Delaware and Maryland in the next few years. We plan to
aggressively pursue favorable outcomes in those states so that our
generation assets are free to compete in the energy markets.
Continued growth of Conectiv Enterprises--our retail businesses-- is
also of paramount importance during 1998 and 1999. Those businesses are in
a start-up mode and we expect the pressure on earnings to subside as these
businesses continue to grow. We believe that our investments in these new
businesses made during 1997, funded largely by Delmarva, will pay off over
the long term.
2
<PAGE>
As we go forward as Conectiv in 1998, we plan to provide you with
periodic updates on selected performance measures. Those measures are in
the areas of merger synergies, electric restructuring, and growth and
profitability measures in our Enterprises business group, which we believe
will demonstrate the progress we are making in those critical areas.
We look forward to speaking with you about Conectiv.
Sincerely,
/s/ Barbara S. Graham
-------------------------
Barbara S. Graham
Senior Vice President and
Chief Financial Officer
The Private Securities Litigation Reform Act of 1995 (Litigation Reform
Act) provides a new safe harbor for forward looking statements to encourage
such disclosures without the threat of litigation, provided those
statements are identified as forward-looking and are accompanied by
meaningful, cautionary statements identifying important factors that could
cause the actual results to differ materially from those projected in the
statement. Forward looking statements are made in this report. Such
statements are based on management's beliefs as well as assumptions made by
and information currently available to management. When used herein, the
words "will", "anticipate", "estimate", "expect", "objective" and similar
expressions are intended to identify forward-looking statements. In
addition to any assumptions, and other factors referred to specifically in
connection with such forward-looking statements, factors that could cause
actual results to differ materially from those contemplated in any forward
looking statements include, among others, the following: deregulation and
the unbundling of energy supplies and services; an increasingly competitive
energy marketplace; sales retention and growth; federal and state
regulatory actions; operating restrictions; and credit market concerns.
The Company undertakes no obligation to publicly update or revise any
forward looking statements, whether as a result of new information, future
events or otherwise. The foregoing review of factors pursuant to the
Litigation Reform Act should not be construed as exhaustive or as any
admission regarding the adequacy of disclosures made by the Company prior
to the effective date of the Litigation Reform Act.
3
<PAGE>
<TABLE>
<CAPTION>
Capital and Acquisition Expenditures: 1998-2002 ($000)
- -------------------------------------------------------
5-Year
1998 1999 2000 2001 2002 Total
---- ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Total Capital & Acquisition Expenditures* $290,346 $335,003 $301,196 $321,895 $266,095 $1,514,535
======== ======== ======== ======== ======== ==========
Energy Supply (2) $53,961 $82,660 $59,288 $96,081 $61,729 $353,719
Energy Delivery (2) $131,067 $142,207 $147,994 $136,267 $134,552 $692,087
Enterprises $97,818 $102,636 $86,414 $82,047 $62,314 $431,229
Conectiv Services $31,510 $27,740 $2,923 $1,174 $1,183
Conectiv Communications $32,770 $34,201 $38,609 $36,606 $25,091
Conectiv Solutions $7,276 $40,211 $28,278 $31,718 $36,001
Conectiv Energy $945 $484 $121 $209 $39
Conectiv Thermal (2) $25,317 $16,483 $12,340
Enertech $7,500 $7,500 $7,500 $7,500 $7,500 $37,500
</TABLE>
Note: (1) Energy Supply and Energy Delivery include one-half of common plant
expenditures.
(2) Represents budgeted common equity contribution.
* Excludes AFUDC
4
<PAGE>
<TABLE>
<CAPTION>
Conectiv Sources and Uses of Cash: 1998-2002 ($000)
- ----------------------------------------------------
5-Year
1998 1999 2000 2001 2002 Total
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Cash Requirements
Capital and Acquisition Expenditures $290,346 $335,003 $301,196 $321,895 $266,095 $1,514,535
Changes in Working Capital 24,803 15,482 26,048 26,202 23,090 115,625
-------- -------- -------- -------- -------- ----------
Total Cash Required $315,149 $350,485 $327,244 $348,097 $289,185 $1,630,160
======== ======== ======== ======== ======== ==========
Internally Generated Funds $281,785 $263,120 $296,573 $334,441 $381,732 $1,557,651
External Financings 134,907 149,732 79,398 68,752 18,198 450,987
Redemption of Securities (101,543) (62,367) (48,727) (55,096) (110,745) (378,478)
-------- -------- -------- -------- -------- ----------
Total Sources of Cash $315,149 $350,485 $327,244 $348,097 $289,185 $1,630,160
======== ======== ======== ======== ======== ===========
</TABLE>
