UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
September 23, 1999
(Date of earliest
event reported)
PECO ENERGY COMPANY
(Exact name of registrant as specified in its charter)
Pennsylvania 1-1401 23-0970240
(State or other (Commission (IRS Employer
jurisdiction of file number) Identification
incorporation) Number)
230l Market Street, Philadelphia, Pennsylvania 19101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(215) 841-4000
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Item 5. Other Events
On September 23, 1999, PECO Energy Company (the "Company") announced
that it entered into an Agreement and Plan of Exchange and Merger, dated as of
September 22, 1999 (the "Merger Agreement"), with Unicom Corporation, an
Illinois corporation ("Unicom") and Newholdco Corporation, a Pennsylvania
corporation and wholly owned subsidiary of the Company ("Newco"). The Merger
Agreement provides for (a) the mandatory exchange of the outstanding common
stock of the Company for common stock of Newco or cash (the "Share Exchange")
and (b) the merger of Unicom with and into Newco (the "Merger" and, together
with the Share Exchange, the "Merger Transaction"). Attached to this Current
Report on Form 8-K is the Merger Agreement.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired. Not applicable.
(b) Pro Forma Financial Information. Not applicable.
(c) Exhibits
99. Agreement and Plan of Exchange and Merger dated as of September 22, 1999,
among PECO Energy Company, Newholdco Corporation and Unicom Corporation
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SIGNATURES
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.
PECO ENERGY COMPANY
\s\ Jean H. Gibson
-----------------------
Jean H. Gibson
Vice President & Controller
September 28, 1999
AGREEMENT AND PLAN OF EXCHANGE AND MERGER
Dated as of September 22, 1999,
Among
PECO ENERGY COMPANY,
NEWHOLDCO CORPORATION
And
UNICOM CORPORATION
<PAGE>
AGREEMENT AND PLAN OF EXCHANGE AND MERGER
dated as of September 22, 1999 (this "Agreement"),
among PECO ENERGY COMPANY, a Pennsylvania corporation
("Parent"), NEWHOLDCO CORPORATION (as defined
herein), a Pennsylvania corporation and a wholly
owned subsidiary of Parent ("Newco"), and UNICOM
CORPORATION, an Illinois corporation (the "Company").
WHEREAS the respective Boards of Directors of Parent, Newco
and the Company have approved the consummation of the business combination
provided for in this Agreement, pursuant to which (a) Parent and Newco will, on
the terms and subject to the conditions set forth in this Agreement, effect a
mandatory share exchange (the "First Step Exchange") whereby each outstanding
share of common stock, no par value, of Parent (the "Parent Common Stock") shall
be acquired by Newco in exchange for common stock, no par value, of Newco (the
"Newco Common Stock") or cash, as herein provided, (b) immediately thereafter,
the Company will, on the terms and subject to the conditions set forth in this
Agreement, merge with and into Newco (the "Second Step Merger" and, together
with the First Step Exchange, the "Merger"), whereby each share of common stock,
no par value, of the Company (the "Company Common Stock") will be converted into
the right to receive Newco Common Stock or cash, as herein provided, (c) the
holders of Parent Common Stock and Company Common Stock will together own all of
the outstanding shares of Newco Common Stock and (d) each share of each other
class of capital stock of Parent and the Company shall be unaffected and remain
outstanding;
WHEREAS for Federal income tax purposes it is intended that
the Merger constitutes transactions described in Section 351 of the Internal
Revenue Code of 1986, as amended (the "Code"), and the Second Step Merger
constitutes a transaction described in Section 368(a) of the Code; and
WHEREAS Parent, Newco and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
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NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
ARTICLE I
The Exchange and Merger
SECTION 1.01. The Exchange and Merger. (a) On the terms and
subject to the conditions set forth in this Agreement, in accordance with the
Business Corporation Law of the Commonwealth of Pennsylvania ("PBCL"), Parent
and Newco shall effect the First Step Exchange at the Exchange Effective Time
(as defined in Section 1.03). As a result of the First Step Exchange, Parent
shall become a wholly owned subsidiary of Newco. The effects and the
consequences of the First Step Exchange and the Second Step Merger shall be as
set forth in Section 1.04.
(b) On the terms and subject to the conditions set forth in
this Agreement, in accordance with the Illinois Business Corporation Act (the
"IBCA") and the PBCL, the Company shall be merged with and into Newco at the
Merger Effective Time (as defined in Section 1.03). At the Merger Effective
Time, the separate corporate existence of the Company shall cease and Newco
shall continue as the surviving corporation (the "Surviving Corporation").
(c) The First Step Exchange, the Second Step Merger, the
issuance by Newco of Newco Common Stock in connection with the Merger (the
"Share Issuance") and the other transactions contemplated by this Agreement are
referred to in this Agreement collectively as the "Transactions".
SECTION 1.02. Closing. The closing (the "Closing") of the
Merger shall take place at such location as shall be determined by the parties
at 10:00 a.m. on the second business day following the satisfaction (or, to the
extent permitted by Applicable Law (as defined in Section 3.05), waiver by all
parties) of the conditions set forth in Section 7.01, or, if on such day any
condition set forth in Section 7.02 or 7.03 has not been satisfied (or, to the
extent permitted by Applicable Law, waived by the party or parties entitled to
the benefits thereof), as soon as practicable after all the conditions set forth
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3
in Article VII have been satisfied (or, to the extent permitted by Applicable
Law, waived by the parties entitled to the benefits thereof), or at such other
place, time and date as shall be agreed in writing between Parent and the
Company. The date on which the Closing occurs is referred to in this Agreement
as the "Closing Date".
SECTION 1.03. Merger Effective Time. (a) Prior to the Closing,
Parent shall prepare, and on the Closing Date Parent shall file with the
Department of State of the Commonwealth of Pennsylvania, articles of exchange or
other appropriate documents (in any such case, the "Articles of Exchange")
executed in accordance with the relevant provisions of the PBCL and shall make
all other filings or recordings required under the PBCL to effect the First Step
Exchange. The First Step Exchange shall become effective at such time as the
Articles of Exchange are duly filed with such Department of State, or at such
other time as Newco and Parent shall agree and specify in the Articles of
Exchange (the time the First Step Exchange becomes effective being the "Exchange
Effective Time").
(b) Prior to the Closing and after the Exchange Effective
Time, Newco and the Company shall prepare, and on the Closing Date and after the
Exchange Effective Time Newco and the Company shall (i) file with the Department
of State of the Commonwealth of Pennsylvania, the articles of merger or other
appropriate documents (in any such case, the "Pennsylvania Articles of Merger")
executed in accordance with the relevant provisions of the PBCL and shall make
all other filings or recordings required under the PBCL to effect the Second
Step Merger and (ii) thereafter file with the Secretary of State of the State of
Illinois, articles of merger or other appropriate documents (in any such case,
the "Illinois Articles of Merger") executed in accordance with the relevant
provisions of the IBCA and shall make all other filings or recordings required
under the IBCA to effect the Second Step Merger. The Second Step Merger shall
become effective at such time as the Illinois Articles of Merger are duly filed
as provided by Applicable Law and the Secretary of State of the State of
Illinois has issued a certificate of merger in respect of the Second Step
Merger, or at such other time as Newco and the Company shall agree and specify
as provided by Applicable Law (the time the
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4
Second Step Merger becomes effective being the "Merger Effective Time").
SECTION 1.04. Effects. The First Step Exchange shall have the
effects set forth in Section 1931 of the PBCL. The Second Step Merger shall have
the effects set forth in Section 1929 of the PBCL and Section 11.50 of the IBCA.
SECTION 1.05. Articles of Incorporation and By-laws. (a) At
the Merger Effective Time, the Articles of Incorporation of Newco (the "Newco
Articles") shall, until thereafter changed or amended as provided therein or by
Applicable Law and as Parent and the Company shall have agreed prior to the
Merger Effective Time, be the Articles of Incorporation of the Surviving
Corporation and shall in any case be amended to provide that the name of Newco
be changed to such name as shall be mutually agreed to by Parent and the
Company.
(b) At the Merger Effective Time, the By-laws of Newco (the
"Newco By-laws") shall, until thereafter changed or amended as provided therein
or by Applicable Law and as Parent and the Company shall have agreed prior to
the Merger Effective Time, be the By-laws of the Surviving Corporation, and
shall in any case be amended by inserting the provisions set forth in Exhibit A
as Article X thereof.
SECTION 1.06. Newco Board of Directors. (a) The directors of
Parent immediately prior to the Exchange Effective Time shall be the directors
of Newco as of the Exchange Effective Time, until the earlier of the Merger
Effective Time or their resignation or removal or the due election and
qualification of their respective successors, as the case may be.
(b) In accordance with the Newco By-laws, as amended pursuant
to Section 1.05(b), as of the Merger Effective Time, the Board of Directors of
the Surviving Corporation (the "Newco Board") shall consist of 16 members, eight
of whom shall be serving as members of the Board of Directors of Parent
immediately prior to the Merger Effective Time who are recommended by the Board
of Directors of Parent immediately prior to the Merger Effective Time,
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5
and eight of whom of whom shall be members of the Board of Directors of the
Company immediately prior to the Merger Effective Time who are recommended by
the Board of Directors of the Company immediately prior to the Merger Effective
Time.
SECTION 1.07. Newco Senior Officers. As of the Merger
Effective Time the senior officers of Newco shall be as set forth in Exhibit B
and shall hold office until their respective successors are duly elected and
qualified, or until their earlier death, resignation or removal in accordance
with the Newco By-Laws.
SECTION 1.08. Operations. (a) Corporate Offices. The Surviving
Corporation shall maintain (i) in Chicago, Illinois offices serving as its
corporate headquarters, (ii) in southeastern Pennsylvania offices serving as the
headquarters of the generation and power marketing businesses of the Surviving
Corporation and its subsidiaries, and (ii) offices in Chicago, Illinois and
southeastern Pennsylvania as the headquarters of Commonwealth Edison Company, an
Illinois corporation ("ComEd"), and Parent, respectively. The chief nuclear
officer of the Surviving Corporation shall maintain offices in both Chicago,
Illinois and Southeastern Pennsylvania.
(b) Charities. The parties agree that provision of charitable
contribution and community support in the respective service areas of Parent and
the Company and their respective subsidiaries serves a number of important
goals. During the two-year period immediately following the Merger Effective
Time, the Surviving Corporation shall provide, directly or indirectly,
charitable contributions and traditional local community support within the
respective service areas of Parent and the Company and each of their
subsidiaries that are utilities at levels substantially comparable to and no
less than the levels of charitable contributions and community support provided
by Parent and the Company and such subsidiaries within their service areas
within the two-year period immediately prior to the Merger Effective Time.
ARTICLE II
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6
Effect on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock. (a) First Step
Exchange. At the Exchange Effective Time, by virtue of the First Step Exchange
and without any action on the part of the holder of any shares of Parent Common
Stock or Newco Common Stock:
(i) Cancelation of Treasury Stock. Each share of Parent Common
Stock that is owned by Parent shall automatically be canceled and
retired and shall cease to exist, and no Newco Common Stock or other
consideration shall be delivered or deliverable in exchange therefor.
(ii) Exchange of Parent Common Stock. (A) Subject to Section
2.01(a)(i) and Section 2.02(a)(iii), each issued share of Parent Common
Stock shall be exchanged for either (1) $45.00 in cash (the "Parent
Cash Consideration") or (2) one fully paid and nonassessable share of
Newco Common Stock (the "Parent Exchange Ratio"), in each case as the
holder thereof shall have elected or be deemed to have elected, in
accordance with Section 2.01(a)(iv).
(B) The Parent Cash Consideration and shares of Newco
Common Stock to be issued by Newco upon the exchange of shares
of Parent Common Stock pursuant to this Section 2.01(a)(ii)
are referred to collectively as "Exchange Consideration". As
of the Exchange Effective Time, all such shares of Parent
Common Stock shall be exchanged for Exchange Consideration and
such shares of Parent Common Stock shall remain outstanding
and shall be owned and held by Newco, and each holder of a
certificate representing any such shares of Parent Common
Stock shall cease to have any rights with respect thereto,
except the right to receive Exchange Consideration upon
surrender of such certificate in accordance with Section 2.02,
without interest.
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7
(iii) Allocation. Notwithstanding anything in this Agreement
to the contrary, the number of shares of Parent Common Stock to be
converted into the right to receive the Parent Cash Consideration in
the First Step Exchange (the "Parent Cash Number") will be equal to
16,666,666 shares of Parent Common Stock. The number of shares of
Parent Common Stock to be converted into the right to receive the
Parent Stock Consideration in the First Step Exchange (the "Parent
Stock Number") will be equal to (A) the number of shares of Parent
Common Stock issued and outstanding immediately prior to the Exchange
Effective Time (ignoring for this purpose any Parent Common Stock to be
canceled pursuant to Section 2.01(a)(i)) less (B) the Parent Cash
Number.
(iv) Election. Subject to allocation in accordance with the
provisions of this Section 2.01(a), each record holder of shares of
Parent Common Stock (other than shares to be canceled in accordance
with Section 2.01(a)(i)) issued and outstanding immediately prior to
the Election Deadline (as defined in Section 2.02(b)) will be entitled,
in accordance with Section 2.02(b), (i) to elect to receive in respect
of each such share (A) the Parent Cash Consideration (a "Parent Cash
Election") or (B) the Parent Stock Consideration (a "Parent Stock
Election") or (ii) to indicate that such record holder has no
preference as to the receipt of the Parent Cash Consideration or the
Parent Stock Consideration for all such shares held by such holder (a
"Parent Non-Election"); provided, however, that record holders of
Parent Common Stock who own, as of the date of the Election Deadline,
less than 100 shares of Parent Common Stock in respect of which a
Parent Non-Election is made or no election is made (all such shares,
collectively with Parent Odd Lot Cash Election Shares (as hereinafter
defined) being herein referred to as the "Parent Deminimis Shares"),
will be deemed to have elected to receive the Parent Cash Consideration
for such shares. "Parent Odd Lot Cash Election Shares" means shares of
Parent Common Stock held by record holders of Parent Common Stock who,
as of the date of the Election Deadline, own less than 100 shares of
Parent Common Stock and have made Parent Cash Elections in respect of
all such shares.
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8
(v) Allocation of Parent Cash Election Shares. In the event
that the aggregate number of shares in respect of which Parent Cash
Elections have been made or are deemed to have been made in accordance
with the proviso at the end of the first sentence of Section
2.01(a)(iv) (the "Parent Cash Election Shares") exceeds the Parent Cash
Number, all shares of Parent Common Stock in respect of which Parent
Stock Elections have been made ("the Parent Stock Election Shares") and
all Parent Non-Election Shares (as defined in Section 2.01(a)(vii))
will be converted into the right to receive the Parent Stock
Consideration, and the Parent Cash Election Shares will be converted
into the right to receive the Parent Cash Consideration or the Parent
Stock Consideration in the following manner:
(A) all Parent Deminimis Shares will be converted
into the right to receive the Parent Cash Consideration;
(B) the number of Parent Cash Election Shares, other
than Parent Deminimis Shares, covered by each Form of Election
(as defined in Section 2.02(b)) to be converted into Parent
Cash Consideration will be determined by multiplying the
number of Parent Cash Election Shares covered by such Form of
Election by a fraction, (A) the numerator of which is the
Parent Cash Number less the number of Parent Deminimis Shares
and (B) the denominator of which is the aggregate number of
Parent Cash Election Shares less the number of Parent
Deminimis Shares, rounded down to the nearest whole number;
provided, however, that, if as a result of such proration, any
holder of Parent Cash Election Shares would, but for this
proviso, receive less than 100 shares of Newco Common Stock in
accordance with Section 2.01(a)(v)(C), all Parent Cash
Election Shares held by such holders (the "Parent Non-Prorated
Cash Shares") will be converted into the Parent Cash
Consideration and the remaining Parent Cash Election Shares to
be converted into the Parent Cash Consideration will be
determined by
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multiplying the number of Parent Cash Election Shares covered
by such Form of Election by a fraction, (A) the numerator of
which is the Parent Cash Number less the sum of the number of
Parent Deminimis Shares and Parent Non-Prorated Cash Shares
and (B) the denominator of which is the aggregate number of
Parent Cash Election Shares less the sum of the number of
Parent Deminimis Shares and Parent Non-Prorated Cash Shares,
rounded down to the nearest whole number; provided further,
however, that, if the number of Parent Non-Prorated Cash
Shares exceeds the difference between the Parent Cash Number
and the number of Parent Deminimis Shares, the Parent
Non-Prorated Cash Shares will be converted into the Parent
Cash Consideration by selecting, by lottery or such other
method as mutually agreed to by Parent and the Company, from
among the record holders of Parent Non-Prorated Cash Shares a
sufficient number of such holders (the "Parent Cash
Designees") such that the number of Parent Cash Election
Shares held by the Parent Cash Designees will, when added to
the Parent Deminimis Shares, be equal as closely as
practicable to the Parent Cash Number, and all such Parent
Cash Election Shares held by such Parent Cash Designees will
be converted into the right to receive the Parent Cash
Consideration; and
(C) all Parent Cash Election Shares not converted
into Parent Cash Consideration in accordance with Section
2.01(a)(v)(A) or (B) will be converted into the right to
receive the Parent Stock Consideration.
(vi) Allocation of Parent Stock Election Shares. In the event
that the aggregate number of Parent Stock Election Shares exceeds the
Parent Stock Number, all Parent Cash Election Shares and all Parent
Non-Election Shares (together, the "Parent Cash Shares") will be
converted into the right to receive the Parent Cash Consideration, and
all Parent Stock Election Shares will be converted into the right to
receive the Parent Cash Consideration or the Parent Stock Consideration
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10
in the following manner:
(A) the number of Parent Stock Election Shares
covered by each Form of Election to be converted into Parent
Cash Consideration will be determined by multiplying the
number of Parent Stock Election Shares covered by such Form of
Election by a fraction, (1) the numerator of which is the
Parent Cash Number less the number of Parent Cash Shares and
(2) the denominator of which is the aggregate number of Parent
Stock Election Shares, rounded down to the nearest whole
number; and
(B) all Parent Stock Election Shares not converted
into Parent Cash Consideration in accordance with Section
2.01(a)(vi)(A) will be converted into the right to receive the
Parent Stock Consideration.
(vii) No Allocation. In the event that neither Section
2.01(a)(v) nor Section 2.01(a)(vi) is applicable, all Parent Cash
Election Shares and deemed Parent Cash Election Shares will be
converted into the right to receive the Parent Cash Consideration, all
Parent Stock Election Shares will be converted into the right to
receive the Parent Stock Consideration, a number of Parent Non-Election
Shares (as hereinafter defined) equal to the Parent Cash Number minus
the sum of Parent Cash Election Shares and Parent Deminimis Shares will
be converted into the right to receive the Parent Cash Consideration
and a number of Parent Non-Election Shares equal to the Parent Stock
Number minus Parent Stock Election Shares will be converted into the
right to receive the Parent Stock Consideration. "Parent Non-Election
Shares" means, collectively, shares of Parent Common Stock in respect
of which a Parent Non-Election is made or as to which no election is
made, other than Parent Deminimis Shares.
(viii) Computations. The Exchange Agent (as defined in Section
2.02(c)) consultation with Parent and the Company, will make all
computations to give effect to this Section 2.01(a).
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(ix) Parent Preferred Stock. The Parent Preferred Stock (as
defined in Section 4.03(a)) outstanding immediately prior to the
Exchange Effective Time shall remain outstanding, without change, after
the Exchange Effective Time, and no consideration shall be delivered or
deliverable in exchange therefor.
(x) Dissent Rights. Notwithstanding anything in this Agreement
to the contrary, shares ("Parent Dissent Shares") of Parent Common
Stock that are outstanding immediately prior to the Exchange Effective
Time and that are held by any person who is entitled to demand and
properly demands payment of the fair value of such Parent Dissent
Shares pursuant to, and who complies in all respects with, Subchapter D
of Chapter 15 of the PBCL ("Subchapter D") shall not be converted into
Exchange Consideration as provided in Section 2.01(a)(ii), but rather
the holders of Parent Dissent Shares shall be entitled to payment of
the fair value of such Parent Dissent Shares in accordance with
Subchapter D; provided, however, that if any such holder shall fail to
perfect or otherwise shall waive, withdraw or lose the right to receive
payment of fair market value under Subchapter D, then the right of such
holder to be paid the fair value of such holder's Parent Dissent Shares
shall cease and such Parent Dissent Shares shall be deemed to have been
converted as of the Exchange Effective Time into, and to have become
exchangeable solely for the right to receive, Exchange Consideration as
provided in Section 2.01(a)(ii).
(b) Second Step Merger. At the Merger Effective Time, by
virtue of the Second Step Merger and without any action on the part of the
holder of any shares of Company Common Stock or Newco Common Stock:
(i) Cancelation of Treasury Stock and Newco- Owned Stock. Each
share of Company Common Stock that is owned by the Company or Newco
shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and no Newco Common Stock or other
consideration shall be delivered or deliverable in exchange therefor.
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(ii) Conversion of Company Common Stock. (A) Subject to
Sections 2.01(b)(i), 2.01(b)(iii) and 2.02(e), each issued share of
Company Common Stock shall be converted into the right to receive
either (1) $42.75 in cash (the "Company Cash Consideration") or (2)
0.95 (the "Company Conversion Number") fully paid and nonassessable
shares of Newco Common Stock (the "Company Exchange Ratio"), in each
case as the holder thereof shall have elected or be deemed to have
elected, in accordance with Section 2.01(b)(iv).
(B) The Company Cash Consideration, shares of Newco Common
Stock to be issued upon the conversion of shares of Company Common
Stock pursuant to this Section 2.01(b)(ii) and cash in lieu of
fractional shares of Newco Common Stock as contemplated by Section
2.02(e) are referred to collectively as "Merger Consideration". As of
the Merger Effective Time, all such shares of Company Common Stock
shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall cease to
have any rights with respect thereto, except the right to receive
Merger Consideration upon surrender of such certificate in accordance
with Section 2.02, without interest.
(iii) Allocation. Notwithstanding anything in this Agreement
to the contrary, the number of shares of the Company Common Stock to be
converted into the right to receive the Company Cash Consideration in
the Second Step Merger (the "Company Cash Number") will be equal to
17,543,859 shares of the Company Common Stock. The number of shares of
the Company Common Stock to be converted into the right to receive the
Company Stock Consideration in the Second Step Merger (the "Company
Stock Number") will be equal to (A) the number of shares of the Company
Common Stock issued and outstanding immediately prior to the Merger
Effective Time (ignoring for this purpose any Company Common Stock to
be canceled pursuant to Section 2.01(b)(i)) less (B) the Company Cash
Number.
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(iv) Election. Subject to allocation in accordance with the
provisions of this Section 2.01(b), each record holder of shares of the
Company Common Stock (other than shares to be canceled in accordance
with Section 2.01(b)(i)) issued and outstanding immediately prior to
the Election Deadline will be entitled, in accordance with Section
2.02(b), (i) to elect to receive in respect of each such share (A) the
Company Cash Consideration (a "Company Cash Election") or (B) the
Company Stock Consideration (a "Company Stock Election") or (ii) to
indicate that such record holder has no preference as to the receipt of
the Company Cash Consideration or the Company Stock Consideration for
all such shares held by such holder (a "Company Non-Election");
provided, however, that record holders of Company Common Stock who own,
as of the date of the Election Deadline, less than 100 shares of the
Company Common Stock in respect of which a Company Non-Election is made
or no election is made (all such shares, collectively with Company Odd
Lot Cash Election Shares (as hereinafter defined) being herein referred
to as the "Company Deminimis Shares") will be deemed to have elected to
receive the Company Cash Consideration for such shares. "Company Odd
Lot Cash Election Shares" means shares of Company Common Stock held by
record holders of Company Common Stock who, as of the date of the
Election Deadline, own less than 100 Shares of Company Common Stock and
have made Company Cash Elections in respect of all such shares.
(v) Allocation of the Company Cash Election Shares. In the
event that the aggregate number of shares in respect of which the
Company Cash Elections have been made or are deemed to have been made
in accordance with the proviso at the end of the first sentence of
Section 2.01(b)(iv) (the "Company Cash Election Shares") exceeds the
Company Cash Number, all shares of the Company Common Stock in respect
of which the Company Stock Elections have been made (the "Company Stock
Election Shares") and all the Company Non-Election Shares (as defined
in Section 2.01(b)(vii)) will be converted into the right to receive
the Company Stock Consideration (and cash in lieu of fractional
interests in accordance with
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Section 2.02(e)), and the Company Cash Election Shares will be
converted into the right to receive the Company Cash Consideration or
the Company Stock Consideration in the following manner:
(A) all the Company Deminimis Shares will be converted into
the right to receive the Company Cash Consideration;
(B) the number of the Company Cash Election Shares, other than
the Company Deminimis Shares, covered by each Form of Election to be
converted into the Company Cash Consideration will be determined by
multiplying the number of the Company Cash Election Shares covered by
such Form of Election by a fraction, (A) the numerator of which is the
Company Cash Number less the number of the Company Deminimis Shares and
(B) the denominator of which is the aggregate number of the Company
Cash Election Shares less the number of the Company Deminimis Shares,
rounded down to the nearest whole number; provided, however, that, if
as a result of such proration, any holder of the Company Cash Election
Shares would, but for this proviso, receive less than 100 shares of
Newco Common Stock in accordance with Section 2.01(b)(v)(C), all the
Company Cash Election Shares held by such holders (the "Company
Non-Prorated Cash Shares") will be converted into the
Company Cash Consideration and the remaining the Company Cash Election
Shares to be converted into the Company Cash Consideration will be
determined by multiplying the number of the Company Cash Election
Shares covered by such Form of Election by a fraction, (A) the
numerator of which is the Company Cash Number less the sum of the
number of the Company Deminimis Shares and the Company Non-Prorated
Cash Shares and (B) the denominator of which is the aggregate number of
the Company Cash Election Shares less the sum of the number of the
Company Deminimis Shares and the Company Non-Prorated Cash Shares,
rounded down to the nearest whole number; provided further, however,
that, if the number of the Company Non-Prorated Cash Shares exceeds the
difference between the Company Cash Number and the number of the
Company Deminimis Shares, the Company Non-Prorated Cash Shares will be
converted into the
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Company Cash Consideration by selecting, by lottery or such other
method as mutually agreed to by Parent and the Company, from among the
record holders of the Company Non-Prorated Cash Shares a sufficient
number of such holders (the "Company Cash Designees") such that the
number of the Company Cash Election Shares held by the Company Cash
Designees will, when added to the Company Deminimis Shares, be equal as
closely as practicable to the Company Cash Number, and all such the
Company Cash Election Shares held by such the Company Cash Designees
will be converted into the right to receive the Company Cash
Consideration; and
(C) all Company Cash Election Shares not converted into the
Company Cash Consideration in accordance with Section 2.01(b)(v)(A) or
(B) will be converted into the right to receive the Company Stock
Consideration (and cash in lieu of fractional interests in accordance
with Section 2.02(e)).
(vi) Allocation of the Company Stock Election Shares. In the
event that the aggregate number of the Company Stock Election Shares
exceeds the Company Stock Number, all the Company Cash Election Shares
and all the Company Non-Election Shares (together, the "Company Cash
Shares") will be converted into the right to receive the Company Cash
Consideration, and all the Company Stock Election Shares will be
converted into the right to receive the Company Cash Consideration or
the Company Stock Consideration in the following manner:
(A) the number of the Company Stock Election Shares covered by
each Form of Election to be converted into the Company Cash
Consideration will be determined by multiplying the number of the
Company Stock Election Shares covered by such Form of Election by a
fraction, (A) the numerator of which is the Company Cash Number less
the number of the Company Cash Shares and (B) the denominator of which
is the aggregate number of the Company Stock Election Shares, rounded
down to the nearest whole number; and
(B) all the Company Stock Election Shares not converted into
<PAGE>
16
the Company Cash Consideration in accordance with Section
2.01(b)(vi)(A) will be converted into the right to receive the Company
Stock Consideration (and cash in lieu of fractional interests in
accordance with Section 2.02(e)).
(vii) No Allocation. In the event that neither Section
2.01(b)(v) nor Section 2.01(b)(vi) is applicable, all the Company Cash
Election Shares and deemed Company Cash Election Shares shall be
converted into the right to receive the Company Cash Consideration, all
the Company Stock Election Shares shall be converted into the right to
receive the Company Stock Consideration (and cash in lieu of fractional
interests in accordance with Section 2.02(e)), a number of Company
Non-Election Shares (as hereinafter defined) equal to the Company Cash
Number minus the sum of Company Cash Election Shares and Company
Deminimis Shares will be converted into the right to receive the
Company Cash Consideration and a number of Company Non-Election Shares
equal to the Company Stock Number minus Company Stock Election Shares
will be converted into the right to receive the Company Stock
Consideration (and cash in lieu of fractional interests in accordance
with Section 2.02(e)). "Company Non-Election Shares" means,
collectively, shares of Company Common Stock in respect of which a
Company Non-Election is made or as to which no election is made, other
than Company Deminimis Shares.
(viii) Computations. The Exchange Agent, in consultation with
Parent and the Company, will make all computations to give effect to
this Section 2.01(b).
(ix) Newco Common Stock. The Newco Common Stock outstanding
immediately prior to the Merger Effective Time issued as contemplated
by Section 2.01(a)(ii) shall remain outstanding, without change, after
the Merger Effective Time, and no Merger Consideration shall be
delivered or deliverable in exchange therefor.
(x) Dissent Rights. Notwithstanding anything in this Agreement
to the contrary, shares ("Company
<PAGE>
17
Dissent Shares") of Company Common Stock that are outstanding
immediately prior to the Merger Effective Time and that are held by any
person who is entitled to demand and properly demands payment of the
fair value of such Company Dissent Shares pursuant to, and who complies
in all respects with, Sections 11.65 and 11.70 of the IBCA ("Sections
11.65 and 11.70") shall be converted into the right to receive Merger
Consideration as provided in Section 2.01(b)(ii), and shall thereafter
be subject to sale and purchase rights in accordance with Sections
11.65 and 11.70.
SECTION 2.02. Exchange of Certificates. (a) Exchange Agent.
Promptly following the Merger Effective Time, Newco shall deposit with such bank
or trust company as may be designated by Newco and reasonably acceptable to
Parent and the Company (the "Exchange Agent"), for the benefit of the holders of
shares of Parent Common Stock and Company Common Stock, for exchange in
accordance with this Article II, through the Exchange Agent, cash equal to the
sum of the total aggregate Parent Cash Consideration and Company Cash
Consideration and certificates representing the shares of Newco Common Stock
issuable pursuant to Section 2.01 in exchange for outstanding Company
Certificates or Parent Certificates. Newco shall provide to the Exchange Agent
on a timely basis, as and when needed after the Merger Effective Time, cash
equal to the sum of the total aggregate Parent Cash Consideration and Company
Cash Consideration (such shares of Newco Common Stock and cash, together with
any dividends or distributions with respect thereto, being hereinafter referred
to as the "Exchange Fund"). For the purposes of such deposit, Newco shall assume
that there will not be any fractional shares of Newco Common Stock. Newco shall
make available to the Exchange Agent, for addition to the Exchange Fund, from
time to time as needed, cash sufficient to pay cash in lieu of fractional shares
in accordance with Section 2.02(e).
(b) Exchange Procedures. (i) Not more than 90 days nor fewer
than 30 days prior to the Closing Date, the Exchange Agent will mail a form of
election (a "Form of Election") to holders of record of shares of Parent Common
Stock and to the holders of record of shares of Company Common Stock (as of a
record date as close as practicable to the date of
<PAGE>
18
mailing and mutually agreed to by Parent and Company). In addition, the Exchange
Agent will use its best efforts to make the Form of Election available to all
persons who become shareholders of Parent or Company during the period between
such record date and the Closing Date. Any election to receive the Exchange
Consideration contemplated by Section 2.01(a)(iv) or the Merger Consideration
contemplated by Section 2.01(b)(iv) will have been properly made only if the
Exchange Agent shall have received at its designated office or offices, by 5:00
p.m., New York City time, on the fifth business day immediately preceding the
Closing Date or such other date as may be agreed to by Parent and the Company
(the "Election Deadline"), a Form of Election properly completed and accompanied
by a Parent Certificate (as hereinafter defined) or a Company Certificate (as
hereinafter defined), as the case may be for the shares to which such Form of
Election relates, duly endorsed in blank or otherwise acceptable for transfer on
the books of Parent or Company, as the case may be (or an appropriate guarantee
of delivery), as set forth in such Form of Election. An election may be revoked
only by written notice received by the Exchange Agent prior to 5:00 p.m., New
York City time, on the Election Deadline. A revoked election cannot be
reinstated without valid resubmission, by the Election Deadline of a valid
Election Form, and a revocation will not constitute an election for any other
consideration. Revoked elections can only be replaced by a new Form of Election
properly completed and accompanied by the applicable Parent Certificate or a
Company Certificate, duly endorsed in blank or otherwise acceptable for transfer
in accordance with the previous sentence that is received by the Exchange Agent
by the Election Deadline. All elections shall automatically be revoked if the
Exchange Agent is notified in writing by Parent and Company that either of the
First Step Exchange or the Second Step Merger has been abandoned. If an election
is so revoked, the Certificate(s) (as hereinafter defined) (or guarantee of
delivery, as appropriate) to which such election relates will be promptly
returned to the person submitting the same to the Exchange Agent. In the case of
multiple Forms of Elections are received by the Exchange Agent in respect of the
same share of Company Common Stock or Parent Common Stock, as the case may be,
the last dated (or if not dated, the last received) will govern.
<PAGE>
19
(ii) Two or more holders of Parent Common Stock or Company
Common Stock who are determined to constructively own the shares of Parent
Common Stock or Company Common Stock, as the case may be, owned by each other by
virtue of Section 318(a) of the Code, and who so certify to Parent's and
Company's satisfaction, and any single holder of shares of Parent Common Stock
or Company Common Stock who holds his shares in two or more different names and
who so certifies to Parent's and Company's satisfaction, may submit a joint Form
of Election covering the aggregate shares of Parent Common Stock or Company
Common Stock, as the case may be, owned by all such holders or by such single
holder, as the case may be. For all purposes of this Agreement, each such group
of holders that, and each such single holder who, submits a joint Form of
Election shall be treated as a single holder of Parent Common Stock or Company
Common Stock, as the case may be.
(iii) Record holders of Parent Common Stock or Company Common
Stock who are nominees only may submit a separate Form of Election for each
beneficial owner for whom such record holder is a nominee; provided, however,
that on the request of Parent or Company, such record holder shall certify to
the satisfaction of Parent or Company that such record holder holds such Parent
Common Stock or Company Common Stock, as the case may be, as nominee for the
beneficial owner thereof. For purposes of this Agreement, each beneficial owner
for which a Form of Election is submitted will be treated as a separate holder
of Parent Common Stock or Company Common Stock, as the case may be, subject,
however, to the immediately preceding sub-paragraph (ii) dealing with joint
Forms of Election and the immediately following sub-paragraph (iii) dealing with
dividend reinvestment plans.
(iv) Any dividend reinvestment plan, employee stock ownership
plan or similar plan of the Company may be treated as a single holder of Company
Common Stock or Parent Common Stock for the purposes of Section 2.02(e).
(v) As soon as reasonably practicable after the Merger
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates that immediately prior to the Exchange Effective
Time represented outstanding shares of Parent Common Stock that were converted
into the right to receive Exchange Consideration (the "Parent Certificates") or
that
<PAGE>
20
immediately prior to the Merger Effective Time represented outstanding
shares of Company Common Stock that were converted into the right to receive
Merger Consideration (the "Company Certificates" and, together with the Parent
Certificates, the "Certificates"), in each case, pursuant to Section 2.01, (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for Exchange Consideration or Merger Consideration, as the case may be.
(vi) With respect to properly made elections in accordance
with Section 2.02(b)(i), upon surrender of a Certificate for cancelation to the
Exchange Agent, together with such letter of transmittal, duly executed, and
such other documents as may reasonably be required by the Exchange Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor
Parent Cash Consideration or Company Cash Consideration and a certificate
representing that number of whole shares of Newco Common Stock (together with
cash in lieu of fractional shares), in each case, that such holder has the right
to receive pursuant to the provisions of this Article II, and the Certificate so
surrendered shall forthwith be canceled. Until such time as a certificate
representing Newco Common Stock is issued to or at the direction of the holder
of a surrendered Company Certificate or Parent Certificate, such Newco Common
Stock shall be deemed not outstanding and shall not be entitled to vote on any
matter. In the event of a transfer of ownership of Parent Common Stock or
Company Common Stock that is not registered in the transfer records of Parent or
the Company, as the case may be, payment may be made and a certificate
representing the appropriate number of shares of Newco Common Stock may be
issued to a person other than the person in whose name the Certificate so
surrendered is registered, if such Certificate shall be
<PAGE>
21
properly endorsed or otherwise be in proper form for transfer and the person
requesting such payment shall pay any transfer or other taxes required by reason
of such payment or the issuance of shares of Newco Common Stock to a person
other than the registered holder of such Certificate or establish to the
satisfaction of Newco that such tax has been paid or is not applicable. Subject
to Sections 11.65 and 11.70 of the IBCA (in the case of a Company Certificate)
or Subchapter D of Chapter 15 of the PBCL (in the case of Parent Certificates)
until surrendered as contemplated by this Section 2.02, each Company Certificate
or Parent Certificate shall be deemed at any time after the Merger Effective
Time or Exchange Effective Time, as applicable, to represent only the right to
receive upon such surrender Merger Consideration or Exchange Consideration, as
applicable, as contemplated by this Section 2.02. No interest shall be paid or
accrue on any cash payable, whether in respect of Exchange Consideration, Merger
Consideration, dividends or otherwise, upon surrender of any Certificate.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Newco Common Stock with a
record date after the Merger Effective Time shall be paid to the holder of any
unsurrendered Company Certificate or Parent Certificate with respect to the
shares of Newco Common Stock issuable upon surrender thereof, and no cash
payment in lieu of fractional shares shall be paid to any such holder pursuant
to Section 2.02(e), until the surrender of such certificate in accordance with
this Article II. Subject to Applicable Law, following surrender of any such
Certificate, there shall be paid to the holder of the certificate representing
whole shares of Newco Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of any cash payable in
lieu of a fractional share of Newco Common Stock to which such holder is
entitled pursuant to Section 2.02(e) and the amount of dividends or other
distributions with a record date after the Merger Effective Time theretofore
paid with respect to such whole shares of Newco Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Merger Effective Time but prior to such
<PAGE>
22
surrender and a payment date subsequent to such surrender payable with respect
to such whole shares of Newco Common Stock.
(d) No Further Ownership Rights in Parent Common Stock or
Company Common Stock. The Exchange Consideration and Merger Consideration issued
(and paid) in accordance with the terms of this Article II upon conversion and
exchange of any shares of Parent Common Stock or Company Common Stock, as the
case may be, shall be deemed to have been issued (and paid) in full satisfaction
of all rights pertaining to such shares of Parent Common Stock or Company Common
Stock, subject, however, to (i) the Surviving Corporation's obligations to pay
or provide for the rights of dissenters and (ii) the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a record
date prior to the Merger Effective Time that may have been declared or made by
the Parent on such shares of Parent Common Stock or the Company on such shares
of Company Common Stock, respectively, in accordance with the terms of this
Agreement or prior to the date of this Agreement and which remain unpaid at the
Merger Effective Time, and after the Merger Effective Time there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of shares of Parent Common Stock or Company Common Stock that were
outstanding immediately prior to the Merger Effective Time. If, after the Merger
Effective Time, any certificates formerly representing shares of Parent Common
Stock or Company Common Stock, as the case may be, are presented to the
Surviving Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Article II.
(e) No Fractional Shares. (i) No certificates or scrip
representing fractional shares of Newco Common Stock shall be issued upon the
conversion of Company Common Stock pursuant to Section 2.01, and such fractional
share interests shall not entitle the owner thereof to vote or to any rights of
a holder of Newco Common Stock. For purposes of this Section 2.02(e), all
fractional shares to which a single record holder would be entitled shall be
aggregated and calculations shall be rounded to three decimal places.
(ii) As promptly as practicable following the
<PAGE>
23
Merger Effective Time, the Exchange Agent shall determine the excess of (A) the
number of shares of Newco Common Stock delivered to the Exchange Agent by Newco
pursuant to Section 2.02(a) over (B) the aggregate number of whole shares of
Newco Common Stock to be issued to holders of Company Common Stock pursuant to
Section 2.02(b) (such excess being herein called the "Excess Shares"). As soon
after the Merger Effective Time as practicable, the Exchange Agent, as agent for
the holders of Company Common Stock, shall sell the Excess Shares at then
prevailing prices on the New York Stock Exchange (the "NYSE"), all in the manner
provided in Section 2.02(e)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent
shall be executed on the NYSE through one or more member firms of the NYSE and
shall be executed in round lots to the extent practicable. The proceeds from
such sale or sales available for distribution to the holders of Company Common
Stock shall be reduced by transfer taxes in connection with such sale or sales
of the Excess Shares. Until the net proceeds of such sale or sales have been
distributed to the holders of Company Common Stock entitled thereto, the
Exchange Agent shall hold such proceeds in trust for such holders of Company
Common Stock (the "Common Shares Trust"). The Exchange Agent shall determine the
portion of the Common Shares Trust to which each holder of a Certificate shall
be entitled, if any, by multiplying the amount of the aggregate net proceeds
comprising the Common Shares Trust by a fraction, the numerator of which is the
amount of the fractional share interest in a share of Newco Common Stock to
which such holder is entitled under Section 2.01(b)(ii) (or would be entitled
but for this Section 2.02(e)) and the denominator of which is the aggregate
amount of fractional interests in a share of Newco Common Stock to which all
holders of Company Common Stock are entitled.
(iv) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Company Common Stock in lieu of any
fractional share interests in Newco Common Stock, the Exchange Agent shall make
available such amounts, without interest, to such holders entitled to receive
such cash.
<PAGE>
24
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund that remains undistributed to the holders of Parent Common Stock or Company
Common Stock for six months after the Merger Effective Time shall be delivered
to Newco, upon demand, and any holder of Parent Common Stock or Company Common
Stock who has not theretofore complied with this Article II shall thereafter
look only to Newco for payment of its claim for Exchange Consideration or Merger
Consideration, as the case may be, and any dividends or distributions with
respect to Newco Common Stock as contemplated by Section 2.02(c).
(g) No Liability. None of Parent, Newco, the Company or the
Exchange Agent shall be liable to any person in respect of any shares of Newco
Common Stock (or dividends or distributions with respect thereto) or cash from
the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Applicable Law. If any Company
Certificate or Parent Certificate has not been surrendered prior to five years
after the Merger Effective Time (or immediately prior to such earlier date on
which Merger Consideration or Exchange Consideration or any dividends or
distributions with respect to Newco Common Stock as contemplated by Section
2.02(c)(i) in respect of such Company Certificate or Parent Certificate would
otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 3.05)), any such shares, cash, dividends or distributions in
respect of such Company Certificate shall, to the extent permitted by Applicable
Law, become the property of the Surviving Corporation, free and clear of all
claims or interest of any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by Newco, on a daily
basis. Any interest and other income resulting from such investments shall be
paid to Newco.
(i) Withholding Rights. Newco shall be entitled to deduct and
withhold from the consideration otherwise payable to any holder of Parent Common
Stock or Company Common Stock pursuant to this Agreement such amounts as may be
required to be deducted and withheld with respect to the
<PAGE>
25
making of such payment under the Code, or under any provision of state, local or
foreign tax law. To the extent that amounts are so withheld and paid over to the
appropriate taxing authority, Newco will be treated as though it withheld an
appropriate amount of the type of consideration otherwise payable pursuant to
this Agreement to any holder of Parent Common Stock or Company Common Stock,
sold such consideration for an amount of cash equal to the fair market value of
such consideration at the time of such deemed sale and paid such cash proceeds
to the appropriate taxing authority.
(j) Determination of Proper Elections. Without limiting the
generality or effect of any other provision hereof, the Exchange Agent will have
discretion to determine whether or not elections have been properly made or
revoked pursuant to this Article II with respect to Parent Common Stock or
Company Common Stock and when elections and revocations were received by it. If
the Exchange Agent determines that any election was not properly made with
respect to Parent Company Stock or Company Common Stock, such Parent Company
Stock or Company Common Stock will be treated by the Exchange Agent as, and for
all purposes of this Agreement will be deemed to be, Parent Non-Election Shares
or Company Non-Election Shares, as the case may be, at the Exchange Effective
Time or the Merger Effective Time, as the case may be. The Exchange Agent will
also make computations as to the allocation and proration contemplated by this
Article II and any such computation will be conclusive and binding. The Exchange
Agent may, with the mutual agreement of Parent and the Company, make such
equitable changes in the procedures set forth herein for the implementation of
the elections provided for in this Article II as it determines to be necessary
or desirable to effect fully such elections.
Section 2.03. Certain Adjustments. (a) Parent and the Company
may, upon mutual agreement, and in order to prevent the failure of the closing
conditions set forth in Section 7.02(d) and 7.03(d) or to ensure that the Merger
and the other Transactions are treated as a purchase of the Company by Parent
under GAAP, change the Parent Cash Number and the Parent Stock Number and the
Company Cash Number and the Company Stock Number (the "Reallocation") so long as
<PAGE>
26
the sum of the (i) product of the Parent Cash Number and the Parent Cash
Consideration and (ii) the product of the Company Cash Number and the Company
Cash Consideration, does not change as a result of the Reallocation.
(b) If after the date hereof and on or prior to the Closing
Date, the outstanding shares of Parent Common Stock or Company Common Stock
shall be changed into a different number of shares by reason of any
reclassification, recapitalization, split-up, combination or exchange of shares,
or any dividend payable in stock or other securities is declared thereon with a
record date within such period, or any similar event shall occur, the Exchange
Consideration and the Merger Consideration will be adjusted accordingly to
provide to the holders of Parent Common Stock and Company Common Stock,
respectively, the same economic effect as contemplated by this Agreement prior
to such reclassification, recapitalization, split-up, combination, exchange or
dividend or similar event. This provision is not intended to affect the need for
either party to obtain the other party's consent to take such an action under
any other provision of this Agreement.
ARTICLE III
Representations and Warranties of the Company
The Company represents and warrants to Parent and Newco as
follows:
SECTION 3.01. Organization, Standing and Power. Each of the
Company and each of its subsidiaries (the "Company Subsidiaries") is duly
organized, validly existing and in good standing (with respect to jurisdictions
which recognize the concept of good standing) under the laws of the jurisdiction
in which it is organized and has full corporate power and authority and
possesses all governmental franchises, licenses, permits, authorizations and
approvals necessary to enable it to own, lease or otherwise hold its properties
and assets and to conduct its businesses as conducted as of the date of this
Agreement, other than such franchises, licenses, permits, authorizations and
approvals the lack of which, individually or in the aggregate, has not
<PAGE>
27
had and could not reasonably be expected to have a Material Adverse Effect on
the Company (a "Company Material Adverse Effect"). The Company and each Company
Subsidiary is duly qualified to do business in each jurisdiction where the
nature of its business or their ownership or leasing of its properties make such
qualification necessary, other than such qualifications the lack of which,
individually or in the aggregate, has not had and could not reasonably be
expected to have a Company Material Adverse Effect. The Company has made
available to Parent true and complete copies of the articles of incorporation of
the Company, as amended to the date of this Agreement (as so amended, the
"Company Charter"), and the By-laws of the Company, as amended to the date of
this Agreement (as so amended, the "Company By-laws"), and the comparable
charter or organizational documents of each Company Subsidiary, in each case as
amended through the date of this Agreement.
SECTION 3.02. Company Subsidiaries; Equity Interests. (a) The
letter, dated as of the date of this Agreement, from the Company to Parent and
Newco (the "Company Disclosure Letter") lists each Company Subsidiary and its
jurisdiction of organization and specifies each of the Company Subsidiaries that
is (i) a "public-utility company", a "holding company", a "subsidiary company",
an "affiliate" of any public-utility company, an "exempt wholesale generator" or
a "foreign utility company" within the meaning of Section 2(a)(5), 2(a)(7),
2(a)(8), 2(a)(11), 32(a)(1) or 33(a)(3) of the Public Utility Holding Company
Act of 1935, as amended ("PUHCA"), respectively, (ii) a "public utility" within
the meaning of Section 201(e) of the Federal Power Act (the "Power Act") or
(iii) a "qualifying facility" within the meaning of the Public Utility
Regulatory Policies Act of 1978, as amended ("PURPA"), or that owns such a
qualifying facility. All the outstanding shares of capital stock of each Company
Subsidiary have been validly issued and are fully paid and nonassessable and,
except as set forth in the Company Disclosure Letter, are owned by the Company,
by another Company Subsidiary or by the Company and another Company Subsidiary,
free and clear of all pledges, liens, charges, mortgages, encumbrances and
security interests of any kind or nature whatsoever (collectively, "Liens").
(b) Except for its interests in the Company
<PAGE>
28
Subsidiaries and except for the ownership interests set forth in the Company
Disclosure Letter or interests acquired after the date of this Agreement without
violating any covenant of this Agreement, the Company does not own, directly or
indirectly, any capital stock, membership interest, partnership interest, joint
venture interest or other equity interest with a fair market value as of the
date of this Agreement in excess of $500,000 in any person, as reasonably
determined by the Company.
SECTION 3.03. Capital Structure. (a) The authorized capital
stock of the Company consists of 400,000,000 shares of Company Common Stock. At
the close of business on August 31, 1999, (i) 217,411,003 shares of Company
Common Stock were issued and outstanding, (ii) 264,406 shares of Company Common
Stock were held by the Company in its treasury, (iii) 4,625,691 shares of
Company Common Stock were subject to outstanding Company Employee Stock Options
(as defined in Section 6.04) and 4,700,637 additional shares of Company Common
Stock were reserved for issuance pursuant to the Company Stock Plans (as defined
in Section 6.04), (iv) 368,171 shares of Company Common Stock were reserved for
issuance pursuant to the Company's Employee Stock Purchase Plan, (v) 164,845
shares of Company Common Stock were reserved for issuance pursuant to the
Company's 1996 Directors' Fee Plan, (vi) 88,526 shares of Company Common Stock
were subject to exchange for the common stock, $12.50 par value of ComEd, and
(vii) 400,000 shares of Company Common Stock were reserved for issuance in
connection with the rights (the "Company Rights") issued pursuant to the Rights
Agreement dated as of February 2, 1998 (as amended from time to time, the
"Company Rights Agreement"), between the Company and First Chicago Trust Company
of New York, as Rights Agent.
(b) Except as set forth in clause (a) of this Section 3.03 or
in the Company Disclosure Letter, at the close of business on August 31, 1999,
no shares of capital stock or other voting securities of the Company were
issued, reserved for issuance or outstanding.
(c) All outstanding shares of Company Common Stock are, and
all such shares that may be issued prior to the Merger Effective Time will be
when issued, duly
<PAGE>
29
authorized, validly issued, fully paid and nonassessable and not subject to or
issued in violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision of
the IBCA, the Company Charter, the Company By-laws or any Contract (as defined
in Section 3.05) to which the Company is a party or otherwise bound.
(d) There are not any bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
holders of Company Common Stock may vote ("Voting Company Debt").
(e) Except as set forth in clause (a) of this Section 3.03 or
in the Company Disclosure Letter, as of the date of this Agreement, there are
not any options, warrants, rights, convertible or exchangeable securities,
"phantom" stock rights, stock appreciation rights, stock-based performance
units, commitments, Contracts, arrangements or undertakings of any kind to which
the Company or any Company Subsidiary is a party or by which any of them is
bound (i) obligating the Company or any Company Subsidiary to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other equity interests in, or any security convertible or exercisable
for or exchangeable into any capital stock of or other equity interest in, the
Company or of any Company Subsidiary or any Voting Company Debt or (ii)
obligating the Company or any Company Subsidiary to issue, grant, extend or
enter into any such option, warrant, call, right, security, commitment,
Contract, arrangement or undertaking.
(f) As of the date of this Agreement, except as described in
the Company Disclosure Letter, there are not any outstanding contractual
obligations of the Company or any Company Subsidiary to repurchase, redeem or
otherwise acquire any shares of capital stock of the Company or any Company
Subsidiary.
(g) The Company has delivered to Parent a complete and correct
copy of the Company Rights Agreement, as amended to the date of this Agreement.
<PAGE>
30
SECTION 3.04. Authority; Execution and Delivery;
Enforceability. (a) The Company has all requisite corporate power and authority
to execute and deliver this Agreement and to consummate the Transactions. The
execution and delivery by the Company of this Agreement and the consummation by
the Company of the Transactions have been duly authorized by all necessary
corporate action on the part of the Company, subject, in the case of the Second
Step Merger, to receipt of the Company Shareholder Approval (as defined in
Section 3.04(c)). The Company has duly executed and delivered this Agreement,
and this Agreement constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms.
(b) The Board of Directors of the Company (the "Company
Board"), at a meeting duly called and held, duly and unanimously adopted
resolutions (i) approving this Agreement, the Merger and the other Transactions,
(ii) determining that the terms of the Second Step Merger and the other
Transactions are fair to and in the best interests of the Company and its
shareholders and (iii) directing that this Agreement be submitted to a vote of
the Company's shareholders and recommending that they approve this Agreement.
Such resolutions are sufficient to render inapplicable to Parent and Newco and
this Agreement, to the extent otherwise applicable, the Merger and the other
Transactions the provisions of Sections 7.85 and 11.75 of the IBCA. To the
Company's knowledge, no other state takeover statute or similar statute or
regulation applies or purports to apply to the Company with respect to this
Agreement, the Second Step Merger or any other Transaction.
(c) The only vote of holders of any class or series of Company
securities necessary to approve and adopt this Agreement and the Second Step
Merger is the approval of this Agreement by the holders of at least two-thirds
of the shares of outstanding Company Common Stock entitled to vote (the "Company
Shareholder Approval"). The affirmative vote of the holders of Company Common
Stock, or any of them, is not necessary to consummate any Transaction other than
the Second Step Merger.
SECTION 3.05. No Conflicts; Consents. (a) Except as set forth
in the Company Disclosure Letter,
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31
the execution and delivery by the Company of this Agreement does not, and the
consummation of the Merger and the other Transactions and compliance with the
terms hereof and thereof will not, conflict with, or result in any violation of
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, consent, approval, cancelation or acceleration
of any obligation or to loss of a material benefit under, or to increased,
additional, accelerated or guaranteed rights or entitlements of any person
under, or result in the creation of any Lien upon any of the properties or
assets of the Company or any Company Subsidiary under, any provision of (i) the
Company Charter, the Company By-laws or the comparable charter or organizational
documents of any Company Subsidiary, (ii) any loan or credit agreement,
contract, lease, license, indenture, note, bond, agreement, permit, concession,
franchise or other instrument (a "Contract") to which the Company or any Company
Subsidiary is a party or by which any of their respective properties or assets
is bound or (iii) subject to the filings and other matters referred to in
Section 3.05(b), any judgment, order or decree ("Judgment") or statute, law,
ordinance, rule or regulation ("Applicable Law") or writ, permit or license
applicable to the Company or any Company Subsidiary or their respective
properties or assets (other than immaterial consents, approvals, licenses,
permits, orders, authorizations, registrations, declarations or filings,
including with respect to communications systems, zoning, name changes,
occupancy and similar routine regulatory approvals), other than, in the case of
clauses (ii) and (iii) above, any such items that, individually or in the
aggregate, have not had and could not reasonably be expected to have a Company
Material Adverse Effect.
(b) No consent, approval, license, permit, order or
authorization (other than immaterial consents, approvals, licenses, permits,
orders, authorizations, registrations, declarations or filings, including with
respect to communications systems, zoning, name changes, occupancy and similar
routine regulatory approvals) ("Consent") of, action by or in respect of, or
registration, declaration or filing with, or notice to, any Federal, state,
local or foreign government or any court of competent jurisdiction,
administrative or regulatory agency or commission or other
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32
governmental authority or instrumentality or any non-governmental
self-regulatory agency, commission or authority, domestic or foreign (a
"Governmental Entity") is required to be obtained or made by or with respect to
the Company or any Company Subsidiary in connection with the execution, delivery
and performance of this Agreement or the consummation of the Transactions, other
than (i) compliance with and filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (ii) the filing with the
Securities and Exchange Commission (the "SEC") of (A) a proxy or information
statement relating to the approval of this Agreement by the Company's
shareholders (the "Proxy Statement"), and (B) such reports under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as may be required in
connection with this Agreement, the Second Step Merger and the other
Transactions, (iii) the filing of the Illinois Articles of Merger with, and the
issuance of a certificate of merger by, the Secretary of State of the State of
Illinois, the filing of the Pennsylvania Articles of Merger with the Department
of State of Pennsylvania and the filing of appropriate documents with the
relevant authorities of the other jurisdictions in which the Company is
qualified to do business, (iv) notice to, and the consent and approval of, the
Federal Energy Regulatory Commission ("FERC") under the Power Act, (v) notice
to, and the consent and approval of, the Nuclear Regulatory Commission (the
"NRC") under the Atomic Energy Act of 1954, as amended (the "Atomic Energy
Act"), (vi) notice to the Illinois Commerce Commission (the "ICC"), (vii) the
consents, filings and approvals required under PUHCA, (viii) compliance with and
such filings as may be required under applicable Environmental Laws (as defined
in Section 3.17), (ix) such filings as may be required in connection with the
taxes described in Section 6.09 and (x) such other items as are set forth in the
Company Disclosure Letter (collectively, whether or not legally required to be
obtained, the "Company Required Statutory Approvals").
(c) The Company and the Company Board have taken all action
necessary to (i) render the Company Rights inapplicable to this Agreement, the
Merger and the other Transactions and (ii) ensure that (A) neither Parent nor
any of its affiliates or associates is or will become an
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33
"Acquiring Person" (as defined in the Company Rights Agreement) by reason of
this Agreement, the Merger or any other Transaction, (B) a "Distribution Date"
(as defined in the Company Rights Agreement) shall not occur by reason of this
Agreement, the Merger or any other Transaction and (C) the Company Rights shall
expire immediately prior to the Merger Effective Time.
SECTION 3.06. SEC Documents; Undisclosed Liabilities. The
Company and the Company Subsidiaries have filed all reports, schedules, forms,
statements and other documents required to be filed by the Company or any
Company Subsidiary with the SEC since January 1, 1998 (the "Company SEC
Documents"). Each Company SEC Document complied in all material respects as of
its respective date with the requirements of the Exchange Act or the Securities
Act of 1933, as amended (the "Securities Act"), as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to such
Company SEC Document, and except to the extent that information contained in any
Company SEC Document has been revised or superseded by a later filed Company SEC
Document, does not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of the Company
included in the Company SEC Documents comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles ("GAAP") (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). Except as
set forth in the Filed Company SEC Documents (as defined in Section 3.08) or the
Company Disclosure Letter or incurred after the date hereof in the usual,
regular and ordinary course of business in substantially the same manner as
previously conducted and
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34
not prohibited by this Agreement, neither the Company nor any Company Subsidiary
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of the Company and its consolidated subsidiaries or in the notes
thereto and that, individually or in the aggregate, could reasonably be expected
to have a Company Material Adverse Effect.
SECTION 3.07. Information Supplied. None of the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 to be filed with the SEC
by Newco in connection with the Share Issuance (the "Form S-4") will, at the
time the Form S-4 is filed with the SEC, at any time it is amended or
supplemented or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (ii) the Proxy Statement will, at the date it is first mailed
to the Company's shareholders or Parent's shareholders or at the time of the
Company Shareholders Meeting (as defined in Section 6.01) or the Parent
Shareholders Meeting (as defined in Section 6.01), contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, except that no
representation is made by the Company with respect to statements made or
incorporated by reference therein based on information supplied by or on behalf
of Parent or Newco for inclusion or incorporation by reference in the Proxy
Statement.
SECTION 3.08. Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Documents filed and publicly available prior to the
date of this Agreement (the "Filed Company SEC Documents") or in the Company
Disclosure Letter:
(a) since December 31, 1998, there has not been
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35
any event, change, effect or development that, individually or in the aggregate,
has had or could reasonably be expected to have a Company Material Adverse
Effect, other than events, changes, effects and developments relating to the
economy in general or to the Company's industry in general and not specifically
relating to the Company or any Company Subsidiary; and
(b) from December 31, 1998 to the date of this Agreement, the
Company has conducted its business only in the ordinary course, and during such
period there has not been:
(i) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect
to any Company Common Stock or any repurchase for value by the Company
of any Company Common Stock;
(ii) any split, combination or reclassification of any Company
Common Stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for
shares of Company Common Stock; or
(iii) any change in accounting methods, principles or
practices by the Company or any Company Subsidiary materially affecting
the consolidated assets, liabilities or results of operations of the
Company, except insofar as may have been required by a change in GAAP.
SECTION 3.09. Taxes. (a) Each of the Company and each Company
Subsidiary has timely filed, or has caused to be timely filed on its behalf, all
Tax Returns required to be filed by it (or requests for extensions to file such
Tax Returns have been timely filed and granted and have not expired), and all
such Tax Returns are true, complete and accurate, except to the extent any
failure to file or any inaccuracies in any filed Tax Returns would not,
individually or in the aggregate, have a Company Material Adverse Effect. All
Taxes shown to be due on such Tax Returns, or otherwise owed by the Company or
any Company Subsidiary, have been timely paid, except to the extent that
<PAGE>
36
any failure to pay, individually or in the aggregate, has not had and could not
reasonably be expected to have a Company Material Adverse Effect.
(b) Except as set forth in the Company Disclosure Letter, the
most recent financial statements contained in the Filed Company SEC Documents
reflect an adequate reserve for all current Taxes payable by the Company and the
Company Subsidiaries (in addition to any reserve for deferred Taxes established
to reflect timing differences between book and Tax income) for all Taxable
periods and portions thereof through the date of such financial statements.
Except as set forth in the Company Disclosure Letter, no deficiency with respect
to any Taxes has, to the best knowledge of the Company, been proposed, asserted
or assessed against the Company or any Company Subsidiary, and no requests for
waivers of the time to assess any such Taxes are pending, except to the extent
any such deficiency or request for waiver, individually or in the aggregate, has
not had and could not reasonably be expected to have a Company Material Adverse
Effect.
(c) The Federal income Tax Returns of the Company and each
Company Subsidiary consolidated in such Returns have been examined by and
settled with the United States Internal Revenue Service for all years through
1995. Except as set forth in the Company Disclosure Letter, all material
assessments for Taxes due with respect to such completed and settled
examinations or any concluded litigation have been fully paid.
(d) There are no material Liens for Taxes (other than for
current Taxes not yet due and payable) on the assets of the Company or any
Company Subsidiary. Except as set forth in the Company Disclosure Letter,
neither the Company nor any Company Subsidiary is bound by any agreement with
respect to Taxes.
(e) The Company and each Company Subsidiary have complied with
all applicable statutes, laws, ordinances, rules and regulations relating to the
payment and withholding of taxes (including withholding of taxes pursuant to
Sections 1441, 1442, 3121 and 3402 of the Code or similar provisions under any
Federal, state or local
<PAGE>
37
laws, domestic and foreign) and have, within the time and in the manner
prescribed by law, withheld from and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under
applicable laws, except to the extent that any failure to withhold or to pay,
individually or in the aggregate, has not had and could not reasonably be
expected to have a Company Material Adverse Effect.
(f) The Company knows of no fact and neither the Company nor
any Company Subsidiary has taken or agreed to take any action that could
reasonably be expected to prevent (i) the Merger from constituting transactions
described in Section 351 of the Code or (ii) the Second Step Merger from
constituting a transaction described in Section 368(a) of the Code.
(g) For purposes of this Agreement:
"Taxes" includes all forms of taxation, whenever created or
imposed, and whether of the United States or elsewhere, and whether imposed by a
local, municipal, state, foreign, Federal or other Governmental Entity, or in
connection with any agreement with respect to Taxes, including all interest,
penalties and additions imposed with respect to such amounts.
"Tax Return" means all Federal, state, local, provincial and
foreign Tax returns, declarations, statements, reports, schedules, forms and
information returns and any amended Tax return required to be filed with any
taxing authority with respect to Taxes.
SECTION 3.10. Absence of Changes in Benefit Plans. Except as
disclosed in the Company Disclosure Letter, from December 31, 1998 to the date
of this Agreement, there has not been any adoption or amendment in any material
respect by the Company or any Company Subsidiary of (a) any collective
bargaining agreements, (b) any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, program, policy, arrangement or
<PAGE>
38
understanding (whether or not legally binding) providing benefits to any current
or former employee, officer or director of the Company or any Company Subsidiary
or any beneficiary or dependent thereof, that is sponsored or maintained by the
Company or any Company Subsidiary or to which the Company or any Company
Subsidiary contributes or is obligated to contribute (collectively, "Company
Benefit Plans") or (c) any Company Employment Arrangements (as defined herein).
Except as disclosed in the Company Disclosure Letter, as of the date of this
Agreement there are not any employment, consulting, indemnification,
change-of-control, severance or termination agreements or arrangements between
the Company or any Company Subsidiary and any current or former employee,
officer or director of the Company or any Company Subsidiary (collectively, the
"Company Employment Arrangements").
SECTION 3.11. ERISA Compliance; Excess Parachute Payments. (a)
The Company Disclosure Letter includes a complete list of all material Company
Benefit Plans and Company Employment Arrangements as of the date of this
Agreement. With respect to each Company Benefit Plan (other than a multiemployer
plan within the meaning of Section 4001(a)(3) of ERISA) and Company Employment
Arrangement, the Company has delivered to Parent true, complete and correct
copies of (i) each such Company Benefit Plan or Company Employment Arrangement
(or, in the case of any unwritten plan or arrangement, a description thereof),
(ii) the most recent annual report on the applicable Form 5500 series filed with
the Internal Revenue Service (if any such report was required), including all
schedules and attachments thereto, (iii) the most recent summary plan
description (if a summary plan description is required) and all summaries of
material modifications thereto, (iv) each trust agreement, group annuity
contract or other funding vehicle relating to any such Company Benefit Plan or
Company Employment Arrangement, (v) the most recent actuarial report or
valuation relating thereto and (vi) the most recent determination letters issued
by the Internal Revenue Service with respect to Company Benefit Plans that are
intended to be qualified and exempt from Federal income taxes under Sections
401(a) and 501(a), respectively, of the Code ("Qualified Plans") and letters of
recognition of exemption with respect to any Company Benefit Plan or related
<PAGE>
39
trust that is intended to meet the requirements of Section 501(c)(9) of the
Code.
(b) With respect to the Company Benefit Plans and Company
Employment Arrangements, individually and in the aggregate, no event has
occurred and, to the knowledge of the Company, there exists no condition or set
of circumstances, in connection with which the Company or any Company Subsidiary
could be subject to any liability that has had or could reasonably be expected
to have a Company Material Adverse Effect (except liability for benefits claims
and funding obligations payable in the ordinary course) under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), the Code or any
other applicable law. For purposes of this Section 3.11(b), the term "Company
Benefit Plan" shall also include any employee benefit plan within the meaning of
Section 3(3) of ERISA that, within the last six years, was sponsored or
maintained by any entity which would be treated under Section 414 of the Code as
a single employer with the Company or any Company Subsidiary or to which any
such entity contributed or was obligated to contribute.
(c) Each Company Benefit Plan and each Company Employment
Arrangement has been administered in accordance with its terms except for any
failures so to administer any Company Benefit Plan or Company Employment
Arrangement as have not had and could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. The
Company, all Company Subsidiaries and all the Company Benefit Plans and Company
Employment Arrangements are in compliance with the applicable provisions of
ERISA, the Code and all other applicable laws and the rules and regulations
thereunder and the terms of all applicable collective bargaining agreements,
except for any failures to be in such compliance as have not had and could not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. Except as disclosed in the Company Disclosure Letter,
there are no pending or, to the knowledge of the Company, threatened or
anticipated claims under or with respect to any Company Benefit Plan or Company
Employment Arrangement by or on behalf of any current or former employee,
officer or director, or dependent or beneficiary thereof, or otherwise
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40
(other than routine claims for benefits).
(d) Except as disclosed in the Company Disclosure Letter, (i)
no current or former employee, officer or director of the Company or any Company
Subsidiary will be entitled to any additional rights or benefits or any
acceleration of the time of payment or vesting of any benefits under any Company
Benefit Plan or Company Employment Arrangement, and no trustee under any "rabbi
trust", or similar arrangement maintained in connection with any Company Benefit
Plan or Company Employment Arrangement will be entitled to any payment, as a
result (either alone or upon the occurrence of any additional or further acts or
events) of the execution of this Agreement or the consummation, announcement or
other actions relating to the Transactions and (ii) no amount payable to any
current or former employee, officer or director of the Company or any Company
Subsidiary will fail to be deductible by reason of Section 280G of the Code.
(e) Each Company Benefit Plan intended to be a Qualified Plan
has received a favorable determination letter from the Internal Revenue Service
that it is so qualified and nothing has occurred since the date of such letter
that could reasonably be expected to affect the qualified status of such Company
Benefit Plan.
(f) The aggregate accumulated benefit obligations of each
Company Benefit Plan subject to Title IV of ERISA (as of the date of the most
recent actuarial valuation prepared for such Company Benefit Plan) do not exceed
the fair market value of the assets of such plan (as of the date of such
valuation).
(g) All contributions and other payments required to have been
made for any completed historical period by the Company or any Company
Subsidiary to any Company Benefit Plan or Company Employment Arrangement (or to
any person pursuant to the terms thereof) have been timely made or paid in full,
or, to the extent not required to be made or paid for such period, have been
reflected in the consolidated financial statements of the Company.
(h) Except as disclosed in the Company Disclosure
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41
Letter, no Company Benefit Plan is a multiemployer plan within the meaning of
Section 4001(a)(3) of ERISA, and none of the Company or any Company Subsidiary
has, at any time during the last six years, contributed to or been obligated to
contribute to any such multiemployer plan. For purposes of the representations
and warranties made in the last sentence of Section 3.11(c) and in Sections
3.11(e) and (f), the term "Company Benefit Plan" shall be deemed to exclude any
such multiemployer plan.
SECTION 3.12. Litigation. Except as disclosed in the Filed
Company SEC Documents or in the Company Disclosure Letter, there is no suit,
action or proceeding pending or, to the knowledge of the Company, threatened
against the Company or any Company Subsidiary that, individually or in the
aggregate, has had or could reasonably be expected to have a Company Material
Adverse Effect, nor is there any Judgment outstanding against the Company or any
Company Subsidiary that has had or could reasonably be expected to have a
Company Material Adverse Effect.
SECTION 3.13. Compliance with Applicable Laws; Permits. (a)
Except as disclosed in the Filed Company SEC Documents or in the Company
Disclosure Letter, the Company and the Company Subsidiaries are in compliance
with the terms of all Company Permits (as defined in Section 3.13(b)) and all
Applicable Laws, except for instances of noncompliance that, individually and in
the aggregate, have not had and could not reasonably be expected to have a
Company Material Adverse Effect. This Section 3.13 does not relate to matters
with respect to Taxes, which are the subject of Section 3.09, Environmental
Laws, which are the subject of Section 3.17, benefits plans, which are the
subject of Section 3.11 and the operation of nuclear power plants, which are the
subject of Section 3.19.
(b) Except as disclosed in the Filed Company SEC Documents or
in the Company Disclosure Letter, the Company and the Company Subsidiaries own
or have sufficient rights and consents to use under existing franchises,
permits, easements, leases, and license agreements (the "Company Permits") all
properties, rights and assets necessary for the conduct of their business and
operations as currently conducted, except where the failure to own or have
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42
sufficient rights to such properties, rights and assets, individually or in the
aggregate, have not had and could not reasonably be expected to have a Company
Material Adverse Effect. Except as provided in the Illinois Electric Customer
Choice and Rate Relief Law of 1997, to the knowledge of the Company, no other
private corporation can commence electric public utility operations in any part
of the respective territories now served by the Company or any Company
Subsidiary, without obtaining a certificate of public convenience and necessity
from the applicable state utility commission.
SECTION 3.14. Brokers; Schedule of Fees and Expenses. No
broker, investment banker, financial advisor or other person, other than
Wasserstein Perella & Co. and Goldman Sachs & Co., the fees and expenses of
which will be paid by the Company, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
Second Step Merger and the other Transactions based upon arrangements made by or
on behalf of the Company.
SECTION 3.15. Opinion of Financial Advisor. The Company has
received the opinion of Wasserstein Perella & Co., dated the date of this
Agreement, to the effect that, as of such date, the Company Merger Consideration
is fair to the holders of Company Common Stock from a financial point of view, a
signed copy of which opinion has been delivered to Parent.
SECTION 3.16. Year 2000. The Company SEC Documents fairly
summarize the status of the Company's computer applications and components,
modification or readiness plan, communications with suppliers and vendors,
contingency plans and estimated cost of remediation as they relate to the Year
2000 issue. The Company has made available to Parent copies of all
correspondence between the Company and its third party suppliers and vendors
concerning their Year 2000 compliance.
SECTION 3.17. Environmental Matters. (a) Compliance. Except as
set forth in the Filed Company SEC Documents or in the Company Disclosure
Letter, the Company and each of the Company Subsidiaries is and has been in
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43
compliance with all applicable Environmental Laws (as defined below), except
where the failure to so comply, individually or in the aggregate, has not had
and could not reasonably be expected to have a Company Material Adverse Effect.
(b) Environmental Permits. Except as set forth in the Filed
Company SEC Documents or in the Company Disclosure Letter, (i) the Company and
each of the Company Subsidiaries has obtained or has applied for all
Environmental Permits (as defined below) necessary for the construction of their
facilities or the conduct of their operations, except where the failure to so
obtain, individually or in the aggregate, has not had and could not reasonably
be expected to have a Company Material Adverse Effect and (ii) all such
Environmental Permits are in good standing or, where applicable, a renewal
application has been timely filed and is pending agency approval, except where
the failure of such Environmental Permits to be in good standing or to have
filed a renewal application on a timely basis has not had and could not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(c) Environmental Claims. Except as set forth in the Filed
Company SEC Documents or in the Company Disclosure Letter, there are no
Environmental Claims (as defined below) that have had or could reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect, pending or, to the knowledge of the Company, threatened against the
Company or any of the Company Subsidiaries.
(d) Releases. Except as set forth in the Filed Company SEC
Documents or in the Company Disclosure Letter, there have been no Releases (as
defined below) of any Hazardous Materials (as defined below) that could be
reasonably likely to form the basis of any Environmental Claim against the
Company or any of the Company Subsidiaries, except for any Environmental Claim
which, individually or in the aggregate, has not had and could not reasonably be
expected to have a Company Material Adverse Effect.
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44
(e) Assumed and Retained Liabilities. Except as disclosed in
the Filed Company SEC Documents or in the Company Disclosure Letter, none of the
Company or the Company Subsidiaries has retained or assumed either contractually
or by operation of law any liabilities or obligations that could reasonably be
likely to form the basis for any Environmental Claim, which has had and could
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(f) Definitions. As used in this Agreement:
(i) "Environmental Claims" means, in respect of any person,
any and all administrative, regulatory or judicial actions, suits,
orders, decrees, suits, demands, directives, claims, liens,
investigations, proceedings or notices of noncompliance or violation by
any person, alleging potential liability (including potential
responsibility or liability for enforcement costs, investigatory costs,
cleanup costs, governmental response costs, removal costs, remedial
costs, mining restoration or rehabilitation costs, natural resources
damages, property damages, personal injuries or penalties) arising out
of, based on or resulting from (A) the presence or Release of any
Hazardous Materials at any location, whether or not owned, operated,
leased or managed by such person; or (B) circumstances forming the
basis of any violation or alleged violation of any Environmental Law or
(C) any and all claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence, Release of, or exposure
to, any Hazardous Materials.
(ii) "Environmental Laws" means all federal, state, local and
foreign laws (including international conventions, protocols and
treaties), common law, rules, regulations, orders, decrees, judgments,
binding agreements or Environmental Permits issued, promulgated or
entered into by or with any Governmental Entity, relating to pollution
or the environment (including ambient air, surface water, groundwater,
land surface or subsurface strata), including laws and regulations
relating to noise levels, nuclear operations, Releases of Hazardous
Materials, or otherwise relating to the
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45
generation, manufacture, processing, distribution, use, treatment,
storage, transport or handling of Hazardous Materials.
(iii) "Environmental Permits" means all permits, licenses,
registrations and other governmental authorizations required under
applicable Environmental Laws.
(iv) "Hazardous Materials" means (A) any petroleum or
petroleum products, radioactive materials or wastes, spent nuclear
fuel, coal ash, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation and polychlorinated biphenyls
("PCBs"); (B) any chemicals, materials, substances or wastes which are
defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "pollutant," "toxic
substances," "source," "special nuclear," and "byproducts" or words of
similar import under any Environmental Law; and (C) any chemical,
material, substance or waste that is prohibited, limited or regulated
pursuant to any Environmental Law.
(v) "Release" means any actual or threatened release, spill,
emission, leaking, dumping, injection, pouring, deposit, disposal,
discharge, dispersal, leaching or migration into the environment
(including ambient air, surface water, groundwater, land surface or
subsurface strata) or within any building, structure, facility or
fixture.
SECTION 3.18. Labor and Employee Relations. (a) Except as set
forth in the Company Disclosure Letter, (i) neither the Company nor any of the
Company Subsidiaries is a party to any collective bargaining agreement or other
labor agreement with any union or labor organization and (ii) to the knowledge
of the Company, there is no current union representation question involving
employees of the Company or any of the Company Subsidiaries, nor does the
Company have knowledge of any activity or proceeding of any labor organization
(or representative thereof) or employee group to organize any such employees,
except to the extent
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46
it, individually or in the aggregate, has not had and could not reasonably be
expected to have a Company Material Adverse Effect.
(b) Except as set forth in the Company Disclosure Letter, or
except to the extent the following, individually or in the aggregate, have not
had and could not reasonably be expected to have a Company Material Adverse
Effect, (A) there is no unfair labor practice, employment discrimination or
other charge, claim, suit, action or proceeding against the Company or any of
the Company Subsidiaries pending, or to the knowledge of the Company, threatened
before any court, governmental department, commission, agency, instrumentality
or authority or any arbitrator and (B) there is no strike, lockout or material
dispute, slowdown or work stoppage pending or, to the knowledge of the Company,
threatened against or involving the Company.
SECTION 3.19. Operations of Nuclear Power Plants. Except as
set forth in the Filed Company SEC Documents or in the Company Disclosure
Letter, (a) the operations of the nuclear generation stations (collectively, the
"Company Nuclear Facilities") currently or formerly owned, in whole or part, by
the Company or any of its affiliates are and have been conducted in compliance
with all Applicable Laws and Company Permits, except for such failures to comply
that, individually or in the aggregate, have not had and could not reasonably be
expected to have a Company Material Adverse Effect, (b) each of the Company
Nuclear Facilities maintains, and is in compliance with, (i) emergency plans
designed to respond to an unplanned Release therefrom of radioactive materials,
(ii) plans for the decommissioning of each of the Company Nuclear Facilities,
(iii) plans for the storage and disposal of spent nuclear fuel, and each such
plan enumerated in (i) through (iii) conform with the requirements of Applicable
Law, and (c) the Company has funded consistent with reasonable budget
projections the current or future decommissioning of each Company Nuclear
Facility and the storage and disposal of spent nuclear fuel.
SECTION 3.20. Parent Share Ownership. Neither the Company nor
any Company Subsidiary owns any shares of Parent Capital Stock or other
securities convertible into
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Parent Capital Stock.
SECTION 3.21. Regulation as a Utility. ComEd is regulated as a
public utility by the State of Illinois. Commonwealth Edison Company of Indiana,
Inc., an Indiana corporation, is regulated as a public utility by the State of
Indiana and by no other state. Except as set forth in the previous sentence,
neither the Company nor any "subsidiary company" or "affiliate" of the Company
is subject to regulation as a public utility or public service company (or
similar designation) by any other state in the United States or any foreign
country. The Company and ComEd are public utility holding companies as defined
by PUHCA, but currently claim exemptions from registration under PUHCA under
Sections 3(a)(1) and 3(a)(2), respectively, of PUHCA pursuant to orders of the
SEC issued thereunder.
SECTION 3.22. Contracts; No Default. Except as disclosed in
the Filed Company SEC Documents or entered into after the date of this Agreement
without violating any covenant of this Agreement, there are no contracts or
agreements that are material to the business, properties, assets, condition
(financial or otherwise), results of operations or prospects of the Company and
the Company Subsidiaries taken as a whole. Neither the Company nor any of the
Company Subsidiaries is in violation of or in default under (nor does there
exist any condition which upon the passage of time or the giving of notice would
cause such a violation of or default under) any loan or credit agreement, note,
bond, mortgage, indenture, lease, permit, concession, franchise, license or any
other contract, agreement, arrangement or understanding, to which it is a party
or by which it or any of its properties or assets is bound, except for
violations or defaults that have not had and could not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect.
SECTION 3.23. Title to Properties. Except as set forth in the
Company Disclosure Letter each of the Company and each of the Company
Subsidiaries has good and sufficient title to its physical properties and
assets, or valid leasehold interests, easements or other appropriate interests
therein or thereto sufficient to conduct its business as presently conducted or
intended to be conducted,
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48
except for such as are no longer used or useful in the conduct of its businesses
or as have been disposed of in the ordinary course of business and except for
Liens, defects in title, easements, restrictive covenants and similar
encumbrances or impediments set forth in the Company Disclosure Letter or that,
in the aggregate, do not and will not materially interfere with its ability to
conduct its business as currently conducted or intended to be conducted.
SECTION 3.24. Intellectual Property. The Company and the
Company Subsidiaries own, or are validly licensed or otherwise have the right to
use, all patents, patent rights, trademarks, trademark rights, trade names,
trade name rights, service marks, service mark rights, copyrights and other
proprietary intellectual property rights and computer programs (collectively,
"Intellectual Property Rights") which are material to the conduct of the
business of the Company and the Company Subsidiaries, taken as a whole. Except
as set forth in the Company Disclosure Letter, no claims are pending or, to the
knowledge of the Company, threatened that the Company or any of the Company
Subsidiaries is infringing or otherwise adversely affecting the rights of any
person with regard to any Intellectual Property Right. To the knowledge of the
Company, except as set forth in the Company Disclosure Letter, no person is
infringing the rights of the Company or any of the Company Subsidiaries with
respect to any Intellectual Property Right except as has not had and could not
reasonably be expected to have a Company Material Adverse Effect.
Section 3.25. Hedging. Except as set forth in the Company
Disclosure Letter, none of the Company or the Company Subsidiaries engages in
any natural gas, electricity or other futures or options trading or is a party
to any price swaps, hedges, futures or similar instruments, except for
transactions and agreements entered into, or hedge contracts, for the purchase
or sale of electricity or hydrocarbons to which the Company or any Company
Subsidiary is a party that are in accordance with the general practices of other
similarly situated companies in the industry.
Section 3.26. Regulatory Proceedings. Except as set forth in
the Company Disclosure Letter, and other than fuel adjustment or purchase gas
adjustment or similar
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49
adjusting rate mechanisms, none of the Company or the Company Subsidiaries all
or part of whose rates or services are regulated by a Governmental Entity (a) is
a party to any rate proceeding before a Governmental Entity that would
reasonably be expected to result in orders having a Company Material Adverse
Effect or (b) has rates that have been or are being collected subject to refund,
pending final resolution of any rate proceeding pending before a Governmental
Entity or on appeal to a court.
ARTICLE IV
Representations and Warranties of Parent and Newco
Parent and Newco, jointly and severally, represent and warrant
to the Company as follows:
SECTION 4.01. Organization, Standing and Power. Each of Parent
and each of its subsidiaries, including Newco (the "Parent Subsidiaries"), is
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has full corporate power and authority
and possesses all governmental franchises, licenses, permits, authorizations and
approvals necessary to enable it to own, lease or otherwise hold its properties
and assets and to conduct its businesses as conducted as of the date of this
Agreement, other than such franchises, licenses, permits, authorizations and
approvals the lack of which, individually or in the aggregate, has not had and
could not reasonably be expected to have a Material Adverse Effect on Parent (a
"Parent Material Adverse Effect"). Parent and each Parent Subsidiary is duly
qualified to do business in each jurisdiction where the nature of its business
or their ownership or leasing of its properties make such qualification
necessary, other than such qualifications the lack of which, individually or in
the aggregate, has not had and could not reasonably be expected to have a Parent
Material Adverse Effect. Parent has made available to the Company true and
complete copies of the amended and restated articles of incorporation of Parent,
as amended to the date of this Agreement (as so amended, the "Parent Charter"),
and the By-laws of Parent, as amended to the date of this Agreement (as so
amended, the
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50
"Parent By-laws"), and the comparable charter or organizational documents of
Newco and each other Parent Subsidiary, in each case as amended through the date
of this Agreement.
SECTION 4.02. Parent Subsidiaries; Equity Interests. (a) The
letter, dated as of the date of this Agreement, from Parent to the Company (the
"Parent Disclosure Letter") lists each Parent Subsidiary and its jurisdiction of
organization and specifies each of the Parent Subsidiaries that is, and as of
the date of this Agreement AmerGen (as hereinafter defined is not), (i) a
"public-utility company", a "holding company", a "subsidiary company", an
"affiliate" of any public-utility company, an "exempt wholesale generator" or a
"foreign utility company" within the meaning of Section 2(a)(5), 2(a)(7),
2(a)(8), 2(a)(11), 32(a)(1) or 33(a)(3) of PUHCA, respectively, (ii) a "public
utility" within the meaning of Section 201(e) of the Power Act or (iii) a
"qualifying facility" within the meaning of PURPA, or that owns such a
qualifying facility. All the outstanding shares of capital stock of each Parent
Subsidiary have been validly issued and are fully paid and nonassessable and,
except as set forth in Parent Disclosure Letter, are owned by Parent, by another
Parent Subsidiary or by Parent and another Parent Subsidiary, free and clear of
all Liens.
(b) Except for its interests in Parent Subsidiaries and except
for the ownership interests set forth in Parent Disclosure Letter or interests
acquired after the date of this Agreement without violating any covenant of this
Agreement, Parent does not own, directly or indirectly, any capital stock,
membership interest, partnership interest, joint venture interest or other
equity interest with a fair market value as of the date of this Agreement in
excess of $500,000 in any person, as reasonably determined by Parent.
(c) Since the date of its incorporation, Newco has not carried
on any business or conducted any operations other than the execution of this
Agreement, the performance of its obligations hereunder and thereunder and
matters ancillary thereto. As of the date of this Agreement, Newco has no
material assets or liabilities.
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51
SECTION 4.03. Capital Structure. (a) The authorized capital
stock of Parent consists of 500,000,000 shares of Parent Common Stock and shares
of preferred stock as set forth in the Parent Disclosure Letter (the "Parent
Preferred Stock" and, together with the Parent Common Stock, the "Parent Capital
Stock"). At the close of business on August 31, 1999, (i) 203,392,956 shares of
Parent Common Stock were issued and outstanding and shares of Parent Preferred
Stock were issued and outstanding as set forth in the Parent Disclosure Letter,
(ii) 38,721,900 shares of Parent Common Stock were held by Parent in its
treasury and (iii) 5,800,841 shares of Parent Common Stock were subject to
outstanding Parent Employee Stock Options (as defined in Section 6.04) and
5,166,533 additional shares of the Parent Common Stock were reserved for
issuance pursuant to Parent Stock Plans (as defined in Section 6.04).
(b) Except as set forth in clause (a) of this Section 4.03 or
in the Parent Disclosure Letter, at the close of business on August 31, 1999, no
shares of capital stock or other voting securities of Parent were issued,
reserved for issuance or outstanding.
(c) All outstanding shares of Parent Capital Stock are, and
all such shares that may be issued prior to the Merger Effective Time will be
when issued, duly authorized, validly issued, fully paid and nonassessable and
not subject to or issued in violation of any purchase option, call option, right
of first refusal, preemptive right, subscription right or any similar right
under any provision of the PBCL, the Parent Charter, the Parent By-laws or any
Contract to which Parent is a party or otherwise bound.
(d) There are not any bonds, debentures, notes or other
indebtedness of Parent having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
holders of Parent Common Stock may vote ("Voting Parent Debt").
(e) Except as set forth in clause (a) of this Section 4.03 or
in the Parent Disclosure Letter, as of the date of this Agreement, there are not
any options, warrants,
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52
rights, convertible or exchangeable securities, "phantom" stock rights, stock
appreciation rights, stock-based performance units, commitments, Contracts,
arrangements or undertakings of any kind to which Parent or any Parent
Subsidiary is a party or by which any of them is bound (i) obligating Parent or
any Parent Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other equity interests
in, or any security convertible or exercisable for or exchangeable into any
capital stock of or other equity interest in, Parent or of any Parent Subsidiary
or any Voting Parent Debt or (ii) obligating Parent or any Parent Subsidiary to
issue, grant, extend or enter into any such option, warrant, call, right,
security, commitment, Contract, arrangement or undertaking.
(f) As of the date of this Agreement, except as described in
the Parent Disclosure Letter, there are not any outstanding contractual
obligations of Parent or any Parent Subsidiary to repurchase, redeem or
otherwise acquire any shares of capital stock of Parent or any Parent
Subsidiary.
(g) The authorized capital stock of Newco consists of
500,000,000 shares of common stock, no par value, 100,000,000 shares of
preferred stock, no par value, and 100,000,000 shares of series preference
stock, no par value, of which only 100 shares of common stock have been validly
issued, are fully paid and nonassessable and are owned by Parent free and clear
of any Lien.
SECTION 4.04. Authority; Execution and Delivery;
Enforceability. (a) Each of Parent and Newco has all requisite corporate power
and authority to execute and deliver this Agreement and to consummate the
Transactions. The execution and delivery by each of Parent and Newco of this
Agreement and the consummation by it of the Transactions have been duly
authorized by all necessary corporate action on the part of Parent and Newco,
subject (i) in the case of the Merger and the Share Issuance, to receipt of the
Parent Shareholder Approval (as defined in Section 4.04(c)) and (ii) adoption by
Parent, as sole shareholder of Newco, of this Agreement. Each of Parent and
Newco has duly executed and delivered this Agreement, and this Agreement
constitutes its legal, valid and binding
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53
obligation, enforceable against it in accordance with its terms.
(b) The Board of Directors of Parent (the "Parent Board"), at
a meeting duly called and held, duly and unanimously adopted resolutions (i)
approving this Agreement, the Merger, the Share Issuance and the other
Transactions, (ii) determining that the terms of the Merger, the Share Issuance
and the other Transactions are fair to and in the best interests of Parent and
its shareholders and (iii) directing that this Agreement be submitted to a vote
of Parent's shareholders and recommending that they adopt this Agreement and
approve the Share Issuance. Such resolutions are sufficient to render
inapplicable to this Agreement, the Merger, the Share Issuance and the other
Transactions, to the extent otherwise applicable, the provisions of Subchapters
D (Section 2538), E, F, G, H, I and J of Chapter 25 of the PBCL and (ii) the
provisions of Sections 508 and 509 of the Parent Charter. To Parent's knowledge,
no other state takeover statute or similar statute or regulation applies or
purports to apply to Parent or Newco with respect to this Agreement, the Merger,
the Share Issuance or any other Transaction.
(c) The only vote of holders of any class or series of Parent
securities necessary to approve and adopt this Agreement, the Merger, the Share
Issuance and the other Transactions is the adoption of this Agreement by the
affirmative vote of a majority of the votes cast by all holders of Parent Common
Stock entitled to vote (collectively, the "Parent Shareholder Approval"). The
affirmative vote of the holders of Parent Capital Stock, or any of them, is not
necessary to consummate any Transaction other than the Share Issuance and the
Merger.
SECTION 4.05. No Conflicts; Consents. (a) Except as set forth
in the Parent Disclosure Letter, the execution and delivery by each of Parent
and Newco of this Agreement does not, and the consummation of the Merger, the
Share Issuance and the other Transactions and compliance with the terms hereof
and thereof will not, conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, consent, approval, cancelation or
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54
acceleration of any obligation or to loss of a material benefit under, or to
increased, additional, accelerated or guaranteed rights or entitlements of any
person under, or result in the creation of any Lien upon any of the properties
or assets of Parent or any Parent Subsidiary under, any provision of (i) Parent
Charter, Parent By-laws or the comparable charter or organizational documents of
any Parent Subsidiary, (ii) any Contract to which Parent or any Parent
Subsidiary is a party or by which any of their respective properties or assets
is bound or (iii) subject to the filings and other matters referred to in
Section 4.05(b), any Judgment or Applicable Law or writ, permit or license
applicable to Parent or any Parent Subsidiary or their respective properties or
assets (other than immaterial consents, approvals, licenses, permits, orders,
authorizations, registrations, declarations or filings, including with respect
to communications systems, zoning, name changes, occupancy and similar routine
regulatory approvals), other than, in the case of clauses (ii) and (iii) above,
any such items that, individually or in the aggregate, have not had and could
not reasonably be expected to have a Parent Material Adverse Effect.
(b) No Consent of, action by or in respect of, or
registration, declaration or filing with, or notice to, any Governmental Entity
is required to be obtained or made by or with respect to Parent or any Parent
Subsidiary in connection with the execution, delivery and performance of this
Agreement or the consummation of the Transactions, other than (i) compliance
with and filings under the HSR Act, (ii) the filing with the SEC of (A) the Form
S-4 and the Proxy Statement and (B) such reports under the Exchange Act, as may
be required in connection with this Agreement, the Merger and the other
Transactions, (iii) the filing of the Articles of Exchange, Pennsylvania
Articles of Merger and the Charter Amendment with the Department of State of the
Commonwealth of Pennsylvania, the filing of the Illinois Articles of Merger
with, and issuance of a certificate of merger by, the Secretary of State of the
State of Illinois and the filing of appropriate documents with the relevant
authorities of the other jurisdictions in which the Company is qualified to do
business, (iv) notice to, and the consent and approval of, FERC under the Power
Act, (v) notice to, and the consent and approval of, the NRC under the Atomic
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55
Energy Act, (vi) notice to and the consent and approval of the Pennsylvania
Public Utility Commission (the "PPUC"), (vii) the consents, filings and
approvals required under PUHCA, (viii) compliance with and such filings as may
be required under applicable Environmental Laws, (ix) such filings as may be
required in connection with the taxes described in Section 6.09 and (x) such
other items as are set forth in the Parent Disclosure Letter (collectively,
whether or not legally required to be obtained, the "Parent Required Statutory
Approvals").
SECTION 4.06. SEC Documents; Undisclosed Liabilities. Parent
has filed all reports, schedules, forms, statements and other documents required
to be filed by Parent with the SEC since January 1, 1998 (the "Parent SEC
Documents"). Each Parent SEC Document complied in all material respects as of
its respective date with the requirements of the Exchange Act or the Securities
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Parent SEC Document, and except to the extent that
information contained in any Parent SEC Document has been revised or superseded
by a later filed Parent SEC Document, does not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The consolidated financial
statements of Parent included in the Parent SEC Documents comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present
the consolidated financial position of Parent and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set forth in the
Filed Parent SEC Documents (as defined in Section 4.08) or the Parent Disclosure
Letter or incurred after the date hereof in the usual, regular and ordinary
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56
course of business in substantially the same manner as previously conducted and
not prohibited by this Agreement, neither Parent nor any Parent Subsidiary has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of Parent and its consolidated subsidiaries or in the notes
thereto and that, individually or in the aggregate, could reasonably be expected
to have a Parent Material Adverse Effect. None of the Parent Subsidiaries is, or
has at any time since January 1, 1998 been, subject to the reporting
requirements of Sections 13(a) and 15(d) of the Exchange Act.
SECTION 4.07. Information Supplied. None of the information
supplied or to be supplied by Parent or Newco for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 is filed with the
SEC, at any time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii) the Proxy
Statement will, at the date it is first mailed to the Company's shareholders or
Parent's shareholders or at the time of the Company Shareholders Meeting or the
Parent Shareholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Form S-4 will comply as to form in all
material respects with the requirements of the Securities Act and the rules and
regulations thereunder, except that no representation is made by Parent or Newco
with respect to statements made or incorporated by reference therein based on
information supplied by or on behalf of the Company for inclusion or
incorporation by reference therein.
SECTION 4.08. Absence of Certain Changes or Events. Except as
disclosed in the Parent SEC Documents filed and publicly available prior to the
date of this Agreement (the "Filed Parent SEC Documents") or in the Parent
Disclosure Letter:
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57
(a) since December 31, 1998, there has not been any event,
change, effect or development that, individually or in the aggregate, has had or
could reasonably be expected to have a Parent Material Adverse Effect, other
than events, changes, effects and developments relating to the economy in
general or to Parent's industry in general and not specifically relating to
Parent or any Parent Subsidiary; and
(b) from December 31, 1998 to the date of this Agreement,
Parent has conducted its business only in the ordinary course, and during such
period there has not been:
(i) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect
to any Parent Capital Stock or any repurchase for value by Parent of
any Parent Capital Stock;
(ii) any split, combination or reclassification of any Parent
Capital Stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for
shares of Parent Capital Stock; or
(iii) any change in accounting methods, principles or
practices by Parent or any Parent Subsidiary materially affecting the
consolidated assets, liabilities or results of operations of Parent,
except insofar as may have been required by a change in GAAP.
SECTION 4.09. Taxes. (a) Each of Parent and each Parent
Subsidiary has timely filed, or has caused to be timely filed on its behalf, all
Tax Returns required to be filed by it (or requests for extensions to file such
Tax Returns have been timely filed and granted and have not expired), and all
such Tax Returns are true, complete and accurate, except to the extent any
failure to file or any inaccuracies in any filed Tax Returns would not,
individually or in the aggregate, have a Parent Material Adverse Effect. All
Taxes shown to be due on such Tax Returns, or otherwise owed by Parent or any
Parent Subsidiary, have been timely paid, except to the extent that any failure
to pay, individually or in the aggregate, has
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not had and could not reasonably be expected to have a Parent Material Adverse
Effect.
(b) Except as set forth in the Parent Disclosure Letter, the
most recent financial statements contained in the Filed Parent SEC Documents
reflect an adequate reserve for all current Taxes payable by Parent and the
Parent Subsidiaries (in addition to any reserve for deferred Taxes established
to reflect timing differences between book and Tax income) for all Taxable
periods and portions thereof through the date of such financial statements.
Except as set forth in the Parent Disclosure Letter, no deficiency with respect
to any Taxes has, to the best knowledge of Parent, been proposed, asserted or
assessed against Parent or any Parent Subsidiary, and no requests for waivers of
the time to assess any such Taxes are pending, except to the extent any such
deficiency or request for waiver, individually or in the aggregate, has not had
and could not reasonably be expected to have a Parent Material Adverse Effect.
(c) The Federal income Tax Returns of Parent and each Parent
Subsidiary consolidated in such Returns have been examined by and settled with
the United States Internal Revenue Service for all years through 1990. Except as
set forth in the Parent Disclosure Letter, all material assessments for Taxes
due with respect to such completed and settled examinations or any concluded
litigation have been fully paid.
(d) There are no material Liens for Taxes (other than for
current Taxes not yet due and payable) on the assets of Parent or any Parent
Subsidiary. Except as set forth in the Parent Disclosure Letter, neither Parent
nor any Parent Subsidiary is bound by any agreement with respect to Taxes.
(e) The Parent and each Parent Subsidiary have complied with
all applicable statutes, laws, ordinances, rules and regulations relating to the
payment and withholding of taxes (including withholding of taxes pursuant to
Sections 1441, 1442, 3121 and 3402 of the Code or similar provisions under any
Federal, state or local laws, domestic and foreign) and have, within the time
and in
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the manner prescribed by law, withheld from and paid over to the proper
governmental authorities all amounts required to be so withheld and paid over
under applicable laws, except to the extent that any failure to withhold or to
pay, individually or in the aggregate, has not had and could not reasonably be
expected to have a Parent Material Adverse Effect.
(f) Parent knows of no fact and neither Parent nor any Parent
Subsidiary has taken or agreed to take any action that could reasonably be
expected to prevent (i) the Merger from constituting transactions described in
Section 351 of the Code or (ii) the Second Step Merger from constituting a
transaction described in Section 368(a) of the Code.
SECTION 4.10. Absence of Changes in Benefit Plans. Except as
disclosed in the Parent Disclosure Letter, from December 31, 1998 to the date of
this Agreement, there has not been any adoption or amendment in any material
respect by Parent or any Parent Subsidiary of (a) any collective bargaining
agreements, (b) any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, program, policy, arrangement or
understanding (whether or not legally binding) providing benefits to any current
or former employee, officer or director of Parent or any Parent Subsidiary or
any beneficiary or dependent thereof, that is sponsored or maintained by Parent
or any Parent Subsidiary or to which Parent or any Parent Subsidiary contributes
or is obligated to contribute (collectively, "Parent Benefit Plans") or (c) any
Parent Employment Arrangements (as defined herein). Except as disclosed in the
Parent Disclosure Letter, as of the date of this Agreement there are not any
employment, consulting, indemnification, change-of-control, severance or
termination agreements or arrangements between Parent or any Parent Subsidiary
and any current or former employee, officer or director of the Parent or any
Parent Subsidiary (collectively, the "Parent Employment Arrangements").
SECTION 4.11. ERISA Compliance; Excess Parachute
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Payments. (a) The Parent Disclosure Letter includes a complete list of all
material Parent Benefit Plans and Parent Employment Arrangements as of the date
of this Agreement. With respect to each Parent Benefit Plan (other than a
multiemployer plan within the meaning of Section 4001(a)(3) of ERISA) and Parent
Employment Arrangement, Parent has delivered to the Company true, complete and
correct copies of (i) each such Parent Benefit Plan or Parent Employment
Arrangement (or, in the case of any unwritten plan or arrangement, a description
thereof), (ii) the most recent annual report on the applicable Form 5500 series
filed with the Internal Revenue Service (if any such report was required),
including all schedules and attachments thereto, (iii) the most recent summary
plan description (if a summary plan description is required) and all summaries
of material modifications thereto, (iv) each trust agreement, group annuity
contract or other funding vehicle relating to any such Parent Benefit Plan or
Parent Employment Arrangement, (v) the most recent actuarial report or valuation
relating thereto and (vi) the most recent determination letters issued by the
Internal Revenue Service with respect to Parent Benefit Plans that are intended
to be Qualified Plans and letters of recognition of exemption with respect to
any Parent Benefit Plan or related trust that is intended to meet the
requirements of Section 501(c)(9) of the Code.
(b) With respect to the Parent Benefit Plans and Parent
Employment Arrangements, individually and in the aggregate, no event has
occurred and, to the knowledge of Parent, there exists no condition or set of
circumstances, in connection with which Parent or any Parent Subsidiary could be
subject to any liability that has had or could reasonably be expected to have a
Parent Material Adverse Effect (except liability for benefits claims and funding
obligations payable in the ordinary course) under ERISA, the Code or any other
applicable law. For purposes of this Section 4.11(b), the term "Parent Benefit
Plan" shall also include any employee benefit plan within the meaning of Section
3(3) of ERISA that, within the last six years, was sponsored or maintained by
any entity which would be treated under Section 414 of the Code as a single
employer with Parent or any Parent Subsidiary or to which any such entity
contributed or was obligated to contribute.
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(c) Each Parent Benefit Plan and each Parent Employment
Arrangement has been administered in accordance with its terms except for any
failures so to administer any Parent Benefit Plan or Parent Employment
Arrangement as have not had and could not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect. Parent, all
Parent Subsidiaries and all the Parent Benefit Plans and Parent Employment
Arrangements are in compliance with the applicable provisions of ERISA, the Code
and all other applicable laws and the rules and regulations thereunder and the
terms of all applicable collective bargaining agreements, except for any
failures to be in such compliance as have not had and could not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect. Except as disclosed in the Parent Disclosure Letter, there are no
pending or, to the knowledge of Parent, threatened or anticipated claims under
or with respect to any Parent Benefit Plan or Parent Employment Arrangement by
or on behalf of any current or former employee, officer or director, or
dependent or beneficiary thereof, or otherwise (other than routine claims for
benefits).
(d) Except as disclosed in the Parent Disclosure Letter, (i)
no current or former employee, officer or director of Parent or any Parent
Subsidiary will be entitled to any additional rights or benefits or any
acceleration of the time of payment or vesting of any benefits under any Parent
Benefit Plan or Parent Employment Arrangement, and no trustee under any "rabbi
trust", or similar arrangement maintained in connection with any Parent Benefit
Plan or Parent Employment Arrangement will be entitled to any payment, as a
result (either alone or upon the occurrence of any additional or further acts or
events) of the execution of this Agreement or the consummation, announcement or
other actions relating to the Transactions and (ii) no amount payable to any
current or former employee, officer or director of Parent or any Parent
Subsidiary will fail to be deductible by reason of Section 280G of the Code.
(e) Each Parent Benefit Plan intended to be a Qualified Plan
has received a favorable determination letter from the Internal Revenue Service
that it is so qualified
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and nothing has occurred since the date of such letter that could reasonably be
expected to affect the qualified status of such Parent Benefit Plan.
(f) The aggregate accumulated benefit obligations of each
Parent Benefit Plan subject to Title IV of ERISA (as of the date of the most
recent actuarial valuation prepared for such Parent Benefit Plan) do not exceed
the fair market value of the assets of such plan (as of the date of such
valuation).
(g) All contributions and other payments required to have been
made for any completed historical period by Parent or any Parent Subsidiary to
any Parent Benefit Plan or Parent Employment Arrangement (or to any person
pursuant to the terms thereof) have been timely made or paid in full, or, to the
extent not required to be made or paid for such period, have been reflected in
the consolidated financial statements of Parent.
(h) Except as disclosed in the Parent Disclosure Letter, no
Parent Benefit Plan is a multiemployer plan within the meaning of Section
4001(a)(3) of ERISA, and none of Parent or any Parent Subsidiary has, at any
time during the last six years, contributed to or been obligated to contribute
to any such multiemployer plan. For purposes of the representations and
warranties made in the last sentence of Section 4.11(c) and in Sections 4.11 (e)
and (f), the term "Parent Benefit Plan" shall be deemed to exclude any such
multiemployer plan.
SECTION 4.12. Litigation. Except as disclosed in the Filed
Parent SEC Documents or in the Parent Disclosure Letter, there is no suit,
action or proceeding pending or, to the knowledge of Parent, threatened against
Parent or any Parent Subsidiary that, individually or in the aggregate, has had
or could reasonably be expected to have a Parent Material Adverse Effect, nor is
there any Judgment outstanding against Parent or any Parent Subsidiary that has
had or could reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.13. Compliance with Applicable Laws; Permits. (a)
Except as disclosed in the Filed Parent SEC
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Documents or in the Parent Disclosure Letter, Parent and Parent Subsidiaries are
in compliance with the terms of all applicable Parent Permits (as defined in
Section 4.13(b)) and all Applicable Laws, except for instances of noncompliance
that, individually and in the aggregate, have not had and could not reasonably
be expected to have a Parent Material Adverse Effect. This Section 4.13 does not
relate to matters with respect to Taxes, which are the subject of Section 4.09,
Environmental Laws, which are the subject of Section 4.17, benefits plans, which
are the subject of Section 4.11 and the operation of nuclear power plants which
are the subject of Section 4.19.
(b) Except as disclosed in the Filed Parent SEC Documents or
in the Parent Disclosure Letter, Parent and the Parent Subsidiaries own or have
sufficient rights and consents to use under existing franchises, permits,
easements, leases, and license agreements (the "Parent Permits") all properties,
rights and assets necessary for the conduct of their business and operations as
currently conducted, except where the failure to own or have sufficient rights
to such properties, rights and assets, individually or in the aggregate, have
not had and could not reasonably be expected to have a Parent Material Adverse
Effect. Except as provided in the Pennsylvania Electricity Generation Customer
Choice and Competition Act of 1996, to the knowledge of Parent, no other private
corporation can commence electric public utility operations in any part of the
respective territories now served by Parent or any Parent Subsidiary, without
obtaining a certificate of public convenience and necessity from the applicable
state utility commission.
SECTION 4.14. Brokers; Schedule of Fees and Expenses. No
broker, investment banker, financial advisor or other person, other than Salomon
Smith Barney Inc. and Morgan Stanley & Company Incorporated, the fees and
expenses of which will be paid by Parent, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
Merger and the other Transactions based upon arrangements made by or on behalf
of Parent or Newco.
SECTION 4.15. Opinions of Financial Advisors.
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Parent has received the opinions of Salomon Smith Barney Inc. and Morgan Stanley
& Company Incorporated, dated the date of this Agreement, to the effect that, as
of such date, the Exchange Consideration is fair to the holders of Parent Common
Stock from a financial point of view, signed copies of which opinions have been
delivered to the Company.
SECTION 4.16. Year 2000. The Parent SEC Documents fairly
summarize the status of Parent's computer applications and components,
modification or readiness plan, communications with suppliers and vendors,
contingency plans and estimated cost of remediation as they relate to the Year
2000 issue. Parent has made available to the Company copies of all
correspondence between Parent and its third party suppliers and vendors
concerning their Year 2000 compliance.
SECTION 4.17. Environmental Matters. (a) Compliance. Except as
set forth in the Filed Parent SEC Documents or in the Parent Disclosure Letter,
Parent and each of the Parent Subsidiaries is and has been in compliance with
all applicable Environmental Laws, except where the failure to so comply,
individually or in the aggregate, has not had and could not reasonably be
expected to have a Parent Material Adverse Effect.
(b) Environmental Permits. Except as set forth in the Filed
Parent SEC Documents or in the Parent Disclosure Letter, (i) Parent and each of
the Parent Subsidiaries has obtained or has applied for all Environmental
Permits necessary for the construction of their facilities or the conduct of
their operations, except where the failure to so obtain, individually or in the
aggregate, has not had and could not reasonably be expected to have a Parent
Material Adverse Effect, and (ii) all such Environmental Permits are in good
standing or, where applicable, a renewal application has been timely filed and
is pending agency approval, except where the failure of such Environmental
Permits to be in good standing or to have filed a renewal application on a
timely basis has not had and could not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
(c) Environmental Claims. Except as set forth in the Filed
Parent SEC Documents or in the Parent Disclosure
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Letter, there are no Environmental Claims that have had or could reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect, pending or, to the knowledge of Parent, threatened against Parent or any
of the Parent Subsidiaries.
(d) Releases. Except as set forth in the Filed Parent SEC
Documents or in the Parent Disclosure Letter, there have been no Releases of any
Hazardous Materials that could be reasonably likely to form the basis of any
Environmental Claim against Parent or any of the Parent Subsidiaries, except for
any Environmental Claim which, individually or in the aggregate, has not had and
could not reasonably be expected to have a Parent Material Adverse Effect.
(e) Assumed and Retained Liabilities. Except as disclosed in
the Filed Parent SEC Documents or in the Parent Disclosure Letter, none of
Parent or the Parent Subsidiaries has retained or assumed either contractually
or by operation of law any liabilities or obligations that could reasonably be
likely to form the basis for any Environmental Claim, which has had and could
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.
SECTION 4.18. Labor and Employee Relations. (a) Except as set
forth in the Parent Disclosure Letter, (i) neither Parent nor any of the Parent
Subsidiaries is a party to any collective bargaining agreement or other labor
agreement with any union or labor organization and (ii) to the knowledge of
Parent, there is no current union representation question involving employees of
Parent or any of the Parent Subsidiaries, nor does Parent have knowledge of any
activity or proceeding of any labor organization (or representative thereof) or
employee group to organize any such employees, except to the extent it,
individually or in the aggregate, has not had and could not reasonably be
expected to have a Parent Material Adverse Effect.
(b) Except as set forth in the Parent Disclosure Letter, or
except to the extent the following, individually or in the aggregate, have not
had and could not reasonably be expected to have a Parent Material Adverse
Effect,
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(A) there is no unfair labor practice, employment discrimination or
other charge, claim, suit, action or proceeding against Parent or any of the
Parent Subsidiaries pending, or to the knowledge of Parent, threatened before
any court, governmental department, commission, agency, instrumentality or
authority or any arbitrator and (B) there is no strike, lockout or material
dispute, slowdown or work stoppage pending or, to the knowledge of Parent,
threatened against or involving Parent.
SECTION 4.19. Operations of Nuclear Power Plants. (a) Except
as set forth in the Filed Parent SEC Documents or in the Parent Disclosure
Letter, (a) the operations of the nuclear generation stations (collectively, the
"Parent Nuclear Facilities") currently or formerly owned, in whole or part, by
Parent or any of its affiliates are and have been conducted in compliance with
all Applicable Laws and Parent Permits, except for such failures to comply that,
individually or in the aggregate, have not had and could not reasonably be
expected to have a Parent Material Adverse Effect, (b) each of the Parent
Nuclear Facilities maintains, and is in compliance with, (i) emergency plans
designed to respond to an unplanned Release therefrom of radioactive materials,
(ii) plans for the decommissioning of each of the Parent Nuclear Facilities,
(iii) plans for the storage and disposal of spent nuclear fuel, and each such
plan enumerated in (i) through (iii) conform with the requirements of Applicable
Law, and (c) Parent has funded consistent with reasonable budget projections the
current or future decommissioning of each Parent Nuclear Facility and the
storage and disposal of spent nuclear fuel.
(b) To the best knowledge of Parent, recognizing that AmerGen
does not as of the date of this Agreement, own, or hold any operating licenses
for, nuclear generating stations, (i) the operations of the nuclear generation
stations which are the subject of an existing purchase, operating or similar
agreement by AmerGen or any of its affiliates or assignees (the "AmerGen Nuclear
Facilities") are and have been conducted in compliance with all Applicable Laws
and necessary permits of Governmental Entities, except for such failures to
comply that, individually or in the aggregate, have not had and could not
reasonably be expected to have a Parent Material Adverse
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Effect, (ii) each of the AmerGen Nuclear Facilities maintains, and is in
compliance with, (A) emergency plans designed to respond to an unplanned Release
therefrom of radioactive materials, (B) plans for the decommissioning of each of
the AmerGen Nuclear Facilities and (C) plans for the storage and disposal of
spent nuclear fuel, and each such plan enumerated in (A) through (C) conform
with the requirements of Applicable Law, and (iii) the current owner has funded
consistent with reasonable budget projections the current or future
decommissioning of each AmerGen Nuclear Facility and the storage and disposal of
spent nuclear fuel.
(c) Parent hereby makes each of the representations and
warranties contained in Sections 4.05(a), 4.05(b), 4.12, 4.13 and 4.17 with
respect to AmerGen, as if AmerGen were a Parent Subsidiary as defined in this
Agreement, it being understood that the Company acknowledges and agrees that as
of the date hereof AmerGen is not a subsidiary and therefore no representation
or warranty is made concerning AmerGen or its business or operations except as
expressly set forth in this Section 4.19(c) and the first sentence of Section
4.02(a) and Section 4.19(b), and each such representation and warranty
pertaining to AmerGen is qualified to the best knowledge of Parent recognizing
that AmerGen does not as of the date of this Agreement, own, or hold any
operating licenses for, nuclear generating stations.
SECTION 4.20. Company Share Ownership. Neither Parent nor any
Parent Subsidiary owns any shares of Company Common Stock or other securities
convertible into Company Common Stock.
SECTION 4.21. Regulation as a Utility. Parent is regulated as
a public utility by the Commonwealth of Pennsylvania and by no other state.
Except as set forth in the previous sentence, neither Parent nor any "subsidiary
company" or "affiliate" of Parent is subject to regulation as a public utility
or public service company (or similar designation) by any other state in the
United States or any foreign country. Parent is a public utility holding company
as defined by PUHCA, but currently claims exemption under Section 3(a)(2) of
PUHCA pursuant to orders of the SEC thereunder.
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SECTION 4.22. Contracts; No Default. Except as disclosed in
the Filed Parent SEC Documents or entered into after the date of this Agreement
without violating any covenant of this Agreement, there are no contracts or
agreements that are material to the business, properties, assets, condition
(financial or otherwise), results of operations or prospects of Parent and the
Parent Subsidiaries taken as a whole. Neither Parent nor any of the Parent
Subsidiaries is in violation of or in default under (nor does there exist any
condition which upon the passage of time or the giving of notice would cause
such a violation of or default under) any loan or credit agreement, note, bond,
mortgage, indenture, lease, permit, concession, franchise, license or any other
contract, agreement, arrangement or understanding, to which it is a party or by
which it or any of its properties or assets is bound, except for violations or
defaults that have not had and could not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
SECTION 4.23. Title to Properties. Except as set forth in the
Parent Disclosure Letter each of Parent and each of the Parent Subsidiaries has
good and sufficient title to its physical properties and assets, or valid
leasehold interests, easements or other appropriate interests therein or thereto
sufficient to conduct its business as presently conducted or intended to be
conducted, except for such as are no longer used or useful in the conduct of its
businesses or as have been disposed of in the ordinary course of business and
except for defects in title, easements, restrictive covenants and similar
encumbrances or impediments set forth in the Parent Disclosure Letter or that,
in the aggregate, do not and will not materially interfere with its ability to
conduct its business as currently conducted or intended to be conducted.
SECTION 4.24. Intellectual Property. Parent and the Parent
Subsidiaries own, or are validly licensed or otherwise have the right to use,
all Intellectual Property Rights which are material to the conduct of the
business of Parent and the Parent Subsidiaries taken as a whole. Except as set
forth in the Parent Disclosure Letter, no claims are pending or, to the
knowledge of Parent, threatened that Parent or any of the Parent Subsidiaries is
infringing or
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otherwise adversely affecting the rights of any person with regard to any
Intellectual Property Right. To the knowledge of Parent, except as set forth in
the Parent Disclosure Letter, no person is infringing the rights of Parent or
any of the Parent Subsidiaries with respect to any Intellectual Property Right
except as has not had and could not reasonably be expected to have a Parent
Material Adverse Effect.
Section 4.25. Hedging. Except as set forth in the Parent
Disclosure Letter, none of Parent or the Parent Subsidiaries engages in any
natural gas, electricity or other futures or options trading or is a party to
any price swaps, hedges, futures or similar instruments, except for transactions
and agreements entered into, or hedge contracts, for the purchase or sale of
electricity or hydrocarbons to which Parent or any Parent Subsidiary is a party
that are in accordance with the general practices of other similarly situated
companies in the industry.
Section 4.26. Regulatory Proceedings. Except as set forth in
the Parent Disclosure Letter and other than fuel adjustment or purchase gas
adjustment or similar adjusting rate mechanisms, none of Parent or the Parent
Subsidiaries all or part of whose rates or services are regulated by a
Governmental Entity (a) is a party to any rate proceeding before a Governmental
Entity that would reasonably be expected to result in orders having a Parent
Material Adverse Effect or (b) has rates that have been or are being collected
subject to refund, pending final resolution of any rate proceeding pending
before a Governmental Entity or on appeal to a court.
ARTICLE V
Covenants Relating to Conduct of Business
SECTION 5.01. Conduct of Business. (a) Conduct of Business by
the Company. Except for matters set forth in the Company Disclosure Letter or
otherwise expressly contemplated by this Agreement, from the date of this
Agreement to the Merger Effective Time the Company shall, and shall cause each
Company Subsidiary to, conduct its
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business in all material respects in the usual, regular and ordinary course
substantially the same manner as previously conducted and use reasonable best
efforts to preserve intact its current business organization in all material
respects, subject to prudent management of work force and business needs, keep
available the services of its current officers and key employees and keep its
relationships with Governmental Entities, customers, suppliers, licensors,
licensees, distributors and others having business dealings with them to the end
that its goodwill and ongoing business shall be unimpaired in all material
respects at the Merger Effective Time. In addition, and without limiting the
generality of the foregoing, except for matters set forth in the Company
Disclosure Letter or otherwise expressly contemplated by this Agreement, from
the date of this Agreement to the Merger Effective Time, the Company shall not,
and shall not permit any Company Subsidiary to, do any of the following without
the prior written consent of Parent:
(i) (A) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, other
than (1) dividends and distributions by a direct or indirect wholly
owned subsidiary of the Company to its parent, (2) regular quarterly
cash dividends with respect to the Company Common Stock, not in excess
of $0.40 per share, in accordance with the Company's past dividend
policy, and (3) regular cash dividends with respect to preferred stock
of the Company or its subsidiaries in accordance with the current terms
thereof, (B) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock, or (C)
purchase, redeem or otherwise acquire any shares of capital stock of
the Company or any Company Subsidiary or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities;
(ii) issue, deliver, sell or grant (A) any shares of its
capital stock, (B) any Voting Company Debt or other voting securities,
(C) any securities convertible into or exchangeable for, or any
options, warrants or
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rights to acquire, any such shares, Voting Company Debt, voting
securities or convertible or exchangeable securities or (D) any
"phantom" stock, "phantom" stock rights, stock appreciation rights or
stock-based performance units, other than (1) the issuance of Company
Common Stock (and associated Company Rights) upon the exercise of
Company Employee Stock Options outstanding on the date of this
Agreement and in accordance with their present terms or pursuant to the
terms of any Company Benefit Plan or Company Employment Arrangement as
in effect on the date of this Agreement or as amended in accordance
with or as permitted by its Agreement, (2) the issuance, subject to
Section 5.01(a)(v), of up to an additional 5,000,000 Company Employee
Stock Options pursuant to the Company Stock Plans in accordance with
their present terms and the terms of the Company stock options issued
in the ordinary course prior to the date of this Agreement and the
issuance of Company Common Stock (and associated Company Rights) upon
the exercise of such Company Employee Stock Options and (3) the
issuance of "phantom" stock or "phantom" stock rights or, subject to
Section 5.01(a)(v), stock appreciation rights or stock-based
performance units, pursuant to the terms of any Company Benefit Plan or
Company Employment Arrangement in effect on the date of this Agreement
or as amended in accordance with or as permitted by this Agreement, and
(4) the issuance of Company Common Stock upon the exercise of Company
Rights;
(iii) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents, except for such
amendments to its certificate of incorporation, by-laws and other
comparable charter or organizational documents that do not have an
adverse affect on the Merger and the other Transactions;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial equity interest in
or portion of the assets of, or by any other manner, any business or
any corporation, partnership, joint venture, association or other
business organization or division thereof or (B) any
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assets that in either case are material, individually or in the
aggregate, to the Company and the Company Subsidiaries, taken as a
whole;
(v) except to the extent required by Applicable Law or by the
terms of any Company Benefit Plan, Company Employment Arrangement or
collective bargaining agreement in effect as of the date of this
Agreement, (A) grant to any current or former employee, officer or
director of the Company or any Company Subsidiary any increase in
compensation or benefits or new incentive compensation grants, except
in the ordinary course of business consistent with prior practice, (B)
grant to any current or former employee, officer or director of the
Company or any Company Subsidiary any increase in severance, pay to
stay or termination pay, except to the extent consistent with past
practice and that, in the aggregate, does not result in a material
increase in benefits or compensation expenses, (C) enter into or amend
any Company Employment Arrangement with any such current or former
employee, officer or director, except to the extent permitted in
subsection (B) above, (D) establish, adopt, enter into or amend in any
material respect any collective bargaining agreement or Company Benefit
Plan, except, with respect to any Company Benefit Plan that is a
Qualified Plan, as may be required to facilitate or obtain a
determination from the Internal Revenue Service that such Company
Benefit Plan is a Qualified Plan or (E) take or permit to be taken any
action to accelerate any rights or benefits or the funding thereof, or
make or permit to be made any material determinations not in the
ordinary course of business consistent with prior practice, under any
collective bargaining agreement, Company Benefit Plan or Company
Employment Arrangement; provided, however, that notwithstanding
anything herein to the contrary, the foregoing shall not restrict the
Company or the Company Subsidiaries from (1) entering into or making
available to newly hired officers and employees or to officers and
employees in the context of promotions based on job performance or
workplace requirements in the ordinary course of business consistent
with past practice, plans, agreements, benefits and compensation
arrangements (including incentive grants) that have, consistent with
past
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practice, been made available to newly hired or promoted officers and
employees, or (2) entering into or amending collective bargaining
agreements with existing collective bargaining representatives so as to
increase compensation or benefits in a manner that does not materially
increase the benefits or compensation expenses of the Company and the
Company Subsidiaries;
(vi) make any change in accounting methods, principles or
practices materially affecting the reported consolidated assets,
liabilities or results of operations of the Company, except as required
by a change in GAAP;
(vii) sell, lease (as lessor), license or otherwise dispose of
or subject to any Lien any properties or assets that are material,
individually or in the aggregate, to the Company and the Company
Subsidiaries, taken as a whole, except sales of inventory and excess or
obsolete assets in the ordinary course of business consistent with past
practice;
(viii) except in the ordinary course of business consistent
with prior practice, (A) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt
securities of the Company or any Company Subsidiary, guarantee any debt
securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another
person or enter into any arrangement having the economic effect of any
of the foregoing, in each case, other than in connection with a
refinancing on commercially reasonable terms, or (B) make any loans,
advances or capital contributions to, or investments in, any other
person, other than to or in the Company or any direct or indirect
wholly owned subsidiary of the Company;
(ix) make or agree to make any new capital expenditure or
expenditures other than as permitted under Section 5.01(a)(iv) that,
individually, is in excess of $50,000,000 or, in the aggregate during
such
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period, are in excess of $250,000,000, except to the extent made or
agreed to be made in order to ensure compliance with the rules and
regulations or an order of the NRC or any other Governmental Entity or
to ensure compliance with the terms of any Permit;
(x) make any material Tax election or settle or compromise any
material Tax liability or refund;
(xi) engage in any activities which would cause a change in
its status under PUHCA, or that would impair the ability of the Company
or ComEd to claim an exemption as of right under Rule 2 of PUHCA prior
to the Merger, other than the application to the SEC under PUHCA
contemplated by this Agreement;
(xii) enter into or commit to any agreement for the purchase
of capacity and/or energy ("Power Purchase Agreement") except for any
Power Purchase Agreement that, in the ordinary course of business, can
be entered into without the prior approval of the Board of Directors or
a committee thereof of the Company (the threshold for requiring
submission to the board or a committee not to be made substantially
higher than that in effect on the date hereof) unless the Company
consults with Parent regarding such Power Purchase Agreement and the
Company has obtained the prior written consent of Parent to such Power
Purchase Agreement or such Power Purchase Agreement is fully compliant
with criteria to which Parent has previously given a generic consent,
in each case, which consent shall not be unreasonably withheld, it
being understood that in such consultation process the Company and
Parent shall comply with all Applicable Law and any applicable
confidentiality or similar third party agreement; or
(xiii) authorize any of, or commit or agree to take any of,
the foregoing actions.
(b) Conduct of Business by Parent. Except for matters set
forth in Parent Disclosure Letter or otherwise expressly contemplated by this
Agreement, from the date of this Agreement to the Merger Effective Time Parent
shall,
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and shall cause each Parent Subsidiary to, conduct its business in all material
respects in the usual, regular and ordinary substantially the same manner as
previously conducted and use all reasonable efforts to preserve intact its
current business organization in all material respects, subject to prudent
management of work force and business needs, keep available the services of its
current officers and employees and keep its relationships with Governmental
Entities, customers, suppliers, licensors, licensees, distributors and others
having business dealings with them to the end that its goodwill and ongoing
business shall be unimpaired in all material respects at the Merger Effective
Time. In addition, and without limiting the generality of the foregoing, except
for matters set forth in the Parent Disclosure Letter or otherwise expressly
contemplated by this Agreement, from the date of this Agreement to the Merger
Effective Time, Parent shall not, and shall not permit any Parent Subsidiary to,
do any of the following without the prior written consent of the Company:
(i) (A) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, other
than (1) dividends and distributions by a direct or indirect wholly
owned subsidiary of Parent to its parent, (2) regular quarterly cash
dividends with respect to the Parent Common Stock, not in excess of
$0.25 per share, in accordance with Parent's past dividend policy and
(3) regular cash dividends with respect to preferred stock of Parent or
its subsidiaries in accordance with the current terms thereof, (B)
split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, or (C) purchase,
redeem or otherwise acquire any shares of capital stock of Parent or
any Parent Subsidiary or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(ii) issue, deliver, sell or grant (A) any shares of its
capital stock, (B) any Voting Parent Debt or other voting securities,
(C) any securities convertible into or exchangeable for, or any
options, warrants or
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rights to acquire, any such shares, Voting Parent Debt, voting
securities or convertible or exchangeable securities or (D) any
"phantom" stock, "phantom" stock rights, stock appreciation rights or
stock-based performance units, other than (1) the issuance of Parent
Common Stock upon the exercise of Parent Employee Stock Options
outstanding on the date of this Agreement and in accordance with their
present terms or pursuant to the terms of any Parent Benefit Plan or
Parent Employment Arrangement as in effect on the date of this
Agreement or as amended in accordance with or as permitted by this
Agreement, (2) the issuance, subject to Section 5.01(b)(v), of up to an
additional 4,900,000 Parent Employee Stock Options and 100,000 shares
of restricted stock pursuant to the Parent Stock Plans in accordance
with their present terms and the terms of the Parent stock options
issued in the ordinary course prior to the date of this Agreement and
the issuance of Parent Common Stock upon the exercise of such Parent
Employee Stock Options and (3) the issuance of "phantom" stock or
"phantom" stock rights or, subject to Section 5.01 (b)(v), stock
appreciation rights or stock-based performance units, pursuant to the
terms of any Parent Benefit Plan or Parent Employment Arrangement in
effect on the date of this Agreement or as amended in accordance with
or as permitted by this Agreement;
(iii) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents, except for such
amendments to its certificate of incorporation, by-laws and other
comparable charter or organizational documents that do not have an
adverse affect on the Merger and the other Transactions;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial equity interest in
or portion of the assets of, or by any other manner, any business or
any corporation, partnership, joint venture, association or other
business organization or division thereof, (B) any assets that are
material, individually or in the aggregate, to Parent and the Parent
Subsidiaries, taken
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as a whole, except Parent or a Parent Subsidiary may acquire or
otherwise invest in any assets, other than nuclear plants, so long as
Parent consults with the Company concerning any acquisition or
investment that is not listed in the Parent Disclosure Letter and
involves an expenditure that, individually, is the excess of
$50,000,000, or in the aggregate during such period, are in excess of
$250,000,000 or (C) any nuclear plants (whether through AmerGen Energy
Company, LLC, a limited liability company organized under the laws of
Delaware ("AmerGen"), or otherwise) other than those nuclear plants in
respect of which Parent or AmerGen has made written offers or has
signed agreements as of the date of this Agreement unless (1) Parent
involves the Company in any review or consideration of such acquisition
of additional nuclear plants, which involvement shall be for the
purpose of ensuring that any such acquisition will be consistent with a
rate of nuclear generation acquisitions and growth that will not impair
Newco's ability to provide and maintain adequate resources and
performance focus for the entire Newco fleet and (2) Parent has
obtained the express written consent of the Company, which consent
shall not be unreasonably withheld, prior to entering into, or
permitting any Parent Subsidiary or AmerGen to enter into, the binding
contract to acquire any such additional nuclear plant, or otherwise
expanding its, or permitting any Parent Subsidiary or AmerGen to expand
their, nuclear capacity;
(v) except to the extent required by Applicable Law or by the
terms of any Parent Benefit Plan, Parent Employment Arrangement or
collective bargaining agreement in effect as of the date of this
Agreement, (A) grant to any current or former employee, officer or
director of Parent or any Parent Subsidiary any increase in
compensation or benefits or new incentive compensation grants, except
in the ordinary course of business consistent with prior practice, (B)
grant to any current or former employee, officer or director of Parent
or any Parent Subsidiary any increase in severance, pay to stay or
termination pay, except to the extent consistent with past practice and
that, in the aggregate, does not result in a material increase
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in benefits or compensation expenses, (C) enter into or amend any
Parent Employment Arrangement with any such current or former employee,
officer or director, except to the extent permitted in subsection (B)
above, (D) establish, adopt, enter into or amend in any material
respect any collective bargaining agreement or Parent Benefit Plan,
except, with respect to any Parent Benefit Plan that is a Qualified
Plan, as may be required to facilitate or obtain a determination from
the Internal Revenue Service that such Parent Benefit Plan is a
Qualified Plan or (E) take or permit to be taken any action to
accelerate any rights or benefits or the funding thereof, or make or
permit to be made any material determinations not in the ordinary
course of business consistent with prior practice, under any collective
bargaining agreement, Parent Benefit Plan or Parent Employment
Arrangement; provided, however, that notwithstanding anything herein to
the contrary, the foregoing shall not restrict Parent or the Parent
Subsidiaries from (1) entering into or making available to newly hired
officers and employees or to officers and employees in the context of
promotions based on job performance or workplace requirements in the
ordinary course of business consistent with past practice, plans,
agreements, benefits and compensation arrangements (including incentive
grants) that have, consistent with past practice, been made available
to newly hired or promoted officers and employees, or (2) entering into
or amending collective bargaining agreements with existing collective
bargaining representatives so as to increase compensation or benefits
in a manner that does not materially increase the benefits or
compensation expenses of Parent and the Parent Subsidiaries;
(vi) make any change in accounting methods, principles or
practices materially affecting the reported consolidated assets,
liabilities or results of operations of Parent, except as required by a
change in GAAP;
(vii) sell, lease (as lessor), license or otherwise dispose of
or subject to any Lien any properties or assets that are material,
individually or
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in the aggregate, to Parent and the Parent Subsidiaries, taken as a
whole, except sales of inventory and excess or obsolete assets in the
ordinary course of business consistent with past practice;
(viii) except in the ordinary course of business consistent
with prior practice, (A) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt
securities of Parent or any Parent Subsidiary, guarantee any debt
securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another
person or enter into any arrangement having the economic effect of any
of the foregoing, in each case, other than in connection with a
refinancing on commercially reasonable terms, or (B) make any loans,
advances or capital contributions to, or investments in, any other
person, other than to or in Parent or any direct or indirect wholly
owned subsidiary of Parent;
(ix) make or agree to make any new capital expenditure or
expenditures other than as permitted by Section 5.01(b)(iv) that,
individually, is in excess of $50,000,000 or, in the aggregate, are in
excess of $250,000,000, except to the extent made or agreed to be made
in order to ensure compliance with the rules and regulations or an
order of the NRC or any other Governmental Entity or to ensure
compliance with the terms of any Permit;
(x) make any material Tax election or settle or compromise any
material Tax liability or refund;
(xi) engage in any activities which would cause a change in
its status under PUHCA, or that would impair the ability of Parent to
claim an exemption as of right under Rule 2 of PUHCA prior to the
Merger, other than the application to the SEC under PUHCA contemplated
by this Agreement;
(xii) enter into or commit to any Power Purchase Agreement
except for any Power Purchase Agreement that,
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in the ordinary course of business, can be entered into without the
prior approval of the Board of Directors or a committee thereof of
Parent (the threshold for requiring submission to the board or a
committee not to be made substantially higher than that in effect on
the date hereof) unless Parent consults with the Company regarding such
Power Purchase Agreement and Parent has obtained the prior written
consent of the Company to such Power Purchase Agreement or such Power
Purchase Agreement is fully compliant with criteria to which the
Company has previously given a generic consent, in each case, which
consent shall not be unreasonably withheld, it being understood that in
such consultation process Parent and the Company shall comply with all
Applicable Law and any applicable confidentiality or similar third
party agreement; or
(xiii) authorize any of, or commit or agree to take any of,
the foregoing actions.
(c) Conduct of Business by Newco. Parent shall cause Newco to
perform its obligations under this Agreement and shall not permit Newco to take
any action other than in furtherance of this Agreement and the Transactions.
(d) Other Actions. The Company and Parent shall not, and shall
not permit any of their respective subsidiaries to, take any action that would,
or that could reasonably be expected to, result in (i) any of the
representations and warranties of such party set forth in this Agreement that is
qualified as to materiality becoming untrue, (ii) any of such representations
and warranties that is not so qualified becoming untrue in any material respect
or (iii) except as otherwise permitted by Section 5.02 or 5.03, any condition to
the Merger set forth in Article VII not being satisfied.
(e) Advice of Changes. The Company and Parent shall promptly
advise the other orally and in writing of any change or event that has or could
reasonably be expected to have a Company Material Adverse Effect or Parent
Material Adverse Effect, as the case may be.
(f) Coordination of Dividends. Each of Parent
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and the Company shall coordinate with the other regarding the declaration and
payment of dividends in respect of Parent Common Stock and Company Common Stock
and the record dates and payment dates relating thereto, it being the intention
of Parent and the Company that no holder of Parent Common Stock, Company Common
Stock or Newco Common Stock shall receive two dividends, or fail to receive one
dividend, for any single calendar quarter with respect to its shares of Parent
Common Stock or Company Common Stock, as the case may be, and/or any shares of
Newco Common Stock any such holder receives in exchange therefor pursuant to the
Merger.
(g) Reorganizations. The parties hereto agree that this
Agreement shall not in any manner restrict (i) Parent from forming a holding
company and such subsidiaries as Parent considers appropriate to separate its
regulated and unregulated businesses (the "Parent Reorganization") and (ii) the
Company from forming such subsidiaries as the Company considers appropriate to
separate its regulated and unregulated businesses (the "Company
Reorganization"). The parties to this Agreement acknowledge and agree that
implementation by Parent of the Parent Reorganization or by the Company of the
Company Reorganization shall not constitute (x) a breach of or failure to
perform any of the representations, warranties or covenants in this Agreement or
(y) otherwise result in the failure of any condition to the obligation of the
Company or Parent, as applicable, to consummate the Merger to be satisfied.
SECTION 5.02. No Solicitation by Company. (a) The Company
agrees that, during the term of this Agreement, it shall not, and shall not
authorize or permit any of its subsidiaries or any director, officer, employee,
agent or representative (collectively, "Representatives") of the Company or any
of its subsidiaries, directly or indirectly, to (i) solicit, initiate, encourage
or facilitate, or furnish or disclose non-public information in furtherance of,
any inquiries or the making of any proposal with respect to a Company Competing
Transaction (as defined herein) or (ii) negotiate, explore or otherwise engage
in discussions with any person (other than Parent or Newco or their respective
Representatives) with respect to any
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Company Competing Transaction. The term "Company Competing Transaction" means
any recapitalization, merger, consolidation or other business combination
involving the Company, or acquisition of any material portion of the capital
stock or assets (except for (A) acquisitions of assets in the ordinary course of
business, (B) acquisitions by the Company that do not and could not reasonably
be expected to impede the consummation of the Merger and do not violate any
other covenant in this Agreement, (C) transactions disclosed in the Company
Disclosure Letter and (D) the Transactions) of the Company, or any combination
of the foregoing. The Company will immediately cease all existing activities,
discussions and negotiations with any parties conducted heretofore with respect
to any of the foregoing and shall use its reasonable best efforts to enforce any
confidentiality or similar agreement relating to a Company Competing
Transaction. From and after the execution of this Agreement, the Company shall
immediately advise Parent in writing of the receipt, directly or indirectly, of
any inquiries, discussions, negotiations, or proposals relating to a Company
Competing Transaction (including the specific terms thereof), and promptly
furnish to Parent a copy of any such proposal or inquiry in addition to any
information provided to or by any third party relating thereto and if such
proposal or inquiry is not in writing, the identity of the person making such
proposal or inquiry. Notwithstanding the foregoing, prior to receipt of the
Company Shareholder Approval, the Company may, but only to the extent that the
Board of Directors of the Company shall conclude in good faith, based upon the
advice of its outside counsel, that failure to take such action could reasonably
be expected to constitute a breach of the fiduciary obligations of such Board of
Directors under Applicable Law, in response to a proposal for a Company
Competing Transaction that constitutes a Qualifying Company Proposal (as defined
in Section 5.02(d)) that did not result from the breach or a deemed breach of
this Section 5.02, and subject to compliance with the notification provisions of
this Section 5.02, (A) furnish non-public information with respect to the
Company to the person proposing such Company Competing Transaction and its
Representatives pursuant to a confidentiality agreement with terms no less
restrictive of such person than those set forth in the Confidentiality Agreement
(as defined in Section 6.02) and (B) participate
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in discussions or negotiations with such person and its Representatives
regarding such Company Competing Transaction. Without limiting the foregoing, it
is agreed that any violation of the restrictions set forth in this Section
5.02(a) by any Representative or affiliate of the Company or any Company
Subsidiary, whether or not such person is purporting to act on behalf of the
Company or any Company Subsidiary or otherwise, shall be deemed to be a breach
of this Section 5.02(a) by the Company.
(b) Neither the Board of Directors of the Company nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent, the approval or recommendation by the
Board of Directors of the Company of this Agreement and the Transactions, (ii)
approve, or permit or cause the Company to enter into, any definitive agreement
providing for the implementation of any Company Competing Transaction (each a
"Company Acquisition Agreement") or (iii) approve or recommend, or propose to
approve or recommend, any Company Competing Transaction. Notwithstanding the
foregoing, prior to receipt of the Company Shareholder Approval, and only to the
extent that the Board of Directors of the Company shall conclude in good faith,
based upon the advice of its outside counsel, that failure to take such action
could reasonably be expected to constitute a breach of the fiduciary obligations
of such Board of Directors under Applicable Law in response to a proposal for a
Company Competing Transaction that constitutes a Qualifying Company Proposal
that did not result from the breach or a deemed breach of this Section 5.02, (A)
the Board of Directors of the Company may withdraw or modify its approval or
recommendation of this Agreement and the Transactions and, in connection
therewith, approve or recommend such Qualifying Company Proposal and (B) the
Board of Directors of the Company may approve and the Company may enter into a
Company Acquisition Agreement contemporaneously with its termination of this
Agreement pursuant to Section 8.01(f).
(c) Nothing contained in this Section 5.02 shall prohibit the
Company from taking and disclosing to its shareholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to its shareholders if, in the good faith
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judgment of the Board of Directors of the Company after consultation with
outside counsel, failure to so disclose would be inconsistent with its
obligations under Applicable Law.
(d) For purposes of this Agreement, "Qualifying Company
Proposal" means any proposal made by a third party to acquire all of the equity
securities or all or substantially all of the assets of the Company, pursuant to
a tender offer, a merger, a consolidation, a recapitalization, a sale of its
assets or otherwise, that is (A) for consideration that is comprised solely of
cash or marketable securities, or a combination thereof, and not conditioned on
financing, (B) on terms which the Board of Directors of the Company determines
in its good faith judgment (based on the advice of a nationally recognized
independent investment banking firm) to be superior from a financial point of
view to the holders of Company Common Stock to the Transactions (taking into
account all of the terms of any proposal by Parent to amend or modify the terms
of the Transactions) and to be more favorable generally to the Company's
shareholders than the Transactions (taking into account all financial and
strategic considerations, including relevant legal, financial, regulatory and
other aspects of such proposal and the third party making such proposal and the
conditions and prospects for completion of such proposal, the strategic
direction of and benefits sought by the Company and all of the terms of any
proposal by Parent to amend or modify the terms of the Transactions) and (C)
reasonably capable of being completed within 18 months of the termination of
this Agreement or by the Outside Date, whichever is later, taking into account
all legal, financial, regulatory and other aspects of such proposal and the
third party making such proposal.
SECTION 5.03. No Solicitation by Parent. (a) Parent agrees
that, during the term of this Agreement, it shall not, and shall not authorize
or permit any of its subsidiaries or any of its or its subsidiaries'
Representatives, directly or indirectly, to (i) solicit, initiate, encourage or
facilitate, or furnish or disclose non-public information in furtherance of, any
inquiries or the making of any proposal with respect to a Parent Competing
Transaction (as defined herein) or (ii) negotiate, explore or otherwise engage
in discussions with any person
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(other than Company or Newco or their respective Representatives) with respect
to any Parent Competing Transaction. The term "Parent Competing Transaction"
means any recapitalization, merger, consolidation or other business combination
involving Parent, or acquisition of any material portion of the capital stock or
assets (except for (A) acquisitions of assets in the ordinary course of
business, (B) acquisitions by Parent that do not and could not reasonably be
expected to impede the consummation of the Merger and do not violate any other
covenant in this Agreement, (C) transactions disclosed in the Parent Disclosure
Letter and (D) the Transactions) of Parent, or any combination of the foregoing.
Parent will immediately cease all existing activities, discussions and
negotiations with any parties conducted heretofore with respect to any of the
foregoing and shall use its reasonable best efforts to enforce any
confidentiality or similar agreement relating to a Parent Competing Transaction.
From and after the execution of this Agreement, Parent shall immediately advise
the Company in writing of the receipt, directly or indirectly, of any inquiries,
discussions, negotiations, or proposals relating to a Parent Competing
Transaction (including the specific terms thereof), and promptly furnish to the
Company a copy of any such proposal or inquiry in addition to any information
provided to or by any third party relating thereto and if such proposal or
inquiry is not in writing, the identity of the person making such proposal or
inquiry. Notwithstanding the foregoing, prior to receipt of the Parent
Shareholder Approval, Parent may, but only to the extent that the Board of
Directors of Parent shall conclude in good faith, based upon the advice of its
outside counsel, that failure to take such action could reasonably be expected
to constitute a breach of the fiduciary obligations of such Board of Directors
under Applicable Law, in response to a proposal for a Parent Competing
Transaction that constitutes a Qualifying Parent Proposal (as defined in Section
5.03(d)) that did not result from the breach or a deemed breach of this Section
5.03, and subject to compliance with the notification provisions of this Section
5.03, (A) furnish non-public information with respect to Parent to the person
proposing such Parent Competing Transaction and its Representatives pursuant to
a confidentiality agreement with terms no less restrictive of such person than
those set forth in the Confidentiality
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Agreement (as defined in Section 6.02) and (B) participate in discussions or
negotiations with such person and its Representatives regarding such Parent
Competing Transaction. Without limiting the foregoing, it is agreed that any
violation of the restrictions set forth in this Section 5.03(a) by any
Representative or affiliate of Parent or any Parent Subsidiary, whether or not
such person is purporting to act on behalf of Parent or any Parent Subsidiary or
otherwise, shall be deemed to be a breach of this Section 5.03(a) by Parent.
(b) Neither the Board of Directors of Parent nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to the Company, the approval or recommendation by the Board of
Directors of Parent of this Agreement and the Transactions, (ii) approve, or
permit or cause Parent to enter into, any definitive agreement providing for the
implementation of any Parent Competing Transaction (each a "Parent Acquisition
Agreement") or (iii) approve or recommend, or propose to approve or recommend,
any Parent Competing Transaction. Notwithstanding the foregoing, prior to
receipt of the Parent Shareholder Approval, and only to the extent that the
Board of Directors of Parent shall conclude in good faith, based upon the advice
of its outside counsel, that failure to take such action could reasonably be
expected to constitute a breach of the fiduciary obligations of such Board of
Directors under Applicable Law in response to a proposal for a Parent Competing
Transaction that constitutes a Qualifying Parent Proposal that did not result
from the breach or a deemed breach of this Section 5.03, (A) the Board of
Directors of Parent may withdraw or modify its approval or recommendation of
this Agreement and the Transactions and, in connection therewith, approve or
recommend such Qualifying Parent Proposal and (B) the Board of Directors of
Parent may approve and Parent may enter into a Parent Acquisition Agreement
contemporaneously with its termination of this Agreement pursuant to Section
8.01(h).
(c) Nothing contained in this Section 5.03 shall prohibit
Parent from taking and disclosing to its shareholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure
to its shareholders if, in the good faith
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judgment of the Board of Directors of Parent after consultation with outside
counsel, failure to so disclose would be inconsistent with its obligations under
Applicable Law.
(d) For purposes of this Agreement, "Qualifying Parent
Proposal" means any proposal made by a third party to acquire all of the equity
securities or all or substantially all of the assets of Parent, pursuant to a
tender offer, a merger, a consolidation, a recapitalization, a sale of its
assets of otherwise, that is (A) for consideration that is comprised solely of
cash or marketable securities, or a combination thereof, and not conditioned on
financing, (B) on terms which the Board of Directors of Parent determines in its
good faith judgment (based on the advice of a nationally recognized independent
investment banking firm) to be superior from a financial point of view to the
holders of Parent Common Stock to the Transactions (taking into account all of
the terms of any proposal by Company to amend or modify the terms of the
Transactions) and to be more favorable generally to Parent's shareholders than
the Transactions (taking into account all financial and strategic
considerations, including relevant legal, financial, regulatory and other
aspects of such proposal and the third party making such proposal and the
conditions and prospects for completion of such proposal, the strategic
direction of and benefits sought by Parent and all of the terms of any proposal
by the Company to amend or modify the terms of the Transactions) and (C)
reasonably capable of being completed within 18 months of the termination of
this Agreement or by the Outside Date, whichever is later, taking into account
all legal, financial, regulatory and other aspects of such proposal and the
third party making such proposal.
ARTICLE VI
Additional Agreements
SECTION 6.01. Preparation of the Form S-4 and the Proxy
Statement; Shareholders Meetings; Adoption by Sole Shareholder. (a) As soon as
practicable following the date of this Agreement, the Company, Parent and Newco
shall prepare and file with the SEC the Proxy Statement in
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preliminary form and Parent, the Company and Newco shall prepare and file with
the SEC the Form S-4, in which the Proxy Statement will be included as a
prospectus. Each of the Company, Parent and Newco shall use its reasonable best
efforts to have the Form S-4 declared effective under the Securities Act as
promptly as practicable after such filing. Each of the Company, Parent and Newco
shall use its reasonable best efforts to cause the Proxy Statement to be mailed
to its respective shareholders as promptly as practicable after the Form S-4 is
declared effective under the Securities Act. Newco shall also take any action
(other than qualifying to do business in any jurisdiction in which it is not now
so qualified) required to be taken under any applicable state securities laws in
connection with the issuance of Newco Common Stock in the Merger and under the
Company Stock Plans and the Parent Stock Plans, and the Company and Parent shall
furnish all information concerning the Company or Parent, as applicable, and the
holders of the Company Common Stock or Parent Common Stock and rights to acquire
Company Common Stock or Parent Common Stock pursuant to the Company Stock Plans
or the Parent Stock Plans as may be reasonably requested in connection with any
such action. The parties shall notify each other promptly of the receipt of any
comments from the SEC or its staff and of any request by the SEC or its staff
for amendments or supplements to the Proxy Statement or the Form S-4 or for
additional information and shall supply each other with copies of all
correspondence between such party or any of its Representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement, the Form S-4 or the Merger.
(b) If prior to the Merger Effective Time any event occurs
with respect to the Company or any Company Subsidiary or any change occurs with
respect to information supplied by or on behalf of the Company for inclusion in
the Proxy Statement or the Form S-4 which, in each case, is required to be
described in an amendment of, or a supplement to, the Proxy Statement or the
Form S-4, the Company shall promptly notify Parent of such event, and the
Company shall cooperate with Parent and Newco in the prompt filing with the SEC
of any necessary amendment or supplement to the Proxy Statement and Form S-4
and, as required by law, in disseminating the information contained in such
amendment or
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supplement to the Company's shareholders and to Parent's shareholders.
(c) If prior to the Merger Effective Time any event occurs
with respect to Parent or any Parent Subsidiary or any change occurs with
respect to information supplied by or on behalf of Parent for inclusion in the
Proxy Statement or the Form S-4 which, in each case, is required to be described
in an amendment of, or a supplement to, the Proxy Statement or the Form S-4,
Parent shall promptly notify the Company of such event, and Parent shall
cooperate with Company in the prompt filing with the SEC of any necessary
amendment or supplement to the Proxy Statement and the Form S-4 and, as required
by law, in disseminating the information contained in such amendment or
supplement to the Company's shareholders and to Parent's shareholders.
(d) The Company shall, as soon as practicable following
effectiveness of the Form S-4, duly call, give notice of, convene and hold a
meeting of its shareholders (the "Company Shareholders Meeting") for the purpose
of seeking the Company Shareholder Approval. The Company shall use its
reasonable best efforts to cause the Proxy Statement to be mailed to the
Company's shareholders as promptly as practicable after the Form S-4 is declared
effective under the Securities Act. Subject to Section 5.02(b), the Company
shall, through its Board of Directors, recommend to its shareholders that they
give the Company Shareholder Approval. Without limiting the generality of the
foregoing, the Company agrees that its obligations pursuant to the first two
sentences of this Section 6.01(d) shall not be affected by the commencement,
public proposal, public disclosure or communication to the Company of any
Company Competing Transaction.
(e) Parent shall, as soon as practicable following the date of
this Agreement, duly call, give notice of, convene and hold a meeting of its
shareholders (the "Parent Shareholders Meeting") for the purpose of seeking the
Parent Shareholder Approval. The Parent shall use its reasonable best efforts to
cause the Proxy Statement to be mailed to the Parent's shareholders as promptly
as practicable after the Form S-4 is declared effective under the Securities
Act. Subject to Section 5.03(b), Parent
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shall, through its Board of Directors, recommend to its shareholders that they
give the Parent Shareholder Approval. Without limiting the generality of the
foregoing, Parent agrees that its obligations pursuant to the first two
sentences of this Section 6.01(e) shall not be affected by the commencement,
public proposal, public disclosure or communication to Parent of any Parent
Competing Transaction.
(f) The Company shall use its reasonable best efforts to cause
to be delivered to Parent a letter of Arthur Andersen LLP, the Company's
independent public accountants, dated a date within two business days before the
date on which the Form S-4 shall become effective and addressed to Parent, in
form and substance reasonably satisfactory to Parent and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Form S-4.
(g) Parent shall use its reasonable best efforts to cause to
be delivered to the Company a letter of PricewaterhouseCoopers LLP, Parent's
independent public accountants, dated a date within two business days before the
date on which the Form S-4 shall become effective and addressed to the Company,
in form and substance reasonably satisfactory to the Company and customary in
scope and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
(h) Parent, as sole shareholder of Newco, shall adopt this
Agreement.
SECTION 6.02. Access to Information; Confidentiality. Each of
the Company and Parent after reasonable notice shall, and shall cause each of
its respective subsidiaries to, afford to the other party and to the officers,
employees, accountants, counsel, financial advisors and other representatives of
such other party, reasonable access during normal business hours during the
period prior to the Merger Effective Time to all their respective properties,
books, contracts, commitments, personnel and records and, during such period,
each of the Company and Parent shall, and shall cause each of its respective
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subsidiaries to, furnish promptly to the other party (a) a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of Federal or state securities laws and (b)
all other information concerning its business, properties and personnel as such
other party may reasonably request. Without limiting the generality of the
foregoing, each of the Company and Parent shall, within two business days of
request therefor, provide to the other the information (x) described in Rule
14a-7(a)(2)(ii) under the Exchange Act, (y) to which a holder of Company Common
Stock would be entitled under Section 7.75 of the IBCA (assuming such holder met
the requirements of such Section) and (z) to which a holder of Parent Common
Stock would be entitled under Section 1508 of the PBCL (assuming such holder met
the requirements of such Section). All information exchanged pursuant to this
Section 6.02 shall be subject to the confidentiality agreement dated July 15,
1999, between the Company and Parent (the "Confidentiality Agreement"), and this
Agreement constitutes a Definitive Agreement as defined therein.
SECTION 6.03. Regulatory Matters; Reasonable Best Efforts. (a)
Regulatory Approvals. Upon the terms and subject to the conditions set forth in
this Agreement, and subject to actions taken in compliance with Section 5.02(b)
or 5.03(b), as the case may be, each of the parties hereto shall cooperate and
promptly prepare and file all necessary documentation, to effect all necessary
applications, notices, petitions, filings and other documents, and shall use
reasonable best efforts to obtain all necessary Consents of all Governmental
Entities necessary or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other Transactions, including
the Parent Required Statutory Approvals and the Company Required Statutory
Approvals. Parent shall have the right to review and approve in advance all
characterizations of the information relating to the Company, on the one hand,
and the Company shall have the right to review and approve in advance all
characterizations of the information relating to Parent, on the other hand, in
either case, which appear in any filing made in connection with the Merger or
the other Transactions. Parent and the Company agree that they will consult with
each other with respect to the obtaining
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of all such necessary Consents of Governmental Entities.
(b) Further Actions. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
Transactions, including (i) the obtaining of all necessary consents, approvals
or waivers from third parties, (ii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the Transactions, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (iii) the execution and delivery of any additional
instruments necessary to consummate the Transactions and to fully carry out the
purposes of this Agreement. Notwithstanding the foregoing, the Company and its
Representatives and Parent and its Representatives shall not be prohibited under
this Section 6.03(b) from taking any actions in compliance with Section 5.02(b)
or 5.03(b), respectively.
(c) State Anti-Takeover Statutes. In connection with and
without limiting the generality of Section 6.03(b), Parent and the Company shall
(i) take all action necessary to ensure that no state anti-takeover statute or
similar statute or regulation is or becomes applicable to any Transaction or
this Agreement and (ii) if any state anti-takeover statute or similar statute or
regulation becomes applicable to any Transaction or this Agreement, take all
action necessary to ensure that the Merger and the other Transactions may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Merger and the other Transactions. Notwithstanding the foregoing, the
Company and its Representatives and Parent and its Representatives shall not be
prohibited under this Section 6.03(c) from taking any action permitted by
Section 5.02(b) or 5.03(b), respectively.
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(d) Notices. The Company shall give prompt notice to Parent,
and Parent or Newco shall give prompt notice to the Company, of (i) any
representation or warranty made by it contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (ii) the failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided, however, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
SECTION 6.04. Company and Parent Stock Options and Other Stock
Plans. (a) Prior to the Merger Effective Time, the Company Board (or, if
appropriate, any committee administering the Company Stock Plans) shall adopt
such resolutions or take such other actions as may be required to effect the
following:
(i) adjust the terms of all outstanding Company Employee Stock
Options to provide that, at the Merger Effective Time, each Company
Employee Stock Option outstanding immediately prior to the Merger
Effective Time shall be deemed to constitute an option to acquire, on
the same terms and conditions as were applicable under such Company
Employee Stock Option, the same number of shares of Newco Common Stock
as the holder of such Company Employee Stock Option would have been
entitled to receive pursuant to the Merger had such holder exercised
such Company Employee Stock Option in full immediately prior to the
Merger Effective Time, at a price per share equal to (A) the aggregate
exercise price for the shares of Company Common Stock otherwise
purchasable pursuant to such Company Employee Stock Option immediately
prior to the Merger Effective Time (whether or not exercisable) divided
by (B) the number of shares of Newco Common Stock deemed purchasable
pursuant to such Company Employee Stock Option; provided, however, that
in the case of any qualified stock options under Sections 422-424 of
the Code, the option price, the number of shares purchasable pursuant
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to such option and the terms and conditions of exercise of such option
shall be determined in order to comply with Section 424(a) of the Code;
(ii) make such other changes to the Company Stock Plans and the
terms of any Company Employee Stock Options as it deems appropriate to
give effect to the Merger (subject to the approval of Parent, which
shall not be unreasonably withheld); and
(iii) ensure that, after the Merger Effective Time, no Company
Employee Stock Options may be granted under any Company Stock Plan.
(b) Prior to the Exchange Effective Time, the Parent Board
(or, if appropriate, any committee administering the Parent Stock Plans) shall
adopt such resolutions or take such other actions as may be required to effect
the following:
(i) adjust the terms of all outstanding Parent Employee Stock
Options to provide that, at the Exchange Effective Time, each Parent
Employee Stock Option outstanding immediately prior to the Exchange
Effective Time shall be deemed to constitute an option to acquire, on
the same terms and conditions as were applicable under such Parent
Employee Stock Option, the same number of shares of Newco Common Stock
as the holder of such Parent Employee Stock Option would have been
entitled to receive pursuant to the Merger had such holder exercised
such Parent Employee Stock Option in full immediately prior to the
Exchange Effective Time, at a price per share equal to (A) the
aggregate exercise price for the shares of Parent Common Stock
otherwise purchasable pursuant to such Parent Employee Stock Option
immediately prior to the Exchange Effective Time (whether or not
exercisable) divided by (B) the number of shares of Newco Common Stock
deemed purchasable pursuant to such Parent Employee Stock Option;
provided, however, that in the case of any qualified stock options
under Sections 422-424 of the Code, the option price, the number of
shares purchasable pursuant to such option and the terms and conditions
of exercise of such option shall be
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determined in order to comply with Section 424(a) of the Code;
(ii) make such other changes to the Parent Stock Plans and the
terms of outstanding Parent Employee Stock Options as it deems
appropriate to give effect to the Merger (subject to the approval of
the Company, which shall not be unreasonably withheld); and
(iii) ensure that, after the Exchange Effective Time, no
Parent Employee Stock Options may be granted under any Parent Stock
Plan.
(c) At the Merger Effective Time, and subject to compliance by
the Company with Section 6.04(a), Newco shall assume all the obligations of the
Company under the Company Stock Plans, each outstanding Company Employee Stock
Option and the agreements evidencing the grants thereof. As soon as practicable
after the Merger Effective Time, Newco shall deliver to the holders of Company
Employee Stock Options appropriate notices setting forth such holders' rights
pursuant to the respective Company Stock Plans, and the agreements evidencing
the grants of such Company Employee Stock Options shall continue in effect on
the same terms and conditions (subject to the adjustments required by this
Section 6.04 after giving effect to the Merger). Newco shall comply with the
terms of the Company Stock Plans and ensure, to the extent required by, and
subject to the provisions of, such Company Stock Plans, that the Company
Employee Stock Options that qualified as qualified stock options prior to the
Merger Effective Time continue to qualify as qualified stock options after the
Merger Effective Time.
(d) At the Exchange Effective Time, and subject to compliance
by Parent with Section 6.04(b), Newco shall assume all the obligations of Parent
under the Parent Stock Plans, each outstanding Parent Employee Stock Option and
Parent SAR the agreements evidencing the grants thereof. As soon as practicable
after the Exchange Effective Time, Newco shall deliver to the holders of Parent
Employee Stock Options and Parent SARs appropriate notices setting forth such
holders' rights pursuant to the respective Parent Stock Plans, and the
agreements evidencing the grants of such Parent Employee Stock Options and
Parent SARs shall continue
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in effect on the same terms and conditions (subject to the adjustments required
by this Section 6.04 after giving effect to the Merger). Newco shall comply with
the terms of the Parent Stock Plans and ensure, to the extent required by, and
subject to the provisions of, such Parent Stock Plans, that the Parent Employee
Stock Options that qualified as qualified stock options prior to the Exchange
Effective Time continue to qualify as qualified stock options after the Exchange
Effective Time.
(e) With respect to each employee or director benefit or
compensation plan, program or arrangement, other than the Company Stock Plans
and the Parent Stock Plans, under which Company Common Stock or Parent Common
Stock is required to be used for purposes of the payment of benefits, grant of
awards or exercise of options (each, a "Stock Plan"), (i) the Company and the
Parent shall take such action as may be necessary so that, after the Merger
Effective Time, such Stock Plan shall provide for issuance or purchase in the
open market only of Newco Common Stock rather than Company Common Stock or
Parent Common Stock, as the case may be, and otherwise to amend such Stock Plans
to reflect this Agreement and the Merger, and (ii) Newco shall take all
corporate action necessary or appropriate to obtain shareholder approval with
respect to such Stock Plan to the extent such approval is required for purposes
of the Code or other Applicable Law. Newco shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Newco Common
Stock for delivery upon exercise of the Company Employee Stock Options and
Parent Employee Stock Options assumed in accordance with this Section 6.04 or
the payment of benefits, grant of awards or exercise of options under such Stock
Plans. As soon as reasonably practicable after the Merger Effective Time, Newco
shall file one or more registration statements on Form S-8 (or any successor or
other appropriate form) with respect to the shares of Newco Common Stock subject
to such Company Employee Stock Options and Parent Employee Stock Options or to
such Stock Plans and shall use its reasonable best efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein
or related thereto) for so long as such Company Employee Stock Options and
Parent Employee Stock Options or such benefits or grants
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of awards remain
payable or such options remain outstanding. With respect to those individuals
who subsequent to the Merger will be subject to the reporting requirements under
Section 16(a) of the Exchange Act, where applicable, Newco shall administer the
Company Stock Plans and Parent Stock Plans assumed pursuant to this Section 6.04
and the Stock Plans in a manner that complies with Rule 16b-3 of the SEC to the
extent the applicable plan complied with such rule prior to the Merger. Prior to
the Merger Effective Time, Parent and Newco shall take all actions as may be
reasonably required to cause the acquisition of equity securities of Newco, as
contemplated by this Section 6.04, by any person who is or will become a
director or officer of Newco to be eligible for exemption under Rule 16b-3(d) of
the SEC.
(f) In this Agreement:
"Company Employee Stock Option" means any option to purchase
Company Common Stock granted under any Company Stock Plan.
"Company Stock Plans" means the Long-Term Incentive Plan of
the Company as amended from time to time.
"Parent Employee Stock Option" means any option to purchase
Parent Common Stock granted under any Parent Stock Plan.
"Parent Stock Plans" means the PECO Energy Company 1989
Long-Term Incentive Plan and the PECO Energy Company 1998 Stock Option
Plan.
"Parent SAR" means any stock appreciation right linked to the
price of Parent Common Stock and granted under any Parent Stock Plan.
SECTION 6.05. Benefit Plans; Workforce Matters. (a) From and
after the Merger Effective Time, Newco and its subsidiaries shall honor and
perform in accordance with their respective terms (as in effect on the date of
this Agreement or as amended in accordance with or as permitted by this
Agreement), all the collective bargaining agreements of the Company, Parent or
any of their respective
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subsidiaries disclosed in the Company Disclosure Letter or the Parent Disclosure
Letter, respectively; provided, however, that this Section 6.05(a) is not
intended to prevent Newco from enforcing such agreements in accordance with
their respective terms, including enforcement of any reserved right to amend,
modify, suspend, revoke or terminate any such agreement.
(b) Subject to Applicable Law and obligations under applicable
collective bargaining agreements, it is the current intention of Parent and the
Company that any reductions in workforce following the Merger Effective Time in
respect of employees of Newco and its subsidiaries shall be made on a fair and
equitable basis, in light of the circumstances and the objectives to be
achieved, as determined by Newco, without regard to whether employment was with
the Company or the Company Subsidiaries or Parent or the Parent Subsidiaries and
with due consideration to the applicable employee's previous work history, prior
experience and skills and Newco's business needs, and any employee whose
employment is terminated or job is eliminated shall be entitled to participate
on a fair and equitable basis as determined by Newco in the job opportunity and
employment placement programs offered by Newco or any of its subsidiaries.
(c) Subject to Applicable Law and obligations under applicable
collective bargaining agreements, each Company Benefit Plan, Parent Benefit
Plan, Company Employment Arrangement and Parent Employment Arrangement in effect
on the date of this Agreement (or as amended or established in accordance with
or as permitted by this Agreement) shall be maintained in effect by Newco and
its subsidiaries, except as provided in Section 6.04, with respect to their
current and former employees, officers or directors of the Company and Company
Subsidiaries and Parent and Parent Subsidiaries, respectively, who are covered
by such plans or arrangements immediately prior to the Merger Effective Time
until Newco determines otherwise on or after the Merger Effective Time. Newco
and its subsidiaries shall honor, perform and, with respect to each Company
Benefit Plan and Parent Benefit Plan and Company Employment Arrangement and
Parent Employment Arrangement that is not a multiemployer benefit plan within
the meaning of
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Section 4001(a)(3) of ERISA, sponsor and administer, each such Company Benefit
Plan and Parent Benefit Plan and Company Employment Arrangement and Parent
Employment Arrangement in accordance with their respective terms (as in effect
on the date of this Agreement or as amended in accordance with or as permitted
by this Agreement), and Newco shall (i) assume as of the Merger Effective Time
each Company Benefit Plan and Company Employment Arrangement maintained by the
Company immediately prior to the Merger Effective Time and as of the Exchange
Effective Time each Parent Benefit Plan and Parent Employment Arrangement
maintained by Parent immediately prior to the Exchange Effective Time and (ii)
perform the obligations under, sponsor and administer such plan or arrangement
in the same manner and to the same extent that the Company or Parent, as the
case may be, would be required to perform, sponsor and administer thereunder;
provided, however, that nothing contained herein shall limit any reserved right
contained in any such Company Benefit Plan, Company Employment Arrangement,
Parent Benefit Plan or Parent Employment Arrangement to amend, modify, suspend,
revoke or terminate any such plan or arrangement. Without limiting the
foregoing, (i) each participant in any Company Benefit Plan or Parent Benefit
Plan shall receive credit for purposes of eligibility to participate, vesting
and eligibility to receive benefits (but specifically excluding for benefit
accrual purposes or where such crediting would result in a duplication of
benefits) under any benefit plan of Newco or any of its subsidiaries or
affiliates for service credited for the corresponding purpose under any such
benefit plan; provided, however, that such crediting of service shall not
operate to cause any such plan or arrangement to fail to comply with the
applicable provisions of the Code or ERISA, (ii) each benefit plan of Newco or
its subsidiaries which is a medical, dental or health benefit plan shall take
into account for purposes of determining a participant's deductibles and
out-of-pocket limits thereunder expenses previously incurred by the participant
during the same year while participating in any other such Company Benefit Plan
or Parent Benefit Plan and shall waive any restrictions and limitations for
pre-existing conditions provided therein for any participant to the extent not
applicable to the participant in any other such Company Benefit Plan or Parent
Benefit Plan in which the participant participated
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immediately prior to participating in that benefit plan, and (iii) each benefit
plan of Newco or its subsidiaries which is a cafeteria plan under Section 125 of
the Code shall cause credits and debits in respect of any participant in any
flexible spending account thereunder for a plan year to be transferred to and
maintained in any such corresponding Company Benefit Plan or Parent Benefit Plan
in which such participant may subsequently participate during the same year. The
Company and the Parent will cooperate on and after the date hereof to develop
appropriate employee benefit plans, programs and arrangements, including but not
limited to, executive and incentive compensation, stock option and supplemental
executive retirement plans for employees and directors of Newco and its
subsidiaries from and after the Merger Effective Time. However, no provision
contained in this Section 6.05(c) shall be deemed to constitute an employment
contract between Newco and any individual, or a waiver of Newco's right to
discharge any employee at any time, with or without cause.
SECTION 6.06. Indemnification. (a) Newco shall, to the fullest
extent permitted by Applicable Law, honor all the Company's and Parent's
respective obligations to indemnify (including any obligations to advance funds
for expenses) the current and former directors and officers of the Company or
Parent, as the case may be, for acts or omissions by such directors and officers
occurring prior to the Merger Effective Time to the extent that such obligations
to indemnify exist on the date of this Agreement, whether pursuant to the
Company Charter or the Parent Charter, as the case may be, the Company By-laws
or the Parent By-laws, as the case may be, individual indemnity agreements or
otherwise, and such obligations shall survive the Merger and shall continue in
full force and effect in accordance with the terms of the Company Charter or the
Parent Charter, as the case may be, the Company By-laws or the Parent By-laws,
as the case may be, and such individual indemnity agreements from the Merger
Effective Time.
(b) For a period of six years after the Merger Effective Time,
Newco shall cause to be maintained in effect the current policies of directors'
and officers' liability insurance maintained by the Company or Parent or such
substantially comparable policies as in effect on the
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Closing Date, as the case may be, (provided that Newco may substitute therefor
policies with reputable and financially sound carriers of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous) with respect to claims arising from or related to facts or events
which occurred at or before the Merger Effective Time. If such insurance
coverage cannot be obtained at all, Newco shall maintain the most advantageous
policies of directors' and officers' insurance reasonably obtainable.
(c) From and after the Merger Effective Time, to the fullest
extent permitted by Applicable Law, Newco shall indemnify, defend and hold
harmless the present and former officers and directors of the Company and
Parent, as the case may be, and their respective subsidiaries and any of their
respective employees who act as a fiduciary under any Company Benefit Plan (each
an "Indemnified Party") against all losses, claims, damages, liabilities, fees
and expenses (including attorneys' fees and disbursements), judgments, fines and
amounts paid in settlement (in the case of settlements, with the approval of the
indemnifying party (which approval shall not be unreasonably withheld))
(collectively, "Losses"), as incurred (payable monthly upon written request
which request shall include reasonable evidence of the Losses set forth therein)
to the extent arising from, relating to, or otherwise in respect of, any actual
or threatened action, suit, proceeding or investigation, in respect of actions
or omissions occurring at or prior to the Merger Effective Time in connection
with such Indemnified Party's duties as an officer, director or employee as
aforesaid, in each case, of the Company or Parent or any of their respective
subsidiaries, including in respect of this Agreement, the Merger and the other
Transactions.
SECTION 6.07. Fees and Expenses. (a) Except as provided below,
all fees and expenses incurred in connection with the Merger and the other
Transactions shall be paid by the party incurring such fees or expenses, whether
or not the Merger is consummated, except that expenses incurred in connection
with filing, printing and mailing the Proxy Statement and the Form S-4 shall be
shared equally by Parent and the Company.
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(b) The Company shall pay to Parent a fee of $250,000,000 if:
(i) the Company terminates this Agreement pursuant to Section 8.01(f); (ii)
Parent terminates this Agreement pursuant to Section 8.01(d); or (iii) any
Company Competing Transaction was proposed to the Company or publicly disclosed
and thereafter the Company terminates this Agreement pursuant to Section
8.01(b)(i) or either the Company or Parent terminates this Agreement pursuant to
Section 8.01(b)(iv) or Parent terminates this Agreement pursuant to Section
8.01(c) (but in the case of termination pursuant to Section 8.01(c), only in the
event of termination for a wilful breach of this Agreement or failure to perform
this Agreement by the Company) and, in each case, within 18 months of such
termination the Company enters into a definitive agreement to consummate or
consummates any Company Competing Transaction. Any fee due under this Section
6.07(b) shall be paid by wire transfer of same-day funds on the date of
termination of this Agreement (except that in the case of termination pursuant
to clause (iii) above such payment shall be made on the date of execution of
such definitive agreement or, if earlier, consummation of such transaction or
another transaction with the same party or its affiliates).
(c) Parent shall pay to the Company a fee of $250,000,000 if:
(i) Parent terminates this Agreement pursuant to Section 8.01(h); (ii) the
Company terminates this Agreement pursuant to Section 8.01(g); (iii) any Parent
Competing Transaction was proposed to Parent or publicly disclosed and
thereafter the Parent terminates this Agreement pursuant to Section 8.01(b)(i)
or either Parent or the Company terminates this Agreement pursuant to Section
8.01(b)(v) or the Company terminates this Agreement pursuant to Section 8.01(e)
(but in the case of termination pursuant to Section 8.01(e), only in the event
of termination for a wilful breach of this Agreement or failure to perform this
Agreement by Parent) and, in each case, within 18 months of such termination
Parent enters into a definitive agreement to consummate or consummates any
Parent Competing Transaction. Any fee due under this Section 6.07(c) shall be
paid by wire transfer of same-day funds on the date of termination of this
Agreement (except that in the case of termination pursuant to clause (iii)
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above such payment shall be made on the date of execution of such definitive
agreement or, if earlier, consummation of such transaction or another
transaction with the same party or its affiliates).
(d) The Company shall reimburse Parent and Newco for all its
out-of-pocket expenses actually incurred in connection with this Agreement, the
Merger and the other Transactions, up to a limit of $15,000,000, if a fee
becomes payable pursuant to Section 6.07(b) or if this Agreement is otherwise
terminated pursuant to Section 8.01(b)(iv) or 8.01(c). Such reimbursement shall
be paid upon demand following such termination.
(e) Parent shall reimburse the Company for all its
out-of-pocket expenses actually incurred in connection with this Agreement, the
Merger and the other Transactions, up to a limit of $15,000,000, if a fee
becomes payable pursuant to Section 6.07(c) or if this Agreement is otherwise
terminated pursuant to Section 8.01(b)(v) or 8.01(e). Such reimbursement shall
be paid upon demand following such termination.
SECTION 6.08. Public Announcements. Parent and Newco, on the
one hand, and the Company, on the other hand, shall consult with each other
before issuing, and provide each other the opportunity to review and comment
upon, any press release or other public statements with respect to this
Agreement, the Merger and the other Transactions and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by Applicable Law, court process or by obligations
pursuant to any listing agreement with any national securities exchange.
SECTION 6.09. Transfer Taxes. All stock transfer, real estate
transfer, documentary, stamp, recording and other similar Taxes (including
interest, penalties and additions to any such Taxes) ("Transfer Taxes") incurred
in connection with the Transactions shall be paid by the party incurring the
Transfer Tax, and the parties hereto shall cooperate with each other in
preparing, executing and filing any Tax Returns with respect to such Transfer
Taxes.
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SECTION 6.10. Affiliates. (a) Promptly following the date of
execution of this Agreement, the Company shall deliver to Parent and Newco a
letter identifying all persons who are expected by the Company to be on the
Closing Date, or were as of the date of this Agreement, "affiliates" of the
Company for purposes of Rule 145 under the Securities Act. The Company shall use
its reasonable best efforts to cause each such person to deliver to Parent on or
prior to the date of mailing of Proxy Statement a written agreement
substantially in the form attached as Exhibit C.
(b) Promptly following the date of execution of this
Agreement, Parent shall deliver to the Company a letter indemnifying all persons
who are expected by Parent to be, on the Closing Date, or were as of the date of
this Agreement, "affiliates" of Parent for purposes of Rule 145 under the
Securities Act. Parent shall use its reasonable best efforts to cause each such
person to deliver to the Company on or prior to the date of mailing of the Proxy
Statement a written agreement substantially in the form of Exhibit D.
SECTION 6.11. Stock Exchange Listing. Parent and the Company
shall use all reasonable efforts to cause the shares of Newco Common Stock to be
issued in the Merger and under the Company Stock Plans and Parent Stock Plans to
be approved for listing on the NYSE, subject to official notice of issuance,
prior to the Closing Date.
SECTION 6.12. Rights Agreements; Consequences if Rights
Triggered. The Company Board shall take all action requested in writing by
Parent in order to render the Company Rights inapplicable to the Merger and the
other Transactions. Except as approved in writing by Parent or as set forth in
the Company Disclosure Letter, the Company Board shall not (i) amend the Company
Rights Agreement, (ii) redeem the Company Rights or (iii) take any action with
respect to, or make any determination under, the Company Rights Agreement. If
any Distribution Date, Stock Acquisition Date or Triggering Event occurs under
the Company Rights Agreement at any time during the period from the date of this
Agreement to the Merger Effective Time, the
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Company and Parent shall make such adjustment to the Company Exchange Ratio and
the Parent Exchange Ratio as the Company and Parent shall mutually agree so as
to preserve the economic benefits that the Company and Parent each reasonably
expected on the date of this Agreement to receive as a result of the
consummation of the Merger and the other Transactions.
SECTION 6.13. Tax Treatment. The parties intend (a) the Merger
to constitute transactions described in Section 351 of the Code and (b) the
Second Step Merger to constitute a transaction described in Section 368(a) of
the Code. Each party and its affiliates shall use reasonable efforts to cause
the Merger to so qualify and to obtain (i) the opinion of Cravath, Swaine &
Moore to the effect that (A) the Merger will constitute transactions described
in Section 351 of the Code and (B) the Second Step Merger will constitute a
transaction described in Section 368(a) of the Code and (ii) the opinion of
Jones, Day, Reavis & Pogue to the effect that the Second Step Merger will
constitute a transaction described in Section 368(a) of the Code. For purposes
of the tax opinions described in Sections 7.02(d) and 7.03(d) of this Agreement,
each of Parent, Newco and the Company shall provide customary representation
letters substantially in the form of Exhibits E, F and G, respectively, each
dated on or about the date that is two business days prior to the date the Proxy
Statement is mailed to the shareholders of Parent and the Company and reissued
as of the Closing Date. Each of Parent, Newco and the Company and each of their
respective affiliates shall not take any action and shall not fail to take any
action or suffer to exist any condition which action or failure to act or
condition would prevent, or would be reasonably likely to prevent, (i) the
Merger from constituting transactions described in Section 351 of the Code or
(ii) the Second Step Merger from constituting a transaction described in Section
368(a) of the Code.
SECTION 6.14. Reorganization and Amendment. The parties to
this Agreement acknowledge and agree that in the event Parent implements the
Parent Reorganization prior to the Exchange Effective Time, certain changes to
the structure of the Merger and the other Transactions will be necessary in
order for the Merger and the other Transactions
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to be consummated as contemplated hereby and for Newco and its subsidiaries to
have, following the Merger Effective Time, the corporate structure as
contemplated hereby, and the parties to this Agreement agree to negotiate in
good faith and enter into an amendment to this Agreement to implement such
necessary changes.
SECTION 6.15. Company Common Stock Repurchase. Prior to the
Merger Effective Time, the Company shall purchase, at prevailing market prices
to the extent possible, the minimum number of shares of Company Common Stock
necessary in order that the Merger and the other Transactions are treated as a
purchase of the Company by Parent under GAAP (in any such determination taking
into account the number of shares of Parent Common Stock in respect of which a
notice of intention to dissent was filed with Parent in accordance with the
PBCL).
SECTION 6.16. Parity of Compensation. At any time during the
period from the Merger Effective Time until December 31, 2003 (the "Transition
Period") when the Chairman of the Board of Directors, Chief Executive Officer
and President of Parent as of the date of this Agreement (the "Parent Chairman")
and the Chairman of the Board of Directors, Chief Executive Officer and
President of the Company (the "Company Chairman") as of the date of this
Agreement are Co-Chief Executive Officers of Newco, each such Co-Chief Executive
Officer shall receive the same salary, bonus and other compensation (including
option grants and other incentive awards and all other forms of compensation)
and enjoy the same other benefits and the same employment security arrangements
as the other Co-Chief Executive Officer.
SECTION 6.17. Board Seats. The Parent Chairman will retire as
an executive of Newco at the end of the Transition Period and shall no longer
serve as chairman of the executive committee of the Newco Board, but shall
continue as a member of the Newco Board. The Company Chairman shall become the
sole Chief Executive Officer of Newco immediately prior to the end of the
Transition Period, and at such time shall be the Chairman of the Board of
Directors of Newco, if immediately prior to such time he holds the position of
Co-Chief Executive Officer. The Newco
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Board or the nominating committee thereof, as applicable, shall nominate for
election the Parent Chairman and the Company Chairman as part of management's
slate of candidates at each meeting of the shareholders (if at the time of such
meeting the Parent Chairman or the Company Chairman, as applicable, is a member
of the Newco Board) at which members of the Newco Board shall be elected as
shall be necessary in order that the Parent Chairman or the Company Chairman, as
applicable, serve as a director of Newco from the end of the Transition Period
until the election of directors first following December 31, 2005.
ARTICLE VII
Conditions Precedent
SECTION 7.01. Conditions to Each Party's Obligation To Effect
The Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Shareholder Approval. The Company shall have obtained the
Company Shareholder Approval, and Parent shall have obtained the Parent
Shareholder Approval.
(b) Listing. The shares of Newco Company Stock issuable to the
Company's and Parent's respective shareholders pursuant to this Agreement and
under the Company Stock Plans and Parent Stock Plans shall have been approved
for listing on the NYSE, subject to official notice of issuance.
(c) Statutory Approvals. The Parent Required Statutory
Approvals and the Company Required Statutory Approvals shall have been obtained
(including, in each case, the expiration or termination of the waiting periods
(and any extensions thereof) under the HSR Act applicable to the Merger and the
Transactions at or prior to the Merger Effective Time, such approvals shall have
become Final Orders (as defined below) and such Final Orders shall not impose
terms or conditions which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on Newco and its prospective
subsidiaries
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taken as a whole or which would be materially inconsistent with the agreements
of the parties contained herein. A "Final Order" means action by the relevant
Governmental Entity which has not been reversed, stayed, enjoined, set aside,
annulled or suspended, with respect to which any waiting period prescribed by
law before the transactions contemplated hereby may be consummated has expired,
and as to which all conditions to the consummation of such transactions
prescribed by law, regulation or order have been satisfied.
(d) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that prior to
asserting this condition, subject to Section 6.03, each of the parties shall
have used all reasonable efforts to prevent the entry of any such injunction or
other order and to appeal as promptly as possible any such injunction or other
order that may be entered.
(e) Form S-4. The Form S-4 shall have become effective under
the Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order, and Newco shall have received all state securities or
"blue sky" authorizations necessary to issue Newco Common Stock pursuant to the
Merger.
(f) Other Consents and Approvals. The consent or approval
(other than Parent Required Statutory Approvals and Company Required Statutory
Approvals) of each person whose consent or approval is required in order to
consummate the Merger and the other Transactions shall have been obtained,
except for those consents and approvals which, if not obtained, could not
reasonably be expected to have a Material Adverse Effect on Newco and its
prospective subsidiaries taken as a whole or on the ability of Parent or the
Company to consummate the Merger and the other Transactions.
SECTION 7.02. Conditions to Obligations of Parent and Newco.
The obligations of Parent and Newco to effect
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109
the Merger are further subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company in this Agreement shall be true and correct as of the
date of this Agreement and as of the Closing Date as though made on the Closing
Date, except to the extent such representations and warranties expressly relate
to an earlier date (in which case such representations and warranties shall be
true and correct on and as of such earlier date), other than for such failures
to be true and correct that, individually and in the aggregate, have not had and
could not reasonably be expected to have a Company Material Adverse Effect.
Parent shall have received a certificate signed on behalf of the Company by the
chief executive officer or the chief financial officer of the Company to such
effect. For purposes of determining the satisfaction of this condition, the
representations and warranties of the Company shall be deemed not qualified by
any references therein to materiality generally or to whether or not any breach
results or may result in a Company Material Adverse Effect.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such effect.
(c) Letters from Company Affiliates. Parent shall have
received from each person named in the letter referred to in Section 6.10(a) an
executed copy of an agreement substantially in the form of Exhibit C.
(d) Tax Opinion. Parent shall have received a written opinion,
dated as of the Closing Date, from Cravath, Swaine & Moore, counsel to Parent,
to the effect that (i) the Merger will constitute transactions described in
Section 351 of the Code and (ii) the Second Step Merger will constitute a
transaction described in Section 368(a) of the Code; it being understood that in
rendering such opinion, such tax counsel shall be entitled to rely upon
customary representations provided by the parties hereto substantially
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110
in the form of Exhibits E, F and G.
SECTION 7.03. Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is further subject to the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Newco in this Agreement shall be true and correct as of
the date of this Agreement and on the Closing Date as though made on the Closing
Date, except to the extent such representations and warranties expressly relate
to an earlier date (in which case such representations and warranties shall be
true and correct on and as of such earlier date), other than for such failures
to be true and correct that, individually and in the aggregate, have not had and
could not reasonably be expected to have a Parent Material Adverse Effect. The
Company shall have received a certificate signed on behalf of Parent by the
chief executive officer or the chief financial officer of Parent to such effect.
For purposes of determining the satisfaction of this condition, the
representations and warranties of Parent and Newco shall be deemed not qualified
by any references therein to materiality generally or to whether or not any
breach results or may result in a Parent Material Adverse Effect.
(b) Performance of Obligations of Parent and Newco. Parent and
Newco shall have performed in all material respects all obligations required to
be performed by them under this Agreement at or prior to the Closing Date, and
the Company shall have received a certificate signed on behalf of Parent by the
chief executive officer and the chief financial officer of Parent to such
effect.
(c) Letters from Parent Affiliates. The Company shall have
received from each person named in the letter referred to in Section 6.10(b) an
executed copy of an agreement substantially in the form of Exhibit D.
(d) Tax Opinion. The Company shall have received a written
opinion, dated as of the Closing Date, from Jones, Day, Reavis & Pogue, counsel
to the Company, to the effect that the Second Step Merger will constitute a
transaction described in Section 368(a) of the Code; it being understood that in
rendering such opinion, such tax counsel shall be
<PAGE>
111
entitled to rely upon customary representations provided by the parties hereto
substantially in the form of Exhibits E, F and G.
(e) First Step Exchange. The First Step Exchange shall have
been consummated.
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.01. Termination. This Agreement may be terminated at
any time prior to the Exchange Effective Time, whether before or after receipt
of the Company Shareholder Approval or the Parent Shareholder Approval:
(a) by mutual written consent of Parent, Newco and the Company;
(b) by either Parent or the Company:
(i) if the Second Step Merger is not consummated on
or before March 31, 2001 (the "Outside Date"), unless the
failure to consummate the Merger is the result of a breach of
this Agreement by the party seeking to terminate this
Agreement; provided, however, that the passage of such period
shall be tolled for any part thereof during which any party
shall be subject to a nonfinal order, decree, ruling or action
restraining, enjoining or otherwise prohibiting the
consummation of the Merger;
(ii) if any Governmental Entity issues an order,
decree or ruling or takes any other action permanently
enjoining, restraining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become
final and nonappealable;
(iii) if any condition to the obligation of such
party to consummate the Merger set forth in Section 7.02 (in
the case of Parent) or 7.03 (in the case of the Company)
becomes incapable of satisfaction prior to the Outside Date;
provided, however, that the failure of such condition to be
<PAGE>
112
met is not the result of a material breach of this Agreement
by the party seeking to terminate this Agreement;
(iv) if, upon a vote at a duly held meeting to obtain
the Company Shareholder Approval, the Company Shareholder
Approval is not obtained; or
(v) if, upon a vote at a duly held meeting of Parent
to obtain the Parent Shareholder Approval, the Parent
Shareholder Approval is not obtained;
(c) by Parent, if the Company breaches or fails to perform in
any material respect any of its representations, warranties or
covenants contained in this Agreement, which breach or failure to
perform (i) would give rise to the failure of a condition set forth in
Section 7.02(a) or 7.02(b), and (ii) cannot be or has not been cured
within 30 days after the giving of written notice to the Company of
such breach (provided that Parent is not then in breach of any
representation, warranty or covenant contained in this Agreement);
(d) by Parent, if (i) the Company Board or any committee
thereof withdraws or modifies, or publicly proposes to withdraw or
modify, in a manner adverse to Parent or Newco, its approval or
recommendation of this Agreement or the Transactions or approves or
recommends, or publicly proposes to approve or recommend, any Company
Competing Transaction or (ii) the Company otherwise breaches, or is
deemed to be in breach of, any of its covenants in Section 5.02 in any
material respect;
(e) by the Company, if Parent breaches or fails to perform in
any material respect of any of its representations, warranties or
covenants contained in this Agreement, which breach or failure to
perform (i) would give rise to the failure of a condition set forth in
Section 7.03(a) or 7.03(b), and (ii) cannot be or has not been cured
within 30 days after the giving of written notice to Parent of such
breach (provided that the Company is not then in breach of any
representation, warranty or covenant in this Agreement);
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113
(f) by the Company, if prior to receipt of the Company
Shareholder Approval, (i) the Company has received a proposal for a
Company Competing Transaction that constitutes a Qualifying Company
Proposal that was not solicited or encouraged by the Company or its
Representatives and that did not otherwise result from the breach or a
deemed breach of Section 5.02, (ii) the Board of Directors of the
Company has determined in good faith, based upon the advice of its
outside counsel that failure to take such action could reasonably be
expected to constitute a breach of the fiduciary obligations of such
Board of Directors under Applicable Law, that it is necessary to (A)
withdraw or modify its approval or recommendation of this Agreement and
the Transactions, (B) terminate this Agreement pursuant hereto and (C)
enter into a Company Acquisition Agreement in connection with such
Company Competing Transaction in order to comply with its fiduciary
obligations under Applicable Law, (iii) the Company has notified Parent
in writing of the determination described in clause (ii) above, (iv) at
least ten business days following receipt by Parent of the notice
referred to in clause (iii) above, and taking into account any proposal
made by Parent since receipt of such notice to amend or modify the
terms of the Transactions, such Qualifying Company Proposal remains a
Qualifying Company Proposal and the Board of Directors of the Company
has again made the determination referred to in clause (ii) above, (v)
the Company is in compliance with Section 5.02, (vi) the Company has
paid in advance the fee due under Section 6.07(b) to Parent, and (vii)
the Board of Directors of the Company concurrently approves, and the
Company concurrently enters into, a Company Acquisition Agreement
providing for the implementation of such Qualifying Company Proposal;
(g) by the Company, if (i) the Parent Board or any committee
thereof withdraws or modifies, or publicly proposes to withdraw or
modify, in a manner adverse to the Company, its approval of this
Agreement or the Transactions or approves or recommends, or publicly
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114
proposes to approve or recommend, any Parent Competing Transaction or
(ii) Parent otherwise breaches, or is deemed to be in breach of, any of
its covenants in Section 5.03 in any material respect; or
(h) by Parent, if prior to receipt of the Parent Shareholder
Approval, (i) Parent has received a proposal for a Parent Competing
Transaction that constitutes a Qualifying Parent Proposal that was not
solicited or encouraged by Parent or its Representatives and that did
not otherwise result from the breach or a deemed breach of the Section
5.03, (ii) the Board of Directors of Parent has determined in good
faith, based upon the advice of its outside counsel that failure to
take such action could reasonably be expected to constitute a breach of
the fiduciary obligations of such Board of Directors under Applicable
Law, that it is necessary to (A) withdraw or modify its approval or
recommendation of this Agreement and the Transactions, (B) terminate
this Agreement pursuant hereto and (C) enter into a Parent Acquisition
Agreement in connection with such Parent Competing Transaction in order
to comply with its fiduciary obligations under Applicable Law, (iii)
Parent has notified the Company in writing of the determination
described in clause (ii) above, (iv) at least ten business days
following receipt by the Company of the notice referred to in clause
(iii) above, and taking into account any proposal made by the Company
since receipt of such notice to amend or modify the terms of the
Transactions, such Qualifying Parent Proposal remains a Qualifying
Parent Proposal and the Board of Directors of Parent has again made the
determination referred to in clause (ii) above, (v) Parent is in
compliance with Section 5.03, (vi) Parent has paid in advance the fee
due under Section 6.07(c) to the Company, and (vii) the Board of
Directors of Parent concurrently approves, and Parent concurrently
enters into, a Parent Acquisition Agreement providing for the
implementation of such Qualifying Parent Proposal.
SECTION 8.02. Effect of Termination. In the event of
termination of this Agreement by either the Company or Parent as provided in
Section 8.01, this Agreement shall
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115
forthwith become void and have no effect, without any liability or obligation on
the part of Parent, Newco or the Company, other than Section 3.14, Section 4.14,
the last two sentences of Section 6.02, Section 6.07, this Section 8.02 and
Article IX, which provisions shall survive such termination, and except to the
extent that such termination results from the wilful breach by a party of any
representation, warranty or covenant set forth in this Agreement, in which case
such termination shall not relieve any party of any liability or damages
resulting from its wilful breach of this Agreement (including any such case in
which a fee is payable by such party pursuant to Section 6.07(b) or (c), or any
expenses of the other party are reimbursed by such party pursuant to Section
6.07(d) or (e), to the extent any such liability or damage suffered by such
other party exceeds such amounts payable pursuant to Section 6.07(b), (c), (d)
or (e)). The Confidentiality Agreement shall, in accordance with its terms,
survive termination of this Agreement.
SECTION 8.03. Amendment. This Agreement may be amended by the
parties at any time before or after receipt of the Company Shareholder Approval
or the Parent Shareholder Approval; provided, however, that after receipt of the
Company Shareholder Approval or the Parent Shareholder Approval, there shall be
made no amendment that by Applicable Law requires further approval by the
shareholders of the Company or Parent without the further approval of such
shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
SECTION 8.04. Extension; Waiver. At any time prior to the
Merger Effective Time, the parties may (a) extend the time for the performance
of any of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 8.03, waive compliance with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
<PAGE>
116
SECTION 8.05. Procedure for Termination, Amendment, Extension
or Waiver. A termination of this Agreement pursuant to Section 8.01, an
amendment of this Agreement pursuant to Section 8.03 or an extension or waiver
pursuant to Section 8.04 shall, in order to be effective, require in the case of
Parent, Newco or the Company, action by its Board of Directors or the duly
authorized designee of its Board of Directors.
ARTICLE IX
General Provisions
SECTION 9.01. Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Merger
Effective Time. This Section 9.01 shall not limit any covenant or agreement of
the parties which by its terms contemplates performance after the Merger
Effective Time.
SECTION 9.02. Notices. All notices, requests, claims, demands
and other communications under this Agreement shall be in writing and shall be
deemed given upon receipt by the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Parent or Newco, to
PECO Energy Company
2301 Market Street
P.O. Box 8699
Philadelphia, PA 19101-8699
Telecopy No: (215) 841-4282
Attention: General Counsel
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
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117
New York, New York 10019
Telecopy No: (212) 474-3700
Attention: Philip A. Gelston
(b) if to the Company, to
Unicom Corporation
10 S. Dearborn, 37th Floor
Chicago, IL 60603
Telecopy No: (312) 394-4488
Attention: General Counsel
with a copy to:
Jones, Day, Reavis & Pogue
77 West Walker Drive
Chicago, Illinois 60001
Telecopy No: (312) 782-8585
Attention: Paul T. Ruxin
Robert A. Yolles
SECTION 9.03. Definitions. For purposes of this Agreement:
An "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person.
A "Material Adverse Effect" means, in respect of any person, a
material adverse effect on (a) the business, assets, condition (financial or
otherwise), prospects or results of operations of such person and its
subsidiaries, taken as a whole or (b) the ability of such person to perform its
obligations under this Agreement or on the ability of such person to consummate
the Merger and the other Transactions.
"Newholdco Corporation" means PECO Energy Corporation, a
Pennsylvania corporation, which shall change its name as soon as reasonably
possible to "Newholdco Corporation".
<PAGE>
A "person" means any individual, firm, corporation,
partnership, company, limited liability company, trust, joint venture,
association, Governmental Entity or other entity.
A "subsidiary" of any person means another person, an amount
of the voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, more than 50% of the
equity interests of which) is owned directly or indirectly by such first person.
SECTION 9.04. Interpretation; Disclosure Letters. When a
reference is made in this Agreement to a Section, such reference shall be to a
Section of this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". Any matter
disclosed in any section of either the Company Disclosure Letter or the Parent
Disclosure Letter shall be deemed disclosed for all purposes and all sections of
the Company Disclosure Letter or Parent Disclosure Letter, as applicable to the
extent that it is reasonably apparent from a reading of such disclosure item
that it would qualify or apply to such other sections, and otherwise shall be
deemed disclosed only for the purposes of the specific Sections of this
Agreement to which such section relates.
SECTION 9.05. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule or
Applicable Law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid,
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119
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 9.06. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries.
This Agreement, taken together with the Company Disclosure Letter, the Parent
Disclosure Letter and the Confidentiality Agreement, (a) constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the Transactions and (b) except for
the provisions of Article II and Sections 6.06, 6.16 and 6.17 are not intended
to confer upon any person other than the parties any rights or remedies.
SECTION 9.08. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof, except to the extent the laws of Pennsylvania or
Illinois are mandatorily applicable to the Merger.
SECTION 9.09. Assignment. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, except that Newco may assign, in
its sole discretion, any of or all its rights, interests and obligations under
this Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Newco of any of its obligations
under this Agreement. Any purported assignment without such consent shall be
void. Subject to the preceding sentences, this Agreement will be binding
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120
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
SECTION 9.10. Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any New York state
court or any Federal court located in the State of New York, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any New York state court or any Federal court located
in the State of New York in the event any dispute arises out of this Agreement
or any Transaction, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
(c) agrees that it will not bring any action relating to this Agreement or any
Transaction in any court other than any New York state court or any Federal
court sitting in the State of New York and (d) waives any right to trial by jury
with respect to any action related to or arising out of this Agreement or any
Transaction.
SECTION 9.11. Newco Obligations. Parent and the Company hereby
agree to take such actions as shall be necessary in order that Newco shall
assume any obligation under this Agreement that by its terms is to be performed
by Newco after the Closing.
<PAGE>
IN WITNESS WHEREOF, Parent, Newco and the Company have duly
executed this Agreement, all as of the date first written above.
PECO ENERGY COMPANY,
by
/s/ Corbin A. McNeill, Jr.
Name: Corbin A. McNeill, Jr.
Title: Chairman of the Board, President, and Chief
Executive Officer
PECO ENERGY CORPORATION,
by
/s/ Corbin A. McNeill, Jr.
Name: Corbin A. McNeill, Jr.
Title: Chairman of the Board, President, and Chief
Executive Officer
UNICOM CORPORATION,
by
/s/ John W. Rowe
Name: John W. Rowe
Title: Chairman of the Board, President, and Chief
Executive Officer
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE IThe Exchange and Merger
<S> <C> <C>
SECTION 1.01. The Exchange and Merger........................................................................2
SECTION 1.02. Closing........................................................................................2
SECTION 1.03. Merger Effective Time..........................................................................3
SECTION 1.04. Effects........................................................................................3
SECTION 1.05. Articles of Incorporation and By-laws..........................................................3
SECTION 1.06. Newco Board of Directors.......................................................................4
SECTION 1.07. Newco Senior Officers..........................................................................4
SECTION 1.08. Operations.....................................................................................4
ARTICLE IIEffect on the Capital Stock of the
Constituent Corporations
SECTION 2.01. Effect on Capital Stock........................................................................5
SECTION 2.02. Exchange of Certificates......................................................................15
Section 2.03. Certain Adjustments...........................................................................22
ARTICLE IIIRepresentations and Warranties of the Company
SECTION 3.01. Organization, Standing and Power..............................................................23
SECTION 3.02. Company Subsidiaries; Equity Interests........................................................24
SECTION 3.03. Capital Structure.............................................................................24
SECTION 3.04. Authority; Execution and Delivery;
Enforceability....................................................................26
SECTION 3.05. No Conflicts; Consents........................................................................27
SECTION 3.06. SEC Documents; Undisclosed Liabilities........................................................29
SECTION 3.07. Information Supplied..........................................................................29
SECTION 3.08. Absence of Certain Changes or Events..........................................................30
SECTION 3.09. Taxes.........................................................................................31
SECTION 3.10. Absence of Changes in Benefit Plans...........................................................32
SECTION 3.11. ERISA Compliance; Excess Parachute Payments...................................................33
SECTION 3.12. Litigation....................................................................................35
SECTION 3.13. Compliance with Applicable Laws; Permits......................................................36
SECTION 3.14. Brokers; Schedule of Fees and Expenses........................................................36
SECTION 3.15. Opinion of Financial Advisor..................................................................37
SECTION 3.16. Year 2000.....................................................................................37
<PAGE>
SECTION 3.17. Environmental Matters.........................................................................37
SECTION 3.18. Labor and Employee Relations..................................................................39
SECTION 3.19. Operations of Nuclear Power Plants............................................................40
SECTION 3.20. Parent Share Ownership........................................................................40
SECTION 3.21. Regulation as a Utility.......................................................................41
SECTION 3.22. Contracts; No Default.........................................................................41
SECTION 3.23. Title to Properties...........................................................................41
SECTION 3.24. Intellectual Property.........................................................................42
Section 3.25. Hedging.......................................................................................42
Section 3.26. Regulatory Proceedings........................................................................42
ARTICLE IVRepresentations and Warranties of Parent and Newco
SECTION 4.01. Organization, Standing and Power..............................................................43
SECTION 4.02. Parent Subsidiaries; Equity Interests.........................................................43
SECTION 4.03. Capital Structure.............................................................................44
SECTION 4.04. Authority; Execution and Delivery;
Enforceability....................................................................46
SECTION 4.05. No Conflicts; Consents........................................................................46
SECTION 4.06. SEC Documents; Undisclosed Liabilities........................................................48
SECTION 4.07. Information Supplied..........................................................................49
SECTION 4.08. Absence of Certain Changes or Events..........................................................49
SECTION 4.09. Taxes.........................................................................................50
SECTION 4.10. Absence of Changes in Benefit Plans...........................................................51
SECTION 4.11. ERISA Compliance; Excess Parachute Payments...................................................52
SECTION 4.12. Litigation....................................................................................54
SECTION 4.13. Compliance with Applicable Laws; Permits......................................................54
SECTION 4.14. Brokers; Schedule of Fees and Expenses........................................................55
SECTION 4.15. Opinions of Financial Advisor.................................................................55
SECTION 4.16. Year 2000.....................................................................................56
SECTION 4.17. Environmental Matters.........................................................................56
SECTION 4.18. Labor and Employee Relations..................................................................57
SECTION 4.19. Operations of Nuclear Power Plants............................................................57
SECTION 4.20. Company Share Ownership.......................................................................59
SECTION 4.21. Regulation as a Utility.......................................................................59
SECTION 4.22. Contracts; No Default.........................................................................59
SECTION 4.23. Title to Properties...........................................................................59
SECTION 4.24. Intellectual Property.........................................................................60
Section 4.25. Hedging.......................................................................................60
Section 4.26. Regulatory Proceedings........................................................................60
ARTICLE V Covenants Relating to Conduct of Business
SECTION 5.01. Conduct of Business...........................................................................61
SECTION 5.02. No Solicitation by Company....................................................................71
SECTION 5.03. No Solicitation by Parent.....................................................................74
<PAGE>
ARTICLE VIAdditional Agreements
SECTION 6.01. Preparation of the Form S-4 and the Proxy
Statement; Shareholders Meetings..................................................76
SECTION 6.02. Access to Information; Confidentiality........................................................79
SECTION 6.03. Regulatory Matters; Reasonable Best Efforts...................................................79
SECTION 6.04. Company and Parent Stock Options and
Other Stock Plans.................................................................81
SECTION 6.05. Benefit Plans; Workforce Matters..............................................................85
SECTION 6.06. Indemnification...............................................................................87
SECTION 6.07. Fees and Expenses.............................................................................88
SECTION 6.08. Public Announcements..........................................................................90
SECTION 6.09. Transfer Taxes................................................................................90
SECTION 6.10. Affiliates....................................................................................90
SECTION 6.11. Stock Exchange Listing........................................................................91
SECTION 6.12. Rights Agreements; Consequences if
Rights Triggered..................................................................91
SECTION 6.13. Tax Treatment..............................................................................91
SECTION 6.14. Reorganization and Amendment..................................................................92
SECTION 6.15. Company Common Stock Repurchase............................................................92
SECTION 6.16. Parity of Compensation.....................................................................92
SECTION 6.17. Board Seats................................................................................93
ARTICLE VIIConditions Precedent
SECTION 7.01. Conditions to Each Party's Obligation
To Effect The Merger..............................................................93
SECTION 7.02. Conditions to Obligations of Parent
and Newco.........................................................................95
SECTION 7.03. Conditions to Obligations of the Company......................................................96
ARTICLE VIIITermination, Amendment and Waiver
SECTION 8.01. Termination...................................................................................97
SECTION 8.02. Effect of Termination........................................................................100
SECTION 8.03. Amendment....................................................................................100
SECTION 8.04. Extension; Waiver............................................................................101
SECTION 8.05. Procedure for Termination, Amendment,
Extension or Waiver..............................................................101
ARTICLE IXGeneral Provisions
SECTION 9.01. Nonsurvival of Representations
<PAGE>
and Warranties...................................................................101
SECTION 9.02. Notices......................................................................................101
SECTION 9.03. Definitions..................................................................................102
SECTION 9.04. Interpretation; Disclosure Letters...........................................................103
SECTION 9.05. Severability.................................................................................103
SECTION 9.06. Counterparts.................................................................................104
SECTION 9.07. Entire Agreement; No Third-Party
Beneficiaries....................................................................104
SECTION 9.08. Governing Law................................................................................104
SECTION 9.09. Assignment...................................................................................104
SECTION 9.10. Enforcement..................................................................................105
SECTION 9.11. Newco Obligations.........................................................................105
</TABLE>
<PAGE>
INDEX OF DEFINED TERMS
Defined Term Section
"Affiliate" Section 9.03
"Agreement" Recitals
"AmerGen" Section 5.01(b)(iv)
"Applicable Law" Section 3.05(a)
"Articles of Exchange" Section 1.03(a)
"Atomic Energy Act" Section 3.05(b)
"Average Price" Section 2.01(a)(viii)
"Certificates" Section 2.02(b)(v)
"Closing" Section 1.02
"Closing Date" Section 1.02
"Code" Recitals
"ComEd" Section 1.08(a)
"Company" Recitals
"Company Acquisition Agreement" Section 5.02(b)
"Company Benefit Plans" Section 3.11(h)
"Company Board" Section 3.04(b)
"Company By-laws" Section 3.01
"Company Cash Consideration" Section 2.01(b)(ii)
"Company Cash Designees" Section 2.01(b)(v)
"Company Cash Election" Section 2.01(b)(iv)
"Company Cash Election Shares" Section 2.01(b)(v)
"Company Cash Number" Section 2.01(b)(iii)
"Company Cash Shares" Section 2.01(b)(vi)
"Company Certificates" Section 2.02(b)(v)
"Company Chairman" Section 6.16
"Company Charter" Section 3.01
"Company Common Stock" Recitals
"Company Competing Transaction" Section 5.02(a)
"Company Conversion Number" Section 2.01(b)(ii)
"Company Deminimis Shares" Section 2.01(b)(iv)
"Company Disclosure Letter" Section 3.02(a)
"Company Dissent Shares" Section 2.01(b)(xi)
"Company Employee Stock Option" Section 6.04(f)
"Company Employment Arrangements" Section 3.10
"Company Exchange Ratio" Section 2.01(b)(ii)
"Company Material Adverse Effect" Section 3.01
"Company Non-Election" Section 2.01(b)(iv)
"Company Non-Election Shares" Section 2.01(b)(vii)
"Company Non-Prorated Cash Shares" Section 2.01(b)(v)
"Company Nuclear Facilities" Section 3.19
"Company Odd Lot Cash Election Shares" Section 2.01(b)(iv)
"Company Permits" Section 3.13(b)
"Company Reorganization" Section 5.01(g)
<PAGE>
"Company Required Statutory Approvals" Section 3.05(b)
"Company Rights" Section 3.03(a)
"Company Rights Agreement" Section 3.03(a)
"Company SEC Documents" Section 3.06
"Company Shareholder Approval" Section 3.04(c)
"Company Shareholders Meeting" Section 6.01(d)
"Company Stock Election" Section 2.01(b)(iv)
"Company Stock Election Shares" Section 2.01(b)(v)
"Company Stock Number" Section 2.01(b)(iii)
"Company Stock Plans" Section 6.04(f)
"Company Subsidiaries" Section 3.01
"Confidentiality Agreement" Section 6.02
"Consent" Section 3.05(b)
"Contract" Section 3.05(a)
"ERISA" Section 3.11(b)
"Election Deadline" Section 2.02(b)
"Environmental Claims" Section 3.17(f)(i)
"Environmental Laws" Section 3.17(f)(ii)
"Environmental Permits" Section 3.17(f)(iii)
"Exchange Act" Section 3.05(b)
"Exchange Agent" Section 2.02(a)
"Exchange Consideration" Section 2.01(a)(ii)
"Exchange Effective Time" Section 1.03(a)
"Exchange Fund" Section 2.02(a)
"FERC" Section 3.05(b)
"Filed Company SEC Documents" Section 4.08
"Filed Parent SEC Documents" Section 4.08
"Final Order" Section 7.01(c)
"First Step Exchange" Recitals
"Form S-4" Section 3.07
"Form of Election" Section 2.02(b)
"GAAP" Section 3.06
"Governmental Entity" Section 3.05(b)
"Hazardous Materials" Section 3.17(f)(iv)
"HSR Act" Section 3.05(b)
"IBCA" Section 1.01(b)
"ICC" Section 3.05(b)
"Illinois Articles of Merger" Section 1.03(b)
"Indemnified Party" Section 6.06(c)
"Intellectual Property Rights" Section 3.24
"Judgment" Section 3.05(a)
"Liens" Section 3.02(a)
"Losses" Section 6.06(c)
"Material Adverse Effect" Section 9.03
"Merger" Recitals
"Merger Consideration" Section 2.01(b)(ii)
"Merger Effective Time" Section 1.03(b)
"NRC" Section 3.05(b)
<PAGE>
"NYSE" Section 2.02(e)(ii)
"Newco" Recitals
"Newco Articles" Section 1.05(a)
"Newco Board" Section 1.06(b)
"Newco By-laws" Section 1.05(b)
"Newco Common Stock" Recitals
"Newholdco Corporation" Section 9.03
"Outside Date" Section 8.01(b)
"PBCL" Section 1.01(a)
"PCBs" Section 3.17(f)(iv)
"PPUC" Section 4.05(b)
"PUHCA" Section 3.02(a)
"PURPA" Section 3.02(a)
"Parent" Recitals
"Parent Acquisition Agreement" Section 5.03(b)
"Parent Benefit Plans" Section 4.10
"Parent Board" Section 4.04(b)
"Parent By-laws" Section 4.01
"Parent Capital Stock" Section 4.03(a)
"Parent Cash Consideration" Section 2.01(a)(ii)
"Parent Cash Designees" Section 2.01(a)(v)
"Parent Cash Election" Section 2.01(a)(iv)
"Parent Cash Election Shares" Section 2.01(a)(v)
"Parent Cash Number" Section 2.01(a)(iii)
"Parent Cash Shares" Section 2.01(a)(vi)
"Parent Certificate" Section 2.02(b)(v)
"Parent Chairman" Section 6.16
"Parent Charter" Section 4.01
"Parent Common Stock" Recitals
"Parent Competing Transaction" Section 5.03(a)
"Parent Deminimis Shares" Section 2.01(a)(iv)
"Parent Disclosure Letter" Section 4.02(a)
"Parent Dissent Shares" Section 2.01(a)(x)
"Parent Employee Stock Option" Section 6.04(f)
"Parent Employment Arrangements" Section 4.10
"Parent Exchange Ratio" Section 2.01(a)(ii)
"Parent Material Adverse Effect" Section 4.01
"Parent Non-Election" Section 2.01(a)(iv)
"Parent Non-Election Shares" Section 2.01(a)(vii)
"Parent Non-Prorated Cash Shares" Section 2.01(a)(v)
"Parent Nuclear Facilities" Section 4.19
"Parent Permits" Section 4.13(b)
"Parent Preferred Stock" Section 4.03(a)
"Parent Reorganization" Section 5.02(g)
<PAGE>
"Parent Required Statutory Approvals" Section 4.05(b)
"Parent SAR" Section 6.04(f)
"Parent SEC Documents" Section 4.06
"Parent Shareholder Approval" Section 4.04(c)
"Parent Shareholders Meeting" Section 6.01(e)
"Parent Stock Election" Section 2.01(a)(iv)
"Parent Stock Election Shares" Section 2.01(a)(v)
"Parent Stock Number" Section 2.01(a)(iii)
"Parent Stock Plans" Section 6.04(f)
"Parent Subsidiaries" Section 4.01
"Power Purchase Agreement" Section 5.01(a)(xii)
"Pennsylvania Articles of Merger" Section 1.03(b)
"Person" Section 9.03
"Power Act" Section 3.02(a)
"Proxy Statement" Section 3.05(b)
"Qualified Plans" Section 3.11(a)
"Qualifying Company Proposal" Section 5.02(d)
"Qualifying Parent Proposal" Section 5.03(d)
"Reallocation" Section 2.03
"Release" Section 3.17(f)(v)
"Representatives" Section 5.02(a)
"SEC" Section 3.05(b)
"Second Step Merger" Recitals
"Sections 11.65 and 11.70" Section 2.01(b)(xi)
"Securities Act" Section 3.06
"Share Issuance" Section 1.01(c)
"Stock Plan" Section 6.04(e)
"Subchapter D" Section 2.01(a)(xi)
"Subsidiary" Section 9.03
"Surviving Corporation" Section 1.01(b)
"Taxes" Section 3.09(g)
"Tax Return" Section 3.09(g)
"Trading Day" Section 2.01(a)(viii)
"Transition Period" Section 6.16
"Transfer Taxes" Section 6.09
"Voting Company Debt" Section 3.03(d)
"Voting Parent Debt" Section 4.03(a)
<PAGE>
EXHIBIT A
ARTICLE X
Governance of the Corporation
During the Transition Period
Section 10.01. Definitions. For purposes of this Article:
(1) "PECO CEO" means Corbin A. McNeill, Jr.
(2) "PECO Directors" means (i) those directors of the
corporation designated by PECO Energy pursuant to Section 1.06(b) of the Merger
Agreement and (ii) any Replacement PECO Director (as defined in Section 10.03(b)
of these by-laws).
(3) "PECO Energy" means PECO Energy Company, a Pennsylvania
corporation and a subsidiary of the corporation.
(4) "Independent Director" means a disinterested, independent
person (determined in accordance with customary standards for independent
directors applicable to U.S. public companies).
(5) "Merger Agreement" means the Agreement and Plan of
Exchange and Merger dated as of September 22, 1999, among PECO Energy, the
corporation and Unicom.
(6) "Merger Effective Time" shall have the meaning assigned to
such term in the Merger Agreement.
(7) "Transition Period" means the period from the Merger
Effective Time until December 31, 2003.
(8) "Unicom" means Unicom Corporation, an Illinois
corporation.
(9) "Unicom CEO" means John W. Rowe.
(10) "Unicom Directors" means (i) those directors of the
corporation designated by Unicom pursuant to Section 1.06(b) of the Merger
Agreement and (ii) any Replacement Unicom Director (as defined in Section
10.03(b)
<PAGE>
of these by-laws).
(11) "ComEd" means Commonwealth Edison Company, an Illinois
corporation and a subsidiary of the corporation.
SECTION 10.02. Corporate Offices. At least for the duration of
the Transition Period, the corporation shall maintain (a) in Chicago, Illinois
offices serving as its corporate headquarters, (b) in southeastern Pennsylvania
offices serving as the headquarters of the generation and power marketing
businesses of the corporation and its subsidiaries, and (c) offices in Chicago,
Illinois and southeastern Pennsylvania as the headquarters of ComEd and PECO
Energy, respectively.
SECTION 10.03. Board of Directors.
(a) Effective immediately at the Merger Effective Time and
during the Transition Period, the board of directors shall consist of sixteen
(16) directors. At the Merger Effective Time, 8 directors shall be PECO
Directors and 8 directors shall be Unicom Directors. The term of a class of the
board of directors comprised of 6 directors shall expire at the first annual
meeting of shareholders following the Merger Effective Time, a second class
comprised of 5 directors shall expire at the second annual meeting of
shareholders following the Merger Effective Time and a third class comprised of
5 directors shall expire at the third annual meeting of shareholders following
the Merger Effective Time, and representation of PECO Directors and Unicom
Directors in each class shall be as nearly equal in numbers as possible.
(b)(i) During the Transition Period the board of directors of
the corporation shall consist of equal numbers of PECO Directors and Unicom
Directors.
(ii) During the Transition Period, the board of directors
(subject to the fiduciary duties of the directors in the case of approval of any
individual) shall take all action necessary to ensure that any vacancy of a
position on the board of directors to be filled by the Board (A) that was held
by an PECO Director is filled promptly by a person designated to fill such seat
by a majority of the PECO Directors remaining on the board of directors (a
"Replacement PECO Director") and (B) that was held by a Unicom Director is
filled promptly by a person designated to fill such seat by a majority of the
Unicom Directors remaining on the board of
<PAGE>
3
directors (a "Replacement Unicom Director").
(iii) With respect to each election of directors by
shareholders during the Transition Period, the board of directors or the
applicable committee thereof shall nominate for election (subject to the
fiduciary duties of the directors in the case of approval of any individual), a
PECO Director to fill any position held prior to such election by a PECO
Director and a Unicom Director to fill any position held prior to such election
by a Unicom Director.
(c) During the Transition Period, the executive committee of
the board of directors shall have 6 members, 2 of which will be the Co-Chief
Executive Officers of the corporation (or if either Co-Chief Executive Officer
ceases to serve as such, another officer of the corporation selected by the PECO
Directors in the case of a replacement for the PECO CEO or by the Unicom
Directors in the case of a replacement for the Unicom CEO), 2 of which shall be
Independent Directors who are PECO Directors and 2 of which shall be Independent
Directors who are Unicom Directors. For the duration of the first half of the
Transition Period so long as he is a Co-Chief Executive Officer, the Unicom CEO
shall be the chairman of the executive committee of the board of directors, and
as of the first day of the second half of the Transition Period, the PECO CEO,
if he is a Co-Chief Executive Officer at such time, shall succeed to such
position and hold it for the duration of the Transition Period. If at any time
during the Transition Period either the Unicom CEO or the PECO CEO, whichever is
at such time the chairman of the executive committee, is unwilling or unable to
hold such office, the other shall succeed to such office for the duration of the
Transition Period if he continues at such time to hold the office of Co-Chief
Executive Officer or Chief Executive Officer of the corporation.
(d) During the Transition Period, each other committee of the
Board shall consist of equal numbers of PECO Directors and Unicom Directors and
the chairmen of the committees of the board of directors (other than the
executive committee) shall be PECO Directors and Unicom Directors in as nearly
equal numbers as possible.
(e) During the Transition Period, the board of
<PAGE>
4
directors shall hold between 6 and 8 regular meetings each fiscal year, with no
less than 2 of such meetings each year to be held in the Philadelphia,
Pennsylvania area and no less than 2 of such meetings each year to be held in
the Chicago, Illinois area.
SECTION 10.04. Chairman of the Board of Directors.
(a) As of the Merger Effective Time and for the duration of
the first half of the Transition Period so long as he is a Co-Chief Executive
Officer or Chief Executive Officer at such time, the PECO CEO shall hold the
position of Chairman of the board of directors, and so long as he is a Co-Chief
Executive Officer or the Chief Executive Officer at such time, the Unicom CEO
shall succeed to the position of Chairman of the board of directors and hold it
for the duration of the Transition Period. If at any time during the Transition
Period either the PECO CEO or the Unicom CEO, whichever is at such time the
Chairman of the board of directors, is unwilling or unable to hold such office,
the board of directors shall elect the other to such office if he continues to
hold the office of Co-Chief Executive Officer of the Corporation at such time.
(b) The Chairman shall chair all meetings of the board of
directors and stockholders at which he is present.
SECTION 10.05. Co-Chief Executive Officers; President.
(a) (i) As of the Merger Effective Time and for the duration
of the Transition Period, each of the PECO CEO and the Unicom CEO shall hold the
position of Co-Chief Executive Officers of the corporation and (ii) as of the
Merger Effective Date and for the duration of the first half of the Transition
Period, the Unicom CEO shall hold the position of President of the corporation.
If at any time during the Transition Period either of the Co-Chief Executive
Officers is unable or unwilling to hold such office, the other Co-Chief
Executive Officer, if he is either the PECO CEO or the Unicom CEO, shall become
the sole Chief Executive Officer of the corporation. The Unicom CEO shall become
the sole Chief Executive Officer immediately prior to the end of the
<PAGE>
5
Transition Period if immediately prior to such time he holds the position of
Co-Chief Executive Officer.
(b) The corporation's generation and wholesale marketing and
trading businesses shall report to the PECO CEO in his capacity as a Co-Chief
Executive Officer, and the corporation's transmission and distribution and
unregulated ventures businesses shall report to the Unicom CEO in his capacity
as a Co-Chief Executive Officer. The corporation's financial, legal, human
resources and other staff functions shall report to the office of the Co-Chief
Executive Officers.
(c) The Co-Chief Executive Officers shall each maintain
offices in both southeastern Pennsylvania and Chicago, Illinois.
SECTION 10.06. Management Changes.
(a) Until the expiration of the Transition Period, so long as
either the PECO CEO or the Unicom CEO is a Co-Chief Executive Officer or the
Chief Executive Officer of the corporation, (i) the election of any other person
to the position of Chairman of the board of directors, chairman of the executive
committee of the board of directors, Co-Chief Executive Officer or Chief
Executive Officer or, as to the first half of the Transition Period, President
or (ii) the removal, replacement or demotion of the PECO CEO or the Unicom CEO
from one or more of such positions, in each case, shall require the affirmative
vote of at least two-thirds of the members of the board of directors(except as
expressly provided in this Article X).
(b) Until the expiration of the Transition Period, none of the
senior officers of the corporation specified in Exhibit D of the Merger
Agreement shall be removed, replaced or demoted without either (i) the consent
of both Co-Chief Executive Officers or (ii) the affirmative vote of two-thirds
of the members of the Newco Board.
SECTION 10.07. Amendment. Until the end of the Transition
Period (a) the provisions of this Article X may not be amended, altered,
repealed or waived in any respect, and the board of directors or the corporation
shall not
<PAGE>
6
otherwise take any action or fail to take any action which would have
the effect of eliminating, limiting, restricting, avoiding or otherwise
modifying the effect of, or waiving compliance with the provisions of this
Article X (e.g., by creating a holding company structure if the certificate of
incorporation, by-laws or similar document of such holding company does not
contain equivalent provisions), without the affirmative vote of at least
two-thirds of the directors or (b) in the case of any amendment proposed by
shareholders without such vote of directors, the affirmative vote of holders of
shares representing at least two-thirds of the votes eligible to be cast in a
general election of directors.
SECTION 10.08. Successors. For the duration of the Transition
Period, the provisions of this Article shall be applicable to (i) any successor
to the corporation as the result of a merger, consolidation or other business
combination, whether or not the corporation is the surviving company in such
transaction, or otherwise and (ii) any corporation or other entity with respect
to which the corporation or its successor is or becomes a direct or indirect
subsidiary, and, in each case, the board of directors shall not permit the
corporation to be a party to any transaction which would not comply with the
foregoing without the affirmative vote of at least two-thirds of the directors.
SECTION 10.09. Effectiveness of this Article X. The provisions
of this Article X shall become null and void and be of no further effect after
the Transition Period.
<PAGE>
EXHIBIT B
Senior Officers of Newco
Co-Chief Executive Officer: Corbin A. McNeill, Jr.
Co-Chief Executive Officer: John W. Rowe
Chief Financial Officer: Michael J. Egan
Chief Transition/ Michael J. Egan
Integration Officer:
Senior Vice President,
Finance: Ruth Ann M. Gillis
General Counsel: Pamela B. Strobel
Chief Nuclear Officer: Oliver D. Kingsley, Jr.
Nuclear Operations
President: Gerald R. Rainey
PECO Distribution President: K. Lawrence
Commonwealth Edison
Distribution President: Carl J. Croskey
Unregulated Retail/ Paul A. Elbert
New Business President:
Senior Vice President,
Human Resources: S. Gary Snodgrass
<PAGE>
EXHIBIT C
PECO Energy Company
P.O. Box 8699
2301 Market Street
Philadelphia, PA 19101
Form of Company Affiliate Letter
Dear Sirs:
The undersigned refers to the Agreement and Plan of Exchange
and Merger (the "Merger Agreement") dated as of September 22, 1999, among PECO
Energy Company, a Pennsylvania corporation, PECO Energy Corporation, a
Pennsylvania corporation, and Unicom Corporation, an Illinois corporation.
Capitalized terms used but not defined in this letter have the meanings give
such terms in the Merger Agreement.
The undersigned, a holder of shares of Company Common Stock,
is entitled to receive in connection with the Merger shares of Newco Common
Stock. The undersigned acknowledges that the undersigned may be deemed an
"affiliate" of the Company within the meaning of Rule 145 ("Rule 145")
promulgated under the Securities Act, although nothing contained herein should
be construed as an admission of such fact.
If in fact the undersigned were an affiliate under the Act,
the undersigned's ability to sell, assign or transfer the Newco Common Stock
received by the undersigned in exchange for any shares of Company Common Stock
pursuant to the Merger may be restricted unless much transaction is registered
under the Act or an exemption from such registration is available. The
undersigned (i) understands that such exemptions are limited and that Newco is
not under any obligation to effect any such registration and (ii) has obtained
advice of counsel as to the nature and conditions of such exemptions, including
information with respect to the applicability to the sale of such securities of
Rules 144 and 145(d) promulgated under the Securities Act.
<PAGE>
The undersigned hereby represents to and covenants with Parent
and Newco that the undersigned will not sell, assign or transfer any of the
Newco Common Stock received by the undersigned in exchange for shares of Company
Common Stock pursuant to the Merger except (i) pursuant to an effective
registration statement under the Securities Act or (ii) in a transaction that,
in the opinion of counsel reasonably satisfactory to Newco or as described in a
"no-action" or interpretive letter from the Staff of the SEC, is not required to
be registered under the Securities Act.
In the event of a sale or other disposition by the undersigned
pursuant to Rule 145, of Newco Common Stock received by the undersigned in the
Merger, the undersigned will supply Newco with evidence of compliance with such
Rule, in the form of a letter in the form of Annex I hereto and the opinion of
counsel or no-action letter referred to above. The undersigned understands that
Newco may instruct its transfer agent to withhold the transfer of any Parent
securities disposed of by the undersigned, but that upon receipt of such
evidence of compliance the transfer agent shall effectuate the transfer of the
Newco Common Stock sold as indicated in the letter.
The undersigned acknowledges and agrees that (i) the Newco
Common Stock issued to the undersigned will all be in certificated form and (ii)
appropriate legends will be placed on certificates representing Newco Common
Stock received by the undersigned in the Merger or held by a transferee thereof,
which legends will be removed by delivery of substitute certificates upon
receipt of an opinion in form and substance reasonably satisfactory to Newco
from counsel reasonably satisfactory to Newco to the effect that such legends
are no longer required for purposes of the Securities Act.
The undersigned acknowledges that (i) the undersigned has
carefully read this letter and understands the requirements hereof and the
limitations imposed upon the distribution, sale, transfer or other disposition
of Newco Common Stock and (ii) the receipt by Parent and Newco of this letter is
an inducement and a condition to Parent's and Newco's respective obligations to
consummate the Merger.
Very truly yours,
Dated:
<PAGE>
ANNEX I
TO EXHIBIT C
[NAME AND ADDRESS OF NEWCO]
On _______________, the undersigned sold the securities of
NEW HOLDCO ("Newco") described below in the space provided for that purpose (the
"Securities"). The Securities were received by the undersigned in connection
with the merger of WEST CO. with and into Newco.
Based upon the most recent report or statement filed by Parent
with the Securities and Exchange Commission, the Securities sold by the
undersigned were within the prescribed limitations set forth in Rule 144(e)
promulgated under the Securities Act of 1933, as amended (the "Securities Act").
The undersigned hereby represents that the Securities were
sold in "brokers' transactions" within the meaning of Section 4(4) of the
Securities Act or in transactions directly with a "market maker" as that term is
defined in Section 3(a)(38) of the Securities Exchange Act of 1934, as amended.
The undersigned further represents that the undersigned has not solicited or
arranged for the solicitation of orders to buy the Securities, and that the
undersigned has not made any payment in connection with the offer or sale of the
Securities to any person other than to the broker who executed the order in
respect of such sale.
Very truly yours,
Dated:
[Space to be provided for description of securities.]
<PAGE>
EXHIBIT D
Unicom Corporation
37th Floor
10 South Dearborn Street
Post Office Box A-3005
Chicago, IL 60690-3005
Form of Parent Affiliate Letter
Dear Sirs:
The undersigned refers to the Agreement and Plan of Exchange
and Merger (the "Merger Agreement") dated as of September 22, 1999, among PECO
Energy Company, a Pennsylvania corporation, PECO Energy Corporation, a
Pennsylvania corporation, and Unicom Corporation, an Illinois corporation.
Capitalized terms used but not defined in this letter have the meanings give
such terms in the Merger Agreement.
The undersigned, a holder of shares of Parent Common Stock, is
entitled to receive in connection with the Merger shares of Newco Common Stock.
The undersigned acknowledges that the undersigned may be deemed an "affiliate"
of Parent within the meaning of Rule 145 ("Rule 145") promulgated under the
Securities Act, although nothing contained herein should be construed as an
admission of such fact.
If in fact the undersigned were an affiliate under the Act,
the undersigned's ability to sell, assign or transfer the Newco Common Stock
received by the undersigned in exchange for any shares of Parent Common Stock
pursuant to the Merger may be restricted unless much transaction is registered
under the Act or an exemption from such registration is available. The
undersigned (i) understands that such exemptions are limited and that Newco is
not under any obligation to effect any such registration and (ii) has obtained
advice of counsel as to the nature and conditions of such exemptions, including
information with respect to the applicability to the sale of such securities of
Rules 144 and 145(d) promulgated under the Securities Act.
<PAGE>
2
The undersigned hereby represents to and covenants with the
Company and Newco that the undersigned will not sell, assign or transfer any of
the Newco Common Stock received by the undersigned in exchange for shares of
Parent Common Stock pursuant to the Merger except (i) pursuant to an effective
registration statement under the Securities Act or (ii) in a transaction that,
in the opinion of counsel reasonably satisfactory to Newco or as described in a
"no-action" or interpretive letter from the Staff of the SEC, is not required to
be registered under the Securities Act.
In the event of a sale or other disposition by the undersigned
pursuant to Rule 145, of Newco Common Stock received by the undersigned in the
Merger, the undersigned will supply Newco with evidence of compliance with such
Rule, in the form of a letter in the form of Annex I hereto and the opinion of
counsel or no-action letter referred to above. The undersigned understands that
Newco may instruct its transfer agent to withhold the transfer of any Parent
securities disposed of by the undersigned, but that upon receipt of such
evidence of compliance the transfer agent shall effectuate the transfer of the
Newco Common Stock sold as indicated in the letter.
The undersigned acknowledges and agrees that (i) the Newco
Common Stock issued to the undersigned will all be in certificated form and (ii)
appropriate legends will be placed on certificates representing Newco Common
Stock received by the undersigned in the Merger or held by a transferee thereof,
which legends will be removed by delivery of substitute certificates upon
receipt of an opinion in form and substance reasonably satisfactory to Newco
from counsel reasonably satisfactory to Newco to the effect that such legends
are no longer required for purposes of the Securities Act.
The undersigned acknowledges that (i) the undersigned has
carefully read this letter and understands the requirements hereof and the
limitations imposed upon the distribution, sale, transfer or other disposition
of Parent Common Stock and (ii) the receipt by the Company and Newco of this
letter is an inducement and a condition to Company's obligations to consummate
the Merger.
Very truly yours,
<PAGE>
3
Dated:
<PAGE>
ANNEX I
TO EXHIBIT D
[NAME AND ADDRESS OF NEWCO]
On _____________________, the undersigned sold the securities
of NEW HOLDCO ("Newco") described below in the space provided for that purpose
(the "Securities"). The Securities were received by the undersigned in
connection with the mandatory share exchange between EAST CO. and Newco.
Based upon the most recent report or statement filed by Parent
with the Securities and Exchange Commission, the Securities sold by the
undersigned were within the prescribed limitations set forth in Rule 144(e)
promulgated under the Securities Act of 1933, as amended (the "Securities Act").
The undersigned hereby represents that the Securities were
sold in "brokers' transactions" within the meaning of Section 4(4) of the
Securities Act or in transactions directly with a "market maker" as that term is
defined in Section 3(a)(38) of the Securities Exchange Act of 1934, as amended.
The undersigned further represents that the undersigned has not solicited or
arranged for the solicitation of orders to buy the Securities, and that the
undersigned has not made any payment in connection with the offer or sale of the
Securities to any person other than to the broker who executed the order in
respect of such sale.
Very truly yours,
Dated:
[Space to be provided for description of securities.]
<PAGE>
EXHIBIT E
[Letterhead of Parent]
[Date]
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Jones, Day, Reavis & Pogue
77 West Walker Drive
Chicago, Illinois 60001
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to
Sections 7.02(d) and 7.03(d) of the Agreement and Plan of Exchange and Merger
(the "Exchange and Merger Agreement") dated as of September 22, 1999, among PECO
ENERGY COMPANY, a Pennsylvania corporation ("Parent"), PECO ENERGY CORPORATION,
a Pennsylvania corporation and a wholly owned subsidiary of Parent ("Newco") and
UNICOM CORPORATION, an Illinois corporation (the "Company"), and in connection
with the filing with the Securities and Exchange Commission (the "SEC") of the
registration statement on Form S-4 (the "Registration Statement"), which
includes the proxy statement/prospectus of Parent and the Company, each as
amended and supplemented through the date hereof, the undersigned certifies and
represents on behalf of Parent and as to Parent, after due inquiry and
investigation, as follows (any capitalized term used but not defined herein
having the meaning given to such term in the Exchange and Merger Agreement):
2. The Merger will be consummated in accordance with the
Exchange and Merger Agreement and as described in the Registration Statement.
The facts relating to the Merger as described in the Registration Statement and
the documents referenced in the Registration Statement are, insofar as such
<PAGE>
facts relate to Parent, true, correct and complete in all material respects.
3. The formula set forth in the Exchange and Merger Agreement
pursuant to which each issued and outstanding share of common stock, no par
value, of Parent (the "Parent Common Stock") will be converted into common
shares, no par value, of Newco (the "Newco Common Stock") or cash is the result
of arm's length bargaining. The aggregate fair market value of the Newco Common
Stock and/or cash to be received by each holder of Parent Common Stock in the
First Step Exchange will be approximately equal to the fair market value of the
Parent Common Stock surrendered in exchange therefor.
4. Parent has not made and does not have any present plan or
intention to make any distributions to holders of Parent Common Stock (other
than dividends in the ordinary course of business) prior to, in contemplation
of, or otherwise in connection with, the Merger.
5. Newco has not acquired, nor, except as a result of the
First Step Exchange will it acquire, nor has it owned in the past five years,
any Parent Common Stock.
6. Parent, Newco and the holders of Parent Common Stock will
each pay their respective expenses, if any, incurred in connection with the
First Step Exchange. Parent has not agreed to assume, nor will it directly or
indirectly assume, any expense or other liability, whether fixed or contingent,
of any holder of Parent Common Stock. Parent has not entered into any
arrangement pursuant to which Newco has agreed to assume, directly or
indirectly, any expense or other liability, whether fixed or contingent,
incurred or to be incurred by Parent or any holder of Parent Common Stock in
connection with or as part of the First Step Exchange or any related
transactions, nor will any of the Parent Common Stock that is acquired by Newco
in connection with the First Step Exchange be subject to any liabilities.
7. Parent is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code of 1986, as amended (the
"Code"), Section 351(e)(1) of the Code or Treasury Regulation Section
1.351-1(c)(1)(ii).
8. Parent will not take, and, to the best knowledge of the
management of Parent there is no present plan or intention of any holders of
Parent Common Stock to take, any position on any Federal, state or local income
or franchise tax return, or take any other tax reporting
<PAGE>
4
position, that is inconsistent (i) with the treatment of the Merger as
transactions described in Section 351 of the Code or (ii) with the treatment of
the Second Step Merger as a reorganization within the meaning of Section 368(a)
of the Code, in each case unless otherwise required by a "determination" (as
defined in Section 1313(a)(1) of the Code) or by applicable state or local tax
law (and then only to the extent required by such applicable state or local tax
law).
9. None of the compensation received by any
stockholder-employee of Parent in respect of periods ending on or prior to the
Exchange Effective Time represents separate consideration for any of his or her
Parent Common Stock. None of the Newco Common Stock that will be received by any
stockholder-employee of Parent in the Merger represents separately bargained for
consideration which is allocable to any employment agreement or arrangement. The
compensation paid to any stockholder-employees will be for services actually
rendered and will be determined by bargaining at arm's-length.
10. There is no intercorporate indebtedness existing between
Newco and Parent.
11. Parent is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
12. On the date of the First Step Exchange, the fair market
value of the assets of Parent will exceed the sum of its liabilities, plus the
amount of liabilities, if any, to which such assets are subject.
13. To the best knowledge of the management of Parent, there
is no present plan or intention on the part of the holders of Parent Common
Stock to sell, exchange or otherwise dispose of, or to enter into any contract
or other arrangement with respect to, any interest in the shares of Newco Common
Stock received in the First Step Exchange in exchange for such Parent Common
Stock such that the former holders of Company Common Stock and the former
holders of Parent Common Stock, in the aggregate, would not own (i) Newco Common
Stock having at least 80% of the total combined voting power of all classes of
Newco stock entitled to vote
<PAGE>
5
and (ii) at least 80% of the total number of shares of each other class of Newco
Stock.
14. None of the holders of Parent Common Stock will retain any
rights in the Parent Common Stock transferred to Newco pursuant to the First
Step Exchange.
15. Newco will not receive any accounts receivable in the
First Step Exchange.
16. To the best knowledge of the management of Parent and
taking into account any issuance of additional shares of Newco Common Stock, any
issuance of Newco Common Stock for services, the exercise of any Newco stock
rights, options, warrants or subscriptions, any public offerings of Newco stock,
and the sale, exchange, transfer by gift or other disposition of any Newco
Common Stock received by holders of Parent Common Stock in the Merger, the
holders of Parent Common Stock and Company Common Stock will collectively be in
"control" of Newco immediately after the Merger. For purposes of this
representation letter, "control" shall mean the ownership of (i) stock
possessing at least 80% of the total combined voting power of all classes of
Newco stock entitled to vote and (ii) at least 80% of the total number of shares
of each other class of Newco stock.
17. The Exchange and Merger Agreement, the Registration
Statement and the other documents described in the Registration Statement
represent the entire understanding of Parent with respect to the Merger and
there are no other written or oral agreements regarding the Merger.
18. The Merger is being undertaken for purposes of enhancing
the business of Parent and for other good and valid business purposes of Parent
as described in the proxy statement/prospectus of Parent and the Company
included in the Registration Statement.
19. The undersigned is authorized to make all the
representations set forth herein on behalf of Parent.
The undersigned acknowledges that (i) the opinions to be
delivered pursuant to Sections 7.02(d) and 7.03(d) of the Exchange and Merger
Agreement will be based on the accuracy of the representations set forth herein
and on the
<PAGE>
6
accuracy of the representations and warranties and the satisfaction
of the covenants and obligations contained in the Exchange and Merger Agreement
and the various other documents related thereto, and (ii) such opinions will be
subject to certain limitations and qualifications including that they may not be
relied upon if any such representations or warranties are not accurate or if any
such covenants or obligations are not satisfied in all material respects.
The undersigned acknowledges that such opinions will not
address any tax consequences of the Merger or any action taken in connection
therewith except as expressly set forth in such opinions.
Very truly yours,
PECO ENERGY COMPANY,
by _____________________________
Name: Corbin A. McNeill, Jr.
Title: Chairman of the Board,
President, and Chief
Executive Officer
<PAGE>
EXHIBIT F
[Letterhead of NEWCO]
[Date]
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Jones, Day, Reavis & Pogue
77 West Walker Drive
Chicago, Illinois 60001
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to
Sections 7.02(d) and 7.03(d) of the Agreement and Plan of Exchange and Merger
(the "Exchange and Merger Agreement") dated as of September 22, 1999, among PECO
ENERGY COMPANY, a Pennsylvania corporation ("Parent"), PECO ENERGY CORPORATION,
a Pennsylvania corporation and a wholly owned subsidiary of Parent ("Newco") and
UNICOM CORPORATION, an Illinois corporation (the "Company"), and in connection
with the filing with the Securities and Exchange Commission (the "SEC") of the
registration statement on Form S-4 (the "Registration Statement"), which
includes the proxy statement/prospectus of Parent and the Company, each as
amended and supplemented through the date hereof, the undersigned certifies and
represents on behalf of Newco and as to Newco, after due inquiry and
investigation, as follows (any capitalized term used but not defined herein
having the meaning given to such term in the Exchange and Merger Agreement):
1. The Merger will be consummated in accordance with the
Exchange and Merger Agreement and as described in
<PAGE>
the Registration Statement. The facts relating to the Merger as described in the
Registration Statement and the documents referenced in the Registration
Statement are, insofar as such facts relate to Newco, true, correct and complete
in all material respects.
2. The formulae set forth in the Exchange and Merger Agreement
pursuant to which each issued and outstanding share of common stock, no par
value, of Parent (the "Parent Common Stock") will be converted into common
shares, no par value, of Newco (the "Newco Common Stock") or cash and each
issued and outstanding share of common stock, no par value, of the Company (the
"Company Common Stock") will be converted into Newco Common Stock or cash are
the result of arm's length bargaining. The aggregate fair market value of the
Newco Common Stock and/or cash to be received by holders of Parent Common Stock
and Company Common Stock in the Merger will be approximately equal to the fair
market value of the Parent Common Stock or the Company Common Stock, as the case
may be, surrendered in exchange therefor.
3. Cash payments to be made to holders of Company Common Stock
in lieu of fractional shares of Newco Common Stock that would otherwise be
issued to such holders in the Second Step Merger will be made for the purpose of
saving Newco the expense and inconvenience of issuing and transferring
fractional shares of Newco Common Stock, and do not represent separately
bargained for consideration. The total cash consideration that will be paid in
the Second Step Merger to holders of Company Common Stock in lieu of fractional
shares of Newco Common Stock is not expected to exceed one percent of the total
consideration that will be issued in the Second Step Merger to such holders in
exchange for their shares of Company Common Stock.
4. (i) Newco has no present plan or intention, following the
Merger, to reacquire, or to cause any corporation that is related to Newco to
acquire, directly or indirectly, any Newco Common Stock issued in the Merger,
except for repurchases of Newco Common Stock by Newco in connection with
[describe specific parameters of any repurchase program to be adopted by Newco].
No corporation that is related to Newco has a plan or intention to purchase any
of the Newco Common Stock issued in the Merger.
(ii) For purposes of this representation letter, a corporation
shall be treated as related to Newco if such corporation is related to Newco
within the meaning of Treasury Regulation Section 1.368-1(e)(3).
<PAGE>
3
5. Newco has not acquired, nor, except as a result of the
First Step Exchange will it acquire, nor has it owned in the past five years,
any Parent Common Stock. Newco has not acquired, nor, except as a result of the
Second Step Merger will it acquire, nor has it owned in the past five years, any
Company Common Stock.
6. Newco has no present plan or intention to make any
distributions after the Merger to holders of Newco Common Stock (other than
dividends made in the ordinary course of business).
7. At the Merger Effective Time, the value of the Newco Common
Stock to be issued to holders of Company Common Stock in the Second Step Merger
will represent at least 50% of the value of the total consideration to be issued
to such holders in the Second Step Merger in exchange for their shares of
Company Common Stock. Further, no liabilities of Parent or any of the holders of
Parent Common Stock and no liabilities of any of the holders of Company Common
Stock will be assumed by Newco, nor will any of the Parent Common Stock or
Company Common Stock acquired by Newco in connection with the Merger be subject
to any liabilities.
8. Parent, Newco, the Company and holders of Parent Common
Stock and Company Common Stock will each pay their respective expenses, if any,
incurred in connection with the Merger. Newco has not paid, directly or
indirectly, nor has it agreed to assume any expense or other liability, whether
fixed or contingent, incurred or to be incurred by Parent, any holder of Parent
Common Stock or any holder of Company Common Stock in connection with or as part
of the Merger or any related transactions.
9. Following the Second Step Merger, Newco or Newco's
"qualified group" of corporations (as defined in Treasury Regulation Section
1.368-1(d)(4)(ii)) will continue the "historic business" of the Company or use a
significant portion of the Company's "historic business assets" in a business
(as such terms are defined in Treasury Regulation Section 1.368-1(d)). Following
the First Step Exchange, Newco will cause Parent to continue its historic
business or to use a significant portion of its historic business assets in a
trade or business.
<PAGE>
4
10. Newco is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code, Section 351(e)(1) of the Code or
Treasury Regulation Section 1.351-1(c)(1)(ii).
11. Newco will not take any position on any Federal, state or
local income or franchise tax return, or take any other tax reporting position,
that is inconsistent (i) with the treatment of the Merger as transactions
described in Section 351 of the Code or (ii) with the treatment of the Second
Step Merger as a reorganization within the meaning of Section 368(a) of the
Code, in each case unless otherwise required by a "determination" (as defined in
Section 1313(a)(1) of the Code) or by applicable state or local tax law (and
then only to the extent required by such applicable state or local tax law).
12. None of the compensation received by any
stockholder-employee of Parent in respect of periods ending on or prior to the
Exchange Effective Time represents separate consideration for any of his or her
Parent Common Stock. None of the compensation received by any
stockholder-employee of the Company in respect of periods ending on or prior to
the Merger Effective Time represents separate consideration for any of his or
her Company Common Stock. None of the Newco Common Stock that will be received
by any stockholder-employee of Parent or the Company in the Merger represents
separately bargained for consideration which is allocable to any employment
agreement or arrangement. The compensation paid to any stockholder-employees
will be for services actually rendered and will be determined by bargaining at
arm's-length.
13. There is no intercorporate indebtedness existing between
(i) Newco and Parent or (ii) Newco (or any of its subsidiaries) and the Company
(or any of its subsidiaries).
14. Newco is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
15. To the best knowledge of the management of Newco and
taking into account any issuance of additional shares of Newco Common Stock, any
issuance of Newco Common
<PAGE>
5
Stock for services, the exercise of any Newco stock rights, options, warrants or
subscriptions, any public offerings of Newco stock, and the sale, exchange,
transfer by gift or other disposition of any Newco Common Stock received in the
Merger, the holders of Parent Common Stock and Company Common Stock will
collectively be in "control" of Newco immediately after the Merger. For purposes
of this representation letter, "control" shall mean the ownership of (i) stock
possessing at least 80% of the total combined voting power of all classes of
Newco stock entitled to vote and (ii) at least 80% of the total number of shares
of each other class of Newco stock.
16. Newco has no present plan or intention to, or to cause any
of its affiliates to, (i) liquidate Newco or Parent, (ii) merge (other than in
connection with the Second Step Merger), liquidate or consolidate Newco or
Parent with or into any other entity (including, without limitation, any
affiliate), (iii) sell, transfer, distribute or otherwise dispose of the Parent
Common Stock or interests in any of its material affiliates or (iv) sell,
transfer, distribute or otherwise dispose of any of the material assets of
Parent, the Company or their affiliates acquired in the Merger (other than in
the ordinary course of business or transfers described in Section 368(a)(2)(C)
of the Code or Treasury Regulation Section 1.368-2(k) that also qualify as
transactions described in Section 351 of the Code).
17. The Newco Common Stock issued in the Merger will
constitute all of Newco's outstanding stock immediately after the Merger. Except
as specifically set forth in the Exchange and Merger Agreement, Newco will not
issue any Newco Common Stock in connection with the Merger in consideration for
services rendered to or for the benefit of Newco or any of its affiliates, or in
consideration for the transfer of any property other than Parent Common Stock or
Company assets.
18. The Exchange and Merger Agreement, the Registration
Statement and the other documents described in the Registration Statement
represent the entire understanding of Newco with respect to the Merger and there
are no other written or oral agreements regarding the Merger.
19. The Merger is being undertaken for purposes of
<PAGE>
6
enhancing the business of Newco and for other good and valid business purposes
of Newco as described in the proxy statement/prospectus of Parent and the
Company included in the Registration Statement.
20. Newco is not a personal service corporation within the
meaning of Section 269A of the Code.
21. The undersigned is authorized to make all the
representations set forth herein on behalf of Newco.
The undersigned acknowledges that (i) the opinions to be
delivered pursuant to Sections 7.02(d) and 7.03(d) of the Exchange and Merger
Agreement will be based on the accuracy of the representations set forth herein
and on the accuracy of the representations and warranties and the satisfaction
of the covenants and obligations contained in the Exchange and Merger Agreement
and the various other documents related thereto, and (ii) such opinions will be
subject to certain limitations and qualifications including that they may not be
relied upon if any such representations or warranties are not accurate or if any
such covenants or obligations are not satisfied in all material respects.
The undersigned acknowledges that such opinions will not
address any tax consequences of the Merger or any action taken in connection
therewith except as expressly set forth in such opinions.
Very truly yours,
PECO ENERGY CORPORATION,
by
Name: Corbin A. McNeill
Title: Chairman of the Board,
President, and Chief
Executive Officer
<PAGE>
EXHIBIT G
[Letterhead of the Company]
[Date]
Jones, Day, Reavis & Pogue
77 West Walker Drive
Chicago, Illinois 60001
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to
Sections 7.02(d) and 7.03(d) of the Agreement and Plan of Exchange and Merger
(the "Exchange and Merger Agreement") dated as of September 22, 1999, among PECO
ENERGY COMPANY, a Pennsylvania corporation ("Parent"), PECO ENERGY CORPORATION,
a Pennsylvania corporation and a wholly owned subsidiary of Parent ("Newco") and
UNICOM CORPORATION, an Illinois corporation (the "Company"), and in connection
with the filing with the Securities and Exchange Commission (the "SEC") of the
registration statement on Form S-4 (the "Registration Statement"), which
includes the proxy statement/prospectus of Parent and the Company, each as
amended and supplemented through the date hereof, the undersigned certifies and
represents on behalf of the Company and as to the Company, after due inquiry and
investigation, as follows (any capitalized term used but not defined herein
having the meaning given to such term in the Exchange and Merger Agreement):
1. The Merger will be consummated in accordance with the
Exchange and Merger Agreement and as described in the Registration Statement.
The facts relating to the Merger
<PAGE>
as described in the Registration Statement and the documents referenced in the
Registration Statement are, insofar as such facts relate to the Company, true,
correct and complete in all material respects.
2. The formula set forth in the Exchange and Merger Agreement
pursuant to which each issued and outstanding share of common stock, no par
value, of the Company (the "Company Common Stock") will be converted into common
shares, no par value, of Newco (the "Newco Common Stock") or cash is the result
of arm's length bargaining. The aggregate fair market value of the Newco Common
Stock and/or cash to be received by each holder of Company Common Stock in the
Second Step Merger will be approximately equal to the fair market value of the
Company Common Stock surrendered in exchange therefor.
3. Cash payments to be made to holders of Company Common Stock
in lieu of fractional shares of Newco Common Stock that would otherwise be
issued to such holders in the Second Step Merger will be made for the purpose of
saving Newco the expense and inconvenience of issuing and transferring
fractional shares of Newco Common Stock, and do not represent separately
bargained for consideration. The total cash consideration that will be paid in
the Second Step Merger to holders of Company Common Stock in lieu of fractional
shares of Newco Common Stock is not expected to exceed one percent of the total
consideration that will be issued in the Second Step Merger to such holders in
exchange for their shares of Company Common Stock.
4. (i) Except to the extent specifically contemplated under
the Exchange and Merger Agreement, neither the Company nor any corporation
related to the Company has acquired or has any present plan or intention to
acquire, directly or indirectly, any Company Common Stock in contemplation of
the Merger, or otherwise as part of a plan of which the Merger is a part.
(ii) For purposes of this representation letter, a
corporation shall be treated as related to the Company if such corporation is
related to the Company within the meaning of Treasury Regulation Section
1.368-1(e)(3) (determined without regard to Treasury Regulation Section
1.368-1(e)(3)(i)(A)).
5. The Company has not made and does not have any present plan
or intention to make any distributions (other than dividends made in the
ordinary course of business) to holders of Company Common Stock prior to, in
contemplation of, or otherwise in connection with, the Merger.
<PAGE>
3
6. Newco, the Company and holders of Company Common Stock will
each pay their respective expenses, if any, incurred in connection with the
Second Step Merger. The Company has not agreed to assume, nor will it directly
or indirectly assume, any expense or other liability, whether fixed or
contingent, of any holder of Company Common Stock. Further, no liabilities of
any of the holders of Company Common Stock will be assumed by Newco, nor will
any of the Company Common Stock acquired by Newco in connection with the Merger
be subject to any liabilities.
7. Any liabilities of the Company that will be assumed by
Newco pursuant to the Merger, and any liabilities to which the assets of the
Company that will be transferred to Newco pursuant to the Merger are subject,
were incurred in the ordinary course of business and are associated with the
assets of the Company.
8. At the Merger Effective Time, the value of the Newco Common
Stock issued to the holders of Company Common Stock in the Second Step Merger
will represent at least 50% of the value of the total consideration issued to
such holders in the Second Step Merger in exchange for their shares of Company
Common Stock.
9. The Company is not an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code of 1986, as
amended (the "Code"), Section 351(e)(1) of the Code or Treasury Regulation
Section 1.351-1(c)(1)(ii).
10. The Company will not take, and to the best knowledge of
the management of the Company there is no present plan or intention by holders
of Company Common Stock to take, any position on any Federal, state or local
income or franchise tax return, or to take any other tax reporting position,
that is inconsistent (i) with the treatment of the Merger as transactions
described in Section 351 of the Code or (ii) with the treatment of the Second
Step Merger as a reorganization within the meaning of Section 368(a) of the
Code, in each case unless otherwise required by a "determination" (as defined in
Section 1313(a)(1) of the
<PAGE>
4
Code) or by applicable state or local tax law (and then only to the extent
required by such applicable state or local tax law).
11. None of the compensation received by any
stockholder-employee of the Company in respect of periods ending on or prior to
the Merger Effective Time represents separate consideration for any of his or
her Company Common Stock. None of the Newco Common Stock that will be received
by any stockholder-employee of the Company in the Merger represents separately
bargained for consideration which is allocable to any employment agreement or
arrangement. The compensation paid to any stockholder-employees will be for
services actually rendered and will be determined by bargaining at arm's-length.
12. There is no intercorporate indebtedness existing between
Newco (or any of its subsidiaries, including Parent) and the Company (or any of
its subsidiaries).
13. The Company is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
14. No assets of the Company have been sold, transferred or
otherwise disposed of which would prevent Newco or Newco's "qualified group" of
corporations (as defined in Treasury Regulation Section 1.368-1(d)(4)(ii)) from
continuing the "historic business" of the Company or from using a significant
portion of the "historic business assets" of the Company in a business following
the Merger (as such terms are defined in Treasury Regulation Section
1.368-1(d)).
15. At the Merger Effective Time, the fair market value of the
assets of the Company transferred to Newco pursuant to the Second Step Merger
will exceed the sum of its liabilities assumed by Newco pursuant to the Second
Step Merger, plus the amount of liabilities, if any, to which such assets are
subject.
16. To the best knowledge of the management of the Company,
there is no present plan or intention on the part of
<PAGE>
5
the holders of Company Common Stock to sell, exchange or otherwise dispose of,
or to enter into any contract or other arrangement with respect to, any interest
in the shares of Newco Common Stock received in the Second Step Merger in
exchange for such Company Common Stock such that the former holders of Company
Common Stock and the former holders of Parent Common Stock, in the aggregate,
would not own (i) Newco Common Stock having at least 80% of the total combined
voting power of all classes of Newco stock entitled to vote and (ii) at least
80% of the total number of shares of each other class of Newco Stock.
17. The Company will not retain any rights in the Company
assets transferred to Newco pursuant to the Second Step Merger.
18. None of the stock of any Company Subsidiary being
transferred in the Second Step Merger is Section 306 stock within the meaning of
Section 306(c) of the Code.
19. Neither the Company nor any Company Subsidiary has been a
"distributing corporation" or a "controlled corporation" in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (i) at any
time during the two-year period prior to the date of the Exchange and Merger
Agreement, (ii) at any time during the period commencing on the date of the
Exchange and Merger Agreement and ending on the date hereof or (iii) which could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with and
including the Merger.
20. To the best knowledge of the management of the Company and
taking into account any issuance of additional shares of Newco Common Stock, any
issuance of Newco Common Stock for services, the exercise of any Newco stock
rights, options, warrants or subscriptions, any public offerings of Newco stock,
and the sale, exchange, transfer by gift or other disposition of any Newco
Common Stock received by holders of Company Common Stock in the Merger, the
holders of Parent Common Stock and Company Common Stock will collectively be in
"control" of Newco immediately after the Merger. For purposes of this
representation letter,
<PAGE>
6
"control" shall mean the ownership of (i) stock possessing at least 80% of the
total combined voting power of all classes of Newco stock entitled to vote and
(ii) at least 80% of the total number of shares of each other class of Newco
stock.
21. The Merger is being undertaken for purposes of enhancing
the business of the Company and for other good and valid business purposes of
the Company as described in the proxy statement/prospectus of Parent and the
Company included in the Registration Statement.
22. The Exchange and Merger Agreement, the Registration
Statement and the other documents described in the Registration Statement
represent the entire understanding of the Company with respect to the Merger and
there are no other written or oral agreements regarding the Merger.
23. The undersigned is authorized to make all the
representations set forth herein on behalf of the Company.
The undersigned acknowledges that (i) the opinions to be
delivered pursuant to Sections 7.02(d) and 7.03(d) of the Exchange and Merger
Agreement will be based on the accuracy of the representations set forth herein
and on the accuracy of the representations and warranties and the satisfaction
of the covenants and obligations contained in the Exchange and Merger Agreement
and the various other documents related thereto, and (ii) such opinions will be
subject to certain limitations and qualifications including that they may not be
relied upon if any such representations or warranties are not accurate or if any
of such covenants or obligations are not satisfied in all material respects.
<PAGE>
7
The undersigned acknowledges that such opinions will not
address any tax consequences of the Merger or any action taken in connection
therewith except as expressly set forth in such opinions.
Very truly yours,
UNICOM CORPORATION
by __________________________
Name: John W. Rowe
Title: Chairman of the Board,
President, and Chief
Executive Officer
