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SECOND AMENDED AND RESTATED AGREEMENT
AND PLAN OF EXCHANGE AND MERGER
Dated as of September 22, 1999,
as Amended and Restated as of October 10, 2000,
Among
PECO ENERGY COMPANY,
EXELON CORPORATION
And
UNICOM CORPORATION
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SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF
EXCHANGE AND MERGER dated as of September 22, 1999, as
amended and restated as of October 10, 2000 (this
"Agreement"), among PECO ENERGY COMPANY, a Pennsylvania
corporation ("Parent"), EXELON CORPORATION, a
Pennsylvania corporation and a wholly owned subsidiary
of Parent ("Newco"), and UNICOM CORPORATION, an
Illinois corporation (the "Company").
WHEREAS Parent, Newco and the Company entered into an
Agreement and Plan of Exchange and Merger dated as of September 22, 1999 (the
"Original Merger Agreement") and an amendment and restatement of the Original
Merger Agreement dated as of January 7, 2000, and they now desire to amend and
restate the Original Merger Agreement as previously amended and restated (it
being understood that all references herein to this "Agreement" refer to the
Original Merger Agreement as previously amended and restated and as amended and
restated hereby and that all references herein to the "date hereof" or the "date
of this Agreement" refer to September 22, 1999);
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"), 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 and 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
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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.
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
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forth in Section 7.02 or 7.03 has not been satisfied (or, to the extent
permitted by Applicable Law, waived by the party or parties entitled to the
benefits thereof), as soon as practicable after all the conditions set forth in
Article VII have been satisfied (or, to the extent permitted by Applicable Law,
waived by the parties entitled to the benefits thereof), or at such other place,
time and date as shall be agreed in writing between Parent and the Company. The
date on which the Closing occurs is referred to in this Agreement as the
"Closing Date".
SECTION 1.03. Merger Effective Time. (a) Prior to the Closing,
Parent shall prepare, and on the Closing Date Parent shall file with the
Department of State of the Commonwealth of Pennsylvania, articles of exchange or
other appropriate documents (in any such case, the "Articles of Exchange")
executed in accordance with the relevant provisions of the PBCL and shall make
all other filings or recordings required under the PBCL to effect the First Step
Exchange. The First Step Exchange shall become effective at such time as the
Articles of Exchange are duly filed with such Department of State, or at such
other time as Newco and Parent shall agree and specify in the Articles of
Exchange (the time the First Step Exchange becomes effective being the "Exchange
Effective Time").
(b) Prior to the Closing and after the Exchange Effective
Time, Newco and the Company shall prepare, and on the Closing Date and after the
Exchange Effective Time Newco and the Company shall (i) file with the Department
of State of the Commonwealth of Pennsylvania, the articles of merger or other
appropriate documents (in any such case, the "Pennsylvania Articles of Merger")
executed in accordance with the relevant provisions of the PBCL and shall make
all other filings or recordings required under the PBCL to effect the Second
Step Merger and (ii) thereafter file with the Secretary of State of the State of
Illinois, articles of merger or other appropriate documents (in any such case,
the "Illinois Articles of Merger") executed in accordance with the relevant
provisions of the IBCA and shall make all other filings or recordings required
under the IBCA to effect the Second Step Merger. The Second Step Merger shall
become effective at such time as the Illinois Articles of Merger are duly filed
as provided by Applicable Law and the Secretary of State of the State of
Illinois has issued a certificate of merger in respect of the Second Step
Merger, or at such other time as Newco and the Company shall agree and specify
as provided by Applicable Law (the time the Second Step Merger becomes effective
being the "Merger Effective Time").
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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 "Exelon Corporation".
(b) At the Merger Effective Time, the By-laws of Newco (the
"Newco By-laws") shall, until thereafter changed or amended as provided therein
or by Applicable Law and as Parent and the Company shall have agreed prior to
the Merger Effective Time, be the By-laws of the Surviving Corporation, and
shall in any case be amended by inserting the provisions set forth in Exhibit A
as Article X thereof.
SECTION 1.06. Newco Board of Directors. (a) The directors of
Parent immediately prior to the Exchange Effective Time shall be the directors
of Newco as of the Exchange Effective Time, until the earlier of the Merger
Effective Time or their resignation or removal or the due election and
qualification of their respective successors, as the case may be.
(b) In accordance with the Newco By-laws, as amended pursuant
to Section 1.05(b), as of the Merger Effective Time, the Board of Directors of
the Surviving Corporation (the "Newco Board") shall consist of 16 members, eight
of whom shall be serving as members of the Board of Directors of Parent
immediately prior to the Merger Effective Time who are recommended by the Board
of Directors of Parent immediately prior to the Merger Effective Time, and eight
of whom of whom shall be members of the Board of Directors of the Company
immediately prior to the Merger Effective Time who are recommended by the Board
of Directors of the Company immediately prior to the Merger Effective Time.
SECTION 1.07. Newco Senior Officers. As of the Merger
Effective Time the senior officers of Newco shall be as set forth in Exhibit B
and shall hold office until their respective successors are duly elected and
qualified, or
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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 (iii) offices in Chicago, Illinois and
southeastern Pennsylvania as the headquarters of Commonwealth Edison Company, an
Illinois corporation ("ComEd"), and Parent, respectively. The chief nuclear
officer of the Surviving Corporation shall maintain offices in both Chicago,
Illinois and southeastern Pennsylvania.
(b) Charities. The parties agree that provision of charitable
contribution and community support in the respective service areas of Parent and
the Company and their respective subsidiaries serves a number of important
goals. During the two-year period immediately following the Merger Effective
Time, the Surviving Corporation shall provide, directly or indirectly,
charitable contributions and traditional local community support within the
respective service areas of Parent and the Company and each of their
subsidiaries that are utilities at levels substantially comparable to and no
less than the levels of charitable contributions and community support provided
by Parent and the Company and such subsidiaries within their service areas
within the two-year period immediately prior to the Merger Effective Time.
ARTICLE II
Effect on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock. (a) First Step
Exchange. At the Exchange Effective Time, by virtue of the First Step Exchange
and without any action on the part of the holder of any shares of Parent Common
Stock or Newco Common Stock:
(i) Cancelation of Treasury Stock. Each share of Parent Common
Stock that is owned by Parent shall automatically be canceled and
retired and shall cease to exist, and no Newco Common Stock or other
consideration shall be delivered or deliverable in exchange therefor.
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(ii) Exchange of Parent Common Stock.
(A) Subject to Section 2.01(a)(i), each issued share
of Parent Common Stock shall be exchanged for one fully paid
and nonassessable share of Newco Common Stock (the "Parent
Exchange Ratio").
(B) The 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 certificate representing any
such shares of Parent Common Stock shall thereafter represent
a like number of shares of Newco Common Stock and,
notwithstanding anything noted thereon, no holder shall have
any rights pertaining to shares of Parent Common Stock except
as specifically set forth in Section 2.02(d)(i) with respect
to unpaid dividends and other distributions.
(iii) 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.
(b) Second Step Merger. At the Merger Effective Time, by
virtue of the Second Step Merger and without any action on the part of the
holder of any shares of Company Common Stock or Newco Common Stock:
(i) Cancelation of Treasury Stock and Newco- Owned Stock. Each
share of Company Common Stock that is owned by the Company or Newco
shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and no Newco Common Stock or other
consideration shall be delivered or deliverable in exchange therefor.
(ii) Conversion of Company Common Stock. (A) Subject to
Sections 2.01(b)(i) and 2.02(e), each issued share of Company Common
Stock shall be converted into the right to receive (1) $3.00 in cash
(the "Company Cash Consideration") and (2) 0.875 (the "Company
Conversion Number") fully paid and
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nonassessable shares of Newco Common Stock (the "Company
Exchange Ratio").
(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 to the
extent 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 and as specifically set forth in Section
2.02(d)(ii) with respect to unpaid dividends and other
distributions.
(iii) 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.
(iv) Dissent Rights. Notwithstanding anything in this
Agreement to the contrary, shares ("Company Dissent Shares") of Company
Common Stock that are outstanding immediately prior to the Merger
Effective Time and that are held by any person who is entitled to
demand and properly demands payment of the fair value of such Company
Dissent Shares pursuant to, and who complies in all respects with,
Sections 11.65 and 11.70 of the IBCA ("Sections 11.65 and 11.70") shall
be 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 Company Common Stock, for exchange in accordance with this Article II,
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through the Exchange Agent, cash equal to the total aggregate Company Cash
Consideration and certificates representing the shares of Newco Common Stock
issuable pursuant to Section 2.01 in exchange for outstanding Company
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 total
aggregate 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 to the extent provided in Section 2.02(e).
(b) Exchange Procedures. 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 Merger
Effective Time represented outstanding shares of Company Common Stock that were
converted into the right to receive Merger Consideration (the "Company
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 Company Certificates shall pass, only upon delivery of the
Company Certificates to the Exchange Agent and shall be in such form and have
such other provisions as the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Company Certificates in
exchange for Merger Consideration. Upon surrender of a Company 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 Company Certificate shall be entitled to
receive in exchange therefor Company Cash Consideration and a certificate
representing that number of whole shares of Newco Common Stock (together with
cash in lieu of fractional shares) that such holder has the right to receive
pursuant to the provisions of this Article II, and the Company 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, 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 Company Common Stock that is not registered in the
transfer records of the Company, payment may be made and a certificate
representing the appropriate number of shares of
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Newco Common Stock may be issued to a person other than the person in whose name
the Company Certificate so surrendered is registered, if such Company
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of such payment or the issuance of shares of Newco
Common Stock to a person other than the registered holder of such Company
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,
until surrendered as contemplated by this Section 2.02, each Company Certificate
shall be deemed at any time after the Merger Effective Time to represent only
the right to receive upon such surrender Merger Consideration, as contemplated
by this Section 2.02. No interest shall be paid or accrue on any cash payable,
whether in respect of Merger Consideration, dividends or otherwise, upon
surrender of any Company Certificate. 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 for the purposes of Section 2.02(e).
Notwithstanding anything to the contrary contained herein, any shares of Newco
Common Stock may be issued in book entry form and, for the purposes of this
Agreement, such issuance shall have the same effect as the issuance of a
certificate representing such shares.
(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 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 Company Certificate, there shall
be paid to the holder of the certificate representing whole shares of Newco
Common Stock issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of any cash payable in lieu of a fractional share of
Newco Common Stock to which such holder is entitled pursuant to Section 2.02(e)
and the amount of dividends or other distributions with a record date after the
Merger Effective Time theretofore paid with respect to such whole shares of
Newco Common Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Merger Effective
Time but prior to such surrender and a payment date subsequent to such surrender
payable with respect to such whole shares of Newco Common Stock.
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(d) No Further Ownership Rights in Parent Common Stock or
Company Common Stock. (i) All certificates which immediately prior to the
Exchange Effective Time represented outstanding shares of Parent Common Stock
shall thereafter represent a like number of shares of Newco Common Stock and,
notwithstanding anything noted thereon, no holder thereof shall have any rights
pertaining to shares of Parent Common Stock, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Exchange Effective Time that may have been
declared or made by the Parent on such shares of Parent Common Stock, in
accordance with the terms of this Agreement or prior to the date of this
Agreement and which remain unpaid at the Exchange Effective Time.
(ii) The Merger Consideration issued (and paid) in accordance
with the terms of this Article II upon conversion and exchange of any shares of
Company Common Stock, shall be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to such shares of 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 Company on such shares of Company Common Stock, 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.
(iii) 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 Company Common
Stock, 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) Except as otherwise agreed to by
the Company and Parent as provided in Section 2.02(e)(v), 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
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2.02(e), all fractional shares to which a single record holder would be entitled
shall be aggregated and calculations shall be rounded to three decimal places.
(ii) As promptly as practicable following the Merger Effective Time,
the Exchange Agent shall determine the excess of (A) the number of shares of
Newco Common Stock delivered to the Exchange Agent by Newco pursuant to Section
2.02(a) over (B) the aggregate number of whole shares of Newco Common Stock to
be issued to holders of Company Common Stock pursuant to Section 2.02(b) (such
excess being herein called the "Excess Shares"). As soon after the Merger
Effective Time as practicable, the Exchange Agent, as agent for the holders of
Company Common Stock, shall sell the Excess Shares at then prevailing prices on
the New York Stock Exchange (the "NYSE"), all in the manner provided in Section
2.02(e)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent
shall be executed on the NYSE through one or more member firms of the NYSE and
shall be executed in round lots to the extent practicable. The proceeds from
such sale or sales available for distribution to the holders of Company Common
Stock shall be reduced by transfer taxes in connection with such sale or sales
of the Excess Shares. Until the net proceeds of such sale or sales have been
distributed to the holders of Company Common Stock entitled thereto, the
Exchange Agent shall hold such proceeds in trust for such holders of Company
Common Stock (the "Common Shares Trust"). The Exchange Agent shall determine the
portion of the Common Shares Trust to which each holder of a Company 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 determina tion 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.
(v) Notwithstanding anything herein to the contrary, if the
Company and Parent so agree prior to the
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Closing, Newco may establish a common stock direct share registration program
pursuant to which shareholders would receive a book entry credit for fractional
shares of Newco Common Stock in lieu of cash as otherwise provided in this
Section 2.02(e). If the Company and Parent agree to have Newco establish such a
program, any reference herein to fractional shares shall refer to such book
entry fractional shares and no cash will be issued for such shares except as may
be provided by such program. In no event will Newco issue certificates or script
representing fractional shares.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund that remains undistributed to the holders of Company Common Stock for six
months after the Merger Effective Time shall be delivered to Newco, upon demand,
and any holder of Company Common Stock who has not theretofore complied with
this Article II shall thereafter look only to Newco for payment of its claim for
Merger Consideration, 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 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 any dividends or distributions with respect to Newco Common
Stock as contemplated by Section 2.02(c)(i) in respect of such Company
Certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 3.05)), any such shares, cash, divi
dends 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
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be required to be deducted and withheld with respect to the making of such
payment under the Code, or under any provision of state, local or foreign tax
law. To the extent that amounts are so withheld and paid over to the appropriate
taxing authority, Newco will be treated as though it withheld an appropriate
amount of the type of consideration otherwise payable pursuant to this Agreement
to any holder of Parent Common Stock or Company Common Stock, sold such
consideration for an amount of cash equal to the fair market value of such
consideration at the time of such deemed sale and paid such cash proceeds to the
appropriate taxing authority.
Section 2.03. Certain Adjustments. 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
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franchises, licenses, permits, authorizations and approvals the lack of which,
individually or in the aggregate, has not had and could not reasonably be
expected to have a Material Adverse Effect on the Company (a "Company Material
Adverse Effect"). The Company and each Company Subsidiary is duly qualified to
do business in each jurisdiction where the nature of its business or their
ownership or leasing of its properties make such qualification necessary, other
than such qualifications the lack of which, individually or in the aggregate,
has not had and could not reasonably be expected to have a Company Material
Adverse Effect. The Company has made available to Parent true and complete
copies of the articles of incorporation of the Company, as amended to the date
of this Agreement (as so amended, the "Company Charter"), and the By-laws of the
Company, as amended to the date of this Agreement (as so amended, the "Company
By-laws"), and the comparable charter or organizational documents of each
Company Subsidiary, in each case as amended through the date of this Agreement.
SECTION 3.02. Company Subsidiaries; Equity Interests. (a) The
letter, dated as of the date of this Agreement, from the Company to Parent and
Newco (the "Company Disclosure Letter") lists each Company Subsidiary and its
jurisdiction of organization and specifies each of the Company Subsidiaries that
is (i) a "public-utility company", a "holding company", a "subsidiary company",
an "affiliate" of any public-utility company, an "exempt wholesale generator" or
a "foreign utility company" within the meaning of Section 2(a)(5), 2(a)(7),
2(a)(8), 2(a)(11), 32(a)(1) or 33(a)(3) of the Public Utility Holding Company
Act of 1935, as amended ("PUHCA"), respectively, (ii) a "public utility" within
the meaning of Section 201(e) of the Federal Power Act (the "Power Act") or
(iii) a "qualifying facility" within the meaning of the Public Utility
Regulatory Policies Act of 1978, as amended ("PURPA"), or that owns such a
qualifying facility. All the outstanding shares of capital stock of each Company
Subsidiary have been validly issued and are fully paid and nonassessable and,
except as set forth in the Company Disclosure Letter, are owned by the Company,
by another Company Subsidiary or by the Company and another Company Subsidiary,
free and clear of all pledges, liens, charges, mortgages, encumbrances and
security interests of any kind or nature whatsoever (collectively, "Liens").
(b) Except for its interests in the Company Subsidiaries and
except for the ownership interests set forth in the Company Disclosure Letter or
interests acquired after the date of this Agreement without violating any
covenant of this Agreement, the Company does not own,
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15
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 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
<PAGE>
16
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.
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,
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17
(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, 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
<PAGE>
18
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 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
<PAGE>
19
in Section 3.17), (ix) such filings as may be required in connection with the
taxes described in Section 6.09 and (x) such other items as are set forth in the
Company Disclosure Letter (collectively, whether or not legally required to be
obtained, the "Company Required Statutory Approvals").
(c) The Company and the Company Board have taken all action
necessary to (i) render the Company Rights inapplicable to this Agreement, the
Merger and the other Transactions and (ii) ensure that (A) neither Parent nor
any of its affiliates or associates is or will become an "Acquiring Person" (as
defined in the Company Rights Agreement) by reason of this Agreement, the Merger
or any other Transaction, (B) a "Distribution Date" (as defined in 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
<PAGE>
20
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments). Except as set forth in the Filed Company SEC Documents (as
defined in Section 3.08) or the Company Disclosure Letter or incurred after the
date hereof in the usual, regular and ordinary course of business in
substantially the same manner as previously conducted and not prohibited by this
Agreement, neither the Company nor any Company Subsidiary has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on a consolidated balance sheet of the Company
and its consolidated subsidiaries or in the notes thereto and that, individually
or in the aggregate, could reasonably be expected to have a Company Material
Adverse Effect.
SECTION 3.07. Information Supplied. None of the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 to be filed with the SEC
by Newco in connection with the Share Issuance (the "Form S- 4") will, at the
time the Form S-4 is filed with the SEC, at any time it is amended or
supplemented or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (ii) the Proxy Statement will, at the date it is first mailed
to the Company's shareholders or Parent's shareholders or at the time of the
Company Shareholders Meeting (as defined in Section 6.01) or the Parent
Shareholders Meeting (as defined in Section 6.01), contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, except that no
representation is made by the Company with respect to statements made or
incorporated by reference therein based on information supplied by or on behalf
of Parent or Newco for inclusion or incorporation by reference in the Proxy
Statement.
SECTION 3.08. Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Documents filed and publicly available prior to the
date of this Agreement (the "Filed Company SEC Documents") or in the Company
Disclosure Letter:
(a) since December 31, 1998, there has not been any event,
change, effect or development that, individually
<PAGE>
21
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 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
<PAGE>
22
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 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
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23
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
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
<PAGE>
24
Agreement. With respect to each Company Benefit Plan (other than a multiemployer
plan within the meaning of Section 4001(a)(3) of ERISA) and Company Employment
Arrangement, the Company has delivered to Parent true, complete and correct
copies of (i) each such Company Benefit Plan or Company Employment Arrangement
(or, in the case of any unwritten plan or arrangement, a description thereof),
(ii) the most recent annual report on the applicable Form 5500 series filed with
the Internal Revenue Service (if any such report was required), including all
schedules and attachments thereto, (iii) the most recent summary plan
description (if a summary plan description is required) and all summaries of
material modifications thereto, (iv) each trust agreement, group annuity
contract or other funding vehicle relating to any such Company Benefit Plan or
Company Employment Arrangement, (v) the most recent actuarial report or
valuation relating thereto and (vi) the most recent determination letters issued
by the Internal Revenue Service with respect to Company Benefit Plans that are
intended to be qualified and exempt from Federal income taxes under Sections
401(a) and 501(a), respectively, of the Code ("Qualified Plans") and letters of
recognition of exemption with respect to any Company Benefit Plan or related
trust that is intended to meet the requirements of Section 501(c)(9) of the
Code.
(b) With respect to the Company Benefit Plans and Company
Employment Arrangements, individually and in the aggregate, no event has
occurred and, to the knowledge of the Company, there exists no condition or set
of circumstances, in connection with which the Company or any Company Subsidiary
could be subject to any liability that has had or could reasonably be expected
to have a Company Material Adverse Effect (except liability for benefits claims
and funding obligations payable in the ordinary course) under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), the Code or any
other applicable law. For purposes of this Section 3.11(b), the term "Company
Benefit Plan" shall also include any employee benefit plan within the meaning of
Section 3(3) of ERISA that, within the last six years, was sponsored or
maintained by any entity which would be treated under Section 414 of the Code as
a single employer with the Company or any Company Subsidiary or to which any
such entity contributed or was obligated to contribute.
(c) Each Company Benefit Plan and each Company Employment
Arrangement has been administered in accordance 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,
<PAGE>
25
individually or in the aggregate, a Company Material Adverse Effect. The
Company, all Company Subsidiaries and all the Company Benefit Plans and Company
Employment Arrangements are in compliance with the applicable provisions of
ERISA, the Code and all other applicable laws and the rules and regulations
thereunder and the terms of all applicable collective bargaining agreements,
except for any failures to be in such compliance as have not had and could not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. Except as disclosed in the Company Disclosure Letter,
there are no pending or, to the knowledge of the Company, threatened or
anticipated claims under or with respect to any Company Benefit Plan or Company
Employment Arrangement by or on behalf of any current or former employee,
officer or director, or dependent or beneficiary thereof, or otherwise (other
than routine claims for benefits).
(d) Except as disclosed in the Company Disclosure Letter, (i)
no current or former employee, officer or director of the Company or any Company
Subsidiary will be entitled to any additional rights or benefits or any
acceleration of the time of payment or vesting of any benefits under any Company
Benefit Plan or Company Employment Arrangement, and no trustee under any "rabbi
trust", or similar arrangement maintained in connection with any Company Benefit
Plan or Company Employment Arrangement will be entitled to any payment, as a
result (either alone or upon the occurrence of any additional or further acts or
events) of the execution of this Agreement or the consummation, announcement or
other actions relating to the Transactions and (ii) no amount payable to any
current or former employee, officer or director of the Company or any Company
Subsidiary will fail to be deductible by reason of Section 280G of the Code.
(e) Each Company Benefit Plan intended to be a Qualified Plan
has received a favorable determination letter from the Internal Revenue Service
that it is so qualified and nothing has occurred since the date of such letter
that could reasonably be expected to affect the qualified status of such Company
Benefit Plan.
(f) The aggregate accumulated benefit obligations of each
Company Benefit Plan subject to Title IV of ERISA (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).
<PAGE>
26
(g) All contributions and other payments required to have been
made for any completed historical period by the Company or any Company
Subsidiary to any Company Benefit Plan or Company Employment Arrangement (or to
any person pursuant to the terms thereof) have been timely made or paid in full,
or, to the extent not required to be made or paid for such period, have been
reflected in the consolidated financial statements of the Company.
(h) Except as disclosed in the Company Disclosure Letter, no
Company Benefit Plan is a multiemployer plan within the meaning of Section
4001(a)(3) of ERISA, and none of the Company or any Company Subsidiary has, at
any time during the last six years, contributed to or been obligated to
contribute to any such multiemployer plan. For purposes of the representations
and warranties made in the last sentence of Section 3.11(c) and in Sections
3.11(e) and (f), the term "Company Benefit Plan" shall be deemed to exclude any
such multiemployer plan.
SECTION 3.12. Litigation. Except as disclosed in the Filed
Company SEC Documents or in the Company Disclosure Letter, there is no suit,
action or proceeding pending or, to the knowledge of the Company, threatened
against the Company or any Company Subsidiary that, individually or in the
aggregate, has had or could reasonably be expected to have a Company Material
Adverse Effect, nor is there any Judgment outstanding against the Company or any
Company Subsidiary that has had or could reasonably be expected to have a
Company Material Adverse Effect.
SECTION 3.13. Compliance with Applicable Laws; Permits. (a)
Except as disclosed in the Filed Company SEC Documents or in the Company
Disclosure Letter, the Company and the Company Subsidiaries are in compliance
with the terms of all Company Permits (as defined in Section 3.13(b)) and all
Applicable Laws, except for instances of noncompliance that, individually and in
the aggregate, have not had and could not reasonably be expected to have a
Company Material Adverse Effect. This Section 3.13 does not relate to matters
with respect to Taxes, which are the subject of Section 3.09, Environmental
Laws, which are the subject of Section 3.17, benefits plans, which are the
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
<PAGE>
27
Permits") all properties, rights and assets necessary for the conduct of their
business and operations as currently conducted, except where the failure to own
or have sufficient rights to such properties, rights and assets, individually or
in the aggregate, have not had and could not reasonably be expected to have a
Company Material Adverse Effect. Except as provided in the Illinois Electric
Customer Choice and Rate Relief Law of 1997, to the knowledge of the Company, no
other private corporation can commence electric public utility operations in any
part of the respective territories now served by the Company or any Company
Subsidiary, without obtaining a certificate of public convenience and necessity
from the applicable state utility commission.
SECTION 3.14. Brokers; Schedule of Fees and Expenses. No
broker, investment banker, financial advisor or other person, other than
Wasserstein Perella & Co. and Goldman Sachs & Co., the fees and expenses of
which will be paid by the Company, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
Second Step Merger and the other Transactions based upon arrangements made by or
on behalf of the Company.
SECTION 3.15. Opinion of Financial Advisor. The Company has
received the opinion of Wasserstein Perella & Co., dated as of January 6, 2000,
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
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
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28
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.
(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.
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29
(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, indemni fication, cost recovery, compensation or
injunctive relief resulting from the presence, Release of, or exposure
to, any Hazardous Materials.
(ii) "Environmental Laws" means all federal, state, local and
foreign laws (including international conventions, protocols and
treaties), common law, rules, regulations, orders, decrees, judgments,
binding agreements or Environmental Permits issued, promulgated or
entered into by or with any Governmental Entity, relating to pollution
or the environment (including ambient air, surface water, groundwater,
land surface or subsurface strata), including laws and regulations
relating to noise levels, nuclear operations, Releases of Hazardous
Materials, or otherwise relating to the generation, manufacture,
processing, distribution, use, 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
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30
"hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes,"
"pollutant," "toxic substances," "source," "special nuclear," and
"byproducts" or words of similar import under any Environmental Law;
and (C) any chemical, material, substance or waste that is prohibited,
limited or regulated pursuant to any Environmental Law.
(v) "Release" means any actual or threatened release, spill,
emission, leaking, dumping, injection, pouring, deposit, disposal,
discharge, dispersal, leaching or migration into the environment
(including ambient air, surface water, groundwater, land surface or
subsurface strata) or within any building, structure, facility or
fixture.
SECTION 3.18. Labor and Employee Relations. (a) Except as set
forth in the Company Disclosure Letter, (i) neither the Company nor any of the
Company Subsidiaries is a party to any collective bargaining agreement or other
labor agreement with any union or labor organization and (ii) to the knowledge
of the Company, there is no current union representation question involving
employees of the Company or any of the Company Subsidiaries, nor does the
Company have knowledge of any activity or proceeding of any labor organization
(or representative thereof) or employee group to organize any such employees,
except to the extent it, individually or in the aggregate, has not had and could
not reasonably be expected to have a Company Material Adverse Effect.
(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
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31
Nuclear Facilities") currently or formerly owned, in whole or part, by the
Company or any of its affiliates are and have been conducted in compliance with
all Applicable Laws and Company Permits, except for such failures to comply
that, individually or in the aggregate, have not had and could not reasonably be
expected to have a Company Material Adverse Effect, (b) each of the Company
Nuclear Facilities maintains, and is in compliance with, (i) emergency plans
designed to respond to an unplanned Release therefrom of radioactive materials,
(ii) plans for the decommissioning of each of the Company Nuclear Facilities,
(iii) plans for the storage and disposal of spent nuclear fuel, and each such
plan enumerated in (i) through (iii) conform with the requirements of Applicable
Law, and (c) the Company has funded consistent with reasonable budget
projections the current or future decommissioning of each Company Nuclear
Facility and the storage and disposal of spent nuclear fuel.
SECTION 3.20. Parent Share Ownership. Neither the Company nor
any Company Subsidiary owns any shares of Parent Capital Stock or other
securities convertible into Parent Capital Stock.
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,
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32
franchise, license or any other contract, agreement, arrangement or
understanding, to which it is a party or by which it or any of its properties or
assets is bound, except for violations or defaults that have not had and could
not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
SECTION 3.23. Title to Properties. Except as set forth in the
Company Disclosure Letter each of the Company and each of the Company
Subsidiaries has good and sufficient title to its physical properties and
assets, or valid leasehold interests, easements or other appropriate interests
therein or thereto sufficient to conduct its business as presently conducted or
intended to be conducted, except for such as are no longer used or useful in the
conduct of its businesses or as have been disposed of in the ordinary course of
business and except for Liens, defects in title, easements, restrictive
covenants and similar encumbrances or impediments set forth in the Company
Disclosure Letter or that, in the aggregate, do not and will 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
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33
hydrocarbons to which the Company or any Company Subsidiary is a party that are
in accordance with the general practices of other similarly situated companies
in the industry.
Section 3.26. Regulatory Proceedings. Except as set forth in
the Company Disclosure Letter, and other than fuel adjustment or purchase gas
adjustment or similar adjusting rate mechanisms, none of the Company or the
Company Subsidiaries all or part of whose rates or services are regulated by a
Governmental Entity (a) is a party to any rate proceeding before a Governmental
Entity that would reasonably be expected to result in orders having a Company
Material Adverse Effect or (b) has rates that have been or are being collected
subject to refund, pending final resolution of any rate proceeding pending
before a Governmental Entity or on appeal to a court.
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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34
"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.
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 pre ferred 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
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35
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, 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
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36
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 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
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37
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 (collec tively, the "Parent Shareholder Approval"). The
affirmative vote of the holders of Parent Capital Stock, or any of them, is not
necessary to consummate any Transaction other than the Share Issuance and the
Merger.
SECTION 4.05. No Conflicts; Consents. (a) Except as set forth
in the Parent Disclosure Letter, the execution and delivery by each of Parent
and Newco of this Agreement does not, and the consummation of the Merger, the
Share Issuance and the other Transactions and compliance with the terms hereof
and thereof will not, conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, consent, approval, cancelation or acceleration of any
obligation or to loss of a material benefit under, or to increased, additional,
accelerated or guaranteed rights or entitlements of any person under, or result
in the creation of any Lien upon any of the properties or assets of Parent or
any Parent Subsidiary under, any provision of (i) Parent Charter, Parent By-laws
or the comparable charter or organizational documents of any Parent Subsidiary,
(ii) any Contract to which Parent or any Parent Subsidiary is a party or by
which any of their respective properties or assets is bound or (iii) subject to
the filings and other matters referred to in Section 4.05(b), any Judgment or
Applicable Law or writ, permit or license applicable to Parent or any Parent
Subsidiary or their respective properties or assets (other than immaterial
consents, approvals, licenses, permits, orders, authorizations, registrations,
declarations or filings, including with respect to communications systems,
zoning, name changes, occupancy and similar routine regulatory approvals), other
than, in the case of clauses (ii) and (iii) above, any such items that,
individually or in the aggregate, have not had and could not reasonably be
expected to have a Parent Material Adverse Effect.
(b) No Consent of, action by or in respect of, or
registration, declaration or filing with, or notice to, any Governmental Entity
is required to be obtained or made by or with respect to Parent or any Parent
Subsidiary in
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38
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 Energy Act, (vi)
notice to and the consent and approval of the Pennsylvania Public Utility
Commission (the "PPUC"), (vii) the consents, filings and approvals required
under PUHCA, (viii) compliance with and such filings as may be required under
applicable Environmental Laws, (ix) such filings as may be required in
connection with the taxes described in Section 6.09 and (x) such other items as
are set forth in the Parent Disclosure Letter (collectively, whether or not
legally required to be obtained, the "Parent Required Statutory Approvals").
SECTION 4.06. SEC Documents; Undisclosed Liabilities. Parent
has filed all reports, schedules, forms, statements and other documents required
to be filed by Parent with the SEC since January 1, 1998 (the "Parent SEC
Documents"). Each Parent SEC Document complied in all material respects as of
its respective date with the requirements of the Exchange Act or the Securities
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Parent SEC Document, and except to the extent that
information contained in any Parent SEC Document has been revised or superseded
by a later filed Parent SEC Document, does not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The consolidated financial
statements of Parent included in the Parent SEC Documents comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent
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39
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present the consolidated financial position of Parent and
its consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments).
Except as set forth in the Filed Parent SEC Documents (as defined in Section
4.08) or the Parent Disclosure Letter or incurred after the date hereof in the
usual, regular and ordinary course of business in substantially the same manner
as previously conducted and not prohibited by this Agreement, neither Parent nor
any Parent Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by GAAP to be set forth on
a consolidated balance sheet of Parent and its consolidated subsidiaries or in
the notes thereto and that, individually or in the aggregate, could reasonably
be expected to have a Parent Material Adverse Effect. None of the Parent
Subsidiaries is, or has at any time since January 1, 1998 been, subject to the
reporting requirements of Sections 13(a) and 15(d) of the Exchange Act.
SECTION 4.07. Information Supplied. None of the information
supplied or to be supplied by Parent or Newco for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 is filed with the
SEC, at any time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii) the Proxy
Statement will, at the date it is first mailed to the Company's shareholders or
Parent's shareholders or at the time of the Company Shareholders Meeting or the
Parent Shareholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Form S-4 will comply as to form in all
material respects with the requirements of the Securities Act and the rules and
regulations thereunder, except that no representation is made by Parent or Newco
with respect to statements made or incorporated by reference therein based on
information supplied by or on behalf of the Company for inclusion or
incorporation by reference therein.
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
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40
Agreement (the "Filed Parent SEC Documents") or in the Parent Disclosure Letter:
(a) since December 31, 1998, there has not been any event,
change, effect or development that, individually or in the aggregate, has had or
could reasonably be expected to have a Parent Material Adverse Effect, other
than events, changes, effects and developments relating to the economy in
general or to Parent's industry in general and not specifically relating to
Parent or any Parent Subsidiary; and
(b) from December 31, 1998 to the date of this Agreement,
Parent has conducted its business only in the ordinary course, and during such
period there has not been:
(i) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect
to any Parent Capital Stock or any repurchase for value by Parent of
any Parent Capital Stock;
(ii) any split, combination or reclassification of any Parent
Capital Stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for
shares of Parent Capital Stock; or
(iii) any change in accounting methods, principles or
practices by Parent or any Parent Subsidiary materi ally 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 not had and could not reasonably
be expected to have a Parent Material Adverse Effect.
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(b) Except as set forth in the Parent Disclosure Letter, the
most recent financial statements contained in the Filed Parent SEC Documents
reflect an adequate reserve for all current Taxes payable by Parent and the
Parent Subsidiaries (in addition to any reserve for deferred Taxes established
to reflect timing differences between book and Tax income) for all Taxable
periods and portions thereof through the date of such financial statements.
Except as set forth in the Parent Disclosure Letter, no deficiency with respect
to any Taxes has, to the best knowledge of Parent, been proposed, asserted or
assessed against Parent or any Parent Subsidiary, and no requests for waivers of
the time to assess any such Taxes are pending, except to the extent any such
deficiency or request for waiver, individually or in the aggregate, has not had
and could not reasonably be expected to have a Parent Material Adverse Effect.
(c) The Federal income Tax Returns of Parent and each Parent
Subsidiary consolidated in such Returns have been examined by and settled with
the United States Internal Revenue Service for all years through 1990. Except as
set forth in the Parent Disclosure Letter, all material assessments for Taxes
due with respect to such completed and settled examinations or any concluded
litigation have been fully paid.
(d) There are no material Liens for Taxes (other than for
current Taxes not yet due and payable) on the assets of Parent or any Parent
Subsidiary. Except as set forth in the Parent Disclosure Letter, neither Parent
nor any Parent Subsidiary is bound by any agreement with respect to Taxes.
(e) The Parent and each Parent Subsidiary have complied with
all applicable statutes, laws, ordinances, rules and regulations relating to the
payment and withholding of taxes (including withholding of taxes pursuant to
Sections 1441, 1442, 3121 and 3402 of the Code or similar provisions under any
Federal, state or local laws, domestic and foreign) and have, within the time
and in the manner prescribed by law, withheld from and paid over to the proper
governmental authorities all amounts required to 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
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action that could reasonably be expected to prevent (i) the Merger from
constituting transactions described in Section 351 of the Code or (ii) the
Second Step Merger from constituting a transaction described in Section 368(a)
of the Code.
SECTION 4.10. Absence of Changes in Benefit Plans. Except as
disclosed in the Parent Disclosure Letter, from December 31, 1998 to the date of
this Agreement, there has not been any adoption or amendment in any material
respect by Parent or any Parent Subsidiary of (a) any collective bargaining
agreements, (b) any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, program, policy, arrangement or
understanding (whether or not legally binding) providing benefits to any current
or former employee, officer or director of Parent or any Parent Subsidiary or
any beneficiary or dependent thereof, that is sponsored or maintained by Parent
or any Parent Subsidiary or to which Parent or any Parent Subsidiary contributes
or is obligated to contribute (collectively, "Parent Benefit Plans") or (c) any
Parent Employment Arrangements (as defined herein). Except as disclosed in the
Parent Disclosure Letter, as of the date of this Agreement there are not any
employment, consulting, indemnification, change- of-control, severance or
termination agreements or arrangements between Parent or any Parent Subsidiary
and any current or former employee, officer or director of the Parent or any
Parent Subsidiary (collectively, the "Parent Employment Arrangements").
SECTION 4.11. ERISA Compliance; Excess Parachute Payments. (a)
The Parent Disclosure Letter includes a complete list of all material Parent
Benefit Plans and Parent Employment Arrangements as of the date of this
Agreement. With respect to each Parent Benefit Plan (other than a multiemployer
plan within the meaning of Section 4001(a)(3) of ERISA) and Parent Employment
Arrangement, 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
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vehicle relating to any such Parent Benefit Plan or Parent Employment
Arrangement, (v) the most recent actuarial report or valuation relating thereto
and (vi) the most recent determination letters issued by the Internal Revenue
Service with respect to Parent Benefit Plans that are intended to be Qualified
Plans and letters of recognition of exemption with respect to any Parent Benefit
Plan or related trust that is intended to meet the requirements of Section
501(c)(9) of the Code.
(b) With respect to the Parent Benefit Plans and Parent
Employment Arrangements, individually and in the aggregate, no event has
occurred and, to the knowledge of Parent, there exists no condition or set of
circumstances, in connection with which Parent or any Parent Subsidiary could be
subject to any liability that has had or could reasonably be expected to have a
Parent Material Adverse Effect (except liability for benefits claims and funding
obligations payable in the ordinary course) under ERISA, the Code or any other
applicable law. For purposes of this Section 4.11(b), the term "Parent Benefit
Plan" shall also include any employee benefit plan within the meaning of Section
3(3) of ERISA that, within the last six years, was sponsored or maintained by
any entity which would be treated under Section 414 of the Code as a single
employer with Parent or any Parent Subsidiary or to which any such entity
contributed or was obligated to contribute.
(c) Each Parent Benefit Plan and each Parent Employment
Arrangement has been administered in accordance with its terms except for any
failures so to administer any Parent Benefit Plan or Parent Employment
Arrangement as have not had and could not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect. Parent, all
Parent Subsidiaries and all the Parent Benefit Plans and Parent Employment
Arrangements are in compliance with the applicable provisions of ERISA, the Code
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).
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(d) Except as disclosed in the Parent Disclosure Letter, (i)
no current or former employee, officer or director of Parent or any Parent
Subsidiary will be entitled to any additional rights or benefits or any
acceleration of the time of payment or vesting of any benefits under any Parent
Benefit Plan or Parent Employment Arrangement, and no trustee under any "rabbi
trust", or similar arrangement maintained in connection with any Parent Benefit
Plan or Parent Employment Arrangement will be entitled to any payment, as a
result (either alone or upon the occurrence of any additional or further acts or
events) of the execution of this Agreement or the consummation, announcement or
other actions relating to the Transactions and (ii) no amount payable to any
current or former employee, officer or director of Parent or any Parent
Subsidiary will fail to be deductible by reason of Section 280G of the Code.
(e) Each Parent Benefit Plan intended to be a Qualified Plan
has received a favorable determination letter from the Internal Revenue Service
that it is so qualified and nothing has occurred since the date of such letter
that could reasonably be expected to affect the qualified status of such Parent
Benefit Plan.
(f) The aggregate accumulated benefit obligations of each
Parent Benefit Plan subject to Title IV of ERISA (as of the date of the most
recent actuarial valuation prepared for such Parent Benefit Plan) do not exceed
the fair market value of the assets of such plan (as of the date of such
valuation).
(g) All contributions and other payments required to have been
made for any completed historical period by Parent or any Parent Subsidiary to
any Parent Benefit Plan 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.
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45
SECTION 4.12. Litigation. Except as disclosed in the Filed
Parent SEC Documents or in the Parent Disclosure Letter, there is no suit,
action or proceeding pending or, to the knowledge of Parent, threatened against
Parent or any Parent Subsidiary that, individually or in the aggregate, has had
or could reasonably be expected to have a Parent Material Adverse Effect, nor is
there any Judgment outstanding against Parent or any Parent Subsidiary that has
had or could reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.13. Compliance with Applicable Laws; Permits. (a)
Except as disclosed in the Filed Parent SEC Documents or in the Parent
Disclosure Letter, Parent and Parent Subsidiaries are in compliance with the
terms of all applicable Parent Permits (as defined in Section 4.13(b)) and all
Applicable Laws, except for instances of noncompliance that, individually and in
the aggregate, have not had and could not reasonably be expected to have a
Parent Material Adverse Effect. This Section 4.13 does not relate to matters
with respect to Taxes, which are the subject of Section 4.09, Environmental
Laws, which are the subject of Section 4.17, benefits plans, which are the
subject of Section 4.11 and the operation of nuclear power plants which are the
subject of Section 4.19.
(b) Except as disclosed in the Filed Parent SEC Documents or
in the Parent Disclosure Letter, Parent and the Parent Subsidiaries own or have
sufficient rights and consents to use under existing franchises, permits,
easements, leases, and license agreements (the "Parent 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 (the "Pennsylvania Competition Act"), 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
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46
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the Merger and the other Transactions based upon arrangements
made by or on behalf of Parent or Newco.
SECTION 4.15. Opinions of Financial Advisors. Parent has
received the opinions of Salomon Smith Barney Inc. and Morgan Stanley & Company
Incorporated, dated as of January 7, 2000, 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 Letter, there are no
Environmental Claims that have had or
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47
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
Environ mental 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, (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
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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 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
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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.
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.
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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 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
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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 business in all material respects in the
usual, regular and ordinary course in 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 relation ships 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 author ize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital
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52
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 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, (3) the issuance
of "phantom" stock or "phantom" stock rights or, subject to Section
5.01(a)(v), stock appreciation rights or stock-based performance units,
pursuant to the terms of any Company Benefit Plan or Company Employment
Arrangement in effect on the date of this Agreement or as amended in
accordance with or as permitted by this Agreement, and (4) the issuance
of Company Common Stock upon the exercise of Company Rights;
(iii) amend its certificate of incorporation, by- laws or
other comparable charter or organizational documents, except for such
amendments to its certificate of incorporation, by-laws and other
comparable charter or organizational documents that do not have an
adverse affect on the Merger and the other Transactions;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial equity interest in
or portion of the assets of, or by
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53
any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof
or (B) any assets that in either case are material, individually or in
the aggregate, to the Company and the Company Subsidiaries, taken as a
whole;
(v) except to the extent required by Applicable Law or by the
terms of any Company Benefit Plan, Company Employment Arrangement or
collective bargaining agreement in effect as of the date of this
Agreement, (A) grant to any current or former employee, officer or
director of the Company or any Company Subsidiary any increase in
compensation or benefits or new incentive compensation grants, except
in the ordinary course of business consistent with prior practice, (B)
grant to any current or former employee, officer or director of the
Company or any Company Subsidiary any increase in severance, pay to
stay or termination pay, except to the extent consistent with past
practice and that, in the aggregate, does not result in a material
increase in benefits or compensation expenses, (C) enter into or amend
any Company Employment Arrangement with any such current or former
employee, officer or director, except to the extent permitted in
subsection (B) above, (D) establish, adopt, enter into or amend in any
material respect any collective bargaining agreement or Company Benefit
Plan, except, with respect to any Company Benefit Plan that is a
Qualified Plan, as may be required to facilitate or obtain a
determination from the Internal Revenue Service that such Company
Benefit Plan is a Qualified Plan or (E) take or permit to be taken any
action to accelerate any rights or benefits or the funding thereof, or
make or permit to be made any material determinations not in the
ordinary course of business consistent with prior practice, under any
collective bargaining agreement, Company Benefit Plan or Company
Employment Arrangement; provided, however, that notwithstanding
anything herein to the contrary, the foregoing shall not restrict the
Company or the Company Subsidiaries from (1) entering into or making
available to newly hired officers and employees or to officers and
employees in the context of promotions based on job performance or
workplace requirements in the ordinary course of business consistent
with past practice, plans, agreements, benefits and compensation
arrangements (including incentive grants) that have, consistent with
past practice, been made available to newly hired or promoted officers
and employees, or (2) entering into or amending collective bargaining
agreements with
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existing collective bargaining representatives so as to increase
compensation or benefits in a manner that does not materially increase
the benefits or compensation expenses of the Company and the Company
Subsidiaries;
(vi) make any change in accounting methods, principles or
practices materially affecting the reported consolidated assets,
liabilities or results of operations of the Company, except as required
by a change in GAAP;
(vii) sell, lease (as lessor), license or otherwise dispose of
or subject to any Lien any properties or assets that are material,
individually or in the aggregate, to the Company and the Company
Subsidiaries, taken as a whole, except sales of inventory and excess or
obsolete assets in the ordinary course of business consistent with past
practice;
(viii) except in the ordinary course of business consistent
with prior practice, (A) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt
securities of the Company or any Company Subsidiary, guarantee any debt
securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another
person or enter into any arrangement having the economic effect of any
of the foregoing, in each case, other than in connection with a
refinancing on commercially reasonable terms, or (B) make any loans,
advances or capital contributions to, or investments in, any other
person, other than to or in the Company or any direct or indirect
wholly owned subsidiary of the Company;
(ix) make or agree to make any new capital expenditure or
expenditures other than as permitted under Section 5.01(a)(iv) that,
individually, is in excess of $50,000,000 or, in the aggregate during
such period, are in excess of $250,000,000, except to the extent made
or agreed to be made in order to ensure compliance with the rules and
regulations or an order of the NRC or any other Governmental Entity or
to ensure compliance with the terms of any Permit;
(x) make any material Tax election or settle or
compromise any material Tax liability or refund;
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55
(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, and shall cause each Parent Subsidiary to, conduct its business in all
material respects in the usual, regular and ordinary course in 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
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56
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
author ize 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 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
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57
the terms of any Parent Benefit Plan or Parent Employment Arrangement
in effect on the date of this Agreement or as amended in accordance
with or as permitted by this Agreement;
(iii) amend its certificate of incorporation, by- laws or
other comparable charter or organizational documents, except for such
amendments to its certificate of incorporation, by-laws and other
comparable charter or organizational documents that do not have an
adverse affect on the Merger and the other Transactions;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial equity interest in
or portion of the assets of, or by any other manner, any business or
any corporation, partnership, joint venture, association or other
business organization or division thereof, (B) any assets that are
material, individually or in the aggregate, to Parent and the Parent
Subsidiaries, taken as a whole, except Parent or a Parent Subsidiary
may acquire or otherwise invest in any assets, other than nuclear
plants, so long as Parent consults with the Company concerning any
acquisition or investment that 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;
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58
(v) except to the extent required by Applicable Law or by the
terms of any Parent Benefit Plan, Parent Employment Arrangement or
collective bargaining agreement in effect as of the date of this
Agreement, (A) grant to any current or former employee, officer or
director of Parent or any Parent Subsidiary any increase in
compensation or benefits or new incentive compensation grants, except
in the ordinary course of business consistent with prior practice, (B)
grant to any current or former employee, officer or director of Parent
or any Parent Subsidiary any increase in severance, pay to stay or
termination pay, except to the extent consistent with past practice and
that, in the aggregate, does not result in a material increase in
benefits or compensation expenses, (C) enter into or amend any Parent
Employment Arrangement with any such current or former employee,
officer or director, except to the extent permitted in subsection (B)
above, (D) establish, adopt, enter into or amend in any material
respect any collective bargaining agreement or Parent Benefit Plan,
except, with respect to any Parent Benefit Plan that is a Qualified
Plan, as may be 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
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59
reported consolidated assets, liabilities or results of operations of
Parent, except as required by a change in GAAP;
(vii) sell, lease (as lessor), license or otherwise dispose of
or subject to any Lien any properties or assets that are material,
individually or in the aggregate, to Parent and the Parent
Subsidiaries, taken as a whole, except sales of inventory and excess or
obsolete assets in the ordinary course of business consistent with past
practice;
(viii) except in the ordinary course of business consistent
with prior practice, (A) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt
securities of Parent or any Parent Subsidiary, guarantee any debt
securities of another person, enter 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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60
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 subsidi aries to, take any action that would,
or that could reason ably be expected to, result in (i) any of the representa
tions and warranties of such party set forth in this Agreement that is qualified
as to materiality becoming untrue, (ii) any of such representations and
warranties that is not so qualified becoming untrue in any material respect or
(iii) except as otherwise permitted by Section 5.02 or 5.03, any condition to
the Merger set forth in Article VII not being satisfied.
(e) Advice of Changes. The Company and Parent shall promptly
advise the other orally and in writing of any change or event that has or could
reasonably be expected to have a Company Material Adverse Effect or Parent
Material Adverse Effect, as the case may be.
(f) Coordination of Dividends. Each of Parent and the Company
shall coordinate with the other regarding the declaration and payment of
dividends in respect of Parent Common Stock and Company Common Stock and the
record dates and payment dates relating thereto, it being the intention of
Parent and the Company that no holder of Parent Common Stock, Company Common
Stock or Newco Common Stock shall receive two dividends, or fail to receive one
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61
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.
(h) Transition Bonds. Notwithstanding any provision herein to
the contrary, this Agreement shall not restrict Parent from (i) issuing through
PECO Energy Trust, a Delaware business trust and a Parent Subsidiary, or through
any other special purpose entity which is a Parent Subsidiary, transition bonds
in accordance with the Pennsylvania Competition Act in an aggregate principal
amount not to exceed $1,000,000,000, (ii) selling, in connection with such
issuance, all or any part of the "Intangible Transition Property" (as such term
is defined in the Pennsylvania Competition Act) and any other property or rights
necessary as collateral to secure such transition bonds and (iii) using the
proceeds from such issuances of transition bonds to purchase Parent Common Stock
for aggregate consideration of up to $500,000,000 as contemplated by Section
6.15(a), to repay outstanding debt of the Parent or to purchase Parent Preferred
Stock.
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
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62
with respect to a Company Competing Transaction (as defined herein) or (ii)
negotiate, explore or otherwise engage in discussions with any person (other
than Parent or Newco or their respective Representatives) with respect to any
Company Competing Transaction. The term "Company Competing Transaction" means
any recapitalization, merger, consolidation or other business combination
involving the Company, or acquisition of any material portion of the capital
stock or assets (except for (A) acquisitions of assets in the ordinary course of
business, (B) acquisitions by the Company that do not and could not reasonably
be expected to impede the consummation of the Merger and do not violate any
other covenant in this Agreement, (C) transactions disclosed in the Company
Disclosure Letter and (D) the Transactions) of the Company, or any combination
of the foregoing. The Company will immediately cease all existing activities,
discussions and negotiations with any parties conducted heretofore with respect
to any of the foregoing and shall use its reasonable best efforts to enforce any
confidentiality or similar agreement relating to a Company Competing
Transaction. From and after the execution of this Agreement, the Company shall
immediately advise Parent in writing of the receipt, directly or indirectly, of
any inquiries, discussions, negotiations, or proposals relating to a Company
Competing Transaction (including the specific terms thereof), and promptly
furnish to Parent a copy of any such proposal or inquiry in addition to any
information provided to or by any third party relating thereto and if such
proposal or inquiry is not in writing, the identity of the person making such
proposal or inquiry. Notwithstanding the foregoing, prior to receipt of the
Company Shareholder Approval, the Company may, but only to the extent that the
Board of Directors of the Company shall conclude in good faith, based upon the
advice of its outside counsel, that failure to take such action could reasonably
be expected to constitute a breach of the fiduciary obligations of such Board of
Directors under Applicable Law, in response to a proposal for a Company
Competing Transaction that constitutes a Qualifying Company Proposal (as defined
in Section 5.02(d)) that did not result from the breach or a deemed breach of
this Section 5.02, and subject to compliance with the notification provisions of
this Section 5.02, (A) furnish non-public information with respect to the
Company to the person proposing such Company Competing Transaction and its
Representatives pursuant to a confidentiality agreement with terms no less
restrictive of such person than those set forth in the Confidentiality Agreement
(as defined in Section 6.02) and (B) participate in discussions or negotiations
with such person and its Representatives regarding such Company Competing
Transaction. Without limiting the foregoing, it is agreed
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63
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 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
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64
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 (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
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65
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 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
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66
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 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
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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) The Company,
Parent and Newco shall prepare and file with the SEC the Proxy Statement in
preliminary form and Parent, the Company and Newco shall prepare and file with
the SEC the Form S-4, in which the Proxy Statement will be included as a
prospectus. Each of the Company, Parent and Newco shall use its reasonable best
efforts to have the Form S-4 declared effective under the Securities Act as
promptly as practicable after such filing. Each of the Company, Parent and Newco
shall use its reasonable best efforts to cause the Proxy Statement to be mailed
to its respective shareholders as promptly as practicable after the Form S-4 is
declared effective under the Securities Act. Newco shall also take any action
(other than qualifying to do business in any jurisdiction in which it is not now
so qualified) required to be taken under any applicable state securities laws in
connection with the issuance of Newco Common Stock in the Merger and under the
Company Stock Plans and the Parent Stock Plans, and the Company and Parent shall
furnish all information concerning the Company or Parent, as applicable, and the
holders of the Company Common Stock or Parent Common Stock and rights to acquire
Company Common Stock or Parent Common Stock pursuant to the Company Stock Plans
or the Parent Stock Plans as may be reasonably requested in connection with any
such action. The parties shall notify each other promptly of the receipt of any
comments from the SEC or its staff and of any request by the SEC or its staff
for amendments or supplements to the Proxy Statement or the Form S-4 or for
additional information and shall supply each other with copies of all
correspondence between such party or any of its Representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement, the Form S-4 or the Merger.
(b) If prior to the Merger Effective Time any event occurs
with respect to the Company or any Company Subsidiary or any change occurs with
respect to information supplied by or on behalf of the Company for inclusion in
the Proxy Statement or the Form S-4 which, in each case, is
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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 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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69
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; Confidenti ality. Each of
the Company and Parent after reasonable notice shall, and shall cause each of
its respective subsidiaries to, afford to the other party and to the officers,
employees, accountants, counsel, financial advisors and other representatives of
such other party, reasonable access during normal business hours during the
period prior to the Merger Effective Time to all their respective properties,
books, contracts, commitments, personnel and records and, during such period,
each of the Company and Parent shall, and shall cause each of its respective
subsidiaries to, furnish promptly to the other party (a) a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of Federal or state securities laws and (b)
all other information concerning its business, properties and personnel as such
other party may reasonably request. Without limiting the generality of the
foregoing,
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each of the Company and Parent shall, within two business days of request
therefor, provide to the other the information (x) described in Rule
14a-7(a)(2)(ii) under the Exchange Act, (y) to which a holder of Company Common
Stock would be entitled under Section 7.75 of the IBCA (assuming such holder met
the requirements of such Section) and (z) to which a holder of Parent Common
Stock would be entitled under Section 1508 of the PBCL (assuming such holder met
the requirements of such Section). All information exchanged pursuant to this
Section 6.02 shall be subject to the confidentiality agreement dated July 15,
1999, between the Company and Parent (the "Confidentiality Agreement"), and this
Agreement constitutes a Definitive Agreement as defined therein.
SECTION 6.03. Regulatory Matters; Reasonable Best Efforts. (a)
Regulatory Approvals. Upon the terms and subject to the conditions set forth in
this Agreement, and subject to actions taken in compliance with Section 5.02(b)
or 5.03(b), as the case may be, each of the parties hereto shall cooperate and
promptly prepare and file all necessary documentation, to effect all necessary
applications, notices, petitions, filings and other documents, and shall use
reasonable best efforts to obtain all necessary Consents of all Governmental
Entities necessary or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other Transactions, including
the Parent Required Statutory Approvals and the Company Required Statutory
Approvals. Parent shall have the right to review and approve in advance all
characterizations of the information relating to the Company, on the one hand,
and the Company shall have the right to review and approve in advance all
characterizations of the information relating to Parent, on the other hand, in
either case, which appear in any filing made in connection with the Merger or
the other Transactions. Parent and the Company agree that they will consult with
each other with respect to the obtaining of all such necessary Consents of
Governmental Entities.
(b) Further Actions. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
Transactions, including (i) the obtaining of all necessary consents, 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
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71
consummation of the Transactions, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (iii) the execution and delivery of any additional
instruments necessary to consummate the Transactions and to fully carry out the
purposes of this Agreement. Notwithstanding the foregoing, the Company and its
Representatives and Parent and its Representatives shall not be prohibited under
this Section 6.03(b) from taking any actions in compliance with Section 5.02(b)
or 5.03(b), respectively.
(c) State Anti-Takeover Statutes. In connection with and
without limiting the generality of Section 6.03(b), Parent and the Company shall
(i) take all action necessary to ensure that no state anti-takeover statute or
similar statute or regulation is or becomes applicable to any Transaction or
this Agreement and (ii) if any state anti- takeover statute or similar statute
or regulation becomes applicable to any Transaction or this Agreement, take all
action necessary to ensure that the Merger and the other Transactions may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Merger and the other Transactions. Notwithstanding the foregoing, the
Company and its Representatives and Parent and its Representatives shall not be
prohibited under this Section 6.03(c) from taking any action permitted by
Section 5.02(b) or 5.03(b), respectively.
(d) Notices. The Company shall give prompt notice to Parent,
and Parent or Newco shall give prompt notice to the Company, of (i) any
representation or warranty made by it contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (ii) the failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided, however, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
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
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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 out standing immediately prior to the Merger
Effective Time shall be deemed to constitute an option to acquire, on
the same terms and conditions as were applicable under such Company
Employee Stock Option, the same number of shares of Newco Common Stock
as the holder of such Company Employee Stock Option would have been
entitled to receive pursuant to the Merger had such holder exercised
such Company Employee Stock Option in full immediately prior to the
Merger Effective Time, at a price per share equal to (A) the aggregate
exercise price for the shares of Company Common Stock otherwise
purchasable pursuant to such Company Employee Stock Option immediately
prior to the Merger Effective Time (whether or not exercisable) divided
by (B) the number of shares of Newco Common Stock deemed purchasable
pursuant to such Company Employee Stock Option; provided, however, that
in the case of any qualified stock options under Sections 422-424 of
the Code, the option price, the number of shares purchasable pursuant
to such option and the terms and conditions of exercise of such option
shall be determined in order to comply with Section 424(a) of the Code;
provided, further, however, that solely for purposes of making the
adjustments to Company Employee Stock Options required by this Section
6.04, the Company Conversion Number shall be 0.95 and the Company Cash
Consideration shall be disregarded;
(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
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73
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 out standing immediately prior to the Exchange
Effective Time shall be deemed to constitute an option to acquire, on
the same terms and conditions as were applicable under such Parent
Employee Stock Option, the same number of shares of Newco Common Stock
as the holder of such Parent Employee Stock Option would have been
entitled to receive pursuant to the Merger had such holder exercised
such Parent Employee Stock Option in full immediately prior to the
Exchange Effective Time, at a price per share equal to (A) the
aggregate exercise price for the shares of Parent Common Stock
otherwise purchasable pursuant to such Parent Employee Stock Option
immediately prior to the Exchange Effective Time (whether or not
exercisable) divided by (B) the number of shares of Newco Common Stock
deemed purchasable pursuant to such Parent Employee Stock Option;
provided, however, that in the case of any qualified stock options
under Sections 422-424 of the Code, the option price, the number of
shares purchasable pursuant to such option and the terms and conditions
of exercise of such option shall be determined in order to comply with
Section 424(a) of the Code;
(ii) make such other changes to the Parent Stock Plans and the
terms of outstanding Parent Employee Stock Options as it deems
appropriate to give effect to the Merger (subject to the approval of
the Company, which shall not be unreasonably withheld); and
(iii) ensure that, after the Exchange Effective Time, no
Parent Employee Stock Options may be granted under any Parent Stock
Plan.
(c) At the Merger Effective Time, and subject to compliance by
the Company with Section 6.04(a), Newco shall assume all the obligations of the
Company under the Company Stock Plans, each outstanding Company Employee Stock
Option and the agreements evidencing the grants thereof. As soon as practicable
after the Merger Effective Time, Newco shall 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
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74
conditions (subject to the adjustments required by this Section 6.04 after
giving effect to the Merger). Newco shall comply with the terms of the Company
Stock Plans and ensure, to the extent required by, and subject to the provisions
of, such Company Stock Plans, that the Company Employee Stock Options that
qualified as qualified stock options prior to the Merger Effective Time continue
to qualify as qualified stock options after the Merger Effective Time.
(d) At the Exchange Effective Time, and subject to compliance
by Parent with Section 6.04(b), Newco shall assume all the obligations of Parent
under the Parent Stock Plans, each outstanding Parent Employee Stock Option and
Parent SAR the agreements evidencing the grants thereof. As soon as practicable
after the Exchange Effective Time, Newco shall deliver to the holders of Parent
Employee Stock Options and Parent SARs appropriate notices setting forth such
holders' rights pursuant to the respective Parent Stock Plans, and the
agreements evidencing the grants of such Parent Employee Stock Options and
Parent SARs shall continue in effect on the same terms and conditions (subject
to the adjustments required by this Section 6.04 after giving effect to the
Merger). Newco shall comply with the terms of the Parent Stock Plans and ensure,
to the extent required by, and subject to the provisions of, such Parent Stock
Plans, that the Parent Employee Stock Options that qualified as qualified stock
options prior to the Exchange Effective Time continue to qualify as qualified
stock options after the Exchange Effective Time.
(e) With respect to each employee or director benefit or
compensation plan, program or arrangement, other than the Company Stock Plans
and the Parent Stock Plans, under which Company Common Stock or Parent Common
Stock is required to be used for purposes of the payment of benefits, grant of
awards or exercise of options (each, a "Stock Plan"), (i) the Company and the
Parent shall take such action as may be necessary so that, after the Merger
Effective Time, such Stock Plan shall provide for issuance or purchase in the
open market only of Newco Common Stock rather than Company Common Stock or
Parent Common Stock, as the case may be, and otherwise to amend such Stock Plans
to 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
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75
Options assumed in accordance with this Section 6.04 or the payment of benefits,
grant of awards or exercise of options under such Stock Plans. As soon as
reasonably practicable after the Merger Effective Time, Newco shall file one or
more registration statements on Form S-8 (or any successor or other appropriate
form) with respect to the shares of Newco Common Stock subject to such Company
Employee Stock Options and Parent Employee Stock Options or to such Stock Plans
and shall use its reasonable best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein or related thereto)
for so long as such Company Employee Stock Options and Parent Employee Stock
Options or such benefits or grants of awards remain payable or such options
remain outstanding. With respect to those individuals who subsequent to the
Merger will be subject to the reporting requirements under Section 16(a) of the
Exchange Act, where applicable, Newco shall administer the Company Stock Plans
and Parent Stock Plans assumed pursuant to this Section 6.04 and the Stock Plans
in a manner that complies with Rule 16b-3 of the SEC to the extent the
applicable plan complied with such rule prior to the Merger. Prior to the Merger
Effective Time, Parent and Newco shall take all actions as may be reasonably
required to cause the acquisition of equity securities of Newco, as contemplated
by this Section 6.04, by any person who is or will become a director or officer
of Newco to be eligible for exemption under Rule 16b-3(d) of the SEC.
(f) In this Agreement:
"Company Employee Stock Option" means any option to purchase
Company Common Stock granted under any Company Stock Plan.
"Company Stock Plans" means the Long-Term Incentive Plan of
the Company as amended from time to time.
"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.
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76
SECTION 6.05. Benefit Plans; Workforce Matters. (a) From and
after the Merger Effective Time, Newco and its subsidiaries shall honor and
perform in accordance with their respective terms (as in effect on the date of
this Agreement or as amended in accordance with or as permitted by this
Agreement), all the collective bargaining agreements of the Company, Parent or
any of their respective subsidiaries disclosed in the Company Disclosure Letter
or the Parent Disclosure Letter, respectively; provided, however, that this
Section 6.05(a) is not intended to prevent Newco from enforcing such agreements
in accordance with their respective terms, including enforcement of any reserved
right to amend, modify, suspend, revoke or terminate any such agreement.
(b) Subject to Applicable Law and obligations under applicable
collective bargaining agreements, it is the current intention of Parent and the
Company that any reductions in workforce following the Merger Effective Time in
respect of employees of Newco and its subsidiaries shall be made on a fair and
equitable basis, in light of the circumstances and the objectives to be
achieved, as determined by Newco, without regard to whether employment was with
the Company or the Company Subsidiaries or Parent or the Parent Subsidiaries and
with due consideration to the applicable employee's previous work history, prior
experience and skills and Newco's business needs, and any employee whose
employment is terminated or job is eliminated shall be entitled to participate
on a fair and equitable basis as determined by Newco in the job opportunity and
employment placement programs offered by Newco or any of its subsidiaries.
(c) Subject to Applicable Law and obligations under applicable
collective bargaining agreements, each 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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77
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 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
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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 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
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79
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.
(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
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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) 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
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this Agreement, the Merger and the other Transactions and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by Applicable Law, court process or by obligations
pursuant to any listing agreement with any national securities exchange.
SECTION 6.09. Transfer Taxes. All stock transfer, real estate
transfer, documentary, stamp, recording and other similar Taxes (including
interest, penalties and additions to any such Taxes) ("Transfer Taxes") incurred
in connection with the Transactions shall be paid by the party incurring the
Transfer Tax, and the parties hereto shall cooperate with each other in
preparing, executing and filing any Tax Returns with respect to such Transfer
Taxes.
SECTION 6.10. Affiliates. (a) Promptly following the date of
execution of this Agreement, the Company shall deliver to Parent and Newco a
letter identify ing all persons who are expected by the Company to be on the
Closing Date, or were as of the date of this Agreement, "affiliates" of the
Company for purposes of Rule 145 under the Securities Act. The Company shall use
its reasonable best efforts to cause each such person to deliver to Parent on or
prior to the date of mailing of Proxy Statement a written agreement
substantially in the form attached as Exhibit C.
(b) Promptly following the date of execution of this
Agreement, Parent shall deliver to the Company a letter indemnifying all persons
who are expected by Parent to be, on the Closing Date, or were as of the date of
this Agreement, "affiliates" of Parent for purposes of Rule 145 under the
Securities Act. Parent shall use its reasonable best efforts to cause each such
person to deliver to the Company on or prior to the date of mailing of the Proxy
Statement a written agreement substantially in the form of Exhibit D.
SECTION 6.11. Stock Exchange Listing. Parent and the Company
shall use all reasonable efforts to cause the shares of Newco Common Stock to be
issued in the Merger and under the Company Stock Plans and Parent Stock Plans to
be approved for listing on the NYSE, subject to official notice of issuance,
prior to the Closing Date.
SECTION 6.12. Rights Agreements; Consequences if Rights
Triggered. The Company Board shall take all action requested in writing by
Parent in order to render the Company Rights inapplicable to the Merger and the
other
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Transactions. Except as approved in writing by Parent or as set forth in the
Company Disclosure Letter, the Company Board shall not (i) amend the Company
Rights Agreement, (ii) redeem the Company Rights or (iii) take any action with
respect to, or make any determination under, the Company Rights Agreement. If
any Distribution Date, Stock Acquisition Date or Triggering Event occurs under
the Company Rights Agreement at any time during the period from the date of this
Agreement to the Merger Effective Time, the Company and Parent shall make such
adjustment to the Company Exchange Ratio and the Parent Exchange Ratio as the
Company and Parent shall mutually agree so as to preserve the economic benefits
that the Company and Parent each reasonably expected on the date of this
Agreement to receive as a result of the consummation of the Merger and the other
Transactions.
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
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structure of the Merger and the other Transactions will be necessary in order
for the Merger and the other Transactions to be consummated as contemplated
hereby and for Newco and its subsidiaries to have, following the Merger
Effective Time, the corporate structure as contemplated hereby, and the parties
to this Agreement agree to negotiate in good faith and enter into an amendment
to this Agreement to implement such necessary changes.
SECTION 6.15. Common Stock Repurchases. (a) Subject to the
last two sentences of this Section 6.15(a), the Company shall use commercially
reasonable best efforts to purchase prior to the Closing at prevailing market
prices to the extent possible shares of Company Common Stock for an aggregate
consideration of $1,000,000,000, and Parent shall use commercially reasonable
best efforts to purchase prior to the Closing at prevailing market prices to the
extent possible shares of Parent Common Stock for an aggregate consideration of
$500,000,000, which purchases shall, in each case, be in addition to all other
purchases permitted by this Agreement (other than Section 6.15(b)) or
contemplated in the Company Disclosure Letter or the Parent Disclosure Letter.
The Company and Parent shall consult on a regular basis concerning the purchases
described in the preceding sentence and cooperate in connection therewith.
Neither the Company nor Parent shall purchase shares pursuant to this Section
6.15(a) if it is reasonably likely that such purchases would result in the
failure of the closing conditions set forth in Sections 7.02(d) and 7.03(d) or
the failure of the Merger and the other Transactions to be treated as a purchase
of the Company by Parent under GAAP.
(b) 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, after giving effect
to the repurchases contemplated by Section 6.15(a), the Merger and the other
Transactions are treated as a purchase of the Company by Parent under GAAP.
(c) To the extent the purchases contemplated by this Section
6.15 are inconsistent with any other provision of this Agreement, the Company
Disclosure Letter or the Parent Disclosure Letter, such provision shall be
deemed to be amended to permit such purchases.
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
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and President of Parent as of the date of this Agreement (the "Parent Chairman")
and the Chairman of the Board of Directors, Chief Executive Officer and
President of the Company (the "Company Chairman") as of the date of this
Agreement are Co-Chief Executive Officers of Newco, each such Co-Chief Executive
Officer shall receive the same salary, bonus and other compensation (including
option grants and other incentive awards and all other forms of compensation)
and enjoy the same other benefits and the same employment security arrangements
as the other Co-Chief Executive Officer.
SECTION 6.17. Board Seats. The Parent Chairman will retire as
an executive of Newco at the end of the Transition Period and shall no longer
serve as chairman of the executive committee of the Newco Board, but shall
continue as a member of the Newco Board. The Company Chairman shall become the
sole Chief Executive Officer of Newco immediately prior to the end of the
Transition Period, and at such time shall be the Chairman of the Board of
Directors of Newco, if immediately prior to such time he holds the position of
Co-Chief Executive Officer. The Newco Board or the nominating committee thereof,
as applicable, shall nominate for election the Parent Chairman and the Company
Chairman as part of management's slate of candidates at each meeting of the
shareholders (if at the time of such meeting the Parent Chairman or the Company
Chairman, as applicable, is a member of the Newco Board) at which members of the
Newco Board shall be elected as shall be necessary in order that the Parent
Chairman or the Company Chairman, as applicable, serve as a director of Newco
from the end of the Transition Period until the election of directors first
following December 31, 2005.
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
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Company Stock Plans and Parent Stock Plans shall have been approved for listing
on the NYSE, subject to official notice of issuance.
(c) Statutory Approvals. The Parent Required Statutory
Approvals and the Company Required Statutory Approvals shall have been obtained
(including, in each case, the expiration or termination of the waiting periods
(and any extensions thereof) under the HSR Act applicable to the Merger and the
Transactions at or prior to the Merger Effective Time, such approvals shall have
become Final Orders (as defined below) and such Final Orders shall not impose
terms or conditions which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on Newco and its prospective
subsidiaries taken as a whole or which would be materially inconsistent with the
agreements of the parties contained herein. A "Final Order" means action by the
relevant Governmental Entity which has not been reversed, stayed, enjoined, set
aside, annulled or suspended, with respect to which any waiting period
prescribed by law before the transactions contemplated hereby may be consummated
has expired, and as to which all conditions to the consummation of such
transactions prescribed by law, regulation or order have been satisfied.
(d) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, 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
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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 the Merger are further subject to
the following conditions:
(a) Representations and Warranties. The repre sentations 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
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representations provided by the parties hereto substantially 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 repre sentations and
warranties of Parent and Newco in this Agreement shall be true and correct as of
the date of this Agreement and on the Closing Date as though made on the Closing
Date, except to the extent such representations and warranties expressly relate
to an earlier date (in which case such representations and warranties shall be
true and correct on and as of such earlier date), other than for such failures
to be true and correct that, individually and in the aggregate, have not had and
could not reasonably be expected to have a Parent Material Adverse Effect. The
Company shall have received a certificate signed on behalf of Parent by the
chief executive officer or the chief financial officer of Parent to such effect.
For purposes of determining the satisfaction of this condition, the
representations and warranties of Parent and Newco shall be deemed not qualified
by any references therein to materiality generally or to whether or not any
breach results or may result in a Parent Material Adverse Effect.
(b) Performance of Obligations of Parent and Newco. Parent and
Newco shall have performed in all material respects all obligations required to
be performed by them under this Agreement at or prior to the Closing Date, and
the Company shall have received a certificate signed on behalf of Parent by the
chief executive officer and the chief financial officer of Parent to such
effect.
(c) Letters from Parent Affiliates. The Company shall have
received from each person named in the letter referred to in Section 6.10(b) an
executed copy of an agreement substantially in the form of Exhibit D.
(d) Tax Opinion. The Company shall have received a written
opinion, dated as of the Closing Date, from Jones, Day, Reavis & Pogue, counsel
to the Company, to the effect that the Second Step Merger will constitute a
transaction described in Section 368(a) of the Code; it being understood that in
rendering such opinion, such tax counsel shall be entitled to rely upon
customary representations provided by the parties hereto substantially in the
form of Exhibits E, F and G.
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(e) First Step Exchange. The First Step Exchange shall have
been consummated.
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.01. Termination. This Agreement may be terminated at
any time prior to the Exchange Effective Time, whether before or after receipt
of the Company Shareholder Approval or the Parent Shareholder Approval:
(a) by mutual written consent of Parent, Newco and
the Company;
(b) by either Parent or the Company:
(i) if the Second Step Merger is not consum mated on
or before March 31, 2001 (the "Outside Date"), unless the
failure to consummate the Merger is the result of a breach of
this Agreement by the party seeking to terminate this
Agreement; provided, however, that the passage of such period
shall be tolled for any part thereof during which any party
shall be subject to a nonfinal order, decree, ruling or action
restraining, enjoining or otherwise prohibiting the
consummation of the Merger;
(ii) if any Governmental Entity issues an order,
decree or ruling or takes any other action permanently
enjoining, restraining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become
final and nonappealable;
(iii) if any condition to the obligation of such
party to consummate the Merger set forth in Section 7.02 (in
the case of Parent) or 7.03 (in the case of the Company)
becomes incapable of satisfaction prior to the Outside Date;
provided, however, that the failure of such condition to be
met is not the result of a material breach of this Agreement
by the party seeking to terminate this Agreement;
(iv) if, upon a vote at a duly held meeting to obtain
the Company Shareholder Approval, the Company Shareholder
Approval is not obtained; or
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(v) if, upon a vote at a duly held meeting of Parent
to obtain the Parent Shareholder Approval, the Parent
Shareholder Approval is not obtained;
(c) by Parent, if the Company breaches or fails to perform in
any material respect any of its representations, warranties or
covenants contained in this Agreement, which breach or failure to
perform (i) would give rise to the failure of a condition set forth in
Section 7.02(a) or 7.02(b), and (ii) cannot be or has not been cured
within 30 days after the giving of written notice to the Company of
such breach (provided that Parent is not then in breach of any
representation, warranty or covenant contained in this Agreement);
(d) by Parent, if (i) the Company Board or any committee
thereof withdraws or modifies, or publicly proposes to withdraw or
modify, in a manner adverse to Parent or Newco, its approval or
recommendation of this Agreement or the Transactions or approves or
recommends, or publicly proposes to approve or recommend, any Company
Competing Transaction or (ii) the Company otherwise breaches, or is
deemed to be in breach of, any of its covenants in Section 5.02 in any
material respect;
(e) by the Company, if Parent breaches or fails to perform in
any material respect of any of its representations, warranties or
covenants contained in this Agreement, which breach or failure to
perform (i) would give rise to the failure of a condition set forth in
Section 7.03(a) or 7.03(b), and (ii) cannot be or has not been cured
within 30 days after the giving of written notice to Parent of such
breach (provided that the Company is not then in breach of any
representation, warranty or covenant in this Agreement);
(f) by the Company, if prior to receipt of the Company
Shareholder Approval, (i) the Company has received a proposal for a
Company Competing Transaction that constitutes a Qualifying Company
Proposal that was not solicited or encouraged by the Company or its
Representatives and that did not otherwise result from the breach or a
deemed breach of Section 5.02, (ii) the Board of Directors of the
Company has determined in good faith, based upon the advice of its
outside 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
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Applicable Law, that it is necessary to (A) withdraw or modify its
approval or recommendation of this Agreement and the Transactions, (B)
terminate this Agreement pursuant hereto and (C) enter into a Company
Acquisition Agreement in connection with such Company Competing
Transaction in order to comply with its fiduciary obligations under
Applicable Law, (iii) the Company has notified Parent in writing of the
determination described in clause (ii) above, (iv) at least ten
business days following receipt by Parent of the notice referred to in
clause (iii) above, and taking into account any proposal made by Parent
since receipt of such notice to amend or modify the terms of the
Transactions, such Qualifying Company Proposal remains a Qualifying
Company Proposal and the Board of Directors of the Company has again
made the determination referred to in clause (ii) above, (v) the
Company is in compliance with Section 5.02, (vi) the Company has paid
in advance the fee due under Section 6.07(b) to Parent, and (vii) the
Board of Directors of the Company concurrently approves, and the
Company concurrently enters into, a Company Acquisition Agreement
providing for the implementation of such Qualifying Company Proposal;
(g) by the Company, if (i) the Parent Board or any committee
thereof withdraws or modifies, or publicly proposes to withdraw or
modify, in a manner adverse to the Company, its approval of this
Agreement or the Transactions or approves or recommends, or publicly
proposes to approve or recommend, any Parent Competing Transaction or
(ii) Parent otherwise breaches, or is deemed to be in breach of, any of
its covenants in Section 5.03 in any material respect; or
(h) by Parent, if prior to receipt of the Parent Shareholder
Approval, (i) Parent has received a proposal for a Parent Competing
Transaction that constitutes a Qualifying Parent Proposal that was not
solicited or encouraged by Parent or its Representatives and that did
not otherwise result from the breach or a deemed breach of the Section
5.03, (ii) the Board of Directors of Parent has determined in good
faith, based upon the advice of its outside counsel that failure to
take such action could 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
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Agreement in connection with such Parent Competing Transaction in order
to comply with its fiduciary obligations under Applicable Law, (iii)
Parent has notified the Company in writing of the determination
described in clause (ii) above, (iv) at least ten business days
following receipt by the Company of the notice referred to in clause
(iii) above, and taking into account any proposal made by the Company
since receipt of such notice to amend or modify the terms of the
Transactions, such Qualifying Parent Proposal remains a Qualifying
Parent Proposal and the Board of Directors of Parent has again made the
determination referred to in clause (ii) above, (v) Parent is in
compliance with Section 5.03, (vi) Parent has paid in advance the fee
due under Section 6.07(c) to the Company, and (vii) the Board of
Directors of Parent concurrently approves, and Parent concurrently
enters into, a Parent Acquisition Agreement providing for the
implementation of such Qualifying Parent Proposal.
SECTION 8.02. Effect of Termination. In the event of
termination of this Agreement by either the Company or Parent as provided in
Section 8.01, this Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of Parent, Newco or the Company,
other than Section 3.14, Section 4.14, the last two sentences of Section 6.02,
Section 6.07, this Section 8.02 and Article IX, which provisions shall survive
such termination, and except to the extent that such termination results from
the wilful breach by a party of any representa tion, 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
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amended except by an instrument in writing signed on behalf of each of the
parties.
SECTION 8.04. Extension; Waiver. At any time prior to the
Merger Effective Time, the parties may (a) extend the time for the performance
of any of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 8.03, waive compliance with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
SECTION 8.05. Procedure for Termination, Amend ment, 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 Agree ment shall be in writing and shall be
deemed given upon
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receipt by the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) if to Parent or Newco, to
PECO Energy Company
2301 Market Street
P.O. Box 8699
Philadelphia, PA 19101-8699
Telecopy No: (215) 841-4282
Attention: General Counsel
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Telecopy No: (212) 474-3700
Attention: Philip A. Gelston
(b) if to the Company, to
Unicom Corporation
10 S. Dearborn, 37th Floor
Chicago, IL 60603
Telecopy No: (312) 394-4488
Attention: General Counsel
with a copy to:
Jones, Day, Reavis & Pogue
77 West Walker Drive
Chicago, Illinois 60001
Telecopy No: (312) 782-8585
Attention: Paul T. Ruxin
Robert A. Yolles
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.
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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.
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. Notwithstanding the amendment and
restatement of this Agreement, as between September 22, 1999 and January 7,
2000, the representations and warranties of the Company set forth in Article III
and of Parent and Newco set forth in Article IV will be deemed for purposes of
Section 7.02(a) and Section 7.03(a), as applicable, and otherwise to have been
made as of September 22, 1999, and not as of January 7, 2000, and such amendment
and restatement will not otherwise affect the other requirements in Sections
7.02(a) and Section 7.03(a).
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SECTION 9.05. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule or
Applicable Law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
SECTION 9.06. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries.
This Agreement, taken together with the Company Disclosure Letter, the Parent
Disclosure Letter and the Confidentiality Agreement, (a) constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the Transactions and (b) except for
the provisions of Article II and Sections 6.06, 6.16 and 6.17 are not intended
to confer upon any person other than the parties any rights or remedies.
SECTION 9.08. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof, except to the extent the laws of Pennsylvania or
Illinois are mandatorily applicable to the Merger.
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 opera tion 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
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assignment without such consent shall be void. Subject to the preceding
sentences, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
SECTION 9.10. Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any New York state
court or any Federal court located in the State of New York, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any New York state court or any Federal court located
in the State of New York in the event any dispute arises out of this Agreement
or any Transaction, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
(c) agrees that it will not bring any action relating to this Agreement or any
Transaction in any court other than any New York state court or any Federal
court sitting in the State of New York and (d) waives any right to trial by jury
with respect to any action related to or arising out of this Agreement or any
Transaction.
SECTION 9.11. Newco Obligations. Parent and the Company hereby
agree to take such actions as shall be necessary in order that Newco shall
assume any obligation under this Agreement that by its terms is to be performed
by Newco after the Closing.
<PAGE>
97
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
EXELON 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>
1
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE I
The 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..........................................................4
SECTION 1.06. Newco Board of Directors.......................................................................4
SECTION 1.07. Newco Senior Officers..........................................................................4
SECTION 1.08. Operations.....................................................................................5
ARTICLE II
Effect on the Capital Stock of theConstituent Corporations
SECTION 2.01. Effect on Capital Stock........................................................................5
SECTION 2.02. Exchange of Certificates.......................................................................7
Section 2.03. Certain Adjustments...........................................................................13
ARTICLE III
Representations and Warranties of the Company
SECTION 3.01. Organization, Standing and Power..............................................................13
SECTION 3.02. Company Subsidiaries; Equity Interests........................................................14
SECTION 3.03. Capital Structure.............................................................................14
SECTION 3.04. Authority; Execution and Delivery;
Enforceability................................................................16
SECTION 3.05. No Conflicts; Consents........................................................................17
SECTION 3.06. SEC Documents; Undisclosed Liabilities........................................................19
SECTION 3.07. Information Supplied..........................................................................20
SECTION 3.08. Absence of Certain Changes or Events..........................................................20
SECTION 3.09. Taxes.........................................................................................21
SECTION 3.10. Absence of Changes in Benefit Plans...........................................................23
SECTION 3.11. ERISA Compliance; Excess Parachute Payments...................................................23
SECTION 3.12. Litigation....................................................................................26
SECTION 3.13. Compliance with Applicable Laws; Permits......................................................26
SECTION 3.14. Brokers; Schedule of Fees and Expenses........................................................27
SECTION 3.15. Opinion of Financial Advisor..................................................................27
SECTION 3.16. Year 2000.....................................................................................27
SECTION 3.17. Environmental Matters.........................................................................27
SECTION 3.18. Labor and Employee Relations..................................................................30
SECTION 3.19. Operations of Nuclear Power Plants............................................................30
SECTION 3.20. Parent Share Ownership........................................................................31
SECTION 3.21. Regulation as a Utility.......................................................................31
<PAGE>
2
SECTION 3.22. Contracts; No Default.........................................................................31
SECTION 3.23. Title to Properties...........................................................................31
SECTION 3.24. Intellectual Property.........................................................................32
Section 3.25. Hedging.......................................................................................32
Section 3.26. Regulatory Proceedings........................................................................32
ARTICLE IV
Representations and Warranties of Parent and Newco
SECTION 4.01. Organization, Standing and Power..............................................................33
SECTION 4.02. Parent Subsidiaries; Equity Interests.........................................................33
SECTION 4.03. Capital Structure.............................................................................34
SECTION 4.04. Authority; Execution and Delivery;
Enforceability................................................................36
SECTION 4.05. No Conflicts; Consents........................................................................37
SECTION 4.06. SEC Documents; Undisclosed Liabilities........................................................38
SECTION 4.07. Information Supplied..........................................................................39
SECTION 4.08. Absence of Certain Changes or Events..........................................................39
SECTION 4.09. Taxes.........................................................................................40
SECTION 4.10. Absence of Changes in Benefit Plans...........................................................41
SECTION 4.11. ERISA Compliance; Excess Parachute Payments...................................................42
SECTION 4.12. Litigation....................................................................................44
SECTION 4.13. Compliance with Applicable Laws; Permits......................................................44
SECTION 4.14. Brokers; Schedule of Fees and Expenses........................................................45
SECTION 4.15. Opinions of Financial Advisors................................................................45
SECTION 4.16. Year 2000.....................................................................................46
SECTION 4.17. Environmental Matters.........................................................................46
SECTION 4.18. Labor and Employee Relations..................................................................47
SECTION 4.19. Operations of Nuclear Power Plants............................................................47
SECTION 4.20. Company Share Ownership.......................................................................49
SECTION 4.21. Regulation as a Utility.......................................................................49
SECTION 4.22. Contracts; No Default.........................................................................49
SECTION 4.23. Title to Properties...........................................................................49
SECTION 4.24. Intellectual Property.........................................................................50
Section 4.25. Hedging.......................................................................................50
Section 4.26. Regulatory Proceedings........................................................................50
ARTICLE V
Covenants Relating to Conduct of Business
SECTION 5.01. Conduct of Business...........................................................................51
SECTION 5.02. No Solicitation by Company....................................................................61
SECTION 5.03. No Solicitation by Parent.....................................................................64
<PAGE>
3
ARTICLE VI
Additional Agreements
SECTION 6.01. Preparation of the Form S-4 and the Proxy
Statement; Shareholders Meetings..............................................67
SECTION 6.02. Access to Information; Confidentiality........................................................69
SECTION 6.03. Regulatory Matters; Reasonable Best Efforts...................................................70
SECTION 6.04. Company and Parent Stock Options and
Other Stock Plans.............................................................71
SECTION 6.05. Benefit Plans; Workforce Matters..............................................................75
SECTION 6.06. Indemnification...............................................................................78
SECTION 6.07. Fees and Expenses.............................................................................79
SECTION 6.08. Public Announcements..........................................................................80
SECTION 6.09. Transfer Taxes................................................................................80
SECTION 6.10. Affiliates....................................................................................81
SECTION 6.11. Stock Exchange Listing........................................................................81
SECTION 6.12. Rights Agreements; Consequences if Rights
Triggered.....................................................................81
SECTION 6.13. Tax Treatment.................................................................................82
SECTION 6.14. Reorganization and Amendment..................................................................82
SECTION 6.15. Common Stock Repurchase.......................................................................83
SECTION 6.16. Parity of Compensation........................................................................83
SECTION 6.17. Board Seats...................................................................................84
ARTICLE VII
Conditions Precedent
SECTION 7.01. Conditions to Each Party's Obligation To
Effect The Merger.............................................................84
SECTION 7.02. Conditions to Obligations of Parent
and Newco.....................................................................86
SECTION 7.03. Conditions to Obligations of the Company......................................................87
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.01. Termination...................................................................................88
SECTION 8.02. Effect of Termination.........................................................................91
SECTION 8.03. Amendment.....................................................................................91
SECTION 8.04. Extension; Waiver.............................................................................92
SECTION 8.05. Procedure for Termination, Amendment,
Extension or Waiver...........................................................92
<PAGE>
4
ARTICLE IX
General Provisions
SECTION 9.01. Nonsurvival of Representations and
Warranties....................................................................92
SECTION 9.02. Notices.......................................................................................92
SECTION 9.03. Definitions...................................................................................93
SECTION 9.04. Interpretation; Disclosure Letters............................................................94
SECTION 9.05. Severability..................................................................................95
SECTION 9.06. Counterparts..................................................................................95
SECTION 9.07. Entire Agreement; No Third-Party
Beneficiaries.................................................................95
SECTION 9.08. Governing Law.................................................................................95
SECTION 9.09. Assignment....................................................................................95
SECTION 9.10. Enforcement...................................................................................96
SECTION 9.11. Newco Obligations.............................................................................96
</TABLE>
<PAGE>
5
INDEX OF DEFINED TERMS
Defined Term Section
"Affiliate" Section 9.03
"Agreement" Recitals
"AmerGen" Section 5.01(b)(iv)
"AmerGen Nuclear Facilities" Section 4.19(b)
"Applicable Law" Section 3.05(a)
"Articles of Exchange" Section 1.03(a)
"Atomic Energy Act" Section 3.05(b)
"Certificates" Section 2.02(b)(v)
"Closing" Section 1.02
"Closing Date" Section 1.02
"Code" Recitals
"ComEd" Section 1.08(a)
"Common Shares Trust" Section 2.02(e)(ii)
"Company" Recitals
"Company Acquisition Agreement" Section 5.02(b)
"Company Benefit Plans" Section 3.10
"Company Board" Section 3.04(b)
"Company By-laws" Section 3.01
"Company Cash Consideration" Section 2.01(b)(ii)
"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 Disclosure Letter" Section 3.02(a)
"Company Dissent Shares" Section 2.01(b)(iv)
"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 Nuclear Facilities" Section 3.19
"Company Permits" Section 3.13(b)
"Company Reorganization" Section 5.01(g)
"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 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)
<PAGE>
6
"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)
"Excess Shares" Section 2.02(e)(ii)
"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 3.08
"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)
"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
"Original Merger Agreement" Recitals
"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)
<PAGE>
7
"Parent By-laws" Section 4.01
"Parent Capital Stock" Section 4.03(a)
"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 Disclosure Letter" Section 4.02(a)
"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 Nuclear Facilities" Section 4.19(a)
"Parent Permits" Section 4.13(b)
"Parent Preferred Stock" Section 4.03(a)
"Parent Reorganization" Section 5.01(g)
"Parent Required Statutory Approvals" Section 4.05(b)
"Parent SAR" Section 6.04(f)
"Parent SEC Documents" Section 4.06
"Parent Shareholder Approval" Section 4.04(c)
"Parent Shareholders Meeting" Section 6.01(e)
"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)
"Pennsylvania Competition Act" Section 4.13(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)
"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)(iv)
"Securities Act" Section 3.06
"Share Issuance" Section 1.01(c)
"Stock Plan" Section 6.04(e)
"Subsidiary" Section 9.03
"Surviving Corporation" Section 1.01(b)
"Taxes" Section 3.09(g)
"Tax Return" Section 3.09(g)
"Transactions" Section 1.01(c)
"Transition Period" Section 6.16
"Transfer Taxes" Section 6.09
"Voting Company Debt" Section 3.03(d)
"Voting Parent Debt" Section 4.03(d)
I.II.A.B.C.1.2.(a)(i)a.b.i.ii.a)b)c)
