<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 18, 1994
REGISTRATION NO. 33-52109
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
----------------
CECO HOLDING COMPANY
(Exact name of registrant as specified in its charter)
----------------
Illinois 6719 Applied For
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction Classification Code Number) Identification No.)
of incorporation or
organization)
37th Floor John C. Bukovski
10 South Dearborn Street Vice President
Post Office Box 767 CECo Holding Company
Chicago, Illinois 60690-0767 37th Floor
(312) 394-4321 10 South Dearborn Street
(Address, including zip code, and Post Office Box 767
telephone number, including area code, Chicago, Illinois 60690-0767
of registrant's principal executive (312) 394-3117
offices) (Name, address, including zip code,
and telephone number, including area
code, of agent for service)
Copies to:
R. Todd Vieregg, P.C.
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
(312) 853-7470
----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the merger ("Merger") of CECo Merging Corporation with and into
Commonwealth Edison Company pursuant to the Merger Agreement described in the
enclosed Prospectus and Proxy Statement have been satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING PRICE REGISTRATION
REGISTERED REGISTERED PER UNIT (1) (1) FEE (2)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, without 216,200,000 $26.875 $5,810,375,000 $2,017,542.41
par value............. Shares
- -----------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Estimated pursuant to Rule 457(f)(1) of the Securities Act of 1933, based
upon the market value of the shares of Commonwealth Edison Company Common
Stock to be converted in the Merger ($26.875 per share, which is the
average of the high and low sales prices of a share of Commonwealth Edison
Company Common Stock on the New York Stock Exchange, Inc. Composite Tape
on March 10, 1994).
(2) The registrant paid $2,013,557.41 of the registration fee when it
initially filed the Registration Statement on January 31, 1994 registering
215,770,000 shares of its Common Stock, based on the market value per
share of $27.0625 on January 25, 1994. The registrant is paying the
balance of the indicated registration fee of $3,985.00 concurrently with
the filing of this Pre-Effective Amendment No. 1 registering an additional
430,000 shares of the registrant's Common Stock, based on the market value
per share of $26.875 on March 10, 1994. See Note (1) above.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
The number of shares of CECo Holding Company Common Stock to be issued in the
conversion of Commonwealth Edison Company Common Stock in the Merger described
herein cannot be precisely determined at the time this Registration Statement
becomes effective because shares of Commonwealth Edison Company Common Stock
may be issued thereafter and until the effective time of the Merger under the
Commonwealth Edison Company Employe Savings and Investment Plan and Employe
Stock Purchase Plan, upon conversion of its $1.425 Convertible Preferred Stock
and currently outstanding Warrants or otherwise. This Registration Statement
covers a number of shares of CECo Holding Company Common Stock which is
estimated to be at least as large as the number of shares of Commonwealth
Edison Company Common Stock which is expected to be outstanding at the
effective time of the Merger. See the undertaking in Item 22(5) in Part II of
this Registration Statement.
-i-
<PAGE>
CECO HOLDING COMPANY
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-4--ITEM NO. AND CAPTION PROSPECTUS AND PROXY STATEMENT
------------------------------ ------------------------------
<S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus... Facing Page of Registration Statement;
Cross Reference Sheet; Outside Front Cover
Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Available Information; Incorporation of
Certain Information by Reference; Table of
Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............ Summary of Restructuring Proposal; Outside
Front Cover Page of Prospectus; Item B.
Corporate Restructuring Plan--Certain
Considerations
4. Terms of the Transaction................. Summary of Restructuring Proposal;
Corporate Restructuring Plan
5. Pro Forma Financial Information ......... Not Applicable
6. Material Contacts with the Company Being
Acquired................................. Not Applicable
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters....................... Not Applicable
8. Interests of Named Experts and Counsel... Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants.............................. Not Applicable
11. Incorporation of Certain Information by
Reference................................ Not Applicable
12. Information with Respect to S-2 or S-3
Registrants.............................. Not Applicable
13. Incorporation of Certain Information by
Reference................................ Not Applicable
14. Information with Respect to Registrants
Other Than S-2 or S-3 Registrants........ Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
15. Information with Respect to S-3
Companies................................ Incorporation of Certain Information by
Reference
16. Information with Respect to S-2 or S-3
Companies................................ Not Applicable
17. Information with Respect to Companies
Other than S-2 or S-3 Companies.......... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM S-4--ITEM NO. AND CAPTION PROSPECTUS AND PROXY STATEMENT
------------------------------ ------------------------------
<S> <C>
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations Are to be Solicited....... Incorporation of Certain Information by
Reference; Introduction--Voting;
Introduction--Security Ownership of
Certain Beneficial Owners and Management;
Corporate Restructuring Plan--Rights of
Dissenting Shareholders; Item A. Election
of Directors; Item B. Corporate
Restructuring Plan--Management; Proxy
Statement
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited in
an Exchange Offer........................ Not Applicable
</TABLE>
<PAGE>
LOGO
COMMONWEALTH EDISON
10 SOUTH DEARBORN STREET
P.O. BOX 767
CHICAGO, ILLINOIS 60690-0767
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 10, 1994
The regular annual meeting of shareholders of Commonwealth Edison Company
("Edison") will be held in the Grand Ballroom of the Chicago Hilton and Towers,
720 South Michigan Avenue, Chicago, Illinois, on Tuesday, May 10, 1994, at
10:30 A.M., Chicago time, for the following purposes, which are described in
the accompanying Proxy Statement, and to transact such other business as may
properly be brought before the meeting:
Item A: To elect a Board of eleven Directors.
Item B: To consider and act upon approval of an Agreement and Plan of
Merger, a copy of which is attached as Exhibit A to the
accompanying Proxy Statement, pursuant to which CECo Merging
Corporation, a subsidiary of CECo Holding Company ("Holding
Company"), will be merged into Edison, with the result that Edison
will become a subsidiary of Holding Company, and the holders of
Edison Common Stock will become the holders of Holding Company
Common Stock.
Item C: To consider and act upon a proposed Amendment to the Edison
Restated Articles of Incorporation, as amended, to limit the
liability of Edison Directors and to provide for indemnification by
Edison of its Directors, officers, employes and agents.
Item D: To consider and act upon approval of the appointment by the Edison
Board of Directors of Arthur Andersen & Co., independent public
accountants, as Auditors for 1994.
Shareholders of record on the books of Edison at 4:00 P.M., Chicago time,
March 11, 1994, will be entitled to vote at the meeting.
PLEASE FILL IN, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY.
IN THE ABSENCE OF SPECIFIC DIRECTION, THE SHARES REPRESENTED BY THE PROXIES
WILL BE VOTED AT THE MEETING AND WILL BE VOTED NON-CUMULATIVELY FOR THE
ELECTION OF THE NOMINEES NAMED IN THIS PROXY STATEMENT AS DIRECTORS, FOR
APPROVAL OF THE MERGER AGREEMENT, FOR APPROVAL OF THE PROPOSED AMENDMENT TO THE
EDISON RESTATED ARTICLES OF INCORPORATION AND FOR APPOINTMENT OF ARTHUR
ANDERSEN & CO. AS AUDITORS.
David A. Scholz
Secretary
March , 1994
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PRELIMINARY PROSPECTUS AND PROXY STATEMENT DATED MARCH 18, 1994
PROXY STATEMENT
FOR
COMMONWEALTH EDISON COMPANY
PROSPECTUS
FOR
CECO HOLDING COMPANY
COMMON STOCK
This Prospectus, including the Proxy Statement forming a part hereof, has
been prepared in connection with the issuance of up to 216,200,000 shares of
Common Stock, without par value, of CECo Holding Company, an Illinois
corporation ("Holding Company"), (i) upon the consummation of the proposed
merger of CECo Merging Corporation, an Illinois corporation ("Merging Corp."),
which is a wholly-owned subsidiary of Holding Company, with and into
Commonwealth Edison Company, an Illinois corporation ("Edison"), and (ii) under
certain stock plans of Edison.
At the effective time of such merger, each share of Edison Common Stock,
$12.50 par value, will automatically be converted into and, without action on
the part of the holder thereof, become one share of Common Stock, without par
value, of Holding Company. The difference in par value will not affect the
market value of such stock.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The executive offices of Holding Company are located at 10 South Dearborn
Street, P.O. Box 767, Chicago, Illinois 60690-0767, and its telephone number at
such address is (312) 394-4321.
This Prospectus and Proxy Statement and the form of proxy were first mailed
to shareholders on or about March , 1994.
-----------
The date of this Prospectus and Proxy Statement is March , 1994.
<PAGE>
THIS PROSPECTUS AND PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE
UPON REQUEST FROM DAVID A. SCHOLZ, SECRETARY, COMMONWEALTH EDISON COMPANY, 37TH
FLOOR, 10 SOUTH DEARBORN STREET, POST OFFICE BOX 767, CHICAGO, ILLINOIS 60690-
0767 (TELEPHONE NUMBER 312/394-8817). IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY MAY 3, 1994.
AVAILABLE INFORMATION
Edison is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended ("1934 Act"), and in accordance therewith
files reports and other information with the Securities and Exchange Commission
("SEC"). Reports, proxy statements and other information filed by Edison can be
inspected and copied at the public reference facilities maintained by the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549, and at its Regional Offices
located at Citicorp Center, 500 West Madison Street, Chicago, IL 60661 and
Seven World Trade Center, New York, NY 10048. Copies of such material can be
obtained from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. In addition, reports, proxy
statements and other information concerning Edison may be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, NY, the
Chicago Stock Exchange, 440 South LaSalle Street, Chicago, IL and the Pacific
Stock Exchange, 301 Pine Street, San Francisco, CA, the exchanges on which
certain of Edison's securities are listed. Holding Company has filed with the
SEC a Registration Statement on Form S-4 under the Securities Act of 1933, as
amended ("1933 Act"), with respect to the shares of Holding Company common
stock, without par value ("Holding Company Common Stock"), offered hereby. This
Prospectus and Proxy Statement does not contain all of the information set
forth in such Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. For further information,
reference is made to such Registration Statement.
Holding Company will become subject to the same informational requirements as
Edison following the merger described in this Prospectus and Proxy Statement,
and will file reports, proxy statements and other information with the SEC in
accordance with the 1934 Act.
----------------
No person has been authorized to give any information or to make any
representation not contained in this Prospectus and Proxy Statement in
connection with the offer contained in this Prospectus and Proxy Statement,
and, if given or made, such information or representation must not be relied
upon as having been authorized.
Neither the delivery of this Prospectus and Proxy Statement nor any
distribution of shares of Holding Company Common Stock made hereunder shall,
under any circumstances, create any implication that there has not been any
change in the affairs of Edison or Holding Company since the respective dates
as of which information is given herein.
REGISTRATION STATEMENT
This Prospectus and Proxy Statement is a prospectus delivered in compliance
with the 1933 Act with respect to the shares of Holding Company Common Stock
offered hereby. A Registration Statement under the 1933 Act has been filed with
the SEC, with respect to the shares of Holding Company Common Stock offered
hereby. As permitted by the rules and regulations of the SEC, this Prospectus
and Proxy Statement omits certain information contained in the Registration
Statement on file with the SEC. The omitted information can be inspected and
copied at the above-described reference facilities maintained by the SEC.
2
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by Edison with the SEC (File No. 1-1839) are
incorporated in this Prospectus and Proxy Statement by reference and made a
part hereof:
(a) The Edison Annual Report on Form 10-K for the year ended December 31,
1992 ("1992 Form 10-K");
(b) The Edison Quarterly Reports on Form 10-Q for the quarterly periods
ended March 31, 1993 (the "March 31, 1993 Form 10-Q"), June 30, 1993 (the
"June 30, 1993 Form 10-Q") and September 30, 1993 (the "September 30, 1993
Form 10-Q"); and
(c) The Edison Current Reports on Form 8-K dated January 28, 1993 (the
"January 28, 1993 Form 8-K"), May 21, 1993, September 24, 1993 and January
28, 1994, as amended by the Form 8-K/A filed March 18, 1994 (the "1994 Form
8-K").
All documents subsequently filed by Edison pursuant to Section 13(a), 13(c),
14 or 15(d) of the 1934 Act, after the date of this Prospectus and Proxy
Statement and prior to the termination of the offer made by this Prospectus and
Proxy Statement, shall be deemed to be incorporated in this Prospectus and
Proxy Statement by reference and to be a part hereof from the respective dates
of filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated by reference in this Prospectus and Proxy
Statement shall be deemed to be modified or superseded for purposes of this
Prospectus and Proxy Statement to the extent that a statement contained in this
Prospectus and Proxy Statement or in any other subsequently filed document
which also is or is deemed to be incorporated by reference in this Prospectus
and Proxy Statement modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus and Proxy Statement.
Edison will provide without charge to each person, including any beneficial
owner, to whom this Prospectus and Proxy Statement is delivered, upon written
or oral request of such person, a copy of any or all of the documents that have
been or may be incorporated in this Prospectus and Proxy Statement by
reference, other than certain exhibits to such documents, unless such exhibits
are specifically incorporated by reference into the information that this
Prospectus and Proxy Statement incorporates. Such requests should be directed
to David A. Scholz, Secretary, Commonwealth Edison Company, 37th Floor, 10
South Dearborn Street, Post Office Box 767, Chicago, IL 60690-0767 (telephone
number 312/394-8817).
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of Restructuring Proposal......................................... 5
Introduction.............................................................. 9
Solicitation and Revocation of Proxies.................................. 9
Manner and Cost of Solicitation......................................... 9
Voting.................................................................. 9
Security Ownership of Certain Beneficial Owners and Management.......... 10
Item A. Election of Directors............................................. 12
Nominees................................................................ 12
Additional Information Concerning Board of Directors.................... 14
Executive Compensation.................................................. 16
Summary Compensation Table............................................ 16
Service Annuity System Plan........................................... 17
Employment Agreement.................................................. 18
Compensation Committee Report on Executive Compensation............... 18
Shareholder Return Performance.......................................... 22
Item B. Corporate Restructuring Plan...................................... 23
Reasons for the Restructuring........................................... 23
Certain Considerations.................................................. 25
Merger Agreement........................................................ 25
Supplemental Agreement.................................................. 26
Required Regulatory Approvals........................................... 26
Illinois Public Utilities Act........................................... 26
Transfer of Edison Assets to Holding Company............................ 27
Dividend Policy......................................................... 28
Treatment of Preferred and Preference Stock............................. 28
Possible Minority Interest.............................................. 28
Amendment or Termination................................................ 29
Rights of Dissenting Shareholders....................................... 29
Effectiveness of the Restructuring...................................... 31
Exchange of Stock Certificates.......................................... 31
Federal Income Tax Consequences......................................... 31
Listing of Holding Company Common Stock................................. 32
Regulation of Holding Company........................................... 32
Management.............................................................. 32
Holding Company Capital Stock........................................... 32
Comparative Shareholders' Rights........................................ 33
Stock Plans............................................................. 34
Transfer Agent and Registrar............................................ 34
Edison Common Stock Market Prices and Dividends......................... 35
Edison Preferred Stock and Edison Preference Stock Market Information... 35
Legal Opinions.......................................................... 36
Experts................................................................. 36
Item C. Amendment of the Edison Restated Articles of Incorporation........ 36
Background.............................................................. 37
Text of the Proposed Amendment.......................................... 37
Reasons for the Proposed Amendment...................................... 37
Effect of the Proposed Amendment........................................ 38
Item D. Approval of Auditors.............................................. 38
Transaction of Other Business............................................. 39
Exhibit A--Agreement and Plan of Merger................................... A-1
Exhibit B--Supplemental Agreement......................................... B-1
Exhibit C--Articles of Incorporation of CECo Holding Company.............. C-1
Exhibit D--Provisions of the Illinois Business Corporation Act Relating to
Rights of Dissenting Shareholders................................. D-1
</TABLE>
4
<PAGE>
SUMMARY OF RESTRUCTURING PROPOSAL
The following is a summary of certain information regarding the restructuring
proposal contained or incorporated by reference in this Prospectus and Proxy
Statement and is qualified in its entirety by the more detailed information
contained or incorporated by reference herein.
PROPOSED RESTRUCTURING
Holding Company has been organized to become the holding company for, and the
direct owner of, Edison and a newly formed subsidiary of Edison named "CECo
Enterprises Inc." ("CECo Enterprises"). The formation of the holding company
structure will be achieved by the merger ("Merger") of a newly formed
subsidiary of Holding Company, Merging Corp., into Edison. In the Merger, the
holders of Edison Common Stock, par value $12.50 per share ("Edison Common
Stock"), immediately prior to the Merger will become the holders of Holding
Company Common Stock immediately after the Merger, and immediately after the
Merger Holding Company will become the sole holder of Edison Common Stock.
Holders of Edison $1.425 Convertible Preferred Stock, without par value
("Edison Preferred Stock"), Edison Cumulative Preference Stock, without par
value ("Edison Preference Stock"), and Warrants will continue to hold such
Stock and Edison Warrants following the Merger, which will not change any
rights of such holders. After the Merger, the Edison Preferred Stock and
Warrants will continue to be convertible only into shares of Edison Common
Stock, and not into Holding Company Common Stock. See "Treatment of Preferred
and Preference Stock" and "Possible Minority Interest."
Edison is principally engaged in the production, purchase, transmission,
distribution and sale of electricity to approximately 3.3 million customers.
Its electric service territory has an area of approximately 11,540 square miles
and an estimated population of 8.1 million, and includes the city of Chicago,
an area of about 225 square miles with an estimated population of three million
from which Edison derives approximately one-third of its ultimate consumer
revenues.
CECo Enterprises is a holding company which will have no assets other than
those involved in its ownership of stock of its subsidiaries; currently, its
only subsidiary is Northwind Inc., which was formed in 1993 to provide district
cooling services to office and other buildings from central locations in
Chicago. Northwind Inc. is currently seeking customers for its services,
creating plans for its facilities and negotiating contracts to procure its
business assets. On the day of the Merger, Edison will transfer the stock of
CECo Enterprises to Holding Company. See "Transfer of Edison Assets to Holding
Company."
Holding Company will have no assets other than those involved in its
ownership of stock of its subsidiaries, which at the effective time of the
Merger will consist of all of the Edison Common Stock and the common stock of
CECo Enterprises. Holding Company will conduct no business other than the
ownership of the stock of its subsidiaries. The principal executive offices of
Holding Company and Edison are located at 10 South Dearborn Street, Post Office
Box 767, Chicago, Illinois 60690-0767, and their telephone number is 312-394-
4321.
Merging Corp. has nominal assets and has been formed for the sole purpose of
effecting the Merger, at which time it will cease to exist.
5
<PAGE>
The following diagrams illustrate the present and proposed corporate
structures of (i) Edison and its subsidiaries before the Merger and (ii)
Holding Company and its subsidiaries following the Merger and the Edison
transfer of CECo Enterprises to Holding Company. Edison will retain its other
subsidiaries, which provide goods and services to Edison.
PRESENT STRUCTURE
Commonwealth Edison Company
-------------------------------------------------
Commonwealth Edison - CECo Enterprises Inc. CECo Holding Company
Company of Indiana, Inc.
Northwind Inc. CECo Merging
Corporation
Edison Development -
Company
Cotter Corporation -
Commonwealth Research -
Corporation
Concomber, Ltd. -
Edison Development -
Canada Inc.
PROPOSED STRUCTURE
CECo Holding Company
-------------------------------------------------
Commonwealth Edison CECo Enterprises Inc.
Company
Northwind Inc.
- --------------------------
Commonwealth Edison -
Company of Indiana,
Inc.
Edison Development -
Company
Cotter Corporation -
Commonwealth Research -
Corporation
Concomber, Ltd. -
Edison Development -
Canada Inc.
6
<PAGE>
EXCHANGE OF CERTIFICATES
It will not be necessary for shareholders to turn in their certificates for
Edison Common Stock in exchange for certificates for Holding Company Common
Stock. The certificates which presently represent outstanding shares of Edison
Common Stock will automatically represent shares of Holding Company Common
Stock following the effectiveness of the Merger. New certificates bearing the
name of the Holding Company will be issued in the future, if, and as,
certificates for presently outstanding shares of Edison Common Stock are
presented for exchange or transfer.
STOCK EXCHANGE LISTINGS
Holding Company will apply to list its Common Stock on the New York, Chicago
and Pacific Stock Exchanges. It is expected that such listings will become
effective on the effective date of the Merger, subject to the rules of such
Exchanges. See "Listing of Holding Company Common Stock."
DIVIDEND POLICY
Dividends on Holding Company Common Stock will depend primarily on the
earnings, financial condition and capital requirements of Edison, and its
ability to pay dividends on the Edison Common Stock owned by Holding Company.
It is currently contemplated that Holding Company will initially pay quarterly
dividends on Holding Company Common Stock at the same rate, and on
approximately the same schedule, as dividends most recently have been paid on
Edison Common Stock. See "Dividend Policy."
REASONS FOR THE RESTRUCTURING
The management and the Board of Directors of Edison unanimously believe that
the proposed restructuring is beneficial because it will permit affiliates of
Edison to engage in non-utility businesses without the prior approval of, or
being regulated by, the Illinois Commerce Commission. The restructuring is
intended to permit timely responses to competitive activities which could
adversely affect the Edison utility business, to insulate the Edison utility
business from the business risks and obligations of other Holding Company
subsidiaries, to provide financial flexibility and to facilitate capital
allocation and managerial accountability. See "Reasons for the Restructuring."
CERTAIN CONSIDERATIONS
Certain factors which should be considered in determining whether or not to
vote to approve the Merger Agreement are discussed under "Item B. Corporate Re-
structuring Plan--Certain Considerations."
VOTE REQUIRED
Only holders of shares of Edison Common Stock, Edison Preferred Stock and
Edison Preference Stock at 4:00 P.M., Chicago time, on March 11, 1994 ("Record
Date"), will be entitled to notice of and to vote at the regular annual meeting
to consider approval of the Merger Agreement to effect the restructuring. As of
March 11, 1994, there were 213,794,559 shares of Edison Common Stock, 281,807
shares of Edison Preferred Stock and 13,789,839 shares of Edison Preference
Stock outstanding. The affirmative votes of the holders of two-thirds of the
outstanding shares of Edison Common Stock, Edison Preferred Stock and Edison
Preference Stock, voting together as a single class, are required to approve
the Merger Agreement. See "Voting."
REGULATORY APPROVALS
Applications for approval of the restructuring have been filed with the SEC
under the Public Utility Holding Company Act of 1935 ("1935 Act"), the Federal
Energy Regulatory Commission ("FERC") under the Federal Power Act and the
Nuclear Regulatory Commission ("NRC") under the Atomic Energy Act. Amendments
to the Illinois Public Utilities Act which became effective on July 13, 1993,
permit the restructuring to occur without the prior approval of the Illinois
Commerce Commission, subject to certain conditions. See "Required Regulatory
Approvals" and "Illinois Public Utilities Act."
7
<PAGE>
CERTAIN TAX CONSEQUENCES
It is intended that the conversion of Edison Common Stock into Holding
Company Common Stock in the Merger will not be taxable under Federal income tax
laws, and it is a condition for the Merger to become effective that Edison
receive either an opinion of counsel or a ruling from the Internal Revenue
Service satisfactory to the Edison Board of Directors with respect to the
Federal income tax consequences of the Merger. Edison has received a ruling
concerning certain tax consequences of the Merger, and it has received an
opinion of Sidley & Austin, counsel to Edison, with respect to certain other
tax consequences of the Merger. See "Federal Income Tax Consequences."
RIGHTS OF DISSENTING SHAREHOLDERS
The holders of Edison Common Stock, Edison Preferred Stock and Edison
Preference Stock have the right to dissent from consummation of the Merger and,
upon compliance with the procedural requirements of the Illinois Business
Corporation Act, to receive the "fair value" of their shares if the Merger is
effected. Any such holders electing to exercise their right of dissent must
deliver to Edison before the vote is taken a written demand for payment of such
holder's shares if the Merger is consummated, and not vote to approve the
Merger Agreement. See "Rights of Dissenting Shareholders" and Exhibit D.
8
<PAGE>
INTRODUCTION
SOLICITATION AND REVOCATION OF PROXIES
The Proxy Statement forming a part hereof is furnished in connection with the
solicitation by the Board of Directors of Edison of proxies for use at the
regular annual meeting of Edison shareholders to be held on May 10, 1994.
Any shareholder giving a proxy will have the right to revoke it at any time
prior to the time it is voted. A proxy may be revoked by written notice to
David A. Scholz, Secretary, Commonwealth Edison Company, 37th Floor, 10 South
Dearborn Street, Post Office Box 767, Chicago, Illinois 60690-0767, execution
of a subsequent proxy or attendance at the annual meeting and voting in person.
Attendance at the meeting will not automatically revoke the proxy. All shares
represented by properly executed and unrevoked proxies received in the
accompanying form in time for the annual meeting will be voted at the meeting
or at any adjournment thereof. A ticket is not required for attendance at the
annual meeting; however, confirmation of stock ownership will be made prior to
admission to the meeting.
The Edison 1993 Annual Report, including financial statements, was mailed to
each Edison shareholder on or about February 15, 1994.
MANNER AND COST OF SOLICITATION
The cost of soliciting proxies will initially be borne by Edison. If the
Merger becomes effective, Holding Company will reimburse Edison for all of the
expenses it incurs in the restructuring, including the cost of soliciting
proxies for approval of the Merger. See "Illinois Public Utilities Act." In
addition to solicitation by mail, officers and employes of Edison may solicit
proxies by telephone or in person. Edison has arranged for Morrow & Co., Inc.
to assist in the solicitation of proxies, at an estimated cost (excluding
reimbursement of out of pocket costs) of $25,000.
VOTING
Shareholders of record on the books of Edison at 4:00 P.M., Chicago time,
March 11, 1994, will be entitled to vote at the regular annual meeting. On
March 11, 1994, there were 213,794,559 outstanding shares of Edison Common
Stock, 281,807 outstanding shares of Edison Preferred Stock and 13,789,839
outstanding shares of Edison Preference Stock (issued in twelve series). Each
share entitles the holder to one vote on each matter submitted to a vote at the
meeting, except that in the election of Directors each shareholder has the
right to vote the number of shares owned by such shareholder for as many
persons as there are Directors to be elected, or to cumulate such votes and
give one candidate as many votes as shall equal the number of Directors to be
elected multiplied by the number of such shares or to distribute such
cumulative votes in any proportion among any number of candidates.
The holders of a majority of the outstanding shares entitled to vote on a
particular matter and represented in person or by proxy will constitute a
quorum for the consideration of such matter at the meeting, except that the
holders of two-thirds of the outstanding shares of Edison Common Stock, Edison
Preferred Stock and Edison Preference Stock (a) entitled to vote on the
proposal to approve the Agreement and Plan of Merger ("Merger Agreement")
between Edison and Merging Corp., and represented in person or by proxy will
constitute a quorum for the consideration of such proposal, and (b) entitled to
vote on the proposed Amendment to the Edison Restated Articles of Incorporation
and represented in person or by proxy will constitute a quorum for the
consideration of such proposal.
With respect to the election of Directors, a shareholder may mark the
accompanying form of proxy to (i) vote for the election of all eleven nominees
named in this Proxy Statement as Directors, (ii) withhold authority to vote for
all such Director nominees or (iii) vote for the election of all such Director
nominees other than any nominee with respect to whom the shareholder withholds
authority to vote. Assuming that a quorum is present at the meeting, the eleven
persons receiving the greatest number of votes shall be elected as Directors.
Withholding authority to vote for a Director nominee will not
9
<PAGE>
prevent such Director nominee from being elected. The proxy holders will
cumulate votes of shares represented by proxies only if a shareholder gives
them specific written instructions to do so.
With respect to the appointment of Auditors, a shareholder may mark the
accompanying form of proxy to (i) vote for the matter, (ii) vote against the
matter or (iii) abstain from voting on the matter. If a quorum to vote on such
matter is present at the meeting, the affirmative vote of a majority of the
shares of stock represented at the meeting and entitled to vote on such matter
is required for approval of the Auditors.
Under Illinois law, the affirmative votes of the holders of two-thirds of the
outstanding shares of Edison Common Stock, Edison Preferred Stock and Edison
Preference Stock, voting together as a single class, are required to approve
(i) the Merger Agreement, and (ii) the Amendment to the Edison Restated
Articles of Incorporation.
The shares represented by the proxy of each shareholder include shares owned
by such shareholder and shares credited to such shareholder's account under the
Edison Dividend Reinvestment and Stock Purchase Plan and Employe Savings and
Investment Plan.
Proxies submitted by brokers for shares beneficially owned by other persons
may indicate that all or a portion of the shares represented by such proxies
are not being voted with respect to approval of the Merger Agreement or the
proposed Amendment to the Edison Restated Articles of Incorporation. This is
because the rules of the New York Stock Exchange do not permit a broker to vote
shares held in street name with respect to such matters in the absence of
instructions from the beneficial owner of such shares. The shares represented
by broker proxies which are not voted with respect to any such matter will not
be counted in determining whether a quorum is present for consideration of such
matter and will not be considered represented at the meeting and entitled to
vote on approval of such matter.
The shares represented by properly executed and unrevoked proxies received in
the accompanying form in time for the meeting will be voted at the meeting and
will be voted as directed in the proxies. IN THE ABSENCE OF SPECIFIC DIRECTION,
THE SHARES REPRESENTED BY THE PROXIES WILL BE VOTED AT THE MEETING AND WILL BE
VOTED NON-CUMULATIVELY FOR THE ELECTION OF THE NOMINEES NAMED IN THIS PROXY
STATEMENT AS DIRECTORS, FOR APPROVAL OF THE MERGER AGREEMENT, FOR APPROVAL OF
THE PROPOSED AMENDMENT TO THE EDISON RESTATED ARTICLES OF INCORPORATION AND FOR
APPOINTMENT OF ARTHUR ANDERSEN & CO. AS AUDITORS. In the event any nominee for
Director shall be unable to serve, which is not now contemplated, the proxies
may or may not be voted for a substitute nominee.
Proxies marked to abstain from voting with respect to the Merger Agreement,
the proposed Amendment to the Edison Restated Articles of Incorporation or the
approval of Auditors will have the legal effect of voting against approval of
such matter.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL DIRECTOR NOMINEES NAMED IN
ITEM A, FOR APPROVAL OF THE MERGER AGREEMENT AS DISCUSSED IN ITEM B, FOR
APPROVAL OF THE AMENDMENT TO THE EDISON RESTATED ARTICLES OF INCORPORATION AS
DISCUSSED IN ITEM C AND FOR APPOINTMENT OF ARTHUR ANDERSEN & CO. AS AUDITORS AS
DISCUSSED IN ITEM D.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists the beneficial ownership, as of December 31, 1993,
of persons known to Edison to be the beneficial owner of more than five percent
of Edison Common Stock. The table also lists the beneficial ownership, as of
March 1, 1994 (except with respect to shares beneficially owned by executive
officers under Edison's Employe Savings and Investment Plan, as to which
beneficial ownership is reported as of December 31, 1993), of Edison Common
Stock by each of the Directors, each of the executive officers named in the
Summary Compensation Table on page 16 and the Edison Directors and executive
officers as a group.
10
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL
OWNERSHIP PERCENT
OF COMMON OF
NAME STOCK CLASS
- ---- ---------- -------
<S> <C> <C>
Wellington Management
Company................ 13,400,043(1) 6.27%
The Capital Group, Inc.. 12,157,000(2) 5.69
Capital Research and
Management Company..... 12,147,800(2) 5.68
Jean Allard............. 1,060 *
James W. Compton........ 1,116 *
Sue L. Gin.............. 1,000 *
Donald P. Jacobs........ 2,044 *
George E. Johnson....... 1,100 *
Harvey Kapnick.......... 4,000 *
Byron Lee, Jr.(3)....... 2,866 *
Edward A. Mason......... 1,098 *
James J. O'Connor....... 16,747(4) *
Frank A. Olson.......... 1,000 *
Samuel K. Skinner....... 1,000 *
Lando W. Zech, Jr....... 3,000 *
Thomas J. Maiman........ 1,128 *
Cordell Reed............ 1,693(5) *
Michael J. Wallace...... 4,136(6) *
Directors and executive
officers as a group (30
persons)............... 67,039(7) *
</TABLE>
- --------
*Less than one percent
(1) Wellington Management Company ("Wellington") is also an investment
management company. According to their Schedule 13G dated February 10,
1994, Wellington exercises shared voting power with its investment
counseling clients with respect to 654,800 shares and shared dispositive
power with such clients with respect to 13,400,043 shares. Its address is
75 State Street, Boston, Massachusetts 02109.
(2) The Capital Group, Inc. ("Capital Group") is the parent company of several
investment management companies, including Capital Research and Management
Company ("CRMC"), and the shares reported as beneficially owned by it
include the shares reported as beneficially owned by CRMC. According to
their Schedule 13G dated February 11, 1994, Capital Group exercises sole
voting power with respect to 9,200 shares and sole dispositive power with
respect to 12,157,000 shares, and CRMC exercises sole dispositive power
with respect to 12,147,800 shares (included within the total shares for
Capital Group). Their address is 333 South Hope Street, Los Angeles,
California 90071.
(3) Mr. Lee also beneficially owns 8 shares of Edison Preference Stock,
representing less than one percent of such class.
(4) Includes 1,392 shares owned by family members.
(5) Includes 323 shares owned by spouse.
(6) Includes 357 shares held in custodial accounts for family members.
(7) Includes: 323 shares owned by spouse; 357 shares held in custodial accounts
for family members; 1,166 shares jointly owned by spouse and in-law; 1,412
shares owned by family members; and 2,571 shares jointly owned with family
members. Such persons also beneficially own 77 shares of Edison Preference
Stock, representing less than one percent of such class.
11
<PAGE>
ITEM A. ELECTION OF DIRECTORS
NOMINEES
Admiral Lando W. Zech, Jr., whose current term as a Director expires at the
1994 annual meeting of shareholders, has reached the mandatory retirement age
for Directors and is not standing for re-election. Admiral Zech has served as a
Director since 1989. His contributions were many and are gratefully
appreciated.
Eleven Directors are to be elected at the annual meeting to serve terms of
one year and until their respective successors have been elected. The Board has
decided that it is not necessary to fill the vacancy caused by the retirement
of Admiral Zech at this time and, therefore, the number of Board members is
being reduced from twelve to eleven. The nominees for Director, all of whom are
now serving as Directors of Edison, are listed below together with certain
biographical information. Except as otherwise indicated, each nominee for
Director has been engaged in his or her present principal occupation for at
least the past five years.
JEAN ALLARD, age 69. Director since 1975. President of the
Metropolitan Planning Council since October 1991. Partner in the
law firm of Sonnenschein Nath & Rosenthal for more than five
years prior to October 1991. Chair of Finance Committee and
[Photo] member of Compensation, Executive and Regulatory and
Environmental Affairs Committees. Other directorships: Axel
Johnson, Inc., LaSalle National Bank, LaSalle National
Corporation, LaSalle National Trust, N.A. and LaSalle Talman
FSB.
JAMES W. COMPTON, age 55. Director since 1989. President and
Chief Executive Officer of the Chicago Urban League. Chairman of
[Photo] Audit Committee and member of Compensation, Executive and
Nominating Committees. Other directorships: Drexel National
Bank, Independence Bank of Chicago and MATRA Transit, Inc.
SUE L. GIN, age 52. Director since 1993. Founder, Owner,
[Photo] Chairman and Chief Executive Officer of Flying Food Fare, Inc.
Member of Audit, Compensation and Finance Committees. Other
directorship: Michigan National Bank.
DONALD P. JACOBS, age 66. Director since 1979. Dean of the J. L.
Kellogg Graduate School of Management, Northwestern University.
Chairman of Regulatory and Environmental Affairs Committee and
[Photo] member of Compensation, Finance and Nominating Committees. Other
directorships: First Chicago Corporation, The First National
Bank of Chicago, Hartmarx Corp., Pet, Incorporated, UDC Homes,
Inc., Unocal Corp. and Whitman Corp.
12
<PAGE>
GEORGE E. JOHNSON, age 66. Director since 1971. Chairman of
Indecorp, Incorporated (holding company for Drexel National Bank
[Photo] and Independence Bank of Chicago). Founder and retired Chairman,
Johnson Products Company, Inc. Member of Audit, Compensation and
Nominating Committees. Other directorships: Drexel National
Bank, Indecorp, Inc., Independence Bank of Chicago and Burrell
Communications Group.
HARVEY KAPNICK, age 68. Director since 1980. Vice Chairman of
General Dynamics Corporation since April 1991. President of
Kapnick Investment Co. Inc. from February 1989 to March 1991.
[Photo] Chairman of Compensation Committee and member of Audit, Finance
and Regulatory and Environmental Affairs Committees. Other
directorships: General Dynamics Corporation and Maytag
Corporation.
BYRON LEE, JR., age 64. Director since 1985. Retired. President
and Chief Executive Officer of Nuclear Management and Resources
[Photo] Council (NUMARC) for more than five years prior to August 1992.
Member of Finance and Nuclear Operations Committees. Other
directorship: Canonie Environmental Services Corp.
EDWARD A. MASON, age 69. Director since 1980. Retired. Vice
President, Research, of Amoco Corporation for more than five
[Photo] years prior to July 1989. Chairman of Nuclear Operations
Committee and member of Compensation and Regulatory and
Environmental Affairs Committees. Other directorship: Symbollon
Corporation.
JAMES J. O'CONNOR, age 57. Director since 1978. Chairman of
Edison. Chairman of Executive Committee and member of Nominating
[Photo] Committee. Other directorships: Corning Incorporated, First
Chicago Corporation, The First National Bank of Chicago,
Scotsman Industries, Inc., Tribune Company and UAL Corporation.
13
<PAGE>
FRANK A. OLSON, age 61. Director since 1992. Chairman and Chief
Executive Officer of The Hertz Corporation. Chairman of
[Photo] Nominating Committee and member of Audit, Compensation and
Regulatory and Environmental Affairs Committees. Other
directorships: Becton, Dickinson and Company, Cooper Industries
and UAL Corporation.
SAMUEL K. SKINNER, age 55. Director since 1993. President of
Edison since February 1993. General Chairman of the Republican
National Committee from August 1992 to January 1993. Chief of
[Photo] Staff to the President of the United States from December 1991
to August 1992. Secretary of the United States Department of
Transportation from February 1989 to December 1991. Member of
Executive Committee. Other directorships: Chicago and North
Western Holdings Corp. and LTV Corporation.
ADDITIONAL INFORMATION CONCERNING BOARD OF DIRECTORS
Compensation of Directors--Directors who are not employes of Edison receive
an annual retainer of $20,000, a fee of $1,000 for each Board and Committee
meeting attended and an additional annual retainer of $2,500 for chairing a
Committee of the Board. Any non-employe Director who is also a member of the
Nuclear Operations Committee receives an additional annual retainer of $5,000.
Directors who are full-time employes of Edison receive no fees for service on
the Board of Directors. Directors' fees may be deferred. Directors, who have
never been an officer or an employe of Edison and who have attained at least
age 65 and completed the required period of Board service, are eligible for
retirement benefits upon retirement. Such benefits are paid to the retired
Director or a surviving spouse for a period equal to such Director's years of
service in an amount per year equal to the annual retainer for Board members as
in effect at the time of payment.
Audit Committee--The Audit Committee consists of five Directors who are not
employes of Edison. Members serve three-year staggered terms. It is the
responsibility of the Audit Committee to review with Edison's independent
Auditors Edison's financial statements and the scope and results of such
Auditors' examinations, to monitor the internal accounting controls and
practices of Edison, to review the Annual Report to shareholders and to
recommend the appointment, subject to shareholder approval, of independent
Auditors. The Committee met two times during 1993. Members of the Committee are
James W. Compton (Chairman), Sue L. Gin, George E. Johnson, Harvey Kapnick, and
Frank A. Olson.
Compensation Committee--The Compensation Committee consists of all Directors
who are not and have never been employes of Edison. Members serve one-year
terms. The Committee reviews management and executive compensation programs and
administers awards under Edison's Deferred Compensation Plan, Management
Incentive Compensation Plan and 1993 Long-Term Incentive Plan. The Committee
met two times during 1993. Members of the Committee are Harvey Kapnick
(Chairman), Jean Allard, James W. Compton, Sue L. Gin, Donald P. Jacobs, George
E. Johnson, Edward A. Mason, Frank A. Olson and Lando W. Zech, Jr.
Executive Committee--The Executive Committee consists of five Directors.
Members serve one-year terms. The remaining Directors constitute alternates to
serve temporarily, in rotation, in place of
14
<PAGE>
any member unable to serve. The Committee has and may exercise all the
authority of the Board of Directors when the Board is not in session, subject
to limitations set forth in the By-Laws. The Committee met six times during
1993. Members of the Committee are James J. O'Connor (Chairman), Jean Allard,
James W. Compton, Samuel K. Skinner and Lando W. Zech, Jr.
Finance Committee--The Finance Committee consists of five Directors. Members
serve one-year terms. The Committee reviews the scope and results of Edison's
financing program. The Committee met three times during 1993. Members of the
Committee are Jean Allard (Chair), Sue L. Gin, Donald P. Jacobs, Harvey Kapnick
and Byron Lee, Jr.
Nominating Committee--The Nominating Committee consists of five Directors, a
majority of whom are not employes of Edison. Members serve one-year terms. The
Committee reviews the qualifications of potential candidates and proposes
nominees for Director to the Board. The Committee will consider nominees
recommended by shareholders if such recommendations are submitted in writing,
accompanied by a description of the proposed nominee's qualifications and other
relevant biographical information and evidence of the consent of the proposed
nominee. The recommendations should be addressed to the Nominating Committee,
in care of the Secretary of Edison. Nominations also may be presented by
shareholders at Edison's annual meeting of shareholders. The Committee met one
time during 1993. Members of the Committee are Frank A. Olson (Chairman), James
W. Compton, Donald P. Jacobs, George E. Johnson and James J. O'Connor.
Nuclear Operations Committee--The Nuclear Operations Committee consists of
three Directors. Members serve one-year terms. The Committee reviews Edison's
nuclear operations. The Committee met nine times during 1993. Members of the
Committee are Edward A. Mason (Chairman), Byron Lee, Jr. and Lando W. Zech, Jr.
Regulatory and Environmental Affairs Committee--The Regulatory and
Environmental Affairs Committee consists of five Directors. Members serve one-
year terms. The Committee reviews Edison's relationships with economic and
environmental regulatory agencies and reviews matters involving Edison before
such agencies. The Committee met four times in 1993. Members of the Committee
are Donald P. Jacobs (Chairman), Jean Allard, Harvey Kapnick, Edward A. Mason
and Frank A. Olson.
Attendance at Meetings--During 1993, there were fifteen meetings of the Board
of Directors. The average attendance of all incumbent Directors, expressed as a
percent of the aggregate total of Board and Board Committee meetings in 1993,
was 95%. Each incumbent Director attended at least 83% of the meetings of the
Board and Board Committees of which the Director was a member.
15
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information relating to the
compensation during the past three calendar years of those persons who were, at
December 31, 1993, the Chief Executive Officer and the other four most highly
compensated executive officers of Edison.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------- ALL OTHER
NAMES AND PRINCIPAL SALARY BONUS OTHER ANNUAL COMPENSATION(1)
POSITION YEAR $ $ $ $
------------------- ---- ------ ----- ------------ ---------------
<S> <C> <C> <C> <C> <C>
James J. O'Connor 1993 668,126 215,137 0 80,976
Chairman (Chief 1992 739,084 0 -- 77,476
Executive Officer) 1991 662,738 0 -- --
Samuel K. Skinner(2) 1993 442,885 157,780 0 101,455
President
Cordell Reed 1993 205,935 44,214 129 20,304
Senior Vice President 1992 216,654 0 -- 19,953
1991 205,227 10,261 -- --
Thomas J. Maiman 1993 196,555 42,200 78 17,633
Senior Vice President 1992 199,249 0 -- 16,079
1991 184,848 27,727 -- --
Michael J. Wallace 1993 190,209 30,178 44 10,395
Senior Vice President 1992 169,023 0 -- 9,046
1991 141,540 5,308 -- --
</TABLE>
- --------
(1) Amounts shown include matching contributions made by Edison pursuant to the
Edison Employe Savings and Investment Plan ("ESIP"), incremental interest
earned on deferred compensation which is in excess of 120% of the
corresponding Federal long-term rate and premiums and administrative
service fees paid by Edison on behalf of the named individuals under
various group life insurance plans. For the year 1993, contributions made
to the ESIP amounted to $8,254, $8,255, $6,296, $6,448 and $6,300 on behalf
of Messrs. O'Connor, Skinner, Reed, Maiman and Wallace, respectively. The
amounts of incremental interest earned during 1993 on deferred compensation
totaled $1,932, $62, $167 and $32 on behalf of Messrs. O'Connor, Reed,
Maiman and Wallace, respectively. Premiums paid during 1993 for Split
Dollar Life, Accidental Death and Travel Accident insurance policies for
Messrs. O'Connor, Skinner, Reed, Maiman and Wallace, respectively, are as
follows: $70,323, $420 and $47; $92,915, $247 and $38; $13,809, $121 and
$16; $10,894, $108 and $16; and $3,944, $104 and $15. Edison is entitled to
recover the premiums and administrative service fees from any amounts paid
by the insurer on such Split Dollar Life policies and has retained a
collateral interest in each policy to the extent of the premiums and
administrative service fees paid with respect to such policy.
(2) Mr. Skinner became employed by Edison in February 1993.
16
<PAGE>
SERVICE ANNUITY SYSTEM PLAN
The following table sets forth the annual retirement benefits payable under
the Service Annuity System Plan (including payments under the unfunded
equalization benefit plan) to employes who retire at age 65 at stated levels of
compensation and years of service at retirement (in 1994).
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGHEST
5-YEAR
AVERAGE ANNUAL NORMAL RETIREMENT BENEFITS AFTER SPECIFIED YEARS OF
EARNINGS SERVICE*
-------- --------------------------------------------------------------------
15 20 25 30 35 40
-------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 35,410 $ 45,018 $ 53,967 $ 62,423 $ 70,511 $ 73,825
200,000 70,821 90,036 107,934 124,847 141,023 147,649
300,000 106,231 135,055 161,901 187,270 211,534 221,474
400,000 141,641 180,073 215,868 249,693 282,046 295,298
500,000 177,052 225,091 269,835 312,116 352,557 369,123
600,000 212,462 270,109 323,802 374,540 423,069 442,948
700,000 247,872 315,128 377,769 436,963 493,580 516,772
800,000 283,283 360,146 431,736 499,386 564,092 590,597
900,000 318,693 405,164 485,703 561,809 634,603 664,421
1,000,000 354,103 450,182 539,670 624,233 705,114 738,246
</TABLE>
- --------
*An employe may elect a marital annuity for a surviving spouse which would
reduce the employe's normal retirement benefits. The amounts shown reflect
certain assumptions as to total earnings, but do not reflect the reduction
for Social Security benefits described below.
Service Annuity System Plan--Edison maintains a non-contributory Service
Annuity System Plan for all regular employes of Edison. The Plan provides
benefits upon retirement at age 65 which are based upon years of service and
percentages of the employe's (a) total earnings and (b) highest consecutive
five-year average annual base pay, reduced by 25% (less one percentage point
for each year of service less than 35 years) of the employe's estimated Social
Security benefits. An employe may retire prior to attaining age 60 and
generally will receive actuarially reduced benefits. A non-executive employe
may work beyond age 65 with additional benefits accruing for earnings and
service after age 65. Contributions to the Plan by Edison are based upon
actuarial determinations that take into account the amount deductible for
income tax purposes and the minimum contribution required under the Employe
Retirement Income Security Act of 1974, as amended. The compensation used in
the computation of annual retirement benefits under the Plan is substantially
equivalent to the amount set forth in the Salary column of the Summary
Compensation Table except that the amount set forth in the Bonus column is
included in the computation of "total earnings." The compensation used in the
computation of annual retirement benefits under the Plan is limited by the
Internal Revenue Code as of January 1, 1994 to $150,000 for any one employe.
Any reduction in the annual retirement benefits payable to management employes
under the Plan as a result of any limitations imposed by the Internal Revenue
Code is restored by an unfunded equalization benefit plan maintained by Edison.
Thus, annual retirement benefits, as set forth in the Pension Plan Table above,
are based on the amounts shown in the Salary and Bonus columns of the Summary
Compensation Table, without limitation as a result of the application of the
provisions of the Internal Revenue Code. Credited years of service under the
Plan for the persons named in the Summary Compensation Table are as follows:
James J. O'Connor, 30 years; Samuel K. Skinner, 1 year; Cordell Reed, 33 years;
Thomas J. Maiman, 28 years; and Michael J. Wallace, 19 years.
17
<PAGE>
EMPLOYMENT AGREEMENT
Edison has an agreement with Mr. Skinner providing for a base salary of
$490,000 and an unfunded supplemental retirement benefit. The supplemental
retirement benefit does not vest until the completion of five years of
employment and, consequently, no benefit is presently available. The formula
underlying the supplemental retirement benefit provides a benefit, together
with any benefits payable under the Service Annuity System Plan and a social
security supplement, equal to one-third of Mr. Skinner's highest base salary
during the preceding five years, after five years of service, and increasing
ratably annually to one-half of such salary after ten years. The agreement also
provides for a severance payment equal to two years of base salary, payable
over three years, and a three year continuation of health and life insurance
benefits in the event that Mr. Skinner's employment is terminated by Edison for
reasons other than death, fraud or willful misconduct. The severance payment is
subject to reduction to the extent that Mr. Skinner receives compensation from
another full-time employer during the payment period.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of Commonwealth Edison
Company has furnished the following report on executive compensation:
Introduction--It is the policy of the Compensation Committee
("Committee") of the Board of Directors of Commonwealth Edison Company
("Company") to compensate executive officers based on their
responsibilities, achievement of annual established goals and the Company's
annual and long-term performance. The Committee believes that compensation
paid should be appropriate in relation to the financial performance of the
Company and should be sufficient to enable the Company to attract and
retain individuals possessing the talents required for the Company's long-
term successful performance. The Committee also believes that the incentive
compensation performance goals for executive management should be based on
factors over which management has significant control and which are
important to the Company's long-term success.
In 1993, there were three major components of compensation applicable to
the executive officers of Commonwealth Edison Company--cash salary, current
compensation unit income and incentive compensation. Cash salary and
current compensation unit income constitute "base salary" for purposes of
the following discussion and represent the amounts included in the Salary
column of the Summary Compensation Table on page 16.
Base Salary Ranges--The process of determining the officers' base salary
begins with establishing a salary range for each officer level. To
establish salary ranges, salary levels at about twenty of the largest
companies in the electric utility industry are reviewed. The salary data
for these companies are taken from the Executive Compensation Survey
prepared by the Edison Electric Institute, an independent electric utility
trade organization. The Committee considers the median levels of base
salary among such companies as a beginning reference point, on grounds that
the basic duties and responsibilities associated with executive officer
positions in the other utilities are similar to those in the Company.
Judgment is then applied to reflect differences in the organization
structure and responsibilities of executive officers at Commonwealth
Edison, in the size and complexity of the Company's operations, and in the
regulatory environment and competitive challenges faced by the Company.
After considering these various factors with respect to 1993, the
Compensation Committee recommended, and the Board approved, salary ranges
which were 5% above 1992 levels.
Finally, regarding comparisons with other companies, it should be noted
that because of the differences discussed above between Commonwealth Edison
and others in the group of twenty or so large utilities, that group is not
used in the performance comparisons shown on page 22. The Dow Jones Utility
Stock Index, which is a well-known and widely-followed utility index
comprising a broader array of utility companies, including Commonwealth
Edison, is used for those comparisons.
Individual Base Salary Determinations--After salary ranges are
established, the base salary of each officer is set within the applicable
range based on a largely subjective assessment of the
18
<PAGE>
particular responsibilities and performance of such officer. The length of
service and level of experience of each officer in his or her area of
responsibility are also considered.
Cash Salary--With respect to each officer other than the Chairman, the
Chairman makes recommendations regarding cash salary. The recommendations
are considered and discussed by the Compensation Committee in a private
meeting with the Chairman. The Chairman's compensation is considered and
discussed by the Committee without the Chairman present. The Committee then
makes recommendations with respect to salary ranges and individual cash
salaries for approval by the full Board.
In view of corporate financial performance in 1992 and the significant
financial uncertainties facing the Company at the outset of 1993, the
Committee did not recommend to the Board any cash salary increases for
executive officers for 1993. Only one officer, who was promoted during the
year and given increased responsibilities, received a cash salary increase.
The amounts shown for certain of the named executive officers under the
Salary column of the Summary Compensation Table for 1993 are lower than
1992 due to the reduced compensation unit income that such officers
received as a result of the dividend reduction that took effect on November
1, 1992.
Current Compensation Unit awards--Current compensation units are awarded
by the Committee under the provisions of the Company's Deferred
Compensation Plan. As with cash salary, the Chairman, meeting privately
with the Committee, makes recommendations regarding the award of current
compensation units to individual executive officers; and the Committee,
meeting without the Chairman, determines the award of such units, if any,
to the Chairman. Current compensation units are awarded as a supplement to
cash salary increases, based largely on subjective judgment as opposed to
quantifiable performance measures, to recognize the special contributions
of individual management personnel and to strengthen the bond between their
interests and those of the Company and its shareholders. Under the Plan,
the holder of current compensation units is entitled to current income
equal to the dividend on one share of common stock for each unit held. Such
income is paid on a quarterly basis, simultaneously with the payment of
dividends, for the duration of employment.
Upon retirement of any individual holding current compensation units,
such units are converted into retirement compensation units. Retirement
compensation units also pay income based on common stock dividends, but
payments are generally subject to certain floor and ceiling amounts
established at time of retirement. Income on retirement compensation units
is payable for the remaining life of the recipient and, if the recipient is
married at the time of retirement, the remaining life of the recipient's
spouse. If an individual holding current compensation units resigns before
retirement, compensation unit income ceases and the individual's
entitlement to retirement compensation units is forfeited.
For the same reasons that no cash salary increases were recommended by
the Committee for 1993, the Committee did not award any new compensation
units for payment in 1993 under the Company's Deferred Compensation Plan.
1993 Incentive Compensation--The third major component of executive
compensation in 1993 was payable under a Special 1993 Incentive
Compensation Plan authorized by the Board in July, 1993. One element of the
Plan was applicable to all employees (including executive officers) and
allowed them to share in operation and maintenance expense savings to the
extent that such expenses for the year 1993 were below budgeted amounts.
Payments under this element of the Plan were based on a percentage of base
salary, with the percentage to be determined by the extent of expense
savings relative to budgeted amounts. Various levels of performance
(threshold, target and maximum) were established for determining Plan
payments. The threshold level of performance, which had to be achieved
before any payment would be made, was an actual operation and maintenance
expense amount at 1.0% ($20.7 million) below budget. At that level,
payments for the executive officers were set at 5% of annual base salary
for the Chairman and President, 3% for Senior Vice Presidents and 2.5% for
all other executive officers. The target level was set at 2% ($41.4
million) below budget with related payments at 10%, 7% and 5% of annual
base salary; and the maximum level was 3% ($62.1 million) below budget,
with related payments
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<PAGE>
at 15%, 10% and 7.5% of annual base salary. For performance exceeding the
maximum level, it was determined that payments would be increased
proportionately. Therefore, actual performance for the year, at 3.44% ($71
million) below budget, resulted in payments to the executive officers under
this element of the Plan equal to 17.2%, 11.47% and 8.6% of annual base
salary for the Chairman and President, the Senior Vice Presidents, and the
other executive officers, respectively. The percentages of base salary
payable at the various levels of performance to the various levels of
officers were determined on the basis of judgment to provide meaningful
incentives to the executive officers and to recognize the different levels
of control and responsibility among the officers.
Another element of the Special 1993 Incentive Compensation Plan, which
was applicable to the executive officers, was based upon achievement of
certain levels of improvement in net income on common stock above budgeted
amounts (after adjusting for the income effects of the settlements which
the Company reached during the second half of 1993 with respect to a number
of its pending rate matters and fuel reconciliation proceedings, and after
adjusting for awards payable under the Plan). The threshold level of
performance necessary for any payment under this element of the Plan was
net income on common stock, as adjusted, at 103% ($401.0 million) of
budgeted net income on common stock. At this level of performance, payments
for the executive officers were set at 5%, 3% and 2.5% of annual base
salary, respectively, for the three officer levels identified earlier. The
target and maximum levels of performance were set at 106% ($412.7 million)
and 109% ($424.3 million), respectively, of the budgeted level. Payments to
the executive officers at the target level of performance were set at 10%,
7% and 5% of annual base salary for the three officer levels; and payments
at the maximum level of performance were set at 15%, 10% and 7.5% of annual
base salary, respectively, for the three levels. Again, the percentages of
base salary payable at the various levels of performance to the various
levels of officers were determined on the basis of judgment to provide
meaningful incentives to the executive officers and to recognize the
different levels of control and responsibility among the officers. Because
actual performance exceeded the maximum level, payments were earned at the
percentages applicable to the maximum level of performance.
Of the total $35.2 million earned by all employees under the Special 1993
Incentive Compensation Plan, about $34.2 million was paid to employees
other than executive officers.
Compensation of the Chief Executive Officer--With regard to the
compensation of the Chief Executive Officer (the Company's Chairman), the
Committee's assessment of his personal performance, based upon a non-
quantifiable evaluation of his leadership, achievements, and contributions
to the Company, was very favorable; but in view of corporate financial
performance in 1992 and the significant financial uncertainties facing the
Company at the outset of 1993, the Committee recommended that the
Chairman's cash salary for 1993 remain at its 1992 level, which was
$560,000. As noted earlier, no new compensation units were awarded for
payment in 1993; and, therefore, the Chairman's 1993 compensation unit
income declined to $108,126 from $179,084 in 1992 as a result of the
dividend reduction that took effect on November 1, 1992. The Chairman's
total $668,126 base salary ($560,000 plus $108,126) placed him 7th from the
top in base salary among CEOs of the 21 largest electric power companies in
the 1993 Executive Compensation Survey of the Edison Electric Institute.
The median base salary of CEOs in the group was $600,000. Finally, the
Chairman's performance-based compensation under the Special 1993 Incentive
Compensation Plan was $215,137, with $114,918 (17.2% of base salary, as
noted earlier) related to the operation and maintenance expense reduction
element of the Plan and $100,219 (15% of base salary, as noted earlier)
related to achievement of the goal, at the maximum level, with respect to
net income on common stock, as adjusted. Thus, the Chairman's total
compensation (cash salary, compensation unit income, and compensation
earned under the Special 1993 Incentive Compensation Plan) for 1993 was
$883,263. This level of compensation
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placed him 13th in total compensation among the CEOs of the 21 largest
electric power companies. The Committee believes this was appropriate for
1993 considering the various aspects of the Company's performance and
circumstances in 1993.
1994 Compensation Programs--In 1993 the Company's shareholders approved
the 1993 Long-Term Incentive Plan which provides for the use of various
forms of stock-based compensation as a part of the Company's compensation
programs. With the help of outside consultants, the Committee is developing
a comprehensive incentive compensation program for the executive officers,
as well as other management personnel. It includes the use of stock and
cash awards for the achievement of annual corporate and business unit
goals, and also the use of performance share units for which payouts are
determined by the Company's common stock performance over moving three-year
periods relative to the Dow Jones Utility Stock Index. In addition, the
Committee is considering other possible features for the program. The
Committee intends to utilize this new incentive compensation program in
1994, thereby significantly advancing its objective to base a greater
portion of compensation on annual and long-term performance.
Compensation Committee
Jean Allard Harvey Kapnick
James W. Compton Edward A. Mason
Sue L. Gin Frank A. Olson
Donald P. Jacobs Lando W. Zech, Jr.
George E. Johnson
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SHAREHOLDER RETURN PERFORMANCE
Set forth below is a line graph comparing the quarterly percentage change in
the cumulative total shareholder return on Edison Common Stock ("CWE") against
the cumulative total return of the S&P 500 Composite Stock Index and the Dow
Jones Utility Stock Index for the five-year period ending December 31, 1993.
CUMULATIVE PERFORMANCE SINCE JANUARY 1, 1989
ASSUMING REINVESTMENT OF DIVIDENDS
(JANUARY 1, 1989 = $100)
TOTAL RETURN
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG CWE COMMON STOCK, DJ UTIL AND S&P 500 COMPOSITE
<CAPTION>
Measurement Period CWE COMMON S&P 500
(Fiscal Year Covered) STOCK DJ UTIL COMPOSITE
- ------------------- ---------- ------- ---------
<S> <C> <C> <C>
Measurement Pt-
12/31/88 $100 $100 $100
FYE 12/31/89 $124 $135 $132
FYE 12/31/90 $125 $129 $127
FYE 12/31/91 $155 $149 $166
FYE 12/31/92 $ 98 $155 $179
FYE 12/31/93 $126 $170 $197
</TABLE>
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ITEM B. CORPORATE RESTRUCTURING PLAN
The management and the Board of Directors of Edison unanimously believe it is
in the best interest of Edison and its shareholders to change the corporate
structure of Edison so that it will become a separate subsidiary of a new
parent holding company, with the present holders of Edison Common Stock
becoming the holders of the common stock of the new parent.
To carry out such restructuring, Edison has caused to be incorporated a new
Illinois corporation, Holding Company, which has a nominal amount of stock
outstanding and no present business or properties of its own. Holding Company,
in turn, has caused to be incorporated a new Illinois corporation, Merging
Corp. The outstanding Holding Company stock is presently owned by Edison, and
the outstanding Merging Corp. stock is presently owned by Holding Company.
Edison and Merging Corp. have entered into the Merger Agreement under which,
subject to shareholder and regulatory approvals and the satisfaction or waiver
of certain conditions, Edison will become a subsidiary of Holding Company
through the Merger of Merging Corp. into Edison. In the Merger, the outstanding
shares of Edison Common Stock will be converted on a share-for-share basis into
Holding Company Common Stock. A copy of the Merger Agreement is attached to
this Prospectus and Proxy Statement as Exhibit A and is incorporated herein by
reference.
In addition, Edison, Holding Company and Merging Corp. have entered into a
Supplemental Agreement which provides for the issuance of Holding Company
Common Stock in the Merger and pursuant to plans under which participants
currently receive Edison Common Stock. A copy of the Supplemental Agreement is
attached to this Prospectus and Proxy Statement as Exhibit B and is
incorporated herein by reference.
It is intended that the restructuring will not have any adverse Federal
income tax consequences to the current holders of Edison Common Stock, Edison
Preferred Stock or Edison Preference Stock. See "Federal Income Tax
Consequences."
REASONS FOR THE RESTRUCTURING
General. The primary purpose of the proposed restructuring into a holding
company system for Edison is to permit Edison affiliates to engage in non-
utility businesses without the prior approval of, or being regulated by, the
Illinois Commerce Commission ("Illinois Commission"), in part to permit timely
responses to competitive activities which could adversely affect the Edison
utility business, to insulate the Edison utility business from the business
risks and obligations of its non-utility affiliates and to provide financial
flexibility and facilitate capital allocation and managerial accountability.
Competition. The demand for electricity provided by Edison and other utility
companies is becoming increasingly affected adversely by competition from non-
utility entities which seek to provide energy services to users of large
quantities of electricity, such as educational, health care and governmental
institutions, and industrial, commercial and wholesale customers.
Such competition results in part from, among other things:
(i) cogeneration facilities developed under the Public Utility Regulatory
Policies Act of 1978 ("PURPA"), which produce electricity which may be used
by the cogenerator or, as required by PURPA, purchased by the local
electric utility; such facilities are qualifying facilities ("QFs");
(ii) generation facilities which may be developed in accordance with the
Energy Policy Act of 1992 ("Energy Act") by non-utility entities which sell
electricity at wholesale to electric utilities; such facilities are exempt
wholesale generators ("EWGs");
(iii) generation facilities which provide electricity to a single user of
large quantities of electricity; such facilities are typically situated on
the property where such electricity is used;
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(iv) the use of natural gas and other forms of energy to satisfy energy
needs which historically have been supplied primarily or exclusively by
electricity;
(v) FERC orders under the Energy Act which could require an electric
utility, such as Edison, to transmit or "wheel" on its own transmission
system power generated for wholesale sale by other electric utilities, QFs
and EWGs; and
(vi) unregulated energy services provided to users of large quantities of
electricity by independent entities or affiliates of utility companies,
any of which may reduce the quantity, or change the use, of electricity sold by
an electric utility, such as Edison, and thereby reduce its revenues and
profits.
Prior to recent amendments to the Illinois Public Utilities Act, Edison was
unable to take any action, either directly or through an Edison subsidiary, to
mitigate or prevent Edison revenue losses from competitive activities of others
without the prior approval of the Illinois Commission. Historically, many
Edison proceedings before the Illinois Commission have been lengthy and
contentious. In such proceedings, Illinois Commission staff, Edison competitors
and customers, special interest advocates and others often seek to obtain some
advantage at the expense of Edison generally, as conditions to such approval.
The probable lengthy duration of Illinois Commission proceedings, potentially
restrictive conditions in any Illinois Commission order, subsequent reversal or
modification by the Illinois Commission of such order, and the possible legal
appeal, stay or reversal of any such order could prevent Edison, either
directly or through subsidiaries, from taking timely and effective competitive
action to mitigate or prevent revenue loss.
Furthermore, the uncertainties about whether and when the Illinois Commission
might issue an order permitting Edison or its subsidiaries to provide energy
services to a particular customer, the results of any legal appeal of such
order and the possibility that such services could be regulated by the Illinois
Commission, could dissuade such customer from contracting to obtain such
services from Edison or its subsidiaries. Edison believes that such
uncertainties were the primary, and perhaps only, reason that the Metropolitan
Pier and Exposition Authority ("MPEA") awarded the contract to provide district
cooling and heating services to its McCormick Place exposition facilities in
Chicago, to a non-utility entity and an unregulated subsidiary of a public
utility holding company, instead of to Edison. Instead of using electricity at
peak daytime rates to operate conventional air conditioning equipment at
McCormick Place, the Edison proposal would have used electricity to produce ice
at low off-peak rates to cool McCormick Place, whereas the proposal selected by
the MPEA will use natural gas to operate equipment to cool McCormick Place. The
result is the loss of a significant customer for Edison electricity, instead of
merely shifting electricity sales from peak daytime hours to off-peak hours.
Consequently, Edison proposes to create a holding company which could create
subsidiaries to compete with non-utility businesses, including unregulated
subsidiaries of other public utility holding companies, to provide unregulated
energy and other services and products to Edison customers and others. Some of
such activities could reduce energy costs of users of large quantities of
electricity and thereby reduce or eliminate incentives for such users to obtain
electricity from other sources, or to switch from using electricity to natural
gas or another form of energy.
See "Illinois Public Utilities Act."
Other. The Edison holding company system will clearly separate its electric
utility business from the non-utility businesses of other Holding Company
subsidiaries. Operating management of Edison will continue to maintain its
focus on meeting its public utility responsibilities. The separation of utility
and non-utility activities will (i) facilitate the allocation of expenses, (ii)
protect Edison from any adverse effects of non-utility operations, (iii)
facilitate the regulation of the Edison utility operations by the Illinois
Commission and (iv) permit the Edison capital structure to be managed
efficiently.
The non-utility subsidiaries of Holding Company would have the flexibility to
use various financing techniques suitable for non-utility businesses, without
any impact on the capital structure or credit of Edison. Such non-utility
businesses could pursue business opportunities which potentially could enhance
the financial strength and operating results of Holding Company.
24
<PAGE>
The Edison electric utility business is expected to constitute the
predominant part of Holding Company's earning power for the foreseeable future.
Edison operations will continue to be subject to the jurisdiction of the
Illinois Commission, FERC and NRC, and conducted with the same assets and
management. The management and Board of Directors of Edison believe that the
restructuring will have no adverse effect on Edison, its customers or the
holders of Edison Preferred Stock, Edison Preference Stock, Edison First
Mortgage Bonds and other debt securities, Warrants or Edison Common Stock,
which will be converted into Holding Company Common Stock in the Merger.
CERTAIN CONSIDERATIONS
CECo Enterprises is currently an Edison subsidiary which will become a
Holding Company subsidiary on the effective date of the Merger. CECo
Enterprises is a holding company which will have no assets other than those
involved in its ownership of stock of its subsidiaries; currently, its only
subsidiary is Northwind Inc., which was formed in 1993 to provide district
cooling services to office and other buildings from central locations in
Chicago. Unregulated subsidiaries of CECo Enterprises may be formed to help
certain large commercial and industrial electric customers of Edison to build
and maintain on-site generation or co-generation plants, or to provide other
energy-related services.
It is the current intention of Holding Company for CECo Enterprises and its
subsidiaries to engage only in energy-related businesses which will not be
regulated by state or federal agencies which regulate public utilities. Such
businesses may involve competitive and other factors not previously experienced
by Edison, and may have different, and perhaps greater, investment risks than
those involved in the regulated electric utility business of Edison. There can
be no assurance that such businesses will be successful or, if unsuccessful,
that they will not have a direct or indirect adverse effect on Holding Company.
Any losses incurred by such businesses will not be recoverable in utility rates
of Edison.
The unregulated businesses of CECo Enterprises and its subsidiaries are
expected for the foreseeable future to comprise an immaterial amount of the
consolidated assets, and to provide an immaterial amount of the consolidated
revenues, of Holding Company because Edison currently has more than $23 billion
of assets and more than $5 billion of annual revenues.
Holding Company will obtain funds to invest in CECo Enterprises and its
subsidiaries from dividends Holding Company receives on its Edison Common
Stock, borrowings by Holding Company and any dividends it may in the future
receive from any earnings of CECo Enterprises and its subsidiaries, although
there can be no assurance that CECo Enterprises and its subsidiaries will have
any earnings, or pay any dividends to Holding Company, in the foreseeable
future.
MERGER AGREEMENT
The Merger Agreement has been unanimously approved by the Boards of Directors
of Edison and Merging Corp., and they have executed the Merger Agreement,
subject to its approval by the holders of the outstanding Edison Common Stock,
Edison Preferred Stock and Edison Preference Stock as described under "Voting."
In the Merger,
(1) each outstanding share of Edison Common Stock will be converted into
one new share of Holding Company Common Stock;
(2) each outstanding share of Edison Preferred Stock and each outstanding
share of Edison Preference Stock will remain outstanding and unchanged (see
"Treatment of Preferred and Preference Stock");
(3) the outstanding shares of Merging Corp. common stock will be
converted into the same number of shares of Edison Common Stock which are
outstanding immediately prior to the effective time of the Merger, and all
of the Edison Common Stock will then be owned by Holding Company; and
(4) the shares of Holding Company Common Stock presently held by Edison
will be cancelled.
25
<PAGE>
As a result, Edison will become a subsidiary of Holding Company, and all of the
Holding Company Common Stock outstanding immediately after the Merger will be
owned by the holders of Edison Common Stock outstanding immediately prior to
the Merger. See Exhibit A.
The Edison Preferred Stock, Edison Preference Stock, Warrants, first mortgage
bonds, debentures and other long-term debt of Edison will be unchanged and will
continue to be outstanding securities and obligations of Edison after the
Merger. The Edison first mortgage bonds will continue to be secured by a first
mortgage lien on all properties of Edison which are currently subject to such
lien. The Edison Restated Articles of Incorporation as then in effect will not
be changed as a result of the Merger.
SUPPLEMENTAL AGREEMENT
Holding Company, Edison and Merging Corp. have entered into a Supplemental
Agreement in which (a) Holding Company has agreed to issue Holding Company
Common Stock in the Merger and under the Edison Stock Plans (see "Stock
Plans"), (b) Edison and Merging Corp. have agreed to merge pursuant to the
Merger Agreement and (c) Edison and Merging Corp. have agreed not to amend the
Merger Agreement without the consent of Holding Company. See Exhibit B.
REQUIRED REGULATORY APPROVALS
Public Utility Holding Company Act of 1935. Commonwealth Edison Company of
Indiana, Inc. ("Indiana Company"), is a public utility company and a wholly-
owned subsidiary of Edison, which is thus a public utility holding company as
well as a public utility company. As a result of the Merger, Holding Company
will become an affiliate of both Edison and the Indiana Company. Section
9(a)(2) of the 1935 Act requires the prior approval of the SEC under Section 10
of the 1935 Act for any person to become an affiliate of more than one public
utility company, and Holding Company has applied for such approval.
The Indiana Company will continue to be a wholly-owned subsidiary of Edison
after the Merger, and Edison will thus continue to be a public utility holding
company, as well as a public utility company, after the Merger. Edison is, and
both Holding Company and Edison will be, exempt from all provisions of the 1935
Act, except Section 9(a)(2) thereof. The basis for such exemptions is that
Holding Company and Edison are each organized and carry on their business
substantially in Illinois, and that neither Edison nor Holding Company will
derive any material part of its income from the Indiana Company. In its
application to the SEC for approval to become an affiliate of more than one
public utility company as a result of the Merger, Holding Company has also
applied to the SEC for an order for such exemption. Edison files annually the
statement prescribed for such exemption by SEC Regulation 250.2 of the 1935
Act.
Federal Power Act. The FERC has held that the transfer of common stock of a
public utility company, such as Edison, from its existing shareholders to a
holding company in a transaction such as the Merger constitutes a transfer of
the "ownership and control" of the facilities of such utility which is subject
to FERC jurisdiction under the Federal Power Act ("FPA"), and is thus a
"disposition of facilities" subject to FERC review and approval under Section
203 of the FPA; Edison has applied for such approval.
Atomic Energy Act. A provision in the Atomic Energy Act requires NRC consent
for the transfer of control of NRC licenses. In response to an inquiry from
another utility, the NRC Staff has asserted that this provision applies to the
creation of a holding company by an NRC-licensed utility company in a
transaction such as the Merger. Edison holds several NRC licenses, including
operating licenses for its nuclear generating stations, and has applied for NRC
approval under the Atomic Energy Act of the transfer of control of such
licenses in the Merger.
Conditions. The Merger is conditioned on the receipt of orders satisfactory
to Edison and Holding Company from the SEC, FERC and NRC in response to the
applications described above.
ILLINOIS PUBLIC UTILITIES ACT
The Illinois Public Utilities Act ("Illinois Act") requires prior Illinois
Commission approval of reorganizations of Illinois public utilities, such as
Edison, and the Merger is such a reorganization. However, Amendments ("1993
Amendments") to the Illinois Act which became effective on July 13, 1993,
permit certain Illinois electric utilities, including Edison, to create and
become a subsidiary of a
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<PAGE>
holding company on or before January 14, 1995, without the approval or consent
of the Illinois Commission, except that such date would be extended by a
petition for such extension filed with the Illinois Commission on such date,
until the Illinois Commission makes certain findings and denies such petition.
The 1993 Amendments were adopted to enable Edison and any other qualifying
Illinois electric utility to reorganize into a holding company system without
the approval or consent of the Illinois Commission in order to avoid the delays
which are inherent in Illinois Commission proceedings on utility reorganization
applications; Illinois Commission proceedings on another recent and very
similar Illinois utility reorganization application endured for more than two
and two-thirds years before the Illinois Commission approved such
reorganization. The 1993 Amendments recognize that it is important for Illinois
electric utilities to form holding companies expeditiously to enable them to
respond quickly to current and expected competitive activities of non-utility
entities, as described under "Reasons for the Restructuring--Competition."
The restructuring of Edison into a holding company system which is described
in this Prospectus and Proxy Statement is a reorganization permitted by the
1993 Amendments and will not require the approval or consent of the Illinois
Commission.
The 1993 Amendments also permit an Illinois electric utility which has
initiated certain actions to create and become a subsidiary of a holding
company pursuant to the 1993 Amendments, to form, invest in, and guarantee
obligations of subsidiaries which engage in specified energy related
businesses, without the approval or consent of the Illinois Commission.
The 1993 Amendments also (i) require Holding Company to pay or reimburse
Edison for all costs incurred by Edison in connection with the Merger, if it
occurs; (ii) authorize Edison to make a loan to Holding Company of up to the
lesser of $10 million or 2.5% of Edison's retained earnings as reported in the
most recent Annual Report filed by Edison with the Illinois Commission, bearing
interest at the rate of 10% per annum, and require that such loan be repaid not
later than 240 days after the Merger occurs--Edison loans to Holding Company
pursuant to such authority will be used by Holding Company to pay its
restructuring and other expenses; (iii) require Holding Company and Edison to
file with the Illinois Commission, information which would be included in an
application for Illinois Commission approval of the Merger, if such approval
were to be applied for; (iv) require the Illinois Commission to reduce Edison's
rates to reflect additional revenues it would have earned if subsidiaries of
Edison or Holding Company had not provided services specified in the 1993
Amendments, if the Illinois Commission finds that there was no reasonable
probability that customers for such services would have obtained such services
from other sources or provided such services for themselves; (v) limit to the
lesser of $170 million or 20% of Edison's retained earnings as reported in the
most recent Annual Report filed by Edison with the Illinois Commission, the
amount of Edison investments in and guarantees of obligations of subsidiaries
formed pursuant to the 1993 Amendments, including CECo Enterprises and its
subsidiaries--such limit will not apply to Holding Company investments in and
guarantees of obligations of its subsidiaries; (vi) require Edison to transfer
or liquidate its interest in subsidiaries formed pursuant to the 1993
Amendments, including CECo Enterprises and its subsidiaries, if Edison is not a
subsidiary of Holding Company on January 14, 1995, or such later date as may be
determined in an Illinois Commission order which makes certain findings and
denies a petition to extend such date; (vii) provide for Illinois Commission
hearings on contracts or arrangements pursuant to which Edison provides
services and facilities to its affiliates, including CECo Enterprises; and
(viii) require Edison to make any portion of its electric distribution and
transmission facilities which would be used by an Edison affiliate to make an
unregulated sale of electricity, available at the same price and under the same
terms and conditions to any other person who offers to make such sale.
TRANSFER OF EDISON ASSETS TO HOLDING COMPANY
CECo Enterprises has been formed by Edison pursuant to the 1993 Amendments,
and will engage through subsidiaries, including Northwind Inc., only in energy
related businesses permitted by the 1993 Amendments until CECo Enterprises is
transferred to Holding Company. The 1993 Amendments require
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<PAGE>
that Edison transfer or liquidate its interest in CECo Enterprises on the date
that Edison becomes a subsidiary of Holding Company; consequently, Edison
intends to transfer to Holding Company on such date, the stock of CECo
Enterprises as a dividend on the Edison Common Stock held by Holding Company.
Except for dividends or other distributions with respect to Edison Common
Stock held by Holding Company, it is expected that Edison will not transfer
without adequate consideration any of its assets to Holding Company or any
Holding Company subsidiaries. Any transactions, other than dividends on Edison
Common Stock held by Holding Company and transactions permitted by the 1993
Amendments, between Edison and any of its affiliates, including Holding
Company, would require the prior approval of the Illinois Commission.
DIVIDEND POLICY
Holding Company does not now, nor will it after the Merger, conduct directly
any business operations from which it will derive any revenues. Holding Company
plans to obtain funds for its own operations from dividends paid to Holding
Company on the stock of its subsidiaries, and from sales of securities or debt
incurred by Holding Company. Dividends on Holding Company Common Stock will
initially depend upon the earnings, financial condition and capital
requirements of Edison, and its ability to pay dividends on the Edison Common
Stock owned by Holding Company. It is currently contemplated that Holding
Company will pay quarterly dividends on Holding Company Common Stock at the
same rate, and on approximately the same schedule as, dividends have most
recently been paid on Edison Common Stock. The quarterly dividend most recently
declared by the Edison Board of Directors on Edison Common Stock was 40c per
share payable May 1, 1994, to holders of record of such stock on March 31,
1994. The amount of dividends on Edison Common Stock following the Merger is
expected to be greater than the amount of dividends on Holding Company Common
Stock to the extent Holding Company needs funds to pay its expenses and to
invest in its subsidiaries.
TREATMENT OF PREFERRED AND PREFERENCE STOCK
The Merger and restructuring will not result in any change in the outstanding
shares of Edison Preferred Stock or Edison Preference Stock. The decision to
have the Edison Preferred Stock and Edison Preference Stock continue as
securities of Edison is based upon, among other factors, a desire not to alter
or potentially alter the nature of the investment represented by such stock, as
well as the need of Edison not to foreclose future issuances of Preferred Stock
and Preference Stock to help meet its capital requirements. The electric
utility operations of Edison presently constitute and are expected to continue
to constitute, the predominant part of the consolidated assets and earning
power of Holding Company. Accordingly, it is believed that the investment
ratings of the Edison Preferred Stock and Edison Preference Stock will not be
affected by the Merger, and that such shares will retain their qualification
for legal investment for certain investors, by remaining as capital stock of
Edison. Edison Preferred Stock and Edison Preference Stock will continue to
rank senior to Edison Common Stock as to dividends and as to assets of Edison
upon any liquidation.
The restructuring is not expected to affect adversely the holders of Edison
Preferred Stock or Edison Preference Stock. However, neither will the assets or
earnings of the Holding Company subsidiaries (other than Edison) be of any
potential benefit to the holders of such stock if the restructuring is
consummated. See "Transfer of Edison Assets to Holding Company."
After the Merger, Edison will continue to be subject to the informational
requirements of the 1934 Act, and will be required to hold annual meetings of
its Preferred, Preference and Common shareholders. However, Edison may decide
not to solicit proxies from its Preferred and Preference shareholders for the
election of Directors and other actions not requiring class votes of such
shareholders, because the shares of Edison Common Stock to be held by Holding
Company will have sufficient voting power to elect Edison Directors and to take
such action.
POSSIBLE MINORITY INTEREST
As of March 11, 1994, there were outstanding (i) 281,807 shares of Edison
Preferred Stock which are convertible at the option of their holders into an
aggregate of 287,443 shares of Edison Common Stock, and (ii) 128,149 Warrants
which are convertible at the option of their holders into an aggregate
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<PAGE>
of 42,716 shares of Edison Common Stock. Such Edison Preferred Stock and
Warrants will not be changed in the Merger, and thereafter will continue to be
convertible into shares of Edison Common Stock. Immediately after the Merger,
Holding Company will own all of the outstanding shares of Edison Common Stock.
Shares of Edison Common Stock issued upon conversion of Edison Preferred
Stock and Warrants prior to the effective time of the Merger will be converted
in the Merger into shares of Holding Company Common Stock, which will be listed
and traded on the New York, Chicago and Pacific Stock Exchanges.
Following the Merger the Edison Common Stock will no longer be listed or
traded on any stock exchange and there will be no other public market for any
shares of Edison Common Stock into which Edison Preferred Stock or Warrants are
converted after the Merger.
The minority interest in Edison Common Stock which would be created by the
conversion of Edison Preferred Stock or Warrants into shares of Edison Common
Stock after the effective time of the Merger, would require Edison to pay to
the holders of such shares of Edison Common Stock dividends at the same times
and in the same amounts as Edison pays dividends to Holding Company on its
shares of Edison Common Stock. The amount of dividends on Edison Common Stock
following the Merger is expected to be greater than the amount of dividends on
Holding Company Common Stock to the extent Holding Company needs funds to pay
its expenses and to invest in its subsidiaries.
AMENDMENT OR TERMINATION
By mutual consent of their respective Boards of Directors, Edison and Merging
Corp. may amend any of the terms of the Merger Agreement at any time before or
after its approval by their respective shareholders, but not after the time
that the Articles of Merger are filed with the Illinois Secretary of State, but
no such amendment may, in the sole judgment of the Board of Directors of
Edison, materially and adversely affect the rights of the holders of Edison
stock.
The Merger Agreement may be terminated and the Merger abandoned at any time
before or after the shareholders of Edison and Merging Corp. have approved the
Merger Agreement, by action of the Board of Directors of Edison if it
determines that consummation of the transactions provided for in the Merger
Agreement would, for any reason, be inadvisable or not in the best interests of
Edison or its shareholders.
RIGHTS OF DISSENTING SHAREHOLDERS
Sections 11.65 and 11.70 of the Illinois Business Corporation Act of 1983
("Illinois Business Corporation Act") are set forth in Exhibit D and provide
that the holders of Edison Common Stock, Edison Preferred Stock and Edison
Preference Stock entitled to vote at the regular annual meeting have the right
to dissent from consummation of the Merger and obtain the "fair value" of their
shares if the Merger is effected.
In order to perfect such dissenters' rights, a shareholder must (a) deliver
to Edison at the Office of the Corporate Secretary, 37th Floor, 10 South
Dearborn Street, P.O. Box 767, Chicago, Illinois 60690-0767, prior to the
taking of the vote of the shareholders upon the approval of the Merger
Agreement, a written demand for payment for his or her shares if the Merger is
consummated; and (b) not vote his or her shares in favor of the approval of the
Merger Agreement.
Within 10 days after the Merger becomes effective or 30 days after delivery
of the written demand for payment, whichever is later, Edison will advise each
shareholder who perfects his or her right to dissent of the opinion of Edison
as to the estimated fair value of the shareholder's shares. "Fair value" with
respect to a dissenter's shares means the value of such shares immediately
before the consummation of the Merger, excluding any appreciation or
depreciation in anticipation of the Merger, unless such exclusion would be
inequitable. At such time, Edison must elect to (a) make a commitment to
purchase such shares at such estimated fair value or (b) instruct such
dissenting shareholder to sell his or her shares (which, with respect to Edison
Common Stock, will have been converted into shares of Holding Company Common
Stock) within 10 days thereafter. Edison may instruct the shareholder to
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<PAGE>
sell shares only if there is a public market on which such shares may be
readily sold. Such a market will exist for Edison Common Stock (which will have
been converted into Holding Company Common Stock at the Effective Time of the
Merger) because the Holding Company Common Stock will be listed on the New
York, Chicago and Pacific Stock Exchanges immediately following the Merger.
Such a public market will exist for Edison Preferred Stock and for only certain
Series of Edison Preference Stock. See "Edison Preferred Stock and Edison
Preference Stock Market Information." If Edison elects to direct the dissenting
shareholder to sell his or her shares and the shareholder does not sell them
within such 10-day period, the shareholder shall be deemed to have sold such
shares of Holding Company Common Stock or Edison Preferred Stock, or Series of
Edison Preference Stock which are listed on the New York Stock Exchange, at the
average closing price of such Stock on such Exchange during such 10-day period,
or to have sold his or her shares of other Series of publicly traded Edison
Preference Stock at the average of the bid and asked price for such shares
quoted by a principal market maker during such 10-day period, as the case may
be.
A shareholder who perfects his or her right to dissent retains all rights of
a shareholder until the Merger is consummated, at which time Edison will pay to
each dissenter, if Edison has not instructed the dissenting shareholders to
sell their shares in the public market, the amount Edison estimates to be the
fair value of such dissenter's shares, plus interest from the date the Merger
was consummated until the date of payment, upon receipt by Edison of the
certificates representing such shares. Edison will include with such payment a
written explanation of the manner by which the interest was calculated.
If the shareholder does not agree with the Edison estimated fair value or
amount of interest, the shareholder must notify Edison in writing, within 30
days after delivery of the Edison statement of fair value, of the shareholder's
estimated fair value of such shares and amount of interest, and demand payment
of the difference between the shareholder's estimate and (a) the amount paid by
Edison or (b) the proceeds (or the amount deemed to be proceeds) of the sale by
the shareholder, whichever is applicable because of the option selected by
Edison, as described above. If, within 60 days after delivery to Edison of the
shareholder's notification of estimated fair value and amount of interest,
Edison and the shareholder have not agreed in writing on the fair value of the
shares or amount of interest, Edison shall either pay the shareholder the
difference between the respective estimated values or file a petition in the
Circuit Court of Cook County, Illinois, requesting the Court to determine the
fair value of the shares and amount of interest. If the Court determines that
the fair value of the shares plus interest exceeds the amount paid by Edison or
the proceeds of the sale of shares, as the case may be, the dissenting
shareholder shall be entitled to judgment for the amount of the excess. The
Court may also assess the costs of the proceeding against either Edison or one
or more dissenting shareholders, upon making certain findings.
In connection with the Merger, Edison intends to reserve the right to elect,
with respect to Common Stock and Preferred Stock, and Preference Stock for
which there is a public market, (a) to offer to pay to dissenting shareholders
the original estimate of Edison of the fair value of such shares and to pay any
additional amount agreed upon by Edison and the shareholder or ordered by the
Court to be paid by Edison to the shareholder as provided in the Illinois
Business Corporation Act, or (b) to direct a dissenting shareholder to sell his
or her shares and to pay only that amount, if any, in excess of the proceeds of
such sale (or the amount of proceeds deemed to have been received) as may be
agreed upon by Edison and the shareholder or ordered by the Court to be paid by
Edison to the shareholder as provided in the Illinois Business Corporation Act.
With respect to Edison Preference Stock for which there is no public market,
Edison does not have the option described in (b) of the preceding sentence and
it will pay to dissenting holders of such shares the fair value of such shares
determined as described herein.
In perfecting a shareholder's right to dissent, neither a vote against
approval of the Merger Agreement nor a proxy directing such a vote will be
deemed to satisfy the requirement that a written demand for payment be
delivered to Edison prior to the taking of the vote thereon. However, a
shareholder who has delivered such written demand before the taking of the vote
thereon will not be
30
<PAGE>
deemed to have waived his or her right to dissent either by failing to vote
against approval of the Merger Agreement or by failing to furnish a proxy
directing such vote. In the absence of specific direction, the shares
represented by signed proxies will be voted for approval of the Merger
Agreement.
Under the Merger Agreement, the Edison Board of Directors has the right to
abandon the Merger for any reason (even after shareholder approval but before
the time the Articles of Merger are filed with the Illinois Secretary of
State), and such right may be exercised if the Edison Board of Directors
considers the aggregate cost of purchasing dissenting shares to be
unacceptable.
EFFECTIVENESS OF THE RESTRUCTURING
After the Edison shareholders have approved the Merger Agreement,
satisfactory orders of the SEC, FERC and NRC have been received, and all other
conditions to the Merger have been satisfied or waived, Edison and Merging
Corp. will file Articles of Merger with the Illinois Secretary of State. The
Merger will thereafter become effective on the date that the Illinois Secretary
of State issues a Certificate of Merger in accordance with the Illinois
Business Corporation Act.
EXCHANGE OF STOCK CERTIFICATES
If the Merger is effected, it will not be necessary for holders of Edison
Common Stock to exchange their existing stock certificates for certificates for
Holding Company Common Stock. The certificates which presently represent
outstanding shares of Edison Common Stock will automatically represent shares
of Holding Company Common Stock. New certificates bearing the name of the
Holding Company will be issued in the future if, and as, certificates
representing presently outstanding shares of Edison Common Stock are presented
for exchange or transfer.
FEDERAL INCOME TAX CONSEQUENCES
The Merger Agreement provides that the proposed restructuring will not occur
unless Edison receives either a ruling from the Internal Revenue Service or an
opinion of counsel, satisfactory to the Board of Directors, with respect to the
Federal income tax consequences of the Merger. Edison has received a ruling
from the Internal Revenue Service regarding the continuation of the Edison
affiliated group of corporations following the Merger. This ruling ensures,
among other matters, that Holding Company, Edison and all current Edison
subsidiaries will be entitled to file a consolidated Federal income tax return
following the Merger and that the distribution by Edison of the stock of CECo
Enterprises to Holding Company on the date of the Merger will not be a
currently taxable event. Edison has received an opinion from its counsel,
Sidley & Austin, regarding certain Federal income tax consequences of the
Merger, to the effect that:
(1) no gain or loss will be recognized by non-dissenting holders of
Edison Common Stock upon the conversion of Edison Common Stock into Holding
Company Common Stock in the Merger;
(2) no gain or loss will be recognized by non-dissenting holders of
Edison Preferred Stock or Edison Preference Stock as a result of the
Merger;
(3) the basis of the Holding Company Common Stock deemed received in the
Merger by non-dissenting holders of Edison Common Stock will be the same as
the basis of the Edison Common Stock converted into such Holding Company
Common Stock in the Merger;
(4) the holding period of Holding Company Common Stock deemed received in
the Merger by non-dissenting holders of Edison Common Stock will include
the period during which they held the Edison Common Stock converted into
such Holding Company Common Stock in the Merger, provided such Edison
Common Stock is held as a capital asset by such holders at the effective
time of the Merger; and
(5) no gain or loss will be recognized by Holding Company or Edison as a
result of the Merger.
Holders of Edison Common Stock, Edison Preferred Stock or Edison Preference
Stock who contemplate dissenting from the Merger should consult their tax
advisors concerning the tax consequences thereof.
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<PAGE>
LISTING OF HOLDING COMPANY COMMON STOCK
Holding Company will apply to have its Common Stock listed on the New York,
Chicago and Pacific Stock Exchanges. It is expected that such listings will
become effective on the effective date of the Merger, subject to the rules of
the New York, Chicago and Pacific Stock Exchanges.
REGULATION OF HOLDING COMPANY
Holding Company, as the owner of the Edison Common Stock and, indirectly, the
Indiana Company common stock, will be a holding company under the 1935 Act.
However, Holding Company will be exempt from all provisions of the 1935 Act
except Section 9(a)(2) thereof, upon its receipt of the SEC order for such
exemption for which it has applied, or pursuant to annual filings of the
statement prescribed for such exemption by SEC Regulation 250.2 of the 1935
Act, as described under "Required Regulatory Approvals--Public Utility Holding
Company Act of 1935". Section 9(a)(2) of the 1935 Act requires prior SEC
approval of the direct or indirect acquisition by Holding Company of 5% or more
of the voting securities of any other electric or gas utility company. There
are also limits on the extent to which Holding Company and its non-utility
subsidiaries can enter into businesses which are not "functionally related" to
the electric utility business without raising questions about Holding Company's
exempt status. SEC policies regarding the scope of permissible non-utility
activities of a public utility holding company are subject to change but
guidelines established in prior decisions of the SEC would require Holding
Company to remain engaged primarily and predominantly in the electric utility
business and to limit the size of its activities outside of such business
relative to Holding Company as a whole.
Holding Company has no present intention of becoming a registered holding
company subject to regulation by the SEC under the 1935 Act.
MANAGEMENT
The Directors of Edison will also become the Directors of Holding Company at
the effective time of the Merger, and they will thereafter serve as the
Directors of both companies. If the Edison shareholders approve the Merger
Agreement, they will be considered also to have ratified the election of such
persons as the Directors of Holding Company. Until the Merger becomes
effective, James J. O'Connor, Chairman and a Director of Edison, and Samuel K.
Skinner, President and a Director of Edison, will be the only Directors of
Holding Company.
The current executive officers of Holding Company are also executive officers
of Edison. The Holding Company executive officers are:
<TABLE>
<S> <C>
James J. O'Connor Chairman
Samuel K. Skinner President
John C. Bukovski Vice President
Roger F. Kovack Comptroller
Dennis F. O'Brien Treasurer
David A. Scholz Secretary
</TABLE>
HOLDING COMPANY CAPITAL STOCK
Authorized. The authorized capital stock of Holding Company consists of 400
million shares of Common Stock, without par value, the provisions of which are
included in the Holding Company Articles of Incorporation attached to this
Prospectus and Proxy Statement as Exhibit C.
Common Stock. Holders of Holding Company Common Stock are entitled to receive
(a) dividends when, as and if declared by its Board of Directors, and (b) all
of the assets of Holding Company available for distribution on a pro rata basis
upon its liquidation, dissolution or winding up, after the payment of all debts
and other obligations.
32
<PAGE>
Each share of Holding Company Common Stock entitles its holder to one vote on
matters properly submitted to a vote of Holding Company shareholders, and, like
the holders of Edison Common Stock, they have the right to cumulate their votes
in elections of Directors.
Except for differences described under "Comparative Shareholders' Rights,"
the provisions of the Articles of Incorporation of Holding Company which
establish the rights of the holders of its Common Stock are essentially the
same as those in the Restated Articles of Incorporation of Edison.
No holder of Holding Company Common Stock has any preemptive or preferential
right to subscribe for any additional issue of Holding Company Common Stock or
to subscribe for any security convertible into Holding Company Common Stock. No
redemption, conversion or sinking fund provisions are applicable to shares of
Holding Company Common Stock.
The Holding Company Common Stock issued in the Merger will be fully paid and
nonassessable.
COMPARATIVE SHAREHOLDERS' RIGHTS
Edison and Holding Company are both Illinois corporations. When the Merger
becomes effective, holders of Edison Common Stock will become holders of
Holding Company Common Stock, and their rights will be governed by the Articles
of Incorporation of Holding Company ("Holding Company Articles") instead of the
Restated Articles of Incorporation of Edison ("Edison Articles"). Holding
Company Articles have been prepared in accordance with the Illinois Business
Corporation Act and give the Holding Company broad corporate powers to engage
in any lawful activity for which a corporation may be formed under the laws of
the State of Illinois. A copy of Holding Company Articles is attached as
Exhibit C to this Prospectus and Proxy Statement.
Certain differences between the rights of holders of Holding Company Common
Stock and those of holders of Edison Common Stock are summarized below.
(a) Preferred and Preference Stock. Holding Company Articles do not
authorize any class of stock other than Common Stock, and the approval of
the holders of Holding Company Common Stock would be required for the
future authorization of any Holding Company preferred stock or preference
stock or additional Common Stock. In addition to the presently outstanding
shares of Edison Preferred Stock and Edison Preference Stock, as of March
11, 1994, there were 850,000 and 9,810,451 authorized but unissued shares
of Edison Prior Preferred Stock and Edison Preference Stock, respectively,
which may be issued in series having such rights and preferences as may be
designated by the Edison Board of Directors. There are no restrictions upon
the issuance of any of such authorized shares except for any actions
required by Illinois law to be taken by the Edison Board of Directors.
(b) Common Stock. Holding Company Articles authorize the issuance of
400,000,000 shares of Common Stock whereas the Edison Articles presently
authorize the issuance of 250,000,000 shares of Common Stock. As of March
11, 1994, there were 213,794,559 shares of Edison Common Stock issued and
outstanding, and 5,950,171 shares of Edison Common Stock reserved for
issuance under certain Stock Plans. There will be the same number of shares
of Holding Company Common Stock issued, outstanding and reserved for
issuance under such Stock Plans immediately after the Merger as the number
of shares of Edison Common Stock which are issued, outstanding and reserved
for such issuance immediately prior to the Merger. The additional
authorized but unissued shares of Holding Company Common Stock could be
used for stock splits or for acquisitions.
Indemnification. Holding Company Articles require Holding Company in certain
circumstances to indemnify its Directors, officers, employes, agents and
certain other persons who serve Holding Company, to the full extent permitted
by the Illinois Business Corporation Act. Holding Company Articles also
authorize it to enter into agreements with its Directors, officers, employes
and others to provide for such indemnification.
33
<PAGE>
Although the Edison Articles currently contain no provisions relating to
indemnification, its By-Laws contain provisions requiring Edison in certain
circumstances to indemnify its Directors, officers, employes, agents and
certain other persons who serve Edison. The Edison shareholders at their
regular annual meeting will consider a proposal to add to the Edison Articles,
provisions relating to indemnification which are the same as those included in
the Holding Company Articles. See "Item C. Amendment of the Edison Restated
Articles of Incorporation."
Limitation on Director Liability. Holding Company Articles include a
provision which limits the personal liability of Holding Company Directors for
monetary damages arising from breach of fiduciary duty, as authorized by a
change to the Illinois Business Corporation Act which became effective January
1, 1994.
Although the Edison Articles currently contain no provisions limiting the
personal liability of Edison Directors for monetary damages, the Edison
shareholders at their regular annual meeting will consider a proposal to add to
the Edison Articles, provisions limiting the liability of Edison Directors
which are the same as those included in the Holding Company Articles. See "Item
C. Amendment of the Edison Restated Articles of Incorporation."
Purpose Clause. The corporate purposes for which Edison may engage in
business are those related to electric, gas and certain other utility
businesses and related activities. Holding Company is authorized by its
Articles, as permitted by the Illinois Business Corporation Act, to engage in
any and all lawful businesses.
Deferred Compensation Plan. Edison Articles permit the Edison Board of
Directors to establish a Deferred Compensation Plan for selected key executive
and management employes of Edison and its wholly-owned subsidiaries; Holding
Company Articles do not provide for any such Plan. The Holding Company Board of
Directors could establish a similar Plan even though the Holding Company
Articles do not specifically provide for such a Plan.
STOCK PLANS
If the Merger is consummated, the Edison Employe Savings and Investment Plan,
1993 Long-Term Incentive Plan, Employe Stock Purchase Plan and Dividend
Reinvestment and Stock Purchase Plan will be amended to provide that Holding
Company Common Stock will be delivered instead of Edison Common Stock pursuant
to such Plans. By approving the Merger Agreement, the Edison shareholders will
be considered also to have ratified the amendment of such Plans to provide for
the delivery of Holding Company Common Stock thereunder.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for Edison Common Stock is First Chicago
Trust Company of New York. The Transfer Agent and Registrar for Holding Company
Common Stock is First Chicago Trust Company of New York.
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<PAGE>
EDISON COMMON STOCK MARKET PRICES AND DIVIDENDS
Edison Common Stock is listed and principally traded on the New York, Chicago
and Pacific Stock Exchanges. The table below sets forth the dividends declared
and the high and low sales prices of Edison Common Stock for the periods
indicated as reported in The Wall Street Journal as New York Stock Exchange--
Composite Transactions.
<TABLE>
<CAPTION>
PRICE RANGE
DIVIDENDS ---------------------------
DECLARED HIGH LOW
--------- ------- -------
<S> <C> <C> <C>
1992
First Quarter $0.75 $40 1/8 $33 3/4
Second Quarter 0.75 34 1/4 26 5/8
Third Quarter 0.40 27 5/8 22 7/8
Fourth Quarter 0.40 26 21 3/4
1993
First Quarter $0.40 $28 1/4 $22 7/8
Second Quarter 0.40 29 7/8 25 5/8
Third Quarter 0.40 31 5/8 27 3/8
Fourth Quarter 0.40 30 5/8 27 3/8
1994
First Quarter
(through March 3, 1994) $0.40 $28 3/4 $25 7/8
</TABLE>
EDISON PREFERRED STOCK AND EDISON PREFERENCE STOCK MARKET INFORMATION
The Edison Preferred Stock and six Series of Edison Preference Stock are
listed and principally traded on the New York, Chicago and Pacific Stock
Exchanges. The table below sets forth the high and low sales prices of Edison
Preferred Stock and Preference Stock of such Series for the periods indicated
as reported in The Wall Street Journal as New York Stock Exchange--Composite
Transactions.
<TABLE>
<CAPTION>
EDISON
PREFERRED STOCK
---------------
HIGH LOW
------- -------
<S> <C> <C>
1992
First Quarter $39 3/4 $34 1/2
Second Quarter 34 3/4 27 1/4
Third Quarter 29 26 1/8
Fourth Quarter 28 3/4 26 1/2
1993
First Quarter $28 1/2 $25 3/4
Second Quarter 28 7/8 26 1/2
Third Quarter 31 3/4 27 3/8
Fourth Quarter 30 3/4 28 1/8
1994
First Quarter
(through
February 28,
1994) $28 5/8 $26 1/4
<CAPTION>
EDISON PREFERENCE STOCK
------------------------------------------------------------------------------------------------------
$1.90 SERIES $2.00 SERIES $7.24 SERIES $8.40 SERIES $8.38 SERIES $8.40 SERIES B
--------------- --------------- ---------------- ----------------- ----------------- -----------------
HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW
------- ------- ------- ------- -------- ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992
First Quarter $24 1/2 $22 7/8 $25 7/8 $24 1/8 $ 91 $87 1/2 $100 1/2 $ 97 7/8 $100 $ 96 1/2 $103 $100
Second Quarter 23 7/8 22 25 23 1/4 90 1/4 85 100 3/4 96 1/8 99 1/4 95 1/2 102 101
Third Quarter 24 22 1/8 25 3/4 23 1/2 90 85 1/2 101 97 1/4 100 95 1/2 102 1/8 100 3/4
Fourth Quarter 24 22 1/2 25 1/4 23 1/8 88 85 99 3/4 95 97 1/2 94 102 1/2 101 1/2
1993
First Quarter $25 1/2 $22 3/8 $26 $23 5/8 $ 95 1/4 $85 1/2 $102 $ 94 5/8 $102 $ 94 $102 $ 98
Second Quarter 25 1/2 24 26 3/8 25 3/8 97 93 103 99 5/8 102 1/2 99 103 98
Third Quarter 26 3/8 24 3/4 27 25 1/2 102 1/2 93 1/2 105 101 1/4 105 100 1/2 101 3/4 101 3/4
Fourth Quarter 25 7/8 24 1/4 26 1/4 25 101 3/4 94 1/2 104 1/2 101 1/4 103 101 102 3/4 101
1994
First Quarter
(through
February 28,
1994) $25 3/4 $24 1/4 $26 $25 $98 1/2 $94 3/8 $102 1/2 $100 $102 1/2 $100 $101 1/4 $101
</TABLE>
The $8.20, $8.85 and $9.25 Series of Edison Preference Stock are held by
institutional investors and are not publicly traded. The $1.96, $6.875, and
$9.00 Series of Edison Preference Stock are traded on a limited and sporadic
basis in the over-the-counter market, but prices are not quoted in any
35
<PAGE>
automated quotation system. The following table sets forth the average of the
high and low per share bid prices of each such Series for the periods indicated
based on information provided to Edison by firms which deal in shares of such
Series.
<TABLE>
<CAPTION>
EDISON PREFERENCE STOCK
---------------------------------------------------
$1.96 SERIES $6.875* SERIES $9.00 SERIES
--------------- ----------------- -----------------
HIGH LOW HIGH LOW HIGH LOW
------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1992
First Quarter $27 1/8 $26 5/8 $108 1/2 $106 3/8
Second Quarter 27 1/8 26 3/4 108 1/4 106 3/8
Third Quarter 26 3/4 25 3/8 109 106 3/8
Fourth Quarter 26 3/4 24 109 7/8 107 7/8
1993
First Quarter $25 1/8 $24 $112 $108 1/2
Second Quarter 25 3/4 25 1/4 $101 $100 112 1/4 110 5/8
Third Quarter 26 1/8 25 3/8 105 1/2 101 1/4 112 1/8 110 1/4
Fourth Quarter 27 1/4 26 1/8 106 1/4 100 3/4 112 7/8 110 5/8
1994
First Quarter
(through March 11,
1994) $27 1/2 $26 7/8 $102 1/2 $100 1/2 $113 $111 1/2
</TABLE>
- --------
*Issued in May 1993
The foregoing average bid prices do not reflect retail mark-ups, mark-downs
or commissions and do not necessarily reflect actual transactions.
LEGAL OPINIONS
Certain legal matters relating to the issuance of the Holding Company Common
Stock in the Merger will be passed upon by Sidley & Austin, One First National
Plaza, Chicago, Illinois 60603.
EXPERTS
The financial statements and schedules included or incorporated by reference
in the 1992 Form 10-K, the March 31, 1993 Form 10-Q, the June 30, 1993 Form 10-
Q, the September 30, 1993 Form 10-Q, the January 28, 1993 Form 8-K and the 1994
Form 8-K, incorporated by reference herein, have been audited by Arthur
Andersen & Co., independent public accountants, as indicated in their reports
with respect thereto, and are incorporated herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving their
reports.
ITEM C. AMENDMENT OF THE EDISON RESTATED ARTICLES OF INCORPORATION
The Edison Board of Directors recommends that the shareholders approve a
proposal to amend the Edison Restated Articles of Incorporation by adding
Article SEVEN (i) to limit the personal liability of the Edison Directors to
Edison or its shareholders for monetary damages arising from breach of
fiduciary duty and (ii) to indemnify Edison Directors, officers, agents and
other persons who provide services to Edison, to the full extent permitted by
the Illinois Business Corporation Act. The proposed amendment to limit the
personal liability of Edison Directors is authorized by a change to the
Illinois Business Corporation Act that became effective on January 1, 1994. The
proposed amendment will assist Edison in attracting and retaining qualified
individuals to serve Edison.
36
<PAGE>
BACKGROUND
Until the amendment of the Illinois Business Corporation Act in July 1993,
Illinois was one of the few states that had not taken action to protect
corporate Directors who acted in good faith but were nevertheless threatened
with substantial liability from negligence claims. As a result of the change in
the law, an Illinois corporation is now able to provide its Directors with
liability protection similar to that available from companies incorporated in
the vast majority of other states, including Delaware. Liability is not limited
under Illinois law if the acts or omissions of Directors are in bad faith,
involve intentional wrongdoing, violate certain statutory provisions, or result
in profit or other advantage to which they are not legally entitled.
The By-Laws of Edison currently provide for indemnification of Edison
Directors, officers, agents and other persons who serve Edison, to the full
extent permitted by the Illinois Business Corporation Act, and the proposed
amendment would add such a provision to the Edison Restated Articles of
Incorporation.
Edison currently maintains liability insurance policies which indemnify
Edison's Directors and officers, the Directors and officers of subsidiaries of
Edison, and the trustees of Edison's Service Annuity Funds, against loss
arising from claims by reason of their legal liability for acts as such
Directors, officers or trustees, subject to limitations and conditions as set
forth in the policies. Among other limitations, the primary policy states that
no coverage is provided for loss representing "amounts which are deemed
uninsurable under the law pursuant to which this policy shall be construed".
TEXT OF THE PROPOSED AMENDMENT
The text of Article SEVEN proposed to be added to the Edison Restated
Articles of Incorporation is as follows:
(a) A director of the Company shall not be personally liable to the
Company or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its shareholders, (ii) for
acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law, (iii) under Section 8.65 of the Business
Corporation Act of the State of Illinois, or (iv) for any transaction from
which the director derived an improper personal benefit. If the Business
Corporation Act of the State of Illinois is amended to authorize corporate
action further eliminating or limiting the personal liability of directors,
then the liability of a director of the Company shall be eliminated or
limited to the full extent permitted by the Business Corporation Act of the
State of Illinois, as so amended. Any repeal or modification of this
paragraph (a) by the shareholders of the Company shall not adversely affect
any right or protection of a director of the Company existing at the time
of such repeal or modification.
(b) Each person who is or was or had agreed to become a director or
officer of the Company, and each person who is or was serving or who had
agreed to serve at the request of the Board or an officer of the Company as
an employe or agent of the Company or as a director, officer, employe, or
agent, trustee or fiduciary of another corporation, partnership, joint
venture, trust or other enterprise (including the heirs, executors,
administrators or estate of such person), shall be indemnified by the
Company to the full extent permitted by the Business Corporation Act of the
State of Illinois or any other applicable laws as presently or hereafter in
effect. Without limiting the generality of the foregoing, the Company may
enter into one or more agreements with any person which provide for
indemnification greater or different than that provided in this paragraph
(b). Any repeal or modification of this paragraph (b) shall not adversely
affect any right or protection existing hereunder or under any such
agreement immediately prior to such repeal or modification.
REASONS FOR THE PROPOSED AMENDMENT
Limitation of Director Liability. Directors of Illinois corporations are
required, under Illinois law, to perform their duties in good faith and with
that degree of care that an ordinarily prudent person in a like position would
use under similar circumstances. A Director may rely upon information, opinions
and
37
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reports prepared by certain officers or employes, professional advisors, or
committees of the Board. Decisions made on that basis are protected by the
"business judgment rule" and should not be questioned by a court in the event
of a lawsuit challenging such decisions. However, the expense of defending such
lawsuits and the inevitable uncertainties of applying the business judgment
rule to particular facts and circumstances mean, as a practical matter, that
Directors are not relieved of the threat of monetary damage awards. The Board
of Directors of Edison, therefore, believes that the proposed amendment should
be adopted in order to ensure that Edison will continue to be able to attract
and retain competent, qualified and talented persons to serve as its Directors.
Indemnification. Although the Edison By-Laws currently provide for the
indemnification of Edison Directors, officers, agents and other persons who
serve Edison, such By-Laws could be changed unilaterally and without notice by
the Edison Board of Directors. The proposed amendment would add such provisions
to the Edison Restated Articles of Incorporation which can only be changed by
action of the Edison shareholders after notice. Indemnification provisions in
the Edison Restated Articles of Incorporation are thus less likely to be
changed than similar provisions in its By-Laws, and the enhanced stability,
predictability and security which result from including such provisions in the
Edison Restated Articles of Incorporation are expected to enhance the ability
of Edison to attract and retain qualified persons to serve it.
EFFECT OF THE PROPOSED AMENDMENT
Limitation of Director Liability. The proposed amendment would protect the
Edison Directors against personal liability to Edison or its shareholders for
any breach of duty unless a judgment or other final adjudication adverse to
them establishes (i) a breach of duty of loyalty to Edison, (ii) acts or
omissions in bad faith or involving intentional misconduct or a knowing
violation of the law, (iii) acts violating the prohibitions contained in
Section 8.65 of the Illinois Business Corporation Act against certain improper
distributions of assets, or (iv) an improper personal benefit to a Director to
which he or she was not legally entitled.
The amendment as proposed would not reduce the fiduciary duty of a Director;
it merely limits monetary damage awards to Edison and its shareholders arising
from certain breaches of the duty. It does not affect the availability of
equitable remedies, such as the right to enjoin or rescind a transaction, based
upon a Director's breach of fiduciary duty. The amendment also does not affect
a Director's liability for acts taken or omitted prior to the time it becomes
effective (after shareholder approval and upon filing with the Illinois
Secretary of State). The limitation of liability afforded by the proposed
amendment affects only actions brought by Edison or its shareholders, and does
not preclude or limit recovery of damages by third parties.
Indemnification. The proposed amendment would not change the rights of Edison
Directors, officers, agents and other persons who serve Edison, to be
indemnified by it to the full extent permitted by the Illinois Business
Corporation Act, but would give them such rights under the Edison Restated
Articles of Incorporation as well as under the Edison By-Laws.
ITEM D. APPROVAL OF AUDITORS
Subject to approval of the shareholders, the Board of Directors of Edison has
appointed Arthur Andersen & Co., independent public accountants, as Auditors to
examine the annual and quarterly consolidated financial statements of Edison
and its subsidiary companies for 1994. The shareholders will be asked at the
meeting to approve such appointment. The firm of Arthur Andersen & Co. has
audited the accounts of Edison since 1932. A representative of Arthur Andersen
& Co. will be present at the meeting to make a statement, if such
representative so desires, and to respond to shareholders' questions.
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* * *
Any shareholder proposal intended to be presented at the 1995 annual meeting
of Edison shareholders must be received at the principal executive offices of
Edison by November 28, 1994, in order to be considered for inclusion in any
proxy materials of Edison relating to that meeting. Any such proposal should be
directed to the Secretary of Edison located on the 37th Floor, First National
Bank Building, 10 South Dearborn Street, Chicago, Illinois. If mailed, it
should be sent to Secretary, Commonwealth Edison Company, 10 South Dearborn
Street, Post Office Box 767, Chicago, Illinois 60690-0767.
TRANSACTION OF OTHER BUSINESS
As of the date of this Prospectus and Proxy Statement, management knows of no
matters to be brought before the annual meeting other than the matters referred
to in this Prospectus and Proxy Statement. If, however, further business is
presented, the proxy holders will act in accordance with their best judgment.
By order of the Edison Board of Directors.
David A. Scholz
Secretary
March , 1994
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EXHIBIT A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is dated as of January 28,
1994, between Commonwealth Edison Company, an Illinois corporation ("Edison"),
and CECo Merging Corporation, an Illinois corporation ("Merging Corp.").
WITNESSETH
WHEREAS, Edison has an authorized capitalization consisting of:
(i) 250,000,000 shares of Common Stock, par value $12.50 per share
("Edison Common Stock"), of which 213,765,354 shares were issued and
outstanding at January 21, 1994;
(ii) 850,000 shares of Prior Preferred Stock, par value $100 per share
("Edison Prior Preferred Stock"), none of which were issued and outstanding
at January 21, 1994;
(iii) 285,806 shares of $1.425 Convertible Preferred Stock, without par
value ("Edison Preferred Stock"), of which 285,806 shares were issued and
outstanding at January 21, 1994; Edison Preferred Stock is convertible into
Edison Common Stock at the rate of 1.02 shares of Edison Common Stock for
each share of Edison Preferred Stock, subject to future adjustment; and
(iv) 13,789,839 shares of Preference Stock, without par value ("Edison
Preference Stock"), of which 13,789,839 shares were issued and outstanding
at January 21, 1994; and
WHEREAS, Merging Corp. has an authorized capitalization consisting of 100
shares of Common Stock, without par value ("Merging Corp. Common Stock"), all
of which are issued and outstanding and owned beneficially and of record by
CECo Holding Company, an Illinois corporation ("Holding Company"); and
WHEREAS, Holding Company has an authorized capitalization consisting of
400,000,000 shares of Common Stock, without par value ("Holding Company Common
Stock"), of which 100 shares are issued and outstanding and owned beneficially
and of record by Edison; and
WHEREAS, the Boards of Directors of Edison, Merging Corp. and Holding
Company, deem it advisable for Merging Corp. to merge with and into Edison
("Merger") in accordance with the Illinois Business Corporation Act of 1983, as
amended ("Act"), and this Agreement; and
WHEREAS, Edison, Merging Corp. and Holding Company have entered into a
Supplemental Agreement dated as of January 28, 1994 ("Supplemental Agreement"),
pursuant to which Holding Company has agreed, among other things, to issue
shares of Holding Company Common Stock upon the conversion of Edison Common
Stock in the Merger.
NOW THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, Edison and Merging Corp. agree that
Merging Corp. shall merge with and into Edison, Edison shall be the corporation
surviving the Merger and the terms and conditions of the Merger, the mode of
carrying it into effect and the manner and basis of converting shares in the
Merger shall be as follows:
ARTICLE I
THE MERGER
(a) Subject to and in accordance with the provisions of this Agreement,
Articles of Merger shall be executed by Edison and Merging Corp. and filed in
the Office of the Secretary of State of Illinois as provided in Sections
11.25(a) and 1.10 of the Act.
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(b) The Merger shall become effective at the time ("Effective Time") the
Secretary of State of Illinois issues a Certificate of Merger in accordance
with Sections 11.25(b) and 11.40 of the Act.
(c) At the Effective Time, Merging Corp. shall be merged with and into
Edison, Edison shall be and is designated as the surviving corporation and
shall continue its corporate existence under the laws of the State of Illinois
and the separate existence of Merging Corp. shall cease (Edison and Merging
Corp. are referred to herein as the "Constituent Corporations" and Edison, the
corporation designated as the surviving corporation, is referred to herein as
the "Surviving Corporation").
(d) Prior to and after the Effective Time, Edison and Merging Corp.,
respectively, shall take all such action as may be necessary or appropriate in
order (i) to effect the Merger, and (ii) thereafter to carry out the purposes
of this Agreement to vest in the Surviving Corporation all the rights,
privileges, immunities and franchises, as of a public or a private nature, of
each Constituent Corporation; and all property, real, personal and mixed, and
all debts and all choses in action, and all and every other interest, of or
belonging to or due to, each Constituent Corporation, and the officers and
Directors of each Constituent Corporation as of the Effective Time shall take
all such action.
ARTICLE II
TERMS OF CONVERSION OF SHARES
At the Effective Time:
(a) Each share of Edison Common Stock issued and outstanding immediately
prior to the Effective Time shall thereupon, and without the surrender of
the stock certificate therefor or any other action on the part of the
holder thereof, be changed and converted into one fully paid and
nonassessable share of Holding Company Common Stock;
(b) The shares of Edison Prior Preferred Stock, if any, and Edison
Preferred Stock and Edison Preference Stock issued and outstanding
immediately prior to the Effective Time shall not be changed, converted or
otherwise affected by the Merger, and each such share shall continue to be
issued and outstanding and to be one fully paid and nonassessable share of
the particular series of Edison Prior Preferred Stock, Edison Preferred
Stock or Edison Preference Stock of the Surviving Corporation;
(c) The shares of Merging Corp. Common Stock issued and outstanding
immediately prior to the Effective Time shall be changed and converted into
the number of shares of Edison Common Stock issued and outstanding
immediately prior to the Effective Time, which shall thereupon be issued
and fully paid and nonassessable shares of the Surviving Corporation;
(d) Each share of Holding Company Common Stock issued and outstanding
immediately prior to the Effective Time shall be cancelled and retired and
all rights in respect thereof shall cease; and
(e) As provided in the Supplemental Agreement, (i) the Edison Employe
Savings and Investment Plan, 1993 Long-Term Incentive Plan, Employe Stock
Purchase Plan and Dividend Reinvestment and Stock Purchase Plan
(collectively the "Plans") will be amended to provide for the delivery of
Holding Company Common Stock instead of Edison Common Stock thereunder;
each right to acquire shares of Edison Common Stock, including, without
limitation, rights (including stock options) to acquire Edison Common Stock
pursuant to any of the Plans, granted and outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into and become a right to
acquire the same number of shares of Holding Company Common Stock at the
same price per share, and upon the same terms and subject to the same
conditions as were applicable immediately prior to the Effective Time under
the relevant right; and (ii) Holding Company shall reserve such number of
shares of Holding Company Common Stock for purposes of the Plans as is
equal to the number of shares of Edison Common Stock so reserved as of the
Effective Time.
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ARTICLE III
ARTICLES OF INCORPORATION AND BY-LAWS
(a) From and after the Effective Time, and until thereafter amended as
provided by law, the Restated Articles of Incorporation of Edison as in effect
immediately prior to the Effective Time shall be and continue to be the
Restated Articles of Incorporation of the Surviving Corporation.
(b) From and after the Effective Time, the By-Laws of Edison as in effect
immediately prior to the Effective Time shall be and continue to be the By-Laws
of the Surviving Corporation until amended.
ARTICLE IV
DIRECTORS AND OFFICERS
The persons who are Directors and officers of Edison immediately prior to the
Effective Time shall continue as Directors and officers, respectively, of the
Surviving Corporation and shall continue to hold office as provided in the By-
Laws of the Surviving Corporation. If, at or following the Effective Time, a
vacancy shall exist in the Board of Directors or in the position of any officer
of the Surviving Corporation, such vacancy may be filled in the manner provided
in the By-Laws of the Surviving Corporation.
ARTICLE V
STOCK CERTIFICATES
Following the Effective Time, each holder of an outstanding certificate or
certificates theretofore representing shares of Edison Common Stock may, but
shall not be required, to surrender the same to Holding Company for
cancellation and exchange or transfer, and each such holder or transferee
thereof will be entitled to receive a certificate or certificates representing
the same number of shares of Holding Company Common Stock as the number of
shares of Edison Common Stock previously represented by the stock certificate
or certificates surrendered. Until so surrendered for cancellation and exchange
or transfer, each outstanding certificate which, prior to the Effective Time,
represented shares of Edison Common Stock shall be deemed and treated for all
corporate purposes to represent the ownership of the same number of shares of
Holding Company Common Stock as though such surrender for cancellation and
exchange or transfer thereof had taken place. The stock transfer books for
Edison Common Stock shall be deemed to be closed at the Effective Time, and no
transfer of shares of Edison Common Stock outstanding immediately prior to the
Effective Time shall thereafter be made on such books. Following the Effective
Time, the holders of certificates representing Edison Common Stock outstanding
immediately before the Effective Time shall cease to have any rights with
respect to stock of the Surviving Corporation and their sole rights shall be
with respect to the Holding Company Common Stock into which their shares of
Edison Common Stock shall have been converted in the Merger.
ARTICLE VI
CONDITIONS TO THE MERGER
Consummation of the Merger is subject to the satisfaction of the following
conditions:
(a) The Merger shall have received such approval of the shareholders of
each Constituent Corporation entitled to vote thereon as is required by the
Act and the Articles of Incorporation of each Constituent Corporation.
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(b) There shall have been obtained either a ruling of the Internal
Revenue Service satisfactory to the Board of Directors of Edison and its
counsel, or an opinion of counsel satisfactory to the Board of Directors of
Edison, with respect to the tax consequences of the Merger and other
transactions incident thereto.
(c) The Holding Company Common Stock to be issued and to be reserved for
issuance as a result of the Merger shall have been approved for listing,
upon official notice of issuance, by the New York, Chicago and Pacific
Stock Exchanges.
(d) A registration statement or registration statements relating to the
shares of Holding Company Common Stock to be issued or reserved for
issuance as a result of the Merger, shall be effective under the Securities
Act of 1933, as amended, and shall not be the subject of any "stop order."
(e) Edison shall have received all consents, approvals and legal opinions
in form and substance satisfactory to Edison, that are necessary or
appropriate for the consummation of the Merger and all other transactions
contemplated thereby.
(f) There shall be no litigation, proceedings or actions pending or
threatened concerning the Merger which in the judgment of the Board of
Directors of Edison renders consummation of the Merger inadvisable.
ARTICLE VII
AMENDMENT, WAIVER AND TERMINATION
(a) Edison and Merging Corp. by mutual consent of their respective Boards of
Directors may amend, modify or supplement this Agreement or waive any condition
set forth in Article VI hereof in such manner as may be agreed upon by them in
writing, at any time before or after approval of this Agreement by the
shareholders of Edison, but not after the time that the Articles of Merger are
filed with the Illinois Secretary of State ("Filing Time"); provided, however,
that no such amendment, modification, supplement or waiver shall, in the sole
judgment of the Board of Directors of Edison, materially and adversely affect
the rights of the shareholders of Edison.
(b) Consummation of the Merger may be deferred by the Board of Directors of
Edison or any authorized officer of Edison for a reasonable period of time if
said Board or officer determines such deferral would be in the best interest of
Edison or its shareholders.
(c) This Agreement may be terminated and the Merger and other transactions
herein provided for abandoned at any time prior to the Filing Time, whether
before or after approval of this Agreement by the shareholders of Edison, by
action of the Board of Directors of Edison if said Board of Directors
determines for any reason that the consummation of the transactions herein
provided for would for any reason be inadvisable or not in the best interests
of Edison or its shareholders.
ARTICLE VIII
MISCELLANEOUS
(a) This Agreement may be executed in counterparts, each of which when so
executed shall be deemed to be an original, and such counterparts shall
together constitute but one and the same instrument.
(b) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Illinois.
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IN WITNESS WHEREOF, Edison and Merging Corp., pursuant to approval and
authorization duly given by resolutions adopted by their respective Boards of
Directors, have each caused this Agreement and Plan of Merger to be executed by
its Chairman of the Board, its President or one of its Vice Presidents and
attested by its Secretary or one of its Assistant Secretaries.
Commonwealth Edison Company
/s/ James J. O'Connor
By __________________________________
James J. O'Connor
Chairman
/s/ David A. Scholz
Attest: _____________________________
David A. Scholz
Secretary
CECo Merging Corporation
/s/ James J. O'Connor
By __________________________________
James J. O'Connor
Chairman
/s/ David A. Scholz
Attest: _____________________________
David A. Scholz
Secretary
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EXHIBIT B
SUPPLEMENTAL AGREEMENT
THIS SUPPLEMENTAL AGREEMENT ("Agreement") is dated as of January 28, 1994,
between Commonwealth Edison Company, an Illinois corporation ("Edison"), CECo
Holding Company, an Illinois corporation ("Holding Company") and CECo Merging
Corporation, an Illinois corporation ("Merging Corp.").
WITNESSETH
WHEREAS, Edison has an authorized capitalization consisting of:
(i) 250,000,000 shares of Common Stock, par value $12.50 per share
("Edison Common Stock"), of which 213,765,354 shares were issued and
outstanding at January 21, 1994;
(ii) 850,000 shares of Prior Preferred Stock, par value $100 per share,
none of which were issued and outstanding at January 21, 1994;
(iii) 285,806 shares of $1.425 Convertible Preferred Stock, without par
value ("Edison Preferred Stock"), of which 285,806 shares were issued and
outstanding at January 21, 1994; Edison Preferred Stock is convertible into
Edison Common Stock at the rate of 1.02 shares of Edison Common Stock for
each share of Edison Preferred Stock, subject to future adjustment; and
(iv) 13,789,839 shares of Preference Stock, without par value, of which
13,789,839 shares were issued and outstanding at January 21, 1994; and
WHEREAS, Merging Corp. has an authorized capitalization consisting of 100
shares of Common Stock, without par value ("Merging Corp. Common Stock"), all
of which are issued and outstanding and owned beneficially and of record by
Holding Company; and
WHEREAS, Holding Company has an authorized capitalization consisting of
400,000,000 shares of Common Stock, without par value ("Holding Company Common
Stock"), of which 100 shares are issued and outstanding and owned beneficially
and of record by Edison; and
WHEREAS, the Boards of Directors of Edison, Merging Corp. and Holding
Company, deem it advisable for Merging Corp. to merge with and into Edison
("Merger") in accordance with the Illinois Business Corporation Act of 1983, as
amended ("Act"), and the Agreement and Plan of Merger dated as of January 28,
1994 ("Merger Agreement"), between Edison and Merging Corp. in which they have
agreed to merge.
NOW THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, Edison and Merging Corp. agree that
Merging Corp. shall merge with and into Edison, Edison shall be the corporation
surviving the Merger and the terms and conditions of the Merger, the mode of
carrying it into effect and the manner and basis of converting shares in the
Merger shall be as set forth in the Merger Agreement.
ARTICLE I
TERMS OF CONVERSION OF SHARES
At the time that the Merger becomes effective ("Effective Time"):
(a) Each share of Edison Common Stock issued and outstanding immediately
prior to the Effective Time shall thereupon, and without the surrender of
the stock certificate therefor or any other action on the part of the
holder thereof, be changed and converted into one fully paid and
nonassessable share of Holding Company Common Stock;
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(b) The shares of Merging Corp. Common Stock issued and outstanding
immediately prior to the Effective Time shall be changed and converted into
the number of shares of Edison Common Stock issued and outstanding
immediately prior to the Effective Time, which shall thereupon be issued
and fully paid and nonassessable shares of Edison Common Stock;
(c) Each share of Holding Company Common Stock issued and outstanding
immediately prior to the Effective Time shall be cancelled, retired, and
revert to an authorized but unissued share of Holding Company Common Stock,
all rights in respect thereof shall cease, and the accounts of Holding
Company shall be reduced by the $1,000 of capital and surplus applicable to
such shares;
(d) Holding Company shall deliver shares of Holding Company Common Stock
pursuant to the Edison Employe Savings and Investment Plan, 1993 Long-Term
Incentive Plan, Employe Stock Purchase Plan and Dividend Reinvestment and
Common Stock Purchase Plan (collectively the "Plans"). Each right to
purchase shares of Edison Common Stock, including, without limitation,
rights (including stock options) to acquire Edison Common Stock pursuant to
any of the Plans, granted and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into and become a right to acquire
the same number of shares of Holding Company Common Stock at the same price
per share, and upon the same terms and subject to the same conditions as
were applicable immediately prior to the Effective Time under the relevant
right; and
(e) Holding Company shall reserve such number of shares of Holding
Company Common Stock for purposes of the Plans as is equal to the number of
shares of Edison Common Stock so reserved as of the Effective Time.
ARTICLE II
DIRECTORS
The persons who are Directors of Edison immediately prior to the Effective
Time shall at the Effective Time become Directors of Holding Company, and shall
continue to hold office as provided in the By-Laws of Holding Company, and if,
at or following the Effective Time, a vacancy shall exist in the Board of
Directors of Holding Company, such vacancy may be filled in the manner provided
in the By-Laws of Holding Company.
ARTICLE III
STOCK CERTIFICATES
Following the Effective Time, each holder of an outstanding certificate or
certificates theretofore representing shares of Edison Common Stock may, but
shall not be required, to surrender the same to Holding Company for
cancellation and exchange or transfer, and each such holder or transferee
thereof will be entitled to receive a certificate or certificates representing
the same number of shares of Holding Company Common Stock as the number of
shares of Edison Common Stock previously represented by the stock certificate
or certificates so surrendered. Until so surrendered for cancellation and
exchange or transfer, each outstanding certificate which, prior to the
Effective Time, represented shares of Edison Common Stock shall be deemed and
treated for all corporate purposes to represent the ownership of the same
number of shares of Holding Company Common Stock as though such surrender for
cancellation and exchange or transfer thereof had taken place.
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ARTICLE IV
MISCELLANEOUS
(a) This Agreement may be terminated and the transactions herein provided for
and the Merger abandoned at any time, whether before or after approval of the
Merger Agreement by the shareholders of Edison, by action of the Board of
Directors of Edison if said Board of Directors determines for any reason that
the consummation of the transactions herein provided for would for any reason
be inadvisable or not in the best interests of Edison or its shareholders.
(b) The Merger Agreement shall not be amended by Edison and Merging Corp.
without the written consent of Holding Company.
(c) This Agreement may be executed in counterparts, each of which when so
executed shall be deemed to be an original, and such counterparts shall
together constitute but one and the same instrument.
(d) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Illinois.
IN WITNESS WHEREOF, Edison, Holding Company and Merging Corp., pursuant to
approval and authorization duly given by resolutions adopted by their
respective Boards of Directors, have each caused this Supplemental Agreement to
be executed by its Chairman of the Board, its President or one of its Vice
Presidents and attested by its Secretary or one of its Assistant Secretaries.
Commonwealth Edison Company
/s/ James J. O'Connor
By __________________________________
James J. O'Connor
Chairman
/s/ David A. Scholz
Attest: _____________________________
David A. Scholz
Secretary
CECo Holding Company
/s/ James J. O'Connor
By __________________________________
James J. O'Connor
Chairman
/s/ David A. Scholz
Attest: _____________________________
David A. Scholz
Secretary
CECo Merging Corporation
/s/ James J. O'Connor
By __________________________________
James J. O'Connor
Chairman
/s/ David A. Scholz
Attest: _____________________________
David A. Scholz
Secretary
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EXHIBIT C
CECO HOLDING COMPANY
ARTICLES OF INCORPORATION
ARTICLE ONE The name of the corporation is CECo Holding Company
ARTICLE TWO The name and address of the registered agent and its registered
office are:
Registered Agent:
David A. Scholz
Registered Office:
10 South Dearborn Street
Post Office Box 767
Chicago, Illinois 60690-0767
Cook County
ARTICLE THREE The purpose or purposes for which the corporation is organized
are to transact any or all lawful businesses for which
corporations may be incorporated under the Business Corporation
Act of 1983, as amended from time to time.
ARTICLE FOUR Paragraph 1. The number of shares which the corporation is
authorized to issue is 400,000,000 shares of Common Stock,
without par value.
Paragraph 2. Initially, the corporation proposes to issue 100
shares of Common Stock for an aggregate consideration of $1,000.
Paragraph 3. The shares of Common Stock shall entitle the
holders thereof to one vote for each share upon all matters upon
which shareholders have the right to vote and to cumulative
voting in all elections of directors by vote of shareholders.
ARTICLE FIVE Paragraph 1. A director of the corporation shall not be
personally liable to the corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty
of loyalty to the corporation or its shareholders, (ii) for acts
or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (iii) under Section
8.65 of the Business Corporation Act of the State of Illinois,
or (iv) for any transaction from which the director derived an
improper personal benefit. If the Business Corporation Act of
the State of Illinois is amended to authorize corporate action
further eliminating or limiting the personal liability of
Directors, then the liability of a director of the corporation
shall be eliminated or limited to the full extent permitted by
the Business Corporation Act of the State of Illinois, as so
amended. Any repeal or modification of this Paragraph 1 by the
shareholders of the corporation shall not adversely affect any
right or protection of a director of the corporation existing at
the time of such repeal or modification.
Paragraph 2. Each person who is or was or had agreed to become a
director or officer of the corporation, and each person who is
or was serving or who had agreed to serve at the request of the
Board of Directors or an officer of the corporation as an
employe or agent of the corporation or as a director, officer,
employe, or agent, trustee or fiduciary of another corporation,
partnership, joint venture, trust or other enterprise (including
the heirs, executors, administrators or estate of such person),
shall be indemnified by the corporation to the full extent
permitted by the Business Corporation Act of the State of
Illinois or any other applicable laws as presently or hereafter
in effect. Without limiting the generality of the foregoing, the
corporation may enter into one or more agreements with any
person which provide for indemnification greater or different
than that provided in this Paragraph 2. Any repeal or
modification of this Paragraph 2 shall not adversely affect any
right or protection existing hereunder immediately prior to such
repeal or modification.
ARTICLE SIX The undersigned incorporator hereby declares, under penalties of
perjury, that the statements made in the foregoing Articles of
Incorporation are true.
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EXHIBIT D
PROVISIONS OF THE ILLINOIS BUSINESS CORPORATION ACT
RELATING TO RIGHTS OF DISSENTING SHAREHOLDERS
SECTION 11.65. RIGHT TO DISSENT.
(a) A shareholder of a corporation is entitled to dissent from, and obtain
payment for his or her shares in the event of any of the following corporate
actions:
(1) consummation of a plan of merger or consolidation or a plan of share
exchange to which the corporation is a party if
(i) shareholder authorization is required for the merger or
consolidation or the share exchange by Section 11.20 or the articles of
incorporation or
(ii) the corporation is a subsidiary that is merged with its parent
or another subsidiary under Section 11.30;
(2) consummation of sale, lease or exchange of all, or substantially all,
of the property and assets of the corporation other than in the usual and
regular course of business;
(3) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) alters or abolishes a preferential right of such shares;
(ii) alters or abolishes a right in respect of redemption, including
a provision respecting a sinking fund for the redemption or repurchase,
of such shares;
(iii) in the case of a corporation incorporated prior to January 1,
1982, limits or eliminates cumulative voting rights with respect to
such shares; or
(4) any other corporate action taken pursuant to a shareholder vote if
the articles of incorporation, by-laws, or a resolution of the board of
Directors provide that shareholders are entitled to dissent and obtain
payment for their shares in accordance with the procedures set forth in
Section 11.70 or as may be otherwise provided in the articles, by-laws or
resolution.
(b) A shareholder entitled to dissent and obtain payment for his or her
shares under this Section may not challenge the corporate action creating his
or her entitlement unless the action is fraudulent with respect to the
shareholder or the corporation or constitutes a breach of a fiduciary duty owed
to the shareholder.
(c) A record owner of shares may assert dissenters' rights as to fewer than
all the shares recorded in such person's name only if such person dissents with
respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf
the record owner asserts dissenters' rights. The rights of a partial dissenter
are determined as if the shares as to which dissent is made and the other
shares were recorded in the names of different shareholders. A beneficial owner
of shares who is not the record owner may assert dissenters' rights as to
shares held on such person's behalf only if the beneficial owner submits to the
corporation the record owner's written consent to the dissent before or at the
same time the beneficial owner asserts dissenters' rights. Amended by P.A. 85-
1269, eff. Jan. 1, 1989.
SECTION 11.70. PROCEDURE TO DISSENT.
(a) If the corporate action giving rise to the right to dissent is to be
approved at a meeting of shareholders, the notice of meeting shall inform the
shareholders of their right to dissent and the procedure to dissent. If, prior
to the meeting, the corporation furnishes to the shareholders material
information with respect to the transaction that will objectively enable a
shareholder to vote on the transaction and to determine whether or not to
exercise dissenters' rights, a shareholder may assert
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<PAGE>
dissenters' rights only if the shareholder delivers to the corporation before
the vote is taken a written demand for payment for his or her shares if the
proposed action is consummated, and the shareholder does not vote in favor of
the proposed action.
(b) If the corporate action giving rise to the right to dissent is not to be
approved at a meeting of shareholders, the notice to shareholders describing
the action taken under Section 11.30 or Section 7.10 shall inform the
shareholders of their right to dissent and the procedure to dissent. If, prior
to or concurrently with the notice, the corporation furnishes to the
shareholders material information with respect to the transaction that will
objectively enable a shareholder to determine whether or not to exercise
dissenters' rights, a shareholder may assert dissenter's rights only if he or
she delivers to the corporation within 30 days from the date of mailing the
notice a written demand for payment for his or her shares.
(c) Within 10 days after the date on which the corporate action giving rise
to the right to dissent is effective or 30 days after the shareholder delivers
to the corporation the written demand for payment, whichever is later, the
corporation shall send each shareholder who has delivered a written demand for
payment a statement setting forth the opinion of the corporation as to the
estimated fair value of the shares, the corporation's latest balance sheet as
of the end of a fiscal year ending not earlier than 16 months before the
delivery of the statement, together with the statement of income for that year
and the latest available interim financial statements, and either a commitment
to pay for the shares of the dissenting shareholder at the estimated fair value
thereof upon transmittal to the corporation of the certificate or certificates,
or other evidence of ownership, with respect to the shares, or instructions to
the dissenting shareholder to sell his or her shares within 10 days after
delivery of the corporation's statement to the shareholder. The corporation may
instruct the shareholder to sell only if there is a public market for the
shares at which the shares may be readily sold. If the shareholder does not
sell within that 10 day period after being so instructed by the corporation,
for purposes of this Section the shareholder shall be deemed to have sold his
or her shares at the average closing price of the shares, if listed on a
national exchange, or the average of the bid and asked price with respect to
the shares quoted by a principal market maker, if not listed on a national
exchange, during that 10 day period.
(d) A shareholder who makes written demand for payment under this Section
retains all other rights of a shareholder until those rights are cancelled or
modified by the consummation of the proposed corporate action. Upon
consummation of that action, the corporation shall pay to each dissenter who
transmits to the corporation the certificate or other evidence of ownership of
the shares the amount the corporation estimates to be the fair value of the
shares, plus accrued interest, accompanied by a written explanation of how the
interest was calculated.
(e) If the shareholder does not agree with the opinion of the corporation as
to the estimated fair value of the shares or the amount of interest due, the
shareholder, within 30 days from the delivery of the corporation's statement of
value, shall notify the corporation in writing of the shareholder's estimated
fair value and amount of interest due and demand payment for the difference
between the shareholder's estimate of fair value and interest due and the
amount of the payment by the corporation or the proceeds of sale by the
shareholder, whichever is applicable because of the procedure for which the
corporation opted pursuant to subsection (c).
(f) If, within 60 days from delivery to the corporation of the shareholder
notification of estimate of fair value of the shares and interest due, the
corporation and the dissenting shareholder have not agreed in writing upon the
fair value of the shares and interest due, the corporation shall either pay the
difference in value demanded by the shareholder, with interest, or file a
petition in the circuit court of the county in which either the registered
office or the principal office of the corporation is located, requesting the
court to determine the fair value of the shares and interest due. The
corporation shall make all dissenters, whether or not residents of this State,
whose demands remain unsettled parties to the proceeding as an action against
their shares and all parties shall be served with a copy of the
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<PAGE>
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law. Failure of the corporation to commence an
action pursuant to this Section shall not limit or affect the right of the
dissenting shareholders to otherwise commence an action as permitted by law.
(g) The jurisdiction of the court in which the proceeding is commenced under
subsection (f) by a corporation is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision of
the question of fair value. The appraisers have the power described in the
order appointing them, or in any amendment to it.
(h) Each dissenter made a party to the proceeding is entitled to judgment for
the amount, if any, by which the court finds that the fair value of his or her
shares, plus interest, exceeds the amount paid by the corporation or the
proceeds of sale by the shareholder, whichever amount is applicable.
(i) The court, in a proceeding commenced under subsection (f), shall
determine all costs of the proceeding, including the reasonable compensation
and expenses of the appraisers, if any, appointed by the court under subsection
(g), but shall exclude the fees and expenses of counsel and experts for the
respective parties. If the fair value of the shares as determined by the court
materially exceeds the amount which the corporation estimated to be the fair
value of the shares or if no estimate was made in accordance with subsection
(c), then all or any part of the costs may be assessed against the corporation.
If the amount which any dissenter estimated to be the fair value of the shares
materially exceeds the fair value of the shares as determined by the court,
then all or any part of the costs may be assessed against that dissenter. The
court may also assess the fees and expenses of counsel and experts for the
respective parties, in amounts the court finds equitable, as follows:
(1) Against the corporation and in favor of any or all dissenters if the
court finds that the corporation did not substantially comply with the
requirements of subsections (a), (b), (c), (d), or (f).
(2) Against either the corporation or a dissenter and in favor of any
other party if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this Section.
If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated and that the fees
for those services should not be assessed against the corporation, the court
may award to that counsel reasonable fees to be paid out of the amounts awarded
to the dissenters who are benefited. Except as otherwise provided in this
Section, the practice, procedure, judgment and costs shall be governed by the
Code of Civil Procedure.
(j) As used in this Section:
(1) "Fair Value", with respect to a dissenter's shares, means the value
of the shares immediately before the consummation of the corporation action
to which the dissenter objects excluding any appreciation or depreciation
in anticipation of the corporate action, unless exclusion would be
inequitable.
(2) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances.
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<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Certain provisions of the Illinois Business Corporation Act of 1983, as
amended, provide that the Registrant may, and in some circumstances must,
indemnify the Directors and officers of the Registrant and of each subsidiary
company against liabilities and expenses incurred by such person by reason of
the fact that such person was serving in such capacity, subject to certain
limitations and conditions set forth in the statute. The Registrant's Articles
of Incorporation and By-Laws provide that the Registrant will indemnify its
Directors and officers, and may indemnify any person serving as director or
officer of another business entity at the Registrant's request, to the extent
permitted by the statute.
The Registrant maintains liability insurance policies which indemnify the
Registrant's Directors and officers, the Directors and officers of subsidiaries
of the Registrant, and the trustees of the Service Annuity Funds, against loss
arising from claims by reason of their legal liability for acts as such
Directors, officers or trustees, subject to limitations and conditions as set
forth in the policies. Among other limitations, the primary policy states that
no coverage is provided for loss representing "amounts which are deemed
uninsurable under the law pursuant to which this policy shall be construed".
The Registrant indemnifies assistant officers and certain other employes
against liabilities and expenses incurred by reason of acts performed in
connection with the operations of the various employe benefit systems of the
Registrant and its subsidiaries.
ITEM 21. EXHIBITS.
The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S> <C>
2(a) Agreement and Plan of Merger (attached as Exhibit A).
2(b) Supplemental Agreement (attached as Exhibit B).
3(a) Articles of Incorporation of CECo Holding Company (at-
tached as Exhibit C).
3(b) By-Laws of CECo Holding Company.*
4 Rights of CECo Holding Company Common Shareholders (in-
cluded in 3(a)).
5 Opinion re Legality of Sidley & Austin.*
8 Opinion re Tax Matters of Sidley & Austin.*
23(a) Consent of Sidley & Austin (included in (5)).
23(b) Consent of Experts.
99(a) Form of Proxy/Direction.*
99(b) Consents of Persons to be Directors of CECo Holding Com-
pany at the Effective Time of the Merger.*
</TABLE>
- --------
*Previously filed.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
II-1
<PAGE>
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement:
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(4) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(5) To remove from registration by means of a post-effective amendment
any shares of Holding Company Common Stock which are not issued in the
Merger.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to Directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 20, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS PRE-EFFECTIVE AMENDMENT NO. 2 TO THE REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF ILLINOIS ON MARCH 18, 1994.
CECo HOLDING COMPANY
/s/ James J. O'Connor
By: _________________________________
James J. O'Connor
Chairman
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS PRE-
EFFECTIVE AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW
BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED, ON MARCH 18, 1994.
SIGNATURE AND TITLE
/s/ James J. O'Connor /s/ Samuel K. Skinner
- ------------------------------------- -------------------------------------
James J. O'Connor Samuel K. Skinner
Chairman and Director President and Director
(principal executive officer)
/s/ John C. Bukovski /s/ Roger F. Kovack
- ------------------------------------- -------------------------------------
John C. Bukovski Roger F. Kovack
Vice President Comptroller
(principal financial officer) (principal accounting officer)
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<PAGE>
EXHIBIT INDEX
The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- ------------------------------------------------------------------
<C> <S>
2(a) Agreement and Plan of Merger (attached as Exhibit A).
2(b) Supplemental Agreement (attached as Exhibit B).
Articles of Incorporation of CECo Holding Company (attached as
3(a) Exhibit C).
3(b) By-Laws of CECo Holding Company.*
Rights of CECo Holding Company Common Shareholders (included in
4 3(a)).
5 Opinion re Legality of Sidley & Austin.*
8 Opinion re Tax Matters of Sidley & Austin.*
23(a) Consent of Sidley & Austin (included in (5)).
23(b) Consent of Experts.
99(a) Form of Proxy/Direction.*
99(b) Consents of Persons to be Directors of CECo Holding Company at the
Effective Time of the Merger.*
</TABLE>
- --------
*Previously filed.
<PAGE>
GRAPHICS APPENDIX LIST
PHOTOS OF THE DIRECTORS AND NOMINEES FOR DIRECTORS APPEAR TO THE LEFT
OF EACH RESPECTIVE NAME ON PAGES 12, 13 AND 14.
<PAGE>
Exhibit 23(b)
CECo Holding Company
Form S-4
File No. 33-52109
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Form S-4 Registration Statement of our reports dated
January 28, 1993, included or incorporated by reference in Commonwealth Edison
Company's Annual Report on Form 10-K for the year ended December 31, 1992; our
reports dated May 13, 1993, August 11, 1993 and November 10, 1993, included in
Commonwealth Edison Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1993, June 30, 1993 and September 30, 1993; and our
report dated March 18, 1994, included in Commonwealth Edison Company's
Current Report on Form 8-K/A dated January 28, 1994. We also hereby consent to
all references to our Firm included in this Form S-4 Registration Statement.
ARTHUR ANDERSEN & CO.
Chicago, Illinois
March 18, 1994
