SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [ ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Section 240.14a-12
Exelon Corporation
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
--------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
--------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------------------------
(4) Date Filed:
--------------------------------------------------------------------------------
[EXELON LETTERHEAD]
KATHERINE K. COMBS
Vice President, Deputy General Counsel,
and Corporate Secretary
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 23, 2002
March 13, 2002
We will hold the annual meeting of shareholders of Exelon Corporation on
Tuesday, April 23, 2002, at 9:30 A.M. (Eastern Time), at the Park Hyatt
Philadelphia at the Bellevue, Broad and Walnut Streets, Philadelphia,
Pennsylvania.
The purpose of the annual meeting is to consider and take action on the
following:
1. Election of five directors: Edward A. Brennan, Bruce DeMars, Richard H.
Glanton, John W. Rowe, and Ronald Rubin, each for a term of three years.
2. Ratification of PricewaterhouseCoopers, LLP as Exelon's independent
accountants for the year 2002.
3. Approval of the Employee Stock Purchase Plan.
4. Approval of amendments to the Long Term Incentive Plan, including an
increase in the number of shares available for awards under the plan.
5. Consideration of a shareholder proposal to require certain investment in
clean energy sources, if properly brought before the meeting.
6. Any other business that properly comes before the annual meeting.
Shareholders of record as of March 1, 2002 can vote at the annual
meeting. This proxy statement, voting instructions and 2001 annual report to
shareholders are being distributed on or about March 13, 2002.
YOUR VOTE IS VERY IMPORTANT. IF VOTING BY MAIL, PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, AND ALLOW SUFFICIENT
TIME FOR THE POSTAL SERVICE TO DELIVER YOUR PROXY BEFORE THE MEETING. IF VOTING
BY TELEPHONE OR INTERNET, PLEASE FOLLOW THE INSTRUCTIONS ON YOUR PROXY CARD.
By order of the board of directors
/s/ KATHERINE K. COMBS
Katherine K. Combs
Vice President, Deputy General
Counsel,
and Corporate Secretary
TABLE OF CONTENTS
Commonly Asked Questions and Answers about the Annual
Meeting................................................... 1
Proposal 1: Election of Directors........................... 4
Proposal 2: Ratification of Exelon's Independent
Accountants..................................... 4
Proposal 3: Approval of the Employee Stock Purchase Plan.... 5
Proposal 4: Approval of Amendments to the Long Term
Incentive Plan............................................ 7
Proposal 5: Investment in Clean Energy...................... 12
Discretionary Voting Authority.............................. 13
Beneficial Ownership........................................ 14
Board of Directors.......................................... 16
Board Committees............................................ 20
Board Compensation.......................................... 22
Report of the Compensation Committee........................ 23
Performance Graph........................................... 26
Summary Compensation Table.................................. 27
Option Grants in 2001....................................... 28
Option Exercises and Year-end Value......................... 29
Retirement Plans............................................ 30
Employment Agreements....................................... 31
Report of the Audit Committee............................... 36
Other Information........................................... 37
Appendix A--Employee Stock Purchase Plan.................... 38
Appendix B--Long Term Incentive Plan........................ 45
For directions to the annual meeting, please refer to the inside back cover.
COMMONLY ASKED
QUESTIONS AND ANSWERS
ABOUT THE ANNUAL MEETING
--------------------------------------------------------------------------------
Q. WHAT AM I VOTING ON?
A: - Proposal 1: Election of five directors: Edward A. Brennan, Bruce DeMars,
Richard H. Glanton, John W. Rowe, and Ronald Rubin, each for a term of
three years, and
- Proposal 2: Ratification of PricewaterhouseCoopers, LLP as Exelon
Corporation's independent accountants for 2002, and
- Proposal 3: Approval of the Employee Stock Purchase Plan, and
- Proposal 4: Approval of amendments to the Long Term Incentive Plan,
including an increase in the number of shares available for awards under
the plan, and
- Proposal 5: Consideration of a shareholder proposal to require the
Company to make certain investments in clean energy.
--------------------------------------------------------------------------------
Q. WHO CAN VOTE?
A: Common shareholders of Exelon Corporation as of the close of business on
the record date, March 1, 2002, can vote at the annual meeting. Each share
of Exelon Corporation common stock gets one vote.
--------------------------------------------------------------------------------
Q. HOW DO I VOTE?
A: Sign and date each proxy card that you receive and return it in the prepaid
envelope or vote by telephone or by Internet. If we receive your signed
proxy before the annual meeting, we will vote your shares as you direct.
You can specify on your proxy whether your shares should be voted for all,
some or none of the nominees for director. You can also specify whether you
approve, disapprove or abstain from the other proposals.
If you do not mark any selections, your proxy card will be voted:
- in favor of the election of the directors named in Proposal 1; and
- in favor of Proposal 2; and
- in favor of Proposal 3; and
- in favor of Proposal 4; and
- against Proposal 5.
You have the right to revoke your proxy at any time before the meeting by:
- notifying the Corporate Secretary; or
- casting another vote either in person or by one of the other methods
discussed above.
1
--------------------------------------------------------------------------------
Q. CAN I VOTE MY SHARES BY TELEPHONE OR BY INTERNET?
A: If you hold your shares in your own name, you may vote by telephone or by
the Internet, by following the instructions included on your proxy card.
If your shares are held in "street name," you will need to contact your
broker or other nominee to find out whether you will be able to vote by
telephone or by Internet.
--------------------------------------------------------------------------------
Q. WHO WILL COUNT THE VOTE?
A: Representatives of EquiServe Trust Company, N.A., and Exelon Corporation's
Office of the Corporate Secretary will count the votes and serve as judges
of election.
--------------------------------------------------------------------------------
Q. WHAT CONSTITUTES A QUORUM?
A: As of the record date, March 1, 2002, 321,420,883 shares of Exelon
Corporation's common stock were issued and outstanding. In order to conduct
the annual meeting, more than one-half of the outstanding shares must be
present or be represented by proxy. This is referred to as a "quorum." If
you submit a properly executed proxy card or vote by telephone or by
Internet, you will be considered part of the quorum. Proxies marked as
abstaining on any proposal to be acted on by shareholders will be treated
as present at the annual meeting for purposes of a quorum. Proxies marked
as abstaining, however, will not be counted as votes cast on that proposal.
Abstaining proxies include proxies containing broker non-votes.
--------------------------------------------------------------------------------
Q. WHAT VOTE IS NEEDED FOR THESE PROPOSALS TO BE ADOPTED?
A: More than one-half of shares present either in person or by proxy and
entitled to vote at the annual meeting must vote for a proposal in order
for it to be adopted. Directors are elected by a plurality, and the five
nominees who receive the most votes will be elected. Abstentions and broker
non-votes will not be taken into account to determine the outcome of the
election of directors or the approval of any proposal.
--------------------------------------------------------------------------------
Q. WHO CONDUCTS THE PROXY SOLICITATION AND HOW MUCH WILL IT COST?
A: Exelon Corporation is asking for your proxy for the annual meeting and will
pay all of the cost of asking for shareholder proxies. We have hired Morrow
& Co., Inc. to help us send out the proxy materials and ask for proxies.
Morrow & Co.'s fee for these services is $15,000, plus out-of-pocket
expenses. We can ask for proxies through the mail or personally by
telephone or telegram. We can use directors, officers and regular employees
of Exelon Corporation to ask for proxies. These people do not receive
additional compensation for these services. We will reimburse brokerage
houses and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses for forwarding solicitation material to the
beneficial owners of Exelon Corporation common stock.
2
--------------------------------------------------------------------------------
Q. HOW DOES A SHAREHOLDER NOMINATE SOMEONE TO BE A DIRECTOR OF
EXELON CORPORATION?
A: The deadline for submitting nominations for the 2002 annual meeting was
November 23, 2001; notice of this deadline was provided in last year's
proxy statement. At the close of business on November 23, 2001, no such
nominations were received. You may recommend any person as a nominee for
director of Exelon Corporation for next year's annual meeting by writing to
Mr. M. Walter D'Alessio, Chairman of the Corporate Governance Committee,
c/o Exelon Corporation, 10 South Dearborn Street, 37th Floor, P.O. Box
805398, Chicago, Illinois 60680-5398. Your recommendation must include
information required under the Bylaws, including information about the
nominating shareholder and the information about the nominee that would be
required to be included in a proxy statement under the rules of the
Securities and Exchange Commission, as well as the signed consent of the
nominee to serve as a director of Exelon if elected. The corporate
governance committee has the sole discretion to decide whom it will
recommend, and the board has the sole discretion to make the final
selection of nominees. You cannot nominate a candidate from the floor of
next year's annual meeting unless you have submitted the notice and the
information required by the Bylaws to the Corporate Secretary and it is
received no later than November 13, 2002.
--------------------------------------------------------------------------------
Q. WHEN ARE THE SHAREHOLDER PROPOSALS FOR THE ANNUAL MEETING HELD
IN THE YEAR 2003 DUE?
A: In order to be considered for next year's annual meeting you must submit
proposals in writing to Ms. Katherine K. Combs, Vice President, Corporate
Secretary and Deputy General Counsel, Exelon Corporation, 10 South Dearborn
Street, 37th Floor, P.O. Box 805398, Chicago, Illinois 60680-5398. Under
the Bylaws, no proposal can be considered at the 2003 annual meeting unless
it is received by the Corporate Secretary before the close of business on
November 13, 2002. The proposal must also meet the other requirements of
the rules of the SEC relating to shareholder proposals.
3
PROPOSALS TO BE VOTED UPON
PROPOSAL 1:
ELECTION OF DIRECTORS
The board of directors of Exelon Corporation consists of 16 members,
divided into three classes. The three-year terms of each class are staggered so
that the term of one class expires at each annual meeting. The terms of the five
Class II directors will expire at the 2002 annual meeting. Terms of Class I
directors expire at the 2004 Annual Meeting, and terms of Class III directors
expire at the 2003 Annual Meeting.
The corporate governance committee has recommended, and the board
nominates, the following Class II directors for re-election: Edward A. Brennan,
Bruce DeMars, Richard H. Glanton, John W. Rowe, and Ronald Rubin. Each has
consented to serve for a three-year term.
If any Class II director is unable to stand for re-election, the board may
reduce the number of Class II directors, or designate a substitute. In that
case, shares represented by proxies may be voted for a substitute Class II
director. We do not expect that any nominee will be unavailable or unable to
serve.
THE CORPORATE GOVERNANCE COMMITTEE AND THE BOARD OF DIRECTORS RECOMMEND A
VOTE "FOR" THESE DIRECTORS.
PROPOSAL 2:
RATIFICATION OF PRICEWATERHOUSECOOPERS, LLP AS EXELON CORPORATION'S INDEPENDENT
ACCOUNTANTS FOR 2002
PricewaterhouseCoopers and its predecessor firm Coopers & Lybrand have been
the independent accountants for PECO Energy Company for many years. The board of
directors selected PricewaterhouseCoopers to be the independent accountants for
Exelon Corporation and its subsidiaries for 2000 through a formal bidding
process, and the shareholders voted to retain them for 2001. The audit committee
and the board of directors believe that PricewaterhouseCooper's knowledge of
Exelon Corporation is invaluable, especially as Exelon Corporation moves to
greater competition in the energy market. Representatives of
PricewaterhouseCoopers working on Exelon Corporation matters are periodically
changed, providing Exelon Corporation with new expertise and experience.
Representatives of PricewaterhouseCoopers have direct access to members of the
audit committee and regularly attend their meetings. Representatives of
PricewaterhouseCoopers will attend the annual meeting to answer appropriate
questions and make a statement if they desire.
In 2001, the audit committee reviewed the PricewaterhouseCoopers Audit Plan
for 2002 and proposed fees and concluded that the scope of audit was appropriate
and the proposed fees were reasonable.
AUDIT FEES
The aggregate fees billed for professional services rendered by
PricewaterhouseCoopers LLP for the audit of Exelon's annual financial statements
for the fiscal year ended December 31, 2001 and for the reviews of the quarterly
financial statements included in the Forms 10-Q were $2,384,649.
4
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The aggregate fees for professional services rendered for financial
information systems design and implementation by PricewaterhouseCoopers LLP for
Exelon for the fiscal year ended December 31, 2001 were $0.
ALL OTHER FEES
The aggregate fees billed for services rendered by PricewaterhouseCoopers,
other that for the services covered in the two preceding paragraphs, for the
fiscal year ended December 31, 2001, were $4,274,661. Such services included
primarily tax planning projects and other tax related services.
THE AUDIT COMMITTEE AND THE BOARD OF DIRECTORS RECOMMEND A VOTE "FOR"
PRICEWATERHOUSECOOPERS, LLP AS EXELON CORPORATION'S INDEPENDENT ACCOUNTANTS FOR
2002.
PROPOSAL 3:
APPROVAL OF THE EXELON CORPORATION EMPLOYEE STOCK PURCHASE PLAN
The Exelon Corporation Employee Stock Purchase Plan (the "Purchase Plan")
was adopted by the board of directors of Exelon Corporation on May 11, 2001 and
became effective on June 1, 2001, subject to approval by the shareholders of
Exelon Corporation. If shareholders do not approve the Purchase Plan, it will
cease to be effective on May 10, 2002.
PURPOSE OF THE PURCHASE PLAN
The purpose of the Purchase Plan is to provide an added incentive for
eligible employees of Exelon Corporation and its participating subsidiaries to
remain employed by such companies and to encourage increased efforts to promote
Exelon Corporation's best interests, by permitting those employees to purchase
shares of Exelon Corporation common stock at below-market prices through payroll
deductions. The Purchase Plan replaces employee stock purchase plans formerly
maintained by PECO Energy Company and Unicom Corporation.
PRINCIPAL TERMS OF THE PURCHASE PLAN
Under the Purchase Plan, eligible employees of Exelon Corporation and
designated subsidiaries (currently subsidiaries in which Exelon Corporation
directly or indirectly owns at least 80% of the total value or voting power) may
authorize their employers to withhold up to 10% of their regular base pay and to
use those amounts to purchase shares of Exelon Corporation common stock. The
Purchase Plan establishes four purchase periods beginning on January 1, April 1,
July 1 and October 1 of each year. A participant's payroll deductions are
accumulated and used to purchase shares of Exelon Corporation common stock as
soon as practicable after the end of each purchase period. The purchase price
per share for any purchase period is equal to 90% of the lesser of the closing
price on the New York Stock Exchange of a share of Exelon Corporation common
stock on the first day of the purchase period or the last day of the purchase
period on which the Exchange is open. Dividends on shares purchased under the
Purchase Plan will be paid in cash unless the participant elects to have the
dividends reinvested to purchase additional shares of Exelon Corporation common
stock. Shares purchased with reinvested dividends will be purchased at fair
market value with no discount. In addition to the 10% limit on payroll
deductions, a participant in the Purchase
5
Plan may not purchase more than 125 shares in any purchase period (500 shares
per year) or more than $25,000 in fair market value of stock in any calendar
year. An individual's purchases under the Purchase Plan also will be limited if
they would cause the employee to own 5% or more of the total combined voting
power or value of all classes of stock of Exelon Corporation or any of its
subsidiaries. The full text of the Purchase Plan is attached as Appendix A.
AVAILABLE SHARES; PARTICIPATING EMPLOYEES
Under the terms of the Purchase Plan, the maximum number of shares of
Exelon Corporation common stock that may be purchased under the Purchase Plan is
3,000,000, subject to adjustment for stock dividends, stock splits or
combinations of shares of Exelon Corporation common stock. Through the purchase
period that ended December 31, 2001, 137,648 shares of Exelon Corporation common
stock had been purchased under the Purchase Plan. John W. Rowe, President and
Co-CEO, has purchased 394 shares under the Purchase Plan. As of March 1, 2002,
approximately 28,705 employees were eligible to participate in the Purchase Plan
and 3,647 were participating in the Purchase Plan.
ADMINISTRATION OF THE PURCHASE PLAN
The Purchase Plan is administered by the Treasurer of Exelon Corporation
(the "Plan Administrator"). The Plan Administrator has the power and authority
to interpret and administer the Purchase Plan, to establish rules and
regulations and appoint agents as deemed appropriate for the proper
administration of the Purchase Plan and to designate which subsidiaries of
Exelon Corporation may participate in the Purchase Plan.
AMENDMENT AND TERMINATION
The board of directors or the Plan Administrator may suspend or amend the
Purchase Plan from time to time, but no amendment may (a) materially adversely
affect any purchase rights outstanding under the Purchase Plan during the
purchase period in which the amendment is adopted, (b) increase the maximum
number of shares of Exelon Corporation common stock which may be purchased under
the Purchase Plan, or (c) decrease the purchase price of a share of Exelon
Corporation common stock for any purchase period below the lesser of 85% of the
fair market value of a share on the first day of the purchase period and 85% of
the fair market value of a share on the last day of the purchase period. The
board of directors or the Plan Administrator may terminate the Purchase Plan at
any time. The Purchase Plan will terminate automatically when the maximum number
of shares that may be purchased under the Purchase Plan has been purchased or in
the event of a change in control of Exelon Corporation.
FEDERAL TAX TREATMENT
Under current U.S. federal tax law, if an employee holds stock acquired
under an "employee stock purchase plan" for a period of two years or more, any
profit to the employee on resale, up to the amount of the discount from market
value on the purchase date, is subject to tax as ordinary income and the balance
is subject to tax as a capital gain. If the stock is held for such period,
Exelon Corporation is not allowed to deduct from its income for federal income
tax purposes the value of the purchase right to the employee. If an employee
disposes of stock within two years of its acquisition, the employee's entire
discount from market value on his purchase date is subject to tax as ordinary
income; any further profit will be subject to tax as a capital gain; any loss,
after considering the full 10% discount as ordinary income, will be treated
6
as a capital loss; and Exelon Corporation will be entitled to a federal income
tax deduction equal to the entire discount.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PURCHASE
PLAN.
PROPOSAL 4:
APPROVAL OF AMENDMENTS TO THE EXELON LONG TERM INCENTIVE PLAN
The Exelon Long-Term Incentive Plan (the "Incentive Plan") was originally
established by PECO Energy Company ("PECO") in 1989 as the PECO Energy Company
1989 Long-Term Incentive Plan. In connection with the exchange of PECO shares
for shares of Exelon Corporation and the merger of Unicom Corporation ("Unicom")
with and into Exelon Corporation, effective October 20, 2000, Exelon Corporation
assumed sponsorship of the Incentive Plan and the Incentive Plan was amended to
change its name and otherwise reflect the share exchange and the merger.
On January 28, 2002, the board of directors of Exelon Corporation approved
an amendment and restatement of the Incentive Plan, subject to shareholder
approval. The material differences from the existing plan that are being made by
the amendment are as follows: (a) adding 13,000,000 shares of Exelon Corporation
common stock to the shares previously authorized to be available for grants
under the Incentive Plan and limiting the number of shares that may be granted
under the Incentive Plan at full value as restricted stock, performance shares
or phantom stock (all of which are described below) to three million, (b)
increasing the number of shares that can granted to any individual in any
calendar year from five hundred thousand to one million, (c) allowing the
compensation committee of the board of directors, which administers the
Incentive Plan, to delegate its authority under the Incentive Plan and
authorizing the Chief Executive Officer(s) of Exelon Corporation to make special
grants to employees generally below the level of Senior Vice President, subject
to maximum numbers of shares that may be granted in any single year in total and
to any individual, (d) clarifying the ability of the board of directors to
cancel certain grants or substitute grants of another company's stock if Exelon
Corporation is a party to a merger, sale, consolidation, reorganization or other
similar corporate transaction, (e) changing the definition of "change in
control" for purposes of the Incentive Plan to be consistent with the definition
of that term in the change of control agreements Exelon Corporation has entered
into with senior executives described under "Employment Agreements -- Change in
Control Severance Arrangements" and (f) limiting the definition of "retirement,"
which accelerates and extends the exercisability of stock options under the
existing Incentive Plan, to retirement under the applicable retirement plan of
Exelon Corporation. The amendment also increases from twenty-one to thirty-three
the number of business criteria which may be used to establish performance goals
for grants and awards under the Incentive Plan which qualify as "qualified
performance based compensation" under Section 162(m) of the Internal Revenue
Code and are therefore not subject to the compensation deduction limitations of
Section 162(m). These business criteria are: (1) cumulative Shareholder Value
Added (SVA), (2) customer satisfaction, (3) revenue, (4) primary or
fully-diluted earnings per share of common stock, (5) net income, (6) total
shareholder return, (7) earnings before interest and taxes (EBIT), (8) cash
flow, including operating cash flows, free cash flow, discounted cash flow
return on investment and cash flow in excess of cost of capital, or any
combination thereof, (9) economic value added, (10) return on equity, (11)
return on capital, (12) return on assets, (13) net operating profits after
taxes, (14) stock price increase, (15) return on sales, (16) debt to equity
ratio, (17) payout ratio, (18) asset turnover, (19) ratio of share price to book
value of shares, (20) price/earnings ratio, (21) employee satisfaction, (22)
diversity, (23) market share, (24) operating income, (25) pre-tax
7
income, (26) safety, (27) diversification of business opportunities, (28)
expense ratios, (29) total expenditures, (30) completion of key projects, (31)
dividend payout as percentage of net income, (32) earnings before interest,
taxes, depreciation and amortization (EBITDA), or (33) any individual
performance objective which is measured solely in terms of quantitative targets
related to the Company, any Subsidiary or the Company's or Subsidiary's
business.
The full text of the Incentive Plan as it is proposed to be amended is
attached as Appendix B to this Proxy Statement.
PURPOSES OF THE INCENTIVE PLAN AND THE AMENDMENT
The purpose of the Incentive Plan is to encourage designated key employees
of Exelon Corporation and its subsidiaries to contribute materially to the
growth of Exelon Corporation, thereby benefiting Exelon Corporation's
shareholders.
The Incentive Plan provides for a variety of awards that can be flexibly
administered in order to attract and retain well-qualified employees by
providing them with performance-based incentives that align those employees'
interests with those of Exelon Corporation's shareholders through the increase
in the proprietary interest of those employees in the growth and success of
Exelon Corporation. The board of directors believes that the Incentive Plan
permits Exelon Corporation to keep pace with developments in compensation
programs and makes Exelon Corporation competitive with other companies that
offer creative incentives to attract and keep employees.
As of March 1, 2002, fewer than 1,150,000 shares remained available for
grants under the Incentive Plan. See "Available Shares and Outstanding Awards"
below. One purpose of the amendment is to make additional shares available for
future grants under the Incentive Plan. The proposed amendment of the Incentive
Plan also is intended to provide the Compensation Committee with additional
flexibility to make large grants where appropriate to reward extraordinary
performance and to enable the Chief Executive Officer(s) of Exelon Corporation
to make special grants rewarding exceptional performance in circumstances, and
at levels of employment, that might otherwise not be recognized.
PRINCIPAL TERMS OF THE INCENTIVE PLAN
Key management employees of Exelon Corporation and its subsidiary companies
(in which Exelon Corporation owns directly or indirectly at least 50% of the
combined voting power of all classes of stock entitled to vote) are eligible to
be selected to participate in the Incentive Plan. Approximately 650 persons are
eligible to participate in the Incentive Plan.
The Incentive Plan authorizes the following types of grants singly, in
combination or in tandem:
Stock Options. Grants consist of options to purchase shares of Exelon
Corporation's common stock, which may be "incentive stock options" or
non-qualified stock options. Incentive stock options must meet the requirements
of Section 422 of the Internal Revenue Code and carry some potential tax
advantages for the recipient. Non-qualified stock options are not subject to
those requirements and do not carry such advantages. Each stock option grant
specifies the number of shares subject to the option, the manner and time of the
option's exercise and the exercise price per share of stock subject to the
option. The exercise price of stock option may not be less than the fair market
value of a share of Exelon Corporation common stock on the date the option is
granted. The exercise price of an option may be paid by a participant in cash,
shares of Exelon Corporation common stock owned by the participant
8
if approved by the Compensation Committee, a combination thereof or such other
consideration as the Compensation Committee may deem appropriate.
Stock Appreciation Rights. A stock appreciation right ("SAR") is a right to
receive a payment (either in cash, shares of Exelon Corporation common stock, or
a combination thereof) equal to the appreciation in market value of a stated
number of shares of Exelon Corporation common stock. The appreciation is
measured by the difference between a base amount stated in the SAR and the
market value of a share of Exelon Corporation common stock on the date of
exercise of the SAR. A SAR may be granted in tandem with a stock option ("Tandem
SARs") or independent of a stock option ("Non-tandem SARs"). A Tandem SAR may be
granted either at the time of the grant of the related stock option or, in the
case of a non-qualified stock option, at any time thereafter during the term of
such option. Upon the exercise of a stock option as to some or all of the shares
covered by the award, the related Tandem SAR is cancelled automatically to the
extent that the number of shares subject to the Tandem SAR exceeds the number of
remaining shares subject to the related stock option.
Restricted Stock. Grants are made of restricted shares of Exelon
Corporation common stock. Such grants will be subject to such terms, conditions,
restrictions and/or limitations, if any, as the Compensation Committee deems
appropriate, which may include vesting periods, restrictions on transferability
and requirements of continued employment.
Performance Shares and Performance Units. Performance shares are shares of
Exelon Corporation common stock and performance units which are valued by
reference to criteria chosen by the Compensation Committee. Such grants are
contingent on the attainment over a specified period of time of certain
performance objectives. The length of the performance period, the performance
objectives to be achieved and the measure of whether and to what degree such
objectives have been achieved are determined by the Compensation Committee.
Amounts earned under performance shares and performance units may be paid in
cash, shares of Exelon Corporation common stock or both.
Phantom Stock. Phantom stock is a grant expressed in terms of, but not
actually represented by, a number of shares of Exelon Corporation common stock.
The Compensation Committee establishes the initial value of the phantom stock at
the time of grant, which may be greater than, equal to or less than the fair
market value of a share of Exelon Corporation common stock. The Compensation
Committee also determines the time at which the phantom stock will be paid and
whether such payment will be in the form of cash, shares of Exelon Corporation
common stock or a combination of both. Any cash payment will be the fair market
value of shares of Exelon Corporation common stock on the payment date equal in
number to the number of shares of phantom stock being paid in cash.
Dividend Equivalents. Each dividend equivalent represents the right to
receive an amount in cash, or in shares of Exelon Corporation common stock
having a fair market value, equal to the amount of each dividend paid on one
share of Exelon Corporation common stock during a period of time established by
the Compensation Committee. Dividend equivalents may be paid currently or
accrued as contingent cash obligations payable at a time or times specified by
the Compensation Committee. Dividend equivalents may be granted separately or in
connection with grants of stock options or phantom stock under the Incentive
Plan.
The Incentive Plan currently limits the maximum aggregate number of shares
of Exelon Corporation common stock that may be granted to any given individual
in any calendar year to 500,000 (proposed to be amended to 1,000,000). The
proposed amendment also adds to the Incentive Plan a provision that limits the
number of shares available to be granted under the
9
Incentive Plan at full value as restricted stock, performance shares or phantom
stock to 3,000,000.
Grants are evidenced by written agreements containing the terms,
conditions, restrictions and/or limitations covering the grant.
AVAILABLE SHARES AND OUTSTANDING AWARDS
On October 20, 2000, the effective date of the exchange of PECO shares for
shares of Exelon Corporation common stock and the merger of Unicom with and into
Exelon Corporation, 10,800,000 shares of Exelon Corporation common stock were
available for grants under the Incentive Plan. Since then, grants covering
9,883,672 shares have been made under the Incentive Plan and grants covering
232,651 shares have expired or been forfeited, leaving 1,148,979 shares of
Exelon Corporation common stock available for future grants under the Incentive
Plan as of March 1, 2002. Approval of the proposed amendment of the Incentive
Plan will increase the number of shares available for future grants under the
Incentive Plan to approximately 14,148,000. As of March 1, 2002, the market
price of Exelon Corporation common stock was $50.52 per share.
Neither the number of shares or units that may be granted under the
Incentive Plan in 2002, nor the dollar value of such benefits, is determinable.
Because of the similarities of the existing Incentive Plan and the Incentive
Plan as it will exist if the proposed amendment is approved, Exelon Corporation
believes that, if the Incentive Plan as proposed to be amended had been in
effect in 2001, participants (including Mr. McNeill, Mr. Rowe, Mr. Kingsley, Ms.
Strobel, Mr. Lawrence, and Mr. Mehrberg) would have received the same types and
amounts of grants as they received under the existing Incentive Plan in 2001.
INCENTIVE PLAN ADMINISTRATION
The Incentive Plan is administered by the compensation committee of the
board of directors of Exelon Corporation. No member of the compensation
committee is eligible to participate in the Incentive Plan. Among the powers
granted to the compensation committee are the authority to interpret the
Incentive Plan, establish rules and regulations for its operation, select
employees of Exelon Corporation and its subsidiaries to receive awards, and
determine the form, amount of other terms and conditions of awards. The
compensation committee also has the power to modify or waive restrictions on
awards, to amend awards and to grant extensions and accelerate awards. Under the
proposed amendment to the Incentive Plan, the Chief Executive Officer(s) of
Exelon Corporation may make special grants of stock options, restricted stock,
stock appreciation rights, performance shares, performance units and phantom
stock, subject to limitations on the numbers of shares that may be granted in
total and to any individual in any single year and to limitations on the levels
of employees who may receive such grants.
AMENDMENT AND TERMINATION
The board of directors may amend the Incentive Plan at any time but may
not, without shareholder approval, adopt any amendment which would increase the
number of shares of common stock available for grants under the Incentive Plan
or which would cause the Incentive Plan to lose its exemption under Securities
and Exchange Commission Regulation Section 240.16b-3.
10
The Incentive Plan has no fixed termination date but may be terminated by
the board at any time. Termination of the Incentive Plan will not affect the
status of any grants outstanding at the date of termination.
FEDERAL TAX TREATMENT.
Under current U.S. federal tax law, the following is a brief summary of the
U.S. federal income tax consequences generally arising with respect to awards
under the Incentive Plan.
A participant who is granted an incentive stock option will not recognize
any taxable income at the time of the grant of the option or at the time of its
exercise. If the participant does not dispose of the shares acquired pursuant to
the exercise of an incentive stock option before the later of two years from the
date of grant and one year from the date of exercise, any gain or loss realized
on a subsequent disposition of the shares will be treated as a long-term capital
gain or loss, and the Exelon Corporation will not be entitled to any deduction
for federal income tax purposes.
A participant who is granted a non-qualified option will not recognize
taxable income at the time of grant, but will recognize taxable income at the
time of exercise equal to the difference between the exercise price of the
shares and the market value of the shares on the date of exercise. The Exelon
Corporation will be entitled to a tax deduction for the amount of income
recognized by the participant.
A participant who is granted a SAR will not recognize any taxable income at
the time of grant, but will recognize taxable income at the time of exercise
equal to the difference between the reference price of the shares and the market
price of the shares on the date of exercise, and the Exelon Corporation will be
entitled to a tax deduction for the amount of income recognized by the
participant.
A participant who has been granted either performance units or performance
shares will not recognize taxable income at the time of the grant. A participant
will recognize ordinary income at the time the grant is paid equal to the amount
of cash paid or the value of shares delivered, and the Exelon Corporation will
be entitled to a tax deduction for the amount of income recognized by the
participant.
A participant who has been granted restricted stock will not recognize
taxable income at the time of the grant, and the Company will not be entitled to
a tax deduction at the time of the grant, unless the participant makes an
election to be taxed at the time of the award. When the restrictions lapse, the
participant will recognize taxable income in an amount equal to the excess of
the fair market value of the shares at such time over the amount, if any, paid
for such shares. The Exelon Corporation will be entitled to a corresponding tax
deduction.
A participant who has been granted phantom stock will not recognize taxable
income at the time of the grant. A participant will recognize ordinary income at
the time the grant is paid equal to the amount of cash paid or the value of
shares delivered, and Exelon Corporation will be entitled to a tax deduction for
the amount of income recognized by the participant.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT OF THE INCENTIVE PLAN.
11
PROPOSAL 5:
PROPOSAL TO INVEST IN CLEAN ENERGY
Mr. Robert B. Mills, 1233 12th St. NW, Washington, DC 20005, who owns
114 1/2 shares of Exelon common stock, has notified the Company that he intends
to present the following proposal at the annual meeting:
"Be it resolved that the shareholders recommend that Exelon Corporation
should invest sufficient resources to build new electrical generation from solar
and wind power sources to replace approximately one percent (1%) of system
capacity yearly for the next twenty years with the goal of having the company
producing twenty percent (20%) of generation capacity from clean renewable
sources in 20 years."
SUPPORTING STATEMENT
"Utility deregulation demands the company present a good public image, and
the public is demanding progress towards clean energy.
Efforts must be made to slow down changes in global climate so that we can
continue to survive on planet earth.
The proposal allows flexibility in schedule for the Board of Directors to
implement this proposal. The 20% figure is just a reasonable and conservative
goal to aim for.
A one percent yearly addition to generation capacity allows for small pilot
plants to be built and tried as the program advances.
The company should look to building facilities that are made to last a long
time.
Solar power towers, wind farms, solar photovoltaic arrays and parabolic
solar thermal collectors already exist in other places in this range of power
production, proving that Exelon could realistically build such facilities in
Pennsylvania, Illinois and elsewhere."
STATEMENT OF THE BOARD OF DIRECTORS
The board of directors recommends a vote AGAINST this proposal because the
proposal sets unreasonable targets that are not based on sound business,
technical or economic assumptions, because the proposal would be very expensive
to implement and because the proposal purports to commit the Company to a
particular strategy over a very long period of time.
Exelon Corporation believes that development of clean, renewable energy
sources is very important. The Company supports research and development of
renewable energy technologies and participates in a number of commercial
projects for clean, renewable energy that are consistent with its business
strategy and its investment policies. In the City of Chicago, for example,
Commonwealth Edison Company, the City of Chicago and other governmental and
private entities have created a unique partnership to develop solar generating
resources. Exelon Power Team has signed 20-year agreements to purchase the
output of three Pennsylvania wind farms. Commonwealth Edison also recently
entered into agreements to connect a proposed wind-powered generating facility
in Illinois to its network and to purchase the electric energy generated by that
facility. The Company also owns and purchases electric power generated from
landfill gas.
The proposal, if adopted by shareholders, would require Exelon Corporation
to develop, at its sole cost, solar and wind-power sources without reference to
any economic, scientific or
12
technical data on which to evaluate such actions. The requirement to replace one
percent of system capacity per year is stated as absolute, regardless of whether
such replacements are practical and regardless of cost.
Generation of electric energy represents a significant portion of the
Company's business and Exelon Corporation is the largest owner and operator of
nuclear generating facilities in the country. Changes in the composition of
electric generating systems such as Exelon's are not easily made in the kind of
successive yearly increments of one percent envisioned by this proposal. In
addition, the proposal would actually require the Company to dismantle parts of
its generating system which may be highly productive, since the proposal
dictates that capacity be replaced rather than adding solar and wind-powered
generation to existing capacity. The costs of dismantling approximately 200
megawatts of generating capacity a year, together with the costs of constructing
and maintaining new solar or wind-powered generating facilities to replace
existing facilities, would be substantial.
The timing and advisability of implementing business strategies, including
strategies for generation of electric energy, depend on many factors and must be
flexible enough to adjust for economic, technological, regulatory and
environmental changes, as well as the demands of consumers. Yet the proposal
would lock Exelon Corporation into a very specific and highly restrictive
schedule of replacing generating capacity over a period of 20 years without
regard to market, economic, technological, regulatory or environmental
developments. The Board of Directors believes that such an inflexible business
strategy is unwarranted and not in the best interests of shareholders.
The board of directors recommends a vote AGAINST this proposal.
DISCRETIONARY VOTING AUTHORITY
The board of Exelon Corporation knows of no other matters to be presented
for action at the meeting. As to any other matters that may properly come before
the meeting, the individuals serving as proxies intend to vote in their best
judgment. Your signed proxy card gives authority to Randall E. Mehrberg and
Katherine K. Combs to vote on these matters.
13
BENEFICIAL OWNERSHIP
This table indicates how much Exelon Corporation common stock was owned by
the beneficial owners of more than 5% of Exelon common stock, and by the
Company's directors and executive officers as of December 31, 2001.
- The shares listed as "Beneficially Owned" include stock options
exercisable within 60 days of December 31, 2001.
- The shares listed as "May Be Acquired" include shares of Exelon
Corporation common stock which can be acquired upon the exercise of stock
options granted under Exelon Corporation plans that are not exercisable
within 60 days of December 31, 2001.
- The shares listed as "Deferred Share Equivalents" include shares not
considered to be "beneficially owned" under rules of the Securities and
Exchange Commission because they are deferred under Exelon Corporation
plans.
- Beneficial ownership of directors and executive officers as a group
represents less than 1% of the outstanding shares of Exelon Corporation
common stock.
--------------------------------------------------------------------------------------------------
BENEFICIALLY DEFERRED
OWNED MAY BE SHARE
NAME SHARES ACQUIRED EQUIVALENTS TOTAL
--------------------------------------------------------------------------------------------------
Wellington Management Company, LLP(1) 23,919,260 23,919,260
Oppenheimer Capital LLC(2) 19,093,588 19,903,588
--------------------------------------------------------------------------------------------------
Edward A. Brennan, Director 3,954 3,837 7,791
Carlos H. Cantu, Director 3,012 1,156 4,168
Daniel L. Cooper, Director 185 5,157 5,342
M. Walter D'Alessio, Director 1,165 6,000 10,991 18,156
Bruce DeMars, Director 4,130 1,537 5,667
G. Fred DiBona, Jr., Director 950 4,454 5,404
Sue L. Gin, Director 12,588 2,857 15,445
Richard H. Glanton, Director 100 6,534 6,634
Rosemarie B. Greco, Director 1,000 5,527 6,527
Edgar D. Jannotta, Director 6,620 7,445 14,065
John M. Palms, Ph.D., Director 1,175 12,121 13,296
John W. Rogers, Jr., Director 2,188 2,935 5,123
Ronald Rubin, Director 1,359 6,000 11,123 18,482
Richard L. Thomas, Director 10,567 4,724 15,291
Corbin A. McNeill, Jr., Director &
Officer 1,128,393 375,266 26,754 1,530,413
John W. Rowe, Director & Officer 506,129 372,916 63,529 942,574
Oliver D. Kingsley, Jr., Officer 200,748 125,083 66,911 392,742
Pamela B. Strobel, Officer 103,193 69,696 20,594 193,843
Kenneth G. Lawrence, Officer 114,158 48,200 7,606 169,964
Randall E. Mehrberg, Officer 0 63,000 0 63,000
--------------------------------------------------------------------------------------------------
Directors & Executive Officers as a
group (28) 2,600,998 1,425,196 311,524 4,337,718
--------------------------------------------------------------------------------------------------
14
BENEFICIAL OWNERSHIP
(1) In a Form 13G filed with the SEC on February 14, 2002, an investment
adviser, Wellington Management Company, LLP, 75 State Street, Boston, MA
02109, disclosed that as of December 31, 2001, it was the beneficial owner
of 23,919,260 Exelon shares, or approximately 7.45% of Exelon's issued and
outstanding common shares. Wellington disclosed that it shared voting power
as to 14,539,002 shares and shared dispositive power as to 23,919,920
shares.
(2) In a Form 13G filed with the SEC on February 12, 2002, an investment
adviser, Oppenheimer Capital LLC, 1345 Avenue of the Americas, 49th Floor,
New York, NY 10105, disclosed that as of December 31, 2001, it was the
beneficial owner of 19,093,588 Exelon shares, or approximately 5.99% of
Exelon's issued and outstanding common shares, and that it held sole voting
and dispositive power as to these shares.
This table does not include 489,093 shares of common stock held under the
Exelon Corporation Retirement Plan. Mr. McNeill, Mr. Rowe, Mr. D'Alessio, Mr.
DiBona, Mr. Jannotta and Mr. Thomas are members of the executive committee which
monitors the investment policy and performance of the investments under that
plan.
15
BOARD OF DIRECTORS
[CORBIN A. McNEILL PHOTO] [EDWARD A. BRENNAN PHOTO]
CORBIN A. MCNEILL, JR. [JOHN W. ROWE PHOTO] EDWARD A. BRENNAN [CARLOS H. CANTU PHOTO]
JOHN W. ROWE CARLOS H. CANTU
CORBIN A. McNEILL, JR.
Mr. McNeill, age 62. Director, Chairman, and co-CEO of Exelon Corporation since
October 20, 2000. Class I director. Former chairman, president and CEO of PECO
Energy Company. Other directorship: Associated Electric and Gas Insurance
Services Limited. In February 2002, Mr. McNeill announced that he will retire as
an officer and director of Exelon effective immediately after the 2002 annual
meeting of shareholders.
JOHN W. ROWE
Mr. Rowe, age 56. Director, President, and co-CEO of Exelon Corporation since
October 20, 2000. Class II director. Former chairman, president, and CEO of
Unicom Corporation and Commonwealth Edison Company. Former president and CEO of
New England Electric System. Other directorship: UnumProvident Corporation.
EDWARD A. BRENNAN
Mr. Brennan, age 68. Director of Exelon Corporation since October 20, 2000.
Class II director. Retired Chairman and CEO of Sears, Roebuck and Co. (retail
merchandiser). Former director of Unicom Corporation and Commonwealth Edison
Company. Other directorships: The Allstate Corporation, AMR Corporation,
Minnesota Mining and Manufacturing Company, and Morgan Stanley.
CARLOS H. CANTU
Mr. Cantu, age 68. Director of Exelon Corporation since October 20, 2000. Class
I director. Retired President and Chief Executive Officer of The ServiceMaster
Company (service businesses). Former director of Unicom Corporation and
Commonwealth Edison Company. Other directorships: The ServiceMaster Company
(Senior Chairman) and First Tennessee National Corporation.
16
BOARD OF DIRECTORS
[DANIEL L. COOPER PHOTO] [BRUCE DEMARS PHOTO]
DANIEL L. COOPER [M. WALTER D'ALESSIO BRUCE DeMARS [G. FRED DIBONA, JR.
PHOTO] PHOTO]
M. WALTER D'ALESSIO G. FRED DiBONA, JR.
DANIEL L. COOPER
Admiral Cooper, age 67. Director of Exelon Corporation since October 20, 2000.
Class I director. Previously served as Vice-President and General Manager,
Nuclear Services Division of Gilbert/Commonwealth, Inc. Retired Assistant Chief
of Naval Operations (Undersea Warfare). Former Director and Vice-Chairman of the
Board of USAA Insurance Company (insurance and financial services company).
Former Chairman of the Advisory Board of the Applied Research Laboratory of The
Penn State University. Former director of PECO Energy Company.
M. WALTER D'ALESSIO
Mr. D'Alessio, age 68. Director of Exelon Corporation since October 20, 2000.
Class III director. Chairman and CEO of Legg Mason Real Estate Services
(commercial mortgage, banking, and pension fund advisors). Former director of
PECO Energy Company. Other directorships: Independence Blue Cross, Brandywine
Real Estate Investment Trust, and Point Five Technologies.
BRUCE DeMARS
Admiral DeMars, age 66. Director of Exelon Corporation since October 20, 2000.
Class II director. Partner, RSD, LLC. Retired Admiral, U.S. Navy, and former
Director of the Naval Nuclear Propulsion Program. Former director of Unicom
Corporation and Commonwealth Edison Company. Other directorships: McDermott
International Inc., and Oceanworks International, Inc.
G. FRED DiBONA, JR.
Mr. DiBona, age 51. Director of Exelon Corporation since October 20, 2000. Class
I director. President and CEO of Independence Blue Cross (health insurance
organization). Also chairman, president, and CEO of Keystone Health Plan East, a
subsidiary of Independence Blue Cross. Former chairman of the Blue Cross and
Blue Shield Association. Former director of PECO Energy Company. Other
directorships: Tasty Baking Company, Philadelphia Suburban Corporation, Eclipsys
Corporation, and Magellan Health Services, Inc.
17
BOARD OF DIRECTORS
[SUE L. GIN PHOTO] [ROSEMARIE B. GRECO
SUE L. GIN [RICHARD H. GLANTON PHOTO] [EDGAR D. JANNOTTA PHOTO]
PHOTO] ROSEMARIE B. GRECO EDGAR D. JANNOTTA
RICHARD H. GLANTON
SUE L. GIN
Ms. Gin, age 59. Director of Exelon Corporation since October 20, 2000. Class I
director. Founder, owner, chairman and CEO of Flying Food Group, Inc. (in-flight
catering company). Former director of Unicom Corporation and Commonwealth Edison
Company.
RICHARD H. GLANTON
Mr. Glanton, age 55. Director of Exelon Corporation since October 20, 2000.
Class II director. Partner of the law firm of Reed Smith Shaw & McClay LLP.
Former director of PECO Energy Company. Other directorships: CGU Corporation,
Philadelphia Suburban Corporation, Philadelphia Suburban Water Company, and
Wackenhut Corrections Corporation.
ROSEMARIE B. GRECO
Ms. Greco, age 55. Director of Exelon Corporation since October 20, 2000. Class
III director. Principal of GRECOventures Ltd. Former president of CoreStates
Financial Corporation and former director, president and CEO of CoreStates Bank,
N.A. Former director of PECO Energy Company. Other directorships: Sunoco, Inc.,
Pennsylvania Real Estate Investment Trust, and Radian Group, Inc. Trustee of SEI
I Mutual Funds of SEI Investments.
EDGAR D. JANNOTTA
Mr. Jannotta, age 70. Director of Exelon Corporation since October 20, 2000.
Class I director. Chairman of William Blair & Company, L.L.C. (investment
banking and brokerage company). Former managing partner and senior partner of
William Blair & Company. Former director of Unicom Corporation and Commonwealth
Edison Company. Other directorships: AAR Corp., Aon Corporation, Bandag,
Incorporated, Inforte Corp., and Molex Incorporated.
18
BOARD OF DIRECTORS
[JOHN M. PALMS, Ph.D. [RONALD RUBIN PHOTO]
PHOTO] [JOHN W. ROGERS, JR. RONALD RUBIN [RICHARD L. THOMAS PHOTO]
JOHN M. PALMS, PH.D. PHOTO] RICHARD L. THOMAS
JOHN W. ROGERS, JR.
JOHN M. PALMS, Ph.D.
Dr. Palms, age 66. Director of Exelon Corporation since October 20, 2000. Class
III director. President of the University of South Carolina and Professor of
Physics since 1991. Former president of Georgia State University; Former
Vice-President for Academic Affairs and the Charles Howard Chandler Professor of
Physics at Emory University. Former director of PECO Energy Company. Other
directorships: Fortis, Inc., SIMCOM International Holdings, Inc., National Merit
Scholarship Corporation, National Collegiate Athletic Association (NCAA);
chairman of the Board of Trustees of the Institute for Defense Analyses, and
formerly a member of the Advisory Council for the Institute of Nuclear Power
Operations.
JOHN W. ROGERS, JR.
Mr. Rogers, age 44. Director of Exelon Corporation since October 20, 2000. Class
III director. Founder, Chairman and CEO of Ariel Capital Management, Inc. (an
institutional money management firm). Former director of Unicom Corporation and
Commonwealth Edison Company. Other directorships: Aon Corporation, Bank One
Corporation, and GATX Corporation.
RONALD RUBIN
Mr. Rubin, age 70. Director of Exelon Corporation since October 20, 2000. Class
II director. Chairman and CEO of the Pennsylvania Real Estate Investment Trust,
(a real estate management and development company). Former director of PECO
Energy Company.
RICHARD L. THOMAS
Mr. Thomas, age 71. Director of Exelon Corporation since October 20, 2000. Class
III director. Retired Chairman of First Chicago NBD Corporation (banking and
financial services) and the First National Bank of Chicago. Former director of
Unicom Corporation and Commonwealth Edison Company. Other directorships: IMC
Global Inc., The PMI Group, Inc., The SABRE Holdings Corporation, Sara Lee
Corporation, and Outsourcing Solutions, Inc.
19
BOARD COMMITTEES
-------------------------------------------------------------------------------------------
COMMITTEE MEMBERSHIP ROSTER
AS OF JANUARY 29, 2002
-------------------------------------------------------------------------------------------
CORPORATE
NAME BOARD EXECUTIVE AUDIT COMPENSATION GOVERNANCE
-------------------------------------------------------------------------------------------
C. A. McNeill, Jr. X* X
-------------------------------------------------------------------------------------------
J. W. Rowe X X*
-------------------------------------------------------------------------------------------
E. A. Brennan X X*
-------------------------------------------------------------------------------------------
C. H. Cantu X X*
-------------------------------------------------------------------------------------------
D. L. Cooper X X X
-------------------------------------------------------------------------------------------
M. W. D'Alessio X X X*
-------------------------------------------------------------------------------------------
B. DeMars X
-------------------------------------------------------------------------------------------
G. F. DiBona, Jr. X X
-------------------------------------------------------------------------------------------
S. L. Gin X X
-------------------------------------------------------------------------------------------
R. H. Glanton X
-------------------------------------------------------------------------------------------
R. B. Greco X X
-------------------------------------------------------------------------------------------
E. D. Jannotta X X X
-------------------------------------------------------------------------------------------
J. M. Palms X X
-------------------------------------------------------------------------------------------
J. W. Rogers, Jr. X X
-------------------------------------------------------------------------------------------
R. Rubin X X
-------------------------------------------------------------------------------------------
R. L. Thomas X X X
-------------------------------------------------------------------------------------------
No. of Meetings in 2001 13 3 7 6 4
-------------------------------------------------------------------------------------------
------------------------- -------------------------------------------------------------------------------------------
COMMITTEE MEMBERSHIP ROSTER
AS OF JANUARY 29, 2002
------------------------- -------------------------------------------------------------------------------------------
ENERGY
GENCO DELIVERY ENTERPRISES
NAME OVERSIGHT OVERSIGHT OVERSIGHT
------------------------- -------------------------------------------------------------------------------------------
C. A. McNeill, Jr.
--------------------------------------------------------------------------------------
J. W. Rowe
-------------------------------------------------------------------------------------------
E. A. Brennan X
-------------------------------------------------------------------------------------------
C. H. Cantu X
-------------------------------------------------------------------------------------------
D. L. Cooper
-------------------------------------------------------------------------------------------
M. W. D'Alessio
-------------------------------------------------------------------------------------------
B. DeMars X X
-------------------------------------------------------------------------------------------
G. F. DiBona, Jr. X
-------------------------------------------------------------------------------------------
S. L. Gin X*
-------------------------------------------------------------------------------------------
R. H. Glanton X X
-------------------------------------------------------------------------------------------
R. B. Greco X*
-------------------------------------------------------------------------------------------
E. D. Jannotta
-------------------------------------------------------------------------------------------
J. M. Palms X*
-------------------------------------------------------------------------------------------
J. W. Rogers, Jr. X
-------------------------------------------------------------------------------------------
R. Rubin X
-------------------------------------------------------------------------------------------
R. L. Thomas
-------------------------------------------------------------------------------------------
No. of Meetings in 2001 4 4 8
-------------------------------------------------------------------------------------------
*Chairperson
The board of directors approved the charter for each committee. Each
committee reviews its own charter and conducts an assessment of its own
performance. The corporate governance committee reviews each of the individual
committee assessments and presents the findings to the full Board.
Audit: The Audit Committee reviews financial reporting and accounting
practices and internal control functions. The committee also reviews and makes
recommendations to the full board regarding risk management policy and risk
limits, officers' and directors' expenses, compliance with appropriate policies
and the Company's code of business conduct, and environmental, legal and
regulatory compliance matters. This committee recommends the independent
accountants and approves the scope of the annual audit by the independent
accountants and internal auditors. All members of this committee are independent
directors. The committee meets outside the presence of management for portions
of its meetings with both the independent accountants and the internal auditors.
Compensation: The Compensation Committee reviews executive compensation and
administers and oversees the employee benefit plans and programs. The committee
makes recommendations to the full board for approval of compensation for the
positions of chairman, chief executive officer, president and executive vice
president. The committee also oversees executive and management development
programs and reviews succession planning and
20
related leadership continuity matters. When appropriate, the committee uses the
services of an independent compensation consultant who reports directly to the
committee. All members of the committee are independent directors.
Corporate Governance: The Corporate Governance Committee considers and
recommends nominees for election as directors. The committee reviews individual
committee self-assessments and makes recommendations on board and committee
organization, membership, functions, compensation and effectiveness. The
committee coordinates the board's role in establishing performance criteria for
the Co-Chief Executive Officers and evaluating the Co-Chief Executive Officers'
performance. The Committee also oversees director orientation and continuing
education programs and oversees the Company's efforts to promote diversity among
directors, officers, employees and contractors. All members of this committee
are independent directors.
Executive: The Executive Committee reviews and makes recommendations to the
full board about significant financial matters and strategic and other business
opportunities. The committee acts on behalf of the full board when the board is
not in session. The committee also oversees the management and investment of
assets in the Company's service annuity fund and nuclear decommissioning trust
funds.
Energy Delivery Oversight: The Energy Delivery Oversight Committee advises
and assists the full board in fulfilling its responsibilities to oversee the
safe, reliable and cost effective delivery of energy and related differentiated
products and services to consumers. The committee also oversees the development
of a growth strategy for the Energy Delivery business. The committee reviews the
regulatory and public policy strategies and practices of the Energy Delivery
business and its relations with regulators, public officials, consumers and
other stakeholders.
Enterprises Oversight: The Enterprises Oversight Committee advises and
assists the full board in fulfilling its responsibilities to oversee the
performance of its unregulated businesses. The committee reviews any significant
investments, acquisitions, divestitures, major initiatives or changes in the
Enterprises strategy. The committee also reviews the Enterprises budget and
business plans and monitors the Enterprises business, operating and financial
performance and key performance indicator results and trends. The committee
reviews the Enterprises risk management strategy, policies and procedures.
Genco Oversight: The Genco Oversight Committee advises and assists the full
board in fulfilling its responsibilities to oversee the safe and reliable
operation of all generating facilities owned or operated by the Company, or its
subsidiaries, including those in which the Company has significant equity or
operational interests. The committee also assists the full board in fulfilling
its fiduciary responsibilities towards facilities in which the Company has
non-operational or minority ownership interests. The committee reviews potential
acquisitions and divestitures, major investments and changes in strategy
regarding the generating facilities and power marketing activities. The
committee also oversees the power marketing activities of the Power Team,
reviews and makes recommendations to the full board on power trading risk
management strategy and performance and the hedged condition of the generation
portfolio.
Each director attended at least eighty-five percent of the meetings of the
board and the meetings of committees of which he or she was a member.
21
BOARD COMPENSATION
Employee directors receive no compensation, other than their normal salary,
for serving on the board or its committees.
Exelon Corporation's total compensation target for directors who are not
officers of Exelon Corporation was the 50th percentile of a peer group
consisting of both general and utility industry companies. The compensation
program was reviewed again in 2001 and the compensation target remained
consistent with the 50th percentile of Exelon's peer group.
Directors are paid in cash and deferred stock units as set forth below, and
are reimbursed expenses, if any, for attending meetings:
$25,000 Annual board retainer
$ 1,500 Meeting fee
$ 3,000 Annual retainer for chairmanship of committees
$50,000 Annual grant of deferred stock units (dollar value)
Directors are required to own at least 3,000 shares of Exelon Corporation
common stock or stock units within three years after their election to the
board.
Directors can elect to defer receiving their cash compensation until
retirement, death or until they no longer serve as director. Deferred
compensation is put into an unfunded account and credited with interest, equal
to the amount that would have been earned had the compensation been invested in
a variety of mutual funds, including one fund composed exclusively of Exelon
common stock. The deferred amounts and accrued interest are unfunded obligations
of Exelon Corporation.
OTHER INFORMATION: Ariel Capital Management, Inc. has acted as investment
manager with respect to a portion of the assets of an employee benefit plan of
Commonwealth Edison Company since 1994. During 2001, the firm received
approximately $204,122 in fees. In 2002, it is estimated that the firm will
receive approximately $250,000 in fees from Exelon. Mr. Rogers is Chairman and
CEO of Ariel Capital Management, Inc. Exelon Corporation believes the fees paid
or payable are equivalent to the fees that would have been paid to an
unaffiliated third party for similar services.
Reed Smith Shaw & McClay LLP provided legal services to Exelon Corporation
during 2001. Mr. Glanton is a partner of the law firm of Reed Smith Shaw &
McClay LLP. Under the board's conflict of interest policy, the board
specifically reviewed the proposal to engage Mr. Glanton's partners to perform
particular legal services and concluded that the representation is in the best
interest of Exelon Corporation.
22
REPORT OF THE
COMPENSATION COMMITTEE
WHAT IS OUR COMPENSATION PHILOSOPHY?
Exelon's executive compensation program is designed to motivate and reward
senior management for achieving high levels of business performance and
outstanding financial results. In 2001, Exelon continued to direct its focus to
compensating executives competitive with high performing energy services
companies and general industry firms. This philosophy reflects a commitment to
attracting executives from competitive businesses and retaining key executives
to ensure continued focus on achieving long-term growth in shareholder value.
The compensation committee, (the "Committee"), composed of non-employee
directors, is responsible for administering executive compensation programs,
policies and practices. Exelon's executive compensation program comprises three
elements:
- Base salary;
- Annual incentives; and
- Long-term incentives.
These components balance short-term and longer range business objectives
and align executive financial rewards with those of Exelon's shareholders.
WHAT FACTORS DO WE CONSIDER IN DETERMINING OVERALL COMPENSATION?
The Committee commissioned a study of compensation programs in the fall of
2001. This analysis was conducted by a leading external management compensation
consulting firm and included an assessment of business plans and strategic goals
and competitive compensation levels compared with the external market.
Exelon's total compensation levels were found to be generally competitive,
the study results indicated that the mix of compensation components (i.e.,
salary, annual and long-term incentives and stock options) is effectively
aligned with the competitive market. Exelon's pay-for-performance places an
emphasis on pay-at-risk. Pay will exceed market levels when excellent
performance is achieved. Failure to achieve target goals will result in below
market pay.
HOW DO WE DETERMINE BASE SALARY?
Base salaries for Exelon's executives are determined based on individual
performance with reference to the salaries of executives in similar positions in
general industry, and where appropriate, the energy services sector. Base salary
is intended to be competitive with comparable markets to attract and retain key
executives. Executive salaries are targeted to approximate the median (50th
percentile) salaries of the companies identified and surveyed.
Mr. McNeill's and Mr. Rowe's 2001 Base Salary: The Committee determined
Mr. McNeill's and Mr. Rowe's base salaries for serving as the Co-Chief Executive
Officers by considering:
- A review of competitive data and estimated competitive levels of base
pay, which were provided by external consulting firms
- performance achieved against financial and operational goals, and
- the implementation of Exelon's strategic plans.
23
During 2001, neither Mr. McNeill nor Mr. Rowe received any increase to
their total annual salary. Their base salaries were last increased to $1,050,000
effective October 20, 2000, the merger closing date, and a base salary review
was conducted on March 1, 2002.
Other Named Executives' 2001 Base Salary: The base salaries of the other
named executive officers listed in the Summary Compensation Table were
determined based upon individual performance and by considering comparable
compensation data from the industry surveys referred to above. A base salary
review was conducted on March 1, 2002.
HOW ARE 2001 ANNUAL INCENTIVES DETERMINED?
Exelon establishes corporate and business unit measures each year which are
based on factors necessary to achieve strategic business objectives. These
measures are incorporated into financial, customer and internal indicators
designed to measure corporate and business unit performance.
The annual incentive awards paid to Exelon executives for 2001 were
determined in accordance with the Exelon Corporation incentive programs. Annual
incentives were paid to executives based on a combination of the achievement of
pre-determined corporate and business unit-specific measures and individual
performance. The incentive plan was designed to tie executive annual incentives
to the achievement of key goals of Exelon Corporation, as applicable, and the
executive's particular business unit.
For 2001, Mr. McNeill's and Mr. Rowe's annual incentive payouts were
determined using the following corporate performance measures:
- Earnings Per Share
- Cash Flow Before Financings
- Customer Focus Index
- Employee Commitment Index
2001 Annual Incentive Award: In evaluating Mr. McNeill's and Mr. Rowe's
performance, the Committee considered the overall performance of Exelon
Corporation against the measures that were achieved under the applicable
incentive program. The committee also considered the leadership demonstrated in
positioning Exelon for the future.
Mr. McNeill's approved award was $1,500,300 and Mr. Rowe's approved award
was $1,500,300.
Other Named Executive Officers' 2001 Annual Incentives: The final 2001
incentive plan payouts as approved by the Committee for the other named
executive officers listed in the Summary Compensation Table were determined in
accordance with the applicable incentive programs and each individual's
performance.
HOW IS COMPENSATION USED TO FOCUS MANAGEMENT IN LONG-TERM VALUE CREATION?
Exelon has established a long-term incentive program that will include a
combination of non-qualified stock options (75%) and performance shares (25%).
Exelon granted long-term incentives in the form of stock options to Key
Management effective October 20, 2000. The purpose of stock options is to align
compensation directly to increases in shareholder value. Individuals receiving
stock options are provided the right to buy a fixed number of shares of Exelon
common stock at the closing price of such stock on the grant date.
24
STOCK OPTION AWARDS
Mr. McNeill and Mr. Rowe received grants of 500,000 non-qualified stock
options in two parts, 266,700 on October 20, 2000 and 233,300 on January 2,
2001. Other Senior executives received grants of two times the target grant size
on October 20, 2000 in support of the launch of Exelon and to motivate
executives to achieve aggressive stock appreciation in support of shareholder
value. All other executives received a target grant on October 20, 2000. The
next scheduled grant for all executives occurred on January 28, 2002.
EXELON PERFORMANCE SHARES
Long-term incentives were awarded in the form of restricted stock to retain
key executives engaged in positioning Exelon Corporation. Awards were determined
based upon the successful completion of strategic goals designed to achieve
long-term business success and increased shareholder value. Depending on Exelon
Corporation's performance each year, the Committee could award performance
shares with prohibitions on sale or transfer until the restrictions lapse.
Performance shares are paid in Exelon stock: 33% vest upon award date, 33%
after the second year and 34% after the third year.
The 2001 Long Term Performance Share Program was based on achievements of
Earnings Per Share (EPS) and Total Shareholder Return (TSR) comparing Exelon to
companies listed on the Dow Jones Utility Index using a three-year TSR
compounded monthly
The Board of Directors approved Mr. McNeill's Performance Share Award of
27,262 shares and Mr. Rowe's Performance Share Award of 27,262 shares.
CAN WE DEDUCT EXECUTIVE COMPENSATION UNDER SECTION 162(m) OF THE INTERNAL
REVENUE CODE?
Under Section 162(m) of the Internal Revenue Code, executive compensation
in excess of $1 million is generally not deductible for purposes of corporate
income taxes. However, "qualified performance-based compensation" which is paid
pursuant to a plan meeting certain requirements of the Code and applicable
regulations remains deductible. The Committee intends to continue reliance on
performance-based compensation programs, consistent with sound executive
compensation policy. Such programs will be designed to fulfill, in the best
possible manner, future corporate business objectives. The Committee's policy
has been to seek to cause executive incentive compensation to qualify as
"performance-based" in order to preserve its deductibility for federal income
tax purposes to the extent possible without sacrificing flexibility in designing
appropriate compensation programs. However, in order to provide executives with
appropriate incentives, the Committee may also determine, in light of all
applicable circumstances, that it would be in the best interests of Exelon for
awards to be paid under certain of its incentive compensation programs or
otherwise in a manner that would not satisfy the requirements to qualify as
performance-based compensation under Code Section 162(m). The portion of
incentive compensation and salary in excess $1 million that does not qualify as
performance-based compensation under Code Section 162(m) will not be deductible
by Exelon for purposes of corporate income taxes to the extent receipt of such
compensation is not deferred. Mr. McNeill and Mr. Rowe deferred 100% of their
long-term incentive awards payable for 2001.
February 25, 2002 COMPENSATION COMMITTEE
Edward A. Brennan, Chairman
Rosemarie B. Greco
Ronald Rubin
Richard L. Thomas
25
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
The performance chart below illustrates a five-year comparison of
cumulative total returns based on an initial investment of $100 in PECO Energy
Company common stock that was exchanged for Exelon Corporation common stock in
the share exchange on October 20, 2000 as compared with the S&P 500 Stock Index
and the S&P Utility Average for the period 1997 through 2001.
This performance chart assumes:
- $100 invested on December 31, 1996 in PECO Energy Company common stock,
S&P 500 Stock Index and S&P Utility Average.
- All dividends are reinvested.
- PECO Energy common stock exchanged for Exelon Corporation common stock
on a 1:1 basis on October 20, 2000.
[This page includes a line chart with the vertical axis showing dollars from
zero to 350 in increments of 50. The horizontal axis shows the end of quarter
dates beginning at 12/96 and ending at 12/01. The quarterly data points are as
follows: ]
Exelon Quarterly Data Points for Performance Graph
EXELON
CORPORATION S & P 500 S & P UTILITIES
----------- --------- ---------------
12/96 100.000 100.000 100.000
3/97 82.280 102.681 96.633
6/97 86.701 120.607 102.307
9/97 98.663 129.641 107.223
12/97 104.108 133.363 124.654
3/98 96.168 151.966 131.659
6/98 128.020 156.984 133.252
9/98 162.474 141.368 139.421
12/98 185.715 171.474 143.063
3/99 207.090 180.018 129.676
6/99 188.455 192.708 144.734
9/99 169.755 180.676 137.796
12/99 158.397 207.560 130.366
3/00 169.124 212.320 140.910
6/00 185.915 206.678 150.356
9/00 280.740 204.677 199.148
12/00 327.466 188.661 208.161
3/01 308.606 166.295 193.422
6/01 303.491 176.027 182.358
9/01 212.745 150.191 149.701
12/01 230.609 166.239 144.824
------------------------------------------------------------------------------------------
Value of Investment at December 31,
1996 1997 1998 1999 2000 2001
------------------------------------------------------------------------------------------
EXELON CORPORATION $100.00 104.11 185.71 158.40 327.47 230.61
-----
S&P 500 $100.00 133.36 171.47 207.56 188.66 166.24
------
S&P Utilities ........ $100.00 124.65 143.06 130.37 208.16 144.82
26
SUMMARY COMPENSATION TABLE
COMPENSATION OF EXECUTIVE OFFICERS
-----------------------------------------------------------------------------------
Annual Compensation
-----------------------------------------------------------------------------------
Bonus
-----------------------
Name and Stock
Principal Position Year Salary($) Cash($) Based(1)($) Other(2)($)
-----------------------------------------------------------------------------------
Corbin A. McNeill, Jr. 2001 1,050,000 1,500,300 0 84,987
Co-CEO & Chairman, 2000 855,830 1,081,472 0 0
Exelon Corp.; 1999 659,857 1,000,000 0 0
Chairman & President,
Exelon Generation
-----------------------------------------------------------------------------------
John W. Rowe 2001 1,050,000 1,500,300 0 71,369
Co-CEO & President, 2000 989,423 1,180,269 0 134,473
Exelon Corp.; 1999 957,692 529,125 529,125* 55,112
Chairman, Exelon
Energy Delivery &
Exelon Enterprises
-----------------------------------------------------------------------------------
Oliver D. Kingsley,
Jr. 2001 650,000 928,000 0 0
EVP, Exelon Corp.; 2000 609,615 677,354 0 98,677
President & Chief 1999 544,385 0 594,000* 175,502
Nuclear Officer,
Exelon Nuclear
-----------------------------------------------------------------------------------
Pamela B. Strobel 2001 450,000 500,500 0 0
EVP, Exelon Corp.; 2000 377,423 269,824 0 0
Vice Chair & CEO 1999 375,131 208,961 69,654* 0
Exelon Energy
Delivery;
Chair, ComEd and
PECO Energy
-----------------------------------------------------------------------------------
Kenneth G. Lawrence 2001 370,577 378,700 0 0
Sr. VP, Exelon Corp.; 2000 318,923 225,666 0 0
President & COO, 1999 291,847 241,200 0 0
Exelon Energy
Delivery;
President, PECO
Energy
-----------------------------------------------------------------------------------
Randall E. Mehrberg(4) 2001 375,000 332,700 0 0
Sr. VP & General 2000 30,288 17,469 0 0
Counsel, 1999 0 0 0 0
Exelon Corp.
-----------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
Long Term Compensation
---------------------------------------------------------------------------------
Awards Payouts
----------------------------------------------------------------
Restricted All Other
Stock Compen-
Name and Award(s) Options(3) Stock sation
Principal Position Year ($) (#) Cash($) Based(1)($) ($)
-------------------------------------------------------------------------------------------------
Corbin A. McNeill, Jr. 2001 1,354,104 233,000 0 0 26,573
Co-CEO & Chairman, 2000 2,803,513 392,500 0 0 3,200
Exelon Corp.; 1999 942,188 0 0 0 3,200
Chairman & President,
Exelon Generation
-------------------------------------------------------------------------------------------------
John W. Rowe 2001 1,354,104 233,000 0 0 52,729
Co-CEO & President, 2000 0 385,450 1,071,878* 1,071,878* 60,293
Exelon Corp.; 1999 0 116,850 475,246 203,677* 42,478
Chairman, Exelon
Energy Delivery &
Exelon Enterprises
-------------------------------------------------------------------------------------------------
Oliver D. Kingsley,
Jr. 2001 597,729 0 0 0 32,499
EVP, Exelon Corp.; 2000 0 223,250 547,251 547,251* 37,745
President & Chief 1999 231,562 38,000 0 322,488* 24,139
Nuclear Officer,
Exelon Nuclear
-------------------------------------------------------------------------------------------------
Pamela B. Strobel 2001 378,187 0 0 0 23,605
EVP, Exelon Corp.; 2000 0 122,250 331,618 331,618* 19,181
Vice Chair & CEO 1999 0 28,500 84,410 84,410* 16,483
Exelon Energy
Delivery;
Chair, ComEd and
PECO Energy
-------------------------------------------------------------------------------------------------
Kenneth G. Lawrence 2001 243,979 0 0 0 14,029
Sr. VP, Exelon Corp.; 2000 777,112 81,600 0 0 4,093
President & COO, 1999 94,219 0 0 0 3,200
Exelon Energy
Delivery;
President, PECO
Energy
-------------------------------------------------------------------------------------------------
Randall E. Mehrberg(4) 2001 243,979 0 0 0 9,692
Sr. VP & General 2000 0 63,000 0 0 150,000(5)
Counsel, 1999 0 0 0 0
Exelon Corp.
-------------------------------------------------------------------------------------------------
(1) All of the amounts shown under "Bonus--Stock-Based" and "Long Term
Compensation Payouts--Stock-Based" were either paid in shares of Exelon
common stock or were deferred and since the merger, are deemed to be
invested in shares of Exelon common stock, and thus fully "at risk"
until the end of the deferral period. Deferred amounts are noted with
an asterisk.
(2) Excludes perquisites and other benefits, unless the aggregate amount of
such compensation is at least $50,000. For 2001, includes $42,805 paid
to Mr. McNeill for financial and legal services and $22,879 paid to Mr.
Rowe for the payment of other taxes.
(3) Grants of options to Mr. Rowe, Mr. Kingsley, and Ms. Strobel prior to
the merger have been adjusted to reflect the substitution of options to
acquire shares of Exelon common stock in accordance with the merger
agreement.
(4) Mr. Mehrberg commenced employment on Dec. 1, 2000.
(5) Includes sign-on payment of $150,000.
27
OPTION GRANTS IN 2001
The "grant date present values" indicated in the option grant table below
are an estimate based on the Black-Scholes option pricing model. Although
executives risk forfeiting these options in some circumstances, these risks are
not factored into the calculated values. The actual value of these options will
be determined by the excess of the stock price over the exercise price on the
date that the options are exercised. There is no certainty that the actual value
realized will be at or near the value estimated by the Black-Scholes option
pricing model. The assumptions used for the Black-Scholes model are as of
December 31, 2001 and are as follows: Risk-free interest rate: 4.85%;
Volatility: 37.17%; Dividend Yield: 3.24%; Time of Exercise: 5 Years.
-----------------------------------------------------------------------------------------------------------------------------
Grant Date
Individual Grants Value
------------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options Grant Date
Underlying Granted to Exercise or Present
Options Employees Base Price Expiration Value
Name Granted (#) (1) in 2000 ($/Sh.) Date ($)
-----------------------------------------------------------------------------------------------------------------------------
Corbin A. McNeill,
Jr. 233,300 37.08% $67.88 01/01/2011 $4,710,327
John W. Rowe 233,300 37.08% $67.88 01/01/2011 $4,710,327
Oliver D. Kingsley,
Jr. 0
Pamela B. Strobel 0
Kenneth G. Lawrence 0
Randall E. Mehrberg 0
-----------------------------------------------------------------------------------------------------------------------------
(1) Regular stock options that would have normally been granted to
eligible participants in January 2001 were granted at the time of
the merger in October 2000 with the exception of the Co CEOs. Due
to Plan limitations as to the maximum number of options that can
be granted in a calendar year, the 10/20/2000 launch grant to the
Co-CEOs was split between that date and January 2, 2001. The
remaining stock options granted during 2001 were deemed
"off-cycle" grants and were usually awarded as part of an
employment offer.
28
OPTION EXERCISES
AND YEAR-END VALUE
This table shows the number and value of exercised and unexercised stock
options for the named executive officers during 2001. Value is determined using
the market value of Exelon common stock at the year-end price of $47.88 per
share, minus the value of Exelon common stock at the exercise price. All options
whose exercise price exceeds the market value are valued at zero.
-----------------------------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at 12/31/2001 at 12/31/2001
-----------------------------------------------------------------------------------------------------------------------------
Shares
Acquired (#) ($)
of Value Exercisable Exercisable
Name Exercise (#) Realized ($) Unexercisable Unexercisable
-----------------------------------------------------------------------------------------------------------------------------
Corbin A. McNeill, Jr. 32,500 $1,478,750 545,833 E $11,586,765 E
494,967 U $ 886,265 U
-----------------------------------------------------------------------------------------------------------------------------
John W. Rowe 100,000 $2,980,000 348,000 E $2,936,529 E
525,100 U $1,058,110 U
-----------------------------------------------------------------------------------------------------------------------------
Oliver D. Kingsley, Jr. 0 0 156,750 E $1,247,315 E
161,500 U $ 550,560 U
-----------------------------------------------------------------------------------------------------------------------------
Pamela B. Strobel 28,025 $1,136,224 78,750 E $ 487,315 E
91,000 U $ 293,680 U
-----------------------------------------------------------------------------------------------------------------------------
Kenneth G. Lawrence 8,000 $ 305,000 87,200 E $1,490,879 E
54,400 U $ 131,037 U
-----------------------------------------------------------------------------------------------------------------------------
Randall E. Mehrberg 0 0 0 E $ 0 E
63,000 U $ 0 U
-----------------------------------------------------------------------------------------------------------------------------
29
RETIREMENT PLANS
The following tables show the estimated annual retirement benefits payable
on a straight-life annuity basis to participating employees, including officers,
in the earnings and year of service classes indicated, under Exelon's
non-contributory retirement plans. Effective January 1, 2001, Exelon Corporation
assumed sponsorship of the Commonwealth Edison Company Service Annuity System
and the PECO Energy Company Service Annuity Plan. Effective December 31, 2001,
these plans were merged to form the Exelon Corporation Retirement Program, which
incorporates the separate benefit formula of each merged plan for employees in
business units formerly covered by that merged plan. Effective January 1, 2001,
Exelon Corporation also established two cash balance pension plans which cover
management employees and electing bargaining unit employees hired on or after
such date. The amounts shown in the table are not subject to any deduction for
Social Security or other offset amounts.
Covered compensation includes salary and bonus which is disclosed in the
Summary Compensation Table on page 20 for the named executive officers. The
calculation of retirement benefits under the plans is based upon average
earnings for the highest consecutive five-year period under the PECO Energy
Company Service Annuity Benefit Formula and for the highest four-year period
(three-year for certain represented employees) under the ComEd Service Annuity
Benefit Formula.
The Internal Revenue Code limits the annual benefits that can be paid from
a tax-qualified retirement plan to $170,000 as of January 1, 2001. As permitted
by the Employee Retirement Income Security Act of 1974, Exelon sponsored
supplemental plans which allow the payment out of its general assets, any
benefits calculated under provisions of the applicable retirement plan which may
be above these limits.
PECO ENERGY SERVICE ANNUITY FORMULA TABLE
-------------------------------------------------------------------------------------------------------------
Annual Normal Retirement Benefits After Specified Years of Service
Highest 5-Year -------------------------------------------------------------------------------
Average Earnings 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
-----------------------------------------------------------------------------------------------------
$ 100,000.00 $ 19,272 $ 26,407 $ 33,543 $ 40,679 $ 47,815 $ 54,950 $ 62,086
200,000.00 39,772 54,657 69,543 84,429 99,315 114,200 129,086
300,000.00 60,272 82,907 105,543 128,179 150,815 173,450 196,086
400,000.00 80,772 111,157 141,543 171,929 202,315 232,700 263,086
500,000.00 101,272 139,407 177,543 215,679 253,815 291,950 330,086
600,000.00 121,772 167,657 213,543 259,429 305,315 351,200 397,086
700,000.00 142,272 195,907 249,543 303,179 356,815 410,450 464,086
800,000.00 162,772 224,157 285,543 346,929 408,315 469,700 531,086
900,000.00 183,272 252,407 321,543 390,679 459,815 528,950 598,086
1,000,000.00 203,772 280,657 357,543 434,429 511,315 588,200 665,086
-------------------------------------------------------------------------------------------------------------
Mr. McNeill and Mr. Lawrence have 34 and 32 credited years of service,
respectively, under PECO Energy Company's pension program.
30
COMMONWEALTH EDISON SERVICE ANNUITY FORMULA TABLE
-------------------------------------------------------------------------------------------------------------
Annual Normal Retirement Benefits After Specified Years of Service
Highest 4-Year -------------------------------------------------------------------------------
Average Earnings 10 15 20 25 30 35 40
-----------------------------------------------------------------------------------------------------
$ 100,000 $ 19,523 $ 31,016 $ 41,648 $ 51,626 $ 61,113 $ 70,232 $ 79,076
200,000 39,647 63,290 85,181 105,720 125,221 143,923 162,013
300,000 59,770 95,563 128,714 159,815 189,328 217,613 244,949
400,000 79,893 127,836 172,247 213,909 253,435 291,303 327,885
500,000 100,017 160,109 215,780 268,003 317,543 364,994 410,822
600,000 120,140 192,383 259,313 322,097 381,650 438,684 493,758
700,000 140,263 224,656 302,846 376,191 445,757 512,375 576,694
800,000 160,386 256,929 346,379 430,286 509,864 586,065 659,630
900,000 180,510 289,202 389,912 484,380 573,972 659,755 742,567
1,000,000 200,633 321,476 433,445 538,474 638,079 733,446 825,503
-------------------------------------------------------------------------------------------------------------
The approximate number of years of credited service under ComEd's pension
programs for the persons named in the Summary Compensation Table are as follows:
John W. Rowe, 24 years; Oliver D. Kingsley, 20 years; Pamela B. Strobel, 9
years, and Randall E. Mehrberg, 1 year. Ms. Strobel will be credited with an
additional 9 years upon attaining age 50.
EMPLOYMENT AGREEMENTS
EMPLOYMENT AGREEMENT WITH JOHN W. ROWE
Exelon entered into an amended employment agreement with Mr. Rowe, which
amended and restated his employment agreement with Unicom Corporation and
Commonwealth Edison Company in effect at the time of the merger forming Exelon
(the "prior agreement") and under which Mr. Rowe will serve as:
- co-chief executive officer and president of Exelon, chairman of the
executive committee of the Exelon board of directors and a member of the
Exelon board of directors during the first half of the transition period
provided for in Exelon's Bylaws, which is defined as the period from the
effective time of the merger forming Exelon (October 20, 2000) until
December 31, 2003,
- co-chief executive officer of Exelon, chairman of the Exelon board of
directors and a member of the Exelon board of directors during the second
half of the transition period, and
- chief executive officer of Exelon, chairman of the Exelon board of
directors and a member of the Exelon board of directors after the
transition period.
Mr. Rowe will succeed to the position of sole chief executive officer of
Exelon or chairman of the Exelon board of directors if:
- prior to the end of the transition period, Mr. McNeill should cease to be
a co-chief executive officer of Exelon or the chairman of the Exelon
board of directors, and
- Mr. Rowe is still a co-chief executive officer of Exelon at that time.
Mr. Rowe will receive an annual base salary determined by Exelon's
compensation committee. Mr. Rowe will be eligible to participate in annual
incentive award programs, long-term incentive plans and stock option plans on
the same basis as other senior executives of
31
Exelon. The agreement provided that a grant of options would be considered at
the time the merger was completed. Mr. Rowe is entitled to participate in all
savings, deferred compensation, retirement and other employee benefit plans
generally available to other senior executives of Exelon. During the transition
period, Mr. Rowe's base salary and participation in the plans and awards
described in this paragraph will be in an amount or on a basis that is not less
than that of Mr. McNeill's or on which Mr. McNeill participates.
Under his amended employment agreement and the prior agreement, Mr. Rowe is
entitled to receive a special supplemental executive retirement plan, or SERP,
benefit if he terminates due to normal retirement, early retirement, termination
without cause, termination for good reason, death or disability or if he
voluntarily terminates his employment for any other reason.
The term "good reason" includes the failure to appoint Mr. Rowe to the
management and Exelon board of director positions described above. The special
SERP benefit will equal the SERP benefit that Mr. Rowe would have received if:
- he had attained age 60 (or his actual age, if greater),
- he had earned 20 years of service on March 16, 1998 and one additional
year of service on each anniversary after that date and prior to
termination, and
- his annual incentive awards for each of 1998 and 1999 had been $300,000
greater than the annual incentive awards he actually received for those
years.
Except as provided in the next paragraph, if Exelon terminates Mr. Rowe's
employment for reasons other than cause, death or disability or if he should
terminate employment for good reason on or after December 31, 2004 and not
within 24 months following a change in control of Exelon, he would be entitled
to the following benefits:
- a prorated annual incentive award for the year in which termination
occurs,
- severance payments equal to his base salary for two years after
termination, and for each year during such period an amount equal to the
average of the annual incentive awards paid to him with respect to the
three years preceding the year of termination or, if greater, his annual
incentive award for the year before termination,
- for the two-year period, continuation of his life, disability, accident,
health and other welfare benefits, plus the retirement benefits described
above and post-retirement health care coverage,
- all of his exercisable options would remain exercisable until the
applicable option expiration date,
- unvested options would continue to become exercisable during the two-year
continuation period and thereafter remain exercisable until the
applicable option expiration date, and
- all compensation earned through the date of termination and coverage and
benefits under all benefit plans to which he is entitled.
Mr. Rowe will receive the termination benefits described in "Change in
Control and Severance Arrangements" below, rather than the benefits described in
the previous paragraph, if Exelon terminates Mr. Rowe without cause or he
terminates with good reason and
- the termination occurs within 24 months after a change in control of
Exelon, or
- the termination occurs at any other time prior to the earlier of normal
retirement or December 31, 2004, or
32
- the termination occurs at any other time on and before normal retirement
because of the failure to appoint or elect Mr. Rowe to the management or
Exelon board of director positions described above.
EMPLOYMENT ARRANGEMENT WITH CORBIN A. MCNEILL, JR.
Although Exelon has not entered into an employment agreement with Mr.
McNeill, the merger agreement provided that at any time during the transition
period when Messrs. McNeill and Rowe are co-chief executive officers, each of
them will receive the same salary, bonus and other compensation (including
option grants and other incentive awards and all other forms of compensation)
and enjoy the same other benefits and the same employment security arrangements
as the other. In February 2002, Mr. McNeill announced that he will retire as an
officer and director of Exelon effective immediately after the 2002 annual
meeting of shareholders. Under an agreement approved by the board of directors
of Exelon, Mr. McNeill will receive the termination benefits described in
'Change in Control Severance Arrangements' below upon his retirement.
EMPLOYMENT AGREEMENT WITH OLIVER D. KINGSLEY, JR.
ComEd entered into an employment agreement with Oliver D. Kingsley, Jr.
pursuant to which he became Executive Vice President and President and Chief
Nuclear Officer--Nuclear Generation Group, effective November 1, 1997. The
agreement provides for a guaranteed increase in annual base salary of at least
4% per year, beginning in 1999.
Mr. Kingsley received an option to purchase 25,000 shares of common stock
with an option price equal to the fair market value of the common stock as of
November 1, 1997. Such option became exercisable in equal installments on
November 1 of 1998, 1999 and 2000, and expires on October 31, 2007. Mr. Kingsley
also received a grant of 20,000 shares of restricted stock that vested in equal
installments on November 1 of 1998, 1999 and 2000.
Mr. Kingsley received $375,000 as an inducement to enter into the
employment agreement, and an annual living cost allowance equal to $75,000
(increased by the amount of applicable taxes on such amount as so increased) for
the first three years of the agreement term.
Mr. Kingsley's employment agreement provides for a retirement benefit equal
to the amount that would have been payable under the Service Annuity System
(plus amounts payable under the ComEd Supplemental Management Retirement Plan)
for an employee who retires at age 60 calculated based on the assumption that
Mr. Kingsley had completed 15 years of credited service beginning with the third
year of his employment and that such credited service increased by five years
during each of the next two years, in addition to his actual years of credited
service after five years of employment.
The employment agreement with Mr. Kingsley provides for a lump sum
severance payment to Mr. Kingsley if he should be terminated without cause equal
to two times his base salary at the time of such termination, and a continuation
of health and life insurance benefits for two years after the date of
termination, plus retirement benefits (calculated as though he had completed at
least 15 years of credited service if such termination occurs during the first
two years of employment) and retire health care coverage. In addition, any
unvested portion of the restricted stock granted under the agreement will
immediately become fully vested and nonforfeitable. These benefits have been
incorporated into a change in control severance agreement that became effective
on October 20, 2000. See "Change in Control Severance Agreements" below.
33
Mr. Kingsley agreed not to use for his own benefit or disclose any
confidential information of Unicom or ComEd during or after the term of his
employment, and not to solicit any employee of ComEd for one year after the term
of his employment with ComEd.
CHANGE IN CONTROL SEVERANCE ARRANGEMENTS
Exelon has entered into change in control agreements with certain senior
executives which generally protect such executives' position and compensation
levels through October 20, 2002 with respect to the Exelon merger in the case of
certain officers, and for two years after certain future changes in control if
such changes in control occur before June 1, 2003. The June 1, 2003 date is
subject to annual extension if there is no change in control before June 1 of
each year. In some cases, these agreements replaced change in control agreements
with PECO Energy and Unicom which became effective upon the completion of the
merger and which cover employment through October 20, 2002. A material adverse
change in compensation or position is included in the definition of "good
reason" for purposes of these agreements. If an executives resigns for good
reason or if the executive's employment is terminated by the company other than
for cause, severance pay and benefits become payable.
The severance payments and benefits provided under the change in control
agreements include:
- Severance payments equal to either two and one-half or three multiplied
by the sum of:
- the employee's annual base salary, plus
- an amount equal to the average of the annual incentive awards paid to
the employee for the two years preceding the year of termination or, if
greater, the target award under the annual incentive award program in
which the employee participates for the year in which termination
occurs.
- A prorated annual incentive award for the year in which termination
occurs.
- Continuation of life, disability, accident, health and other welfare
benefit coverage for three years; thereafter, if applicable, retiree
coverage is available.
- Outplacement services.
- All of a terminated employee's exercisable options remain exercisable
until the applicable option expiration date, and all unvested options
become fully exercisable and remain so until the applicable option
expiration date.
- Any deferred stock units, restricted stock, or restricted share units
become fully vested and any other long-term incentive plan award which is
unvested would vest.
- For purposes of determining benefits under the supplemental retirement
plan or arrangement in which the employee participates, the employee will
be credited with three additional years of credited service, age and
compensation.
- For purposes of determining eligibility for retiree welfare benefits, the
employee will be deemed to have three additional years of service and
age.
- All compensation earned through the date of termination as well as all
coverage and benefits under all benefit plans to which the employee is
entitled.
Pursuant to the terms of offers of employment or employment agreements,
certain employees are also entitled to additional service credits for purposes
of retiree health care eligibility and for determining benefits under the
supplemental retirement plan or arrangement in which they participate.
34
In connection with the severance benefits described above, each executive
who was an employee of PECO Energy prior to the merger is subject to a
non-compete agreement for 24 months from the applicable termination date.
Although a participating employee does not have a duty to mitigate the amounts
due from the company, continued welfare benefit coverage would be offset during
the applicable continuation period by comparable coverage provided under welfare
plans of another employer.
Employees who are senior vice-presidents or above will receive an
additional payment to cover excise taxes imposed under Section 4999 of the
Internal Revenue Code on "excess parachute payments" or under similar state or
local law if the after-tax amount of payments and benefits subject to these
taxes exceeds 110% of the "safe harbor" amount that would not subject the
employee to these excise taxes. If the after-tax amount, however, is less than
110% of the safe harbor amount, payments and benefits subject to these taxes
would be reduced or eliminated to equal the safe harbor amount. Benefits payable
to other employees subject to the excise taxes imposed under Section 4999 of the
Internal Revenue Code will be reduced to the employees' safe harbor amount.
35
REPORT OF THE AUDIT COMMITTEE
Management is responsible for Exelon's financial reporting process
including its system of internal controls, and for the preparation of
consolidated financial statements in accordance with generally accepted
accounting principles. Exelon's independent accountants, PricewaterhouseCoopers
LLP, are responsible for auditing those financial statements. The audit
committee's responsibility is to monitor and review these processes. It is not
the audit committee's responsibility to conduct auditing or accounting reviews
or procedures. The audit committee members are not employees of Exelon and are
not accountants or auditors by profession or experts in accounting or auditing.
Accordingly, the audit committee has relied, without independent verification,
on management's representation that the financial statements have been prepared
with integrity and objectivity and in conformity with generally accepted
accounting principles and on the representations of the independent accountants
included in their report on Exelon's financial statements. The audit committee's
oversight does not provide it with an independent basis to determine that
management has maintained appropriate accounting and financial reporting
principles or policies, or appropriate internal controls and procedures designed
to assure compliance with accounting standards and applicable laws and
regulations. Furthermore, the audit committee's considerations and discussions
with management and the independent accountants do not assure that Exelon's
financial statements are presented in accordance with generally accepted
accounting principles, that the audit of Exelon's financial statements has been
carried out in accordance with generally accepted auditing standards or that
Exelon's independent accountants are in fact "independent."
The audit committee met seven times in 2001. In addition, in January 2002
the audit committee held a special meeting with Exelon's accounting staff and
the independent accountants designed to provide the audit committee with an
opportunity to learn more about recent Securities and Exchange Commission
disclosure pronouncements, about the Enron failure and related disclosure
ramifications, and about Exelon's balance sheet composition and Exelon's most
important accounting policies.
In fulfilling its responsibilities, the committee has reviewed and
discussed the audited financial statements contained in the 2001 Annual Report
on SEC Form 10-K with Exelon Corporation's management and the independent
accountants. The committee discussed with the independent accountants the
matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended. In addition, the committee has
discussed with the independent accountants the accountants' independence from
Exelon Corporation and its management, including the matters in the written
disclosures required by Independence Standard Board Standard No. 1, Independence
Discussions with Audit Committees.
In reliance on the reviews and discussions referred to above, the committee
recommended to the Board of Directors (and the Board has approved) that the
audited financial statements be included in Exelon Corporation's Annual Report
on SEC Form 10-K for the year ended December 31, 2001, for filing with the
Securities and Exchange Commission.
February 25, 2002 AUDIT COMMITTEE
Carlos H. Cantu, Chair
Daniel L. Cooper
Sue L. Gin
John M. Palms
36
OTHER INFORMATION
TRANSACTIONS WITH MANAGEMENT: Pamela B. Strobel, is an Executive Vice
President of Exelon Corporation, the Vice Chair and Chief Executive Officer of
Exelon Energy Delivery Company, and the Chairman of Commonwealth Edison Company
(ComEd) and PECO Energy Company (PECO), all of which are subsidiaries of Exelon
Corporation. Ms. Strobel's husband, Russ M. Strobel, was elected Executive Vice
President, General Counsel and Secretary of Nicor Inc. ("Nicor") in January
2002. Since January 1, 2002, Nicor Gas, a subsidiary of Nicor, and ComEd have
been parties to the following transactions, proposed transactions or business
dealings: (1) Nicor Gas and ComEd are parties to an interim agreement approved
by the Illinois Commerce Commission under which they cooperate in cleaning up
residue at former manufactured gas plant sites. Under the interim agreement,
costs are split between Nicor Gas and ComEd, except that if they cannot agree
upon a final allocation of costs, the interim agreement provides for
arbitration. For the year 2001, Nicor Gas billed ComEd approximately $955,170
under the interim agreement, and ComEd billed Nicor Gas approximately
$10,461,591. For year 2002, Nicor Gas estimates that it will bill ComEd
$5,000,000 and that ComEd will bill Nicor Gas $18,000,000; (2) Nicor Gas and
ComEd are parties to an agreement made in 2001 under which Nicor Gas will
acquire approximately 23 miles of ComEd's right of way in connection with a
pipeline project. ComEd received payments from Nicor Gas under this agreement of
$4,500,000 in 2001 and expects to receive payments of approximately $4,500,000
in 2002. (3) Nicor Gas and ComEd are parties to a three-year agreement entered
into in May 2000 pursuant to which Nicor Gas transports gas to an electric
generating station in Rockford, Illinois. In 2001, Nicor Gas received
approximately $2,962,743 in payments under this agreement, and Nicor Gas
estimates that it will receive payments of approximately $3,000,000 from ComEd
in 2002; (4) Nicor Energy, L.L.C. (Nicor Energy), a subsidiary of Nicor, in its
capacity as a power marketer, purchases electricity from ComEd for resale to
certain Nicor Energy customers. In 2001, the total amount of such purchases by
Nicor Energy was approximately $54,792,000, and in 2002 such purchases are
expected to approximate $42,000,000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE: Based solely upon
a review of copies of Section 16 reports provided to Exelon Corporation and
written representations received from directors and executive officers that no
other reports were required during 2001, Exelon believes that its directors and
executive officers made all required filings during 2001 with three exceptions.
Mr. McNeill was granted shares of deferred phantom stock in an exempt
transaction. The grant was reflected in the Summary Compensation Table in
Exelon's 2001 Proxy Statement, but the grant was not reported in Mr. McNeill's
Form 5 for 2000. When the oversight was discovered, the grant was reported in
Mr. McNeill's Form 5 for 2001. Mr. Snodgrass executed a cashless exercise of
stock options in January 2001 but no Form 4 was filed for that month. When the
oversight was discovered, the exercise and sale was reported in Mr. Snodgrass'
Form 5 for 2001. Ms. Strobel executed cashless exercises of two sets of stock
options on the same day in February 2001. Her Form 4 for that month reported the
exercise and sale related to one of the grants but did not report the exercise
and sale of the second grant. When the oversight was discovered, the exercise
and sale was reported in Ms. Strobel's Form 5 for 2001.
37
APPENDIX A
EXELON CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The purpose of the Exelon Corporation Employee Stock Purchase
Plan (the "Plan") is to provide employees of Exelon Corporation, a Pennsylvania
corporation (the "Company"), and its Subsidiary Companies (as defined below)
added incentive to remain employed by such companies and to encourage increased
efforts to promote the best interests of such companies by permitting eligible
employees to purchase shares of common stock, no par value, of the Company
("Common Stock") at below-market prices. The Plan is intended to qualify as an
"employee stock purchase plan" under section 423 of the Internal Revenue Code of
1986, as amended (the "Code"). For purposes of the Plan, the term "Subsidiary
Companies" shall mean all corporations which are subsidiary corporations (within
the meaning of Section 424(f) of the Code) and of which the Company is the
common parent. The Company and its Subsidiary Companies that, from time to time,
have been designated by the Plan Administrator as eligible to participate in the
Plan with respect to their employees are hereinafter referred to collectively as
the "Participating Companies."
2. ELIGIBILITY. (A) ELIGIBLE EMPLOYEE. Participation in the Plan shall be
limited to each employee of the Participating Companies who satisfies all of the
following conditions (an "Eligible Employee") as of the first day of the
relevant Purchase Period (as defined in Section 3):
(i) such employee's customary employment is for 20 or more hours per
week; and
(ii) such employee has been continuously employed by the Participating
Companies for at least 3 consecutive calendar months.
Notwithstanding the foregoing, an individual rendering services to a
Participating Company pursuant to either of the following agreements shall not
be considered an Eligible Employee with respect to any period preceding the date
on which a court or administrative agency issues a final determination that such
individual is an employee: (1) an agreement providing that such services are to
be rendered as an independent contractor or (2) an agreement with an entity,
including a leasing organization within the meaning of section 414(n)(2) of the
Code, that is not a Participating Company.
(B) LIMITATIONS. Notwithstanding anything contained in the Plan to the
contrary, no Eligible Employee shall acquire a right to purchase Common Stock
hereunder to the extent that (i) immediately after receiving such right, such
employee would own 5% or more of the total combined voting power or value of all
classes of stock of the Company or any Subsidiary Company (including any stock
attributable to such employee under section 424(d) of the Code), or (ii) for any
calendar year such right would permit such employee's aggregate rights to
purchase stock under all employee stock purchase plans of the Company and its
Subsidiary Companies exercisable during such calendar year to accrue at a rate
which exceeds $25,000 of fair market value of such stock for such calendar year.
In addition, the number of shares of Common Stock which may be purchased by any
Eligible Employee during any Purchase Period shall not exceed 125 (subject to
adjustment pursuant to Section 12), or such other number as may be determined by
the Plan Administrator (as defined in Section 11) and set forth in a written
Appendix to the Plan.
3. EFFECTIVE DATE; PURCHASE PERIODS. (A) EFFECTIVE DATE. The Plan shall
become effective on June 1, 2001 or on such later date as may be specified by
the Board of Directors (the "Board") of the Company or the Plan Administrator
(as defined in Section 11). The Plan shall cease to be effective unless, within
12 months after the date of its adoption by the Board, it has been approved by
the shareholders of the Company.
38
APPENDIX A -- (CONTINUED)
(B) PURCHASE PERIODS. A "Purchase Period" shall consist of the three
consecutive month period beginning on each July 1, October 1, January 1 and
April 1 commencing on or after the effective date of the Plan and prior to its
termination.
4. PARTICIPATION. (A) ENROLLMENT. Each Eligible Employee shall be entitled
to enroll in the Plan as of any Purchase Period which begins on or after such
employee has become an Eligible Employee.
To enroll in the Plan, an Eligible Employee shall make a request to the
Company or its designated agent at the time and in the manner specified by the
Plan Administrator (as defined in Section 11), specifying the amount of payroll
deduction to be applied to the compensation paid to the employee by the
employee's employer while the employee is a participant in the Plan. The amount
of each payroll deduction specified in such request for each such payroll period
shall be a whole percentage amount, unless otherwise determined by the Plan
Administrator, not to exceed 10%, or such lesser percentage as may be determined
by the Plan Administrator, of the participant's regular base salary or wages
(before withholding or other deductions) paid to him or her during the Purchase
Period by any of the Participating Companies. Subject to compliance with
applicable rules prescribed by the Plan Administrator, the request shall become
effective as of the Purchase Period following the day the Company or its
designated agent receives such request.
Payroll deductions shall be made for each participant in accordance with
such participant's request until such participant's participation in the Plan
terminates, such participant's request is revised or the Plan is suspended or
terminated, all as hereinafter provided.
(B) CHANGES TO RATE OF PAYROLL DEDUCTION. A participant may change the
amount of his or her payroll deduction under the Plan effective as of any
subsequent Purchase Period by so directing the Company or its designated agent
at the time and in the manner specified by the Plan Administrator. A participant
may not change the amount of his or her payroll deduction effective as of any
time other than the beginning of a Purchase Period, except that a participant
may elect to suspend his or her payroll deduction under the Plan as provided in
Section 7.
(C) PURCHASE ACCOUNTS. Payroll deductions for each participant shall be
credited to a purchase account established on behalf of the participant on the
books of the participant's employer or such employer's designated agent (a
"Purchase Account"). At the end of each Purchase Period, the amount in each
participant's Purchase Account will be applied to the purchase of the number of
whole and fractional shares of Common Stock determined by dividing such amount
by the Purchase Price (as defined in Section 5) for such Purchase Period. No
interest shall accrue at any time for any amount credited to a Purchase Account
of a participant (except as required by local law as determined by the Plan
Administrator).
5. PURCHASE PRICE. The purchase price (the "Purchase Price") per share of
Common Stock hereunder for any Purchase Period shall be 90% of the lesser of (i)
the closing price of a share of Common Stock on the New York Stock Exchange on
the first day of such Purchase Period on which such exchange is open for trading
or (ii) the closing price of a share of Common Stock on such exchange on the
last day of such Purchase Period on which such exchange is open for trading. If
such sum results in a fraction of one cent, the Purchase Price shall be
increased to the next higher full cent.
6. ISSUANCE OF STOCK. The Common Stock purchased by each participant shall
be issued in book entry form and shall be considered to be issued and
outstanding to such participant's credit as of the end of the last day of each
Purchase Period. A participant will be issued a certificate for his or her whole
number of shares of Common Stock which have been held in book entry form for at
least two years following the first day of the Purchase Period in which such
shares were purchased, upon request of such participant or his or her legal
representative or, if so directed by the Plan
39
APPENDIX A -- (CONTINUED)
Administrator (as defined in Section 11), upon the termination of the Plan. In
such event, the cash equivalent of any fractional shares shall also be
distributed to such participant. Such cash equivalent shall be determined by
multiplying the fractional share by the fair market value of a share of Common
Stock (determined as provided in Section 5) on the last day of the Purchase
Period immediately preceding such issuance.
The Plan Administrator may permit or require that shares be deposited
directly with a broker designated by the Plan Administrator or to a designated
agent of the Company, and the Plan Administrator may use electronic or automated
methods of share transfer. The Plan Administrator may require that shares be
retained with such broker or agent for a designated period of time and/or may
establish other procedures to permit tracking of disqualifying dispositions of
such shares, and may also impose a transaction fee with respect to a sale of
shares of Common Stock issued to a participant's credit and held by such a
broker or agent. The Plan Administrator may permit shares purchased under the
Plan to participate in a dividend reinvestment plan or program maintained by the
Company, and establish a default method for the payment of dividends.
After the close of each Purchase Period, information will be made available
to each participant regarding the entries made to such participant's Purchase
Account, the number of shares of Common Stock purchased and the applicable
Purchase Price. In the event that the maximum number of shares of Common Stock
are purchased by the participant for the Purchase Period and cash remains
credited to the participant's Purchase Account, such cash shall be refunded to
such participant. For purposes of the preceding sentence, the maximum number of
shares of Common Stock that may be purchased by a participant for a Purchase
Period shall be determined under Section 2.
7. SUSPENSION OF PAYROLL DEDUCTION OR TERMINATION OF PARTICIPATION.
(A) SUSPENSION OF PAYROLL DEDUCTION. A participant may elect at any time
and in the manner specified by the Plan Administrator (as defined in Section 11)
to suspend his or her payroll deduction under the Plan, provided such election
is received by the Company or its designated agent prior to the date specified
by the Plan Administrator for suspension of payroll deduction with respect to a
Purchase Period. If the election is not received by such date, such suspension
of payroll deduction shall be effective as of the next succeeding Purchase
Period. Upon a participant's suspension of payroll deduction, any cash credited
to such participant's Purchase Account shall be refunded to such participant. A
participant who suspends payroll deduction under the Plan shall be permitted to
resume payroll deduction as of any Purchase Period following the Purchase Period
in which such suspension was effective, by making a new request at the time and
in the manner specified by the Plan Administrator.
(B) TERMINATION OF PARTICIPATION. If the participant dies, terminates
employment with the Participating Companies for any reason, or otherwise ceases
to be an Eligible Employee, such participant's participation in the Plan shall
immediately terminate. Upon such terminating event, the cash credited to such
participant's Purchase Account on the date of such termination shall be refunded
to such participant or his or her legal representative, as the case may be.
8. TERMINATION, SUSPENSION OR AMENDMENT OF THE PLAN.
(A) TERMINATION. The Company, by action of the Board or the Plan
Administrator (as defined in Section 11), may terminate the Plan at any time, in
which case notice of such termination shall be given to all participants, but
any failure to give such notice shall not impair the effectiveness of the
termination.
Without any action being required, the Plan shall terminate in any event
when the maximum number of shares of Common Stock to be sold under the Plan (as
provided in Section 12) has been
40
APPENDIX A -- (CONTINUED)
purchased. Such termination shall not impair any rights which under the Plan
shall have vested on or prior to the date of such termination. If at any time
the number of shares of Common Stock remaining available for purchase under the
Plan are not sufficient to satisfy all then-outstanding purchase rights, the
Board or Plan Administrator may determine an equitable basis of apportioning
available shares of Common Stock among all participants.
At any time following the termination of the Plan, the Plan Administrator
may direct that one or more certificates for the number of whole shares of
Common Stock held for each participant's benefit and the cash equivalent of any
fractional share so held shall be delivered to such participant. Such cash
equivalent shall be determined by multiplying the fractional share by the fair
market value of a share of Common Stock (determined as provided in Section 5) on
the last day of the Purchase Period immediately preceding such termination.
Except as otherwise provided in Section 14, the cash, if any, credited to each
participant's Purchase Account shall be distributed to such participant as soon
as practicable after the Plan terminates.
(B) SUSPENSION OR AMENDMENT. The Board or the Plan Administrator may
suspend payroll deductions under the Plan or amend the Plan from time to time in
any respect for any reason; provided, however, that no such suspension or
amendment shall (a) materially adversely affect any purchase rights outstanding
under the Plan during the Purchase Period in which such amendment or suspension
is adopted, (b) increase the maximum number of shares of Common Stock which may
be purchased under the Plan, (c) decrease the Purchase Price of a share of
Common Stock for any Purchase Period below the lesser of 85% of the fair market
value thereof on the first day of such Purchase Period and 85% of such fair
market value on the last day of such Purchase Period or (d) adversely affect the
qualification of the Plan under section 423 of the Code. If payroll deductions
under the Plan are suspended pursuant to this Section, such payroll deductions
shall resume as of the first Purchase Period commencing with or immediately
following the date on which such suspension ends, in accordance with the
participants' payroll deduction elections then in effect.
9. NON-TRANSFERABILITY. Rights acquired under the Plan are not transferable
and may be exercised only by a participant or his or her legal representative,
as the case may be.
10. SHAREHOLDER'S RIGHTS. No Eligible Employee or participant shall by
reason of the Plan have any rights of a shareholder of the Company until he or
she shall acquire a share of Common Stock as herein provided.
11. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Treasurer of the Company (the "Plan Administrator"). In addition to the powers
and authority specifically granted to the Plan Administrator pursuant to any
other provision of the Plan, the Plan Administrator shall have full power and
authority to: (i) interpret and administer the Plan and any instrument or
agreement entered into under the Plan; (ii) establish such rules and regulations
and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; (iii) designate which Subsidiary Companies shall
participate in the Plan; (iv) make any other determination and take any other
action that the Plan Administrator deems necessary or desirable for
administration of the Plan. Decisions of the Plan Administrator shall be final,
conclusive and binding upon all persons having an interest in the Plan.
The Plan shall be administered so as to ensure that all participants have
the same rights and privileges as are provided by section 423(b)(5) of the Code.
12. MAXIMUM NUMBER OF SHARES. The maximum number of shares of Common Stock
which may be purchased under the Plan is 3,000,000, subject to adjustment as set
forth below. Shares of Common Stock sold hereunder may be treasury shares,
authorized and unissued shares, shares purchased for participants in the open
market (on an exchange or in negotiated transactions) or any combination
thereof. If the Company shall, at any time after the effective date of the Plan,
change its
41
APPENDIX A -- (CONTINUED)
issued Common Stock into an increased number of shares, with or without par
value, through a stock dividend or a stock split, or into a decreased number of
shares, with or without par value, through a combination of shares, then,
effective with the record date for such change, the maximum number of shares of
Common Stock which thereafter may be purchased under the Plan and the maximum
number of shares which thereafter may be purchased during any Purchase Period
shall be the maximum number of shares which, immediately prior to such record
date, remained available for purchase under the Plan and under any Purchase
Period proportionately increased, in case of such stock dividend or stock split,
or proportionately decreased in case of such combination of shares.
13. MISCELLANEOUS. Except as otherwise expressly provided herein, (i) any
request, election or notice under the Plan from an Eligible Employee or
participant shall be transmitted or delivered to the Company or its designated
agent and, subject to any limitations specified in the Plan, shall be effective
when so delivered and (ii) any request, notice or other communication from the
Company or its designated agent that is transmitted or delivered to Eligible
Employees or participants shall be effective when so transmitted or delivered.
The Plan, and the Company's obligation to sell and deliver shares of Common
Stock hereunder, shall be subject to all applicable federal and state laws,
rules and regulations, and to such approval by any regulatory or governmental
agency as may, in the opinion of counsel for the Company, be required.
14. CHANGE IN CONTROL. In the event of any Change in Control of the
Company, as defined below, the then current Purchase Period shall thereupon end,
the Plan Administrator shall direct that the cash credited to all participants'
Purchase Accounts shall be applied to purchase shares pursuant to Sections 4, 5
and 6 or refunded to participants, and the Plan shall immediately terminate. For
purposes of this Section 14, the term "Change in Control" shall mean any of the
following events:
(a) Any person, as such term is used in Rule 13d-5 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
group, as defined in Sections 3(a)(9) and 13(d)(3) of the Exchange Act
(each such person or group, an "SEC Person"), becomes the beneficial owner,
as defined in Rule 13d-3 promulgated under the Exchange Act (a "Beneficial
Owner"), of 20% or more of the then outstanding common stock of the Company
or of the securities of the Company entitled to vote generally in the
election of directors ("Voting Securities") representing 20% or more of the
combined voting power of all the then outstanding Voting Securities (such
an SEC Person, a "20% Owner"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a Change in
Control: (1) any acquisition directly from the Company (excluding any
acquisition resulting from the exercise of an exercise, conversion or
exchange privilege unless the security being so exercised, converted or
exchanged was acquired directly from the Company), (2) any acquisition by
the Company, (3) any acquisition by an employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled
by the Company (a "Company Plan"), or (4) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i), (ii)
and (iii) of subsection (c) of this definition; provided further, that for
purposes of clause (2), if any 20% Owner of the Company other than the
Company or any Company Plan becomes a 20% Owner by reason of an acquisition
by the Company, and such 20% Owner of the Company shall, after such
acquisition by the Company, become the beneficial owner of any additional
outstanding common shares of the Company or any additional outstanding
Voting Securities of the Company (other than pursuant to any dividend
reinvestment plan or arrangement maintained by the Company) and such
beneficial ownership is publicly announced, such additional beneficial
ownership shall constitute a Change in Control; or
(b) Individuals who, as of the effective date of the Plan, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Incumbent
42
APPENDIX A -- (CONTINUED)
Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest (as such
terms are used in Rule 14a-11 promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of
a person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation
("Merger"), or the sale or other disposition of more than 50% of the
operating assets of the Company (determined on a consolidated basis), other
than in connection with a sale-leaseback or other arrangement resulting in
the continued utilization of such assets (or the operating products of such
assets) by the Company (such reorganization, merger, consolidation, sale or
other disposition, a "Corporate Transaction"); excluding, however, a
Corporate Transaction pursuant to which:
(i) all or substantially all of the individuals and entities who
are the Beneficial Owners, respectively, of the outstanding common stock
of Company and outstanding Voting Securities of the Company immediately
prior to such Corporate Transaction beneficially own, directly or
indirectly, more than 60% of, respectively, the then-outstanding shares
of common stock and the combined voting power of the then-outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
Corporate Transaction (including, without limitation, a corporation
which, as a result of such transaction, owns the Company or all or
substantially all of the assets of the Company either directly or
through one or more subsidiaries) in substantially the same proportions
as their ownership immediately prior to such Corporate Transaction of
the outstanding common stock of Company and outstanding Voting
Securities of the Company, as the case may be;
(ii) no SEC Person (other than the corporation resulting from such
Corporate Transaction, and any person which beneficially owned,
immediately prior to such Corporate Transaction, directly or indirectly,
20% or more of the outstanding common stock of the Company or the
outstanding Voting Securities of the Company, as the case may be)
becomes a 20% Owner, directly or indirectly, of the then-outstanding
common stock of the corporation resulting from such Corporate
Transaction or the combined voting power of the outstanding voting
securities of such corporation; and
(iii) individuals who were members of the Incumbent Board will
constitute at least a majority of the members of the board of directors
of the corporation resulting from such Corporate Transaction; or
(d) Approval by the Company's shareholders of a plan of complete
liquidation or dissolution of the Company, other than a plan of liquidation
or dissolution which results in the acquisition of all or substantially all
of the assets of the Company by an affiliated company.
15. RULES FOR NON-UNITED STATES JURISDICTIONS. The Plan Administrator may
establish rules or procedures relating to the operation and administration of
the Plan to accommodate specific requirements of applicable local laws and
procedures, including, without limitation, rules and procedures governing
payroll deductions, payment of interest, conversion of local currency, payroll
tax, withholding procedures and handling of stock certificates which vary with
local requirements.
The Plan Administrator may also adopt sub-plans applicable to particular
Participating Companies or locations, which sub-plans may be designed to be
outside the scope of section 423 of the Code. The rules of such sub-plans may
take precedence over the provisions of this Plan, with
43
APPENDIX A -- (CONTINUED)
the exception of Section 4, but unless otherwise superceded by the terms of such
sub-plan, the provisions of this Plan shall govern the operation of such
sub-plan.
16. NO ENLARGEMENT OF EMPLOYEE RIGHTS. Nothing contained in this Plan shall
be deemed to give any Eligible Employee the right to continued employment with
the Company or any Subsidiary Company or to interfere with the right of the
Company or any Subsidiary Company to discharge any Eligible Employee at any
time.
17. GOVERNING LAW. This Plan, any related agreements (such as an enrollment
form), and all determinations made and actions taken pursuant thereto, to the
extent not otherwise governed by the Code or the law of the United States, shall
be governed by the laws of the state of Pennsylvania and construed in accordance
therewith without giving effect to principles of conflicts of law.
44
APPENDIX B
EXELON CORPORATION
LONG-TERM INCENTIVE PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 28, 2002)
PECO Energy Company ("PECO") originally established the PECO Energy Company
1989 Long-Term Incentive Plan (the "Plan"). The outstanding shares of PECO have
been exchanged with shares of Exelon Corporation ("Exelon" or the "Company"),
causing Exelon to become PECO's parent (the "Share Exchange"). Immediately
thereafter, Unicom Corporation merged with and into Exelon (the "Merger"). In
connection with the Share Exchange and Merger, Exelon assumed sponsorship of the
Plan and changed the Plan's name to the Exelon Long-Term Incentive Plan. The
Plan was previously amended and restated, effective October 20, 2000, to reflect
these events and is hereby further amended and restated, effective January 28,
2002 except as otherwise specifically provided herein.
The purpose of the Plan is to encourage designated key employees of Exelon
and its subsidiaries to contribute materially to the growth of the Company,
thereby benefiting the Company's shareholders.
1. ADMINISTRATION.
(A) ESTABLISHMENT OF COMMITTEE. The Plan shall be administered and
interpreted by a committee (the "Committee") appointed by the Board of Directors
of Exelon (the "Board"). The Committee shall consist of two or more persons
appointed by the Board, all of whom shall be "outside directors" as defined
under section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") and related Treasury regulations, and "non-employee directors" as
defined under Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
(B) COMMITTEE AUTHORITY. The Committee shall have the authority to (i)
determine the individuals to whom grants shall be made under the Plan, (ii)
determine the type, amount and terms of the grants to be made to each such
individual, (iii) determine the time when the grants will be made and the
duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability (iv) amend
the terms of any previously issued Grant, and (v) deal with any other matters
arising under the Plan. The Committee shall have full power and authority to
administer and interpret the Plan, to make factual determinations and to adopt
or amend such rules, regulations, agreements and instruments for implementing
the Plan and for the conduct of its business as it deems necessary or advisable,
in its sole discretion. All powers and authority of the Committee shall be
exercised in its sole discretion, in the best interest of the Company, not as a
fiduciary, and in keeping with the objectives of the Plan and need not be
uniform as to similarly situated individuals. A majority of the Committee shall
constitute a quorum. The acts of the Committee shall be either (i) acts of a
majority of the members of the Committee present at any meeting at which a
quorum is present or (ii) acts approved in writing by all of the members of the
Committee without a meeting.
The Committee may delegate some or all of its authority hereunder to the
Chief Executive Officer(s) or other executive officer of the Company as the
Committee deems appropriate; provided however, that the Committee may not
delegate its power and authority to any such person (i) with regard to a Grant
made to a person who is a "covered employee" within the meaning of Section
162(m) of the Code or who, in the Committee's judgment, is likely to be a
covered employee at any time during the period a Grant hereunder to such
employee would be outstanding or (ii) with regard to the selection for
participation in the Plan of an officer or other person subject to Section 16 of
the Exchange Act or whose title is "senior vice president" or higher, or
decisions concerning the timing, pricing or amount of a Grant to such an
individual.
45
APPENDIX B--(CONTINUED)
(C) COMMITTEE DETERMINATIONS. The Committee's interpretations of the Plan
and all determinations made by the Committee pursuant to the powers vested in it
hereunder shall be conclusive and binding on all persons having any interest in
the Plan or in any awards granted hereunder.
2. GRANTS.
Awards under the Plan may consist of grants of incentive stock options as
described in Section 5 ("Incentive Stock Options"), nonqualified stock options
as described in Section 5 ("Nonqualified Stock Options") (Incentive Stock
Options and Nonqualified Stock Options are collectively referred to as
"Options"), restricted stock as described in Section 6 ("Restricted Stock"),
stock appreciation rights as described in Section 7 ("SARs"), performance units
as described in Section 8 ("Performance Units"), performance shares as described
in Section 8 ("Performance Shares"), phantom stock as described in Section 9
("Phantom Stock"), and dividend equivalents as described in Section 10
("Dividend Equivalents") (hereinafter collectively referred to as "Grants"). All
Grants shall be subject to the terms and conditions set forth herein and to such
other terms and conditions consistent with this Plan as the Committee deems
appropriate and as are specified in writing by the Committee to the individual
in a grant instrument (the "Grant Instrument") or an amendment to the Grant
Instrument. Grants under a particular Section of the Plan need not be uniform as
among the grantees.
3. SHARES SUBJECT TO THE PLAN.
(A) SHARES AUTHORIZED. Subject to the adjustment specified in Section 3(c)
below, the aggregate number of shares of common stock of the Company ("Company
Stock") available under the Plan is sixteen million, subject to the adjustment
specified in Section 3(c) below. Notwithstanding the preceding sentence, (i)
effective January 28, 2002, an additional 13 million shares of Company Stock
shall be so available under the Plan, subject to the approval of the Company's
shareholders, and (ii) the aggregate number of shares available to be granted on
or after January 28, 2002 under the Plan as Restricted Stock, Performance
Shares/Unit or Phantom Stock which may be settled in shares of Company Stock is
three million. The shares available under the Plan may be authorized but
unissued shares of Company Stock or reacquired shares of Company Stock,
including treasury shares and shares purchased by the Company on the open market
for purposes of the Plan. To the extent that shares of Company Stock subject to
an outstanding Option (except to the extent shares of Company Stock are issued
or delivered by the Company in connection with the exercise of a tandem SAR),
free-standing SAR, Restricted Stock Grant, Performance Share Grant or Phantom
Stock Grant are not issued or delivered by reason of the expiration,
termination, cancellation or forfeiture of such Grant or by reason of the
delivery or withholding of shares of Company Stock to pay all or a portion of
the exercise price of a Grant, if any, or to satisfy all of a portion of the tax
withholding obligations relating to a Grant, then such shares of Company Stock
shall again be available under this Plan.
(B) INDIVIDUAL LIMIT. During any calendar year, no individual may be
granted Options or other Grants under the Plan that, in the aggregate, may be
settled by delivery of more than one million shares of Company Stock, subject to
adjustment as provided in Section 3(c). In addition, with respect to Grants the
value of which is based on the Fair Market Value of Company Stock and that may
be settled in cash (in whole or in part), no individual may be paid during any
calendar year cash amounts relating to such Grants that exceed the greater of
the Fair Market Value (as defined in Section 5(b)(iii)) of the number of shares
of Company Stock set forth in the preceding sentence either at the date of grant
or at the date of settlement. This provision sets forth two separate
limitations, so that Grants that may be settled solely by delivery of Company
Stock will not operate to reduce the amount or value of cash-only Grants, and
vice versa; nevertheless, Grants that may be settled in Company Stock or cash
must not exceed either limitation.
46
APPENDIX B--(CONTINUED)
With respect to Grants, the value of which is not based on the Fair Market
Value of Company Stock, no individual may receive during any calendar year cash
or shares of Company Stock with a fair market value at date of settlement that,
in the aggregate, exceeds two million dollars.
(C) ADJUSTMENTS; CERTAIN CORPORATE TRANSACTIONS. If there is any change in
the number or kind of shares of Company Stock outstanding (i) by reason of a
stock dividend, spinoff, recapitalization, stock split, or combination or
exchange of shares, (ii) by reason of a merger, reorganization or consolidation
in which the Company is the surviving corporation, (iii) by reason of a
reclassification or change in par value, or (iv) by reason of any other
extraordinary or unusual event affecting the outstanding Company Stock as a
class without the Company's receipt of consideration, or if the value of
outstanding shares of Company Stock is substantially reduced as a result of a
spinoff or the Company's payment of an extraordinary dividend or distribution,
the maximum number of shares of Company Stock available for Grants, the maximum
number of shares of Company Stock that any individual participating in the Plan
may be granted in any year, the number of shares covered by outstanding Grants,
the kind of shares issued under the Plan, and the price per share or the
applicable market value of such Grants may be appropriately adjusted by the
Committee to reflect any increase or decrease in the number of, or change in the
kind or value of, issued shares of Company Stock to preclude, to the extent
practicable, the enlargement or dilution of rights and benefits under such
Grants; provided, however, that any fractional shares resulting from such
adjustment shall be eliminated. Any adjustments determined by the Committee
shall be final, binding and conclusive. If and to the extent that any such
change in the number or kind of shares of Company Stock outstanding is effected
solely by application of a mathematical formula (e.g., a 2-for-1 stock split),
the adjustment described in this Section 3(c) shall be made and shall occur
automatically by application of such formula, without further action by the
Committee.
Without limiting the generality of the foregoing paragraph, if the Company
shall be a party to any merger, sale, consolidation, reorganization or other
similar transaction (a "Corporate Transaction"), the Board (as constituted
immediately prior to the consummation of such Corporate Transaction) may, in its
discretion (i) require the substitution for each share of Company Stock then
subject to an Option or SAR, the number and class of shares, if any, into which
each outstanding share of Company Stock shall be converted pursuant to such
Corporate Transaction (with the Exercise Price of any such Option or the base
amount of any such SAR being appropriately adjusted by the Board without an
increase in the aggregate purchase price); or (ii) require such Option or SAR to
be surrendered to the Company by the holder to be immediately cancelled by the
Company, and provide for the holder to receive either (A) a cash payment in an
amount not less than the number of shares of Company Stock then subject to such
Option or SAR (whether or not then exercisable with respect to such shares),
multiplied by the excess (if any) of the highest per share price offered to
holders of Company Stock in any transaction whereby the Corporate Transaction
takes place over the Exercise Price of such Option or the base amount of such
SAR or (B) shares of stock into which outstanding shares of Company Stock shall
be converted pursuant to such Corporate Transaction having a fair market value
not less than the amount determined under clause (A) above.
4. ELIGIBILITY FOR PARTICIPATION.
(A) ELIGIBLE PERSONS. All key management employees of Exelon and its
Subsidiaries ("Employees"), including Employees who are officers or members of
the Board and persons expected to become key management employees, shall be
eligible to participate in the Plan. Members of the Board who are not Employees
shall not be eligible to participate in the Plan. "Subsidiary" shall mean a
corporation in which the Company owns, directly or indirectly, at least 50% of
the combined voting power of all classes of stock entitled to vote.
47
APPENDIX B--(CONTINUED)
(B) SELECTION OF GRANTEES. The Committee shall select the Employees to
receive Grants and shall determine the number of shares of Company Stock subject
to a particular Grant, and/or shall establish such other terms and conditions
applicable to such Grant, in such manner as the Committee determines. Employees
who receive Grants under this Plan shall hereinafter be referred to as
"Grantees."
5. GRANTING OF OPTIONS.
(A) NUMBER OF SHARES. The Committee shall determine the number of shares of
Company Stock that will be subject to each Grant of Options; provided, however
that the Chief Executive Officer(s) of the Company may make special grants of
Options to Employees who are not "covered persons" within the meaning of Section
162(m) of the Code, officers subject to Section 16 of the Exchange Act or
persons whose title is "senior vice president" or higher, provided that the
number of shares of Company Stock subject to such Options granted in any single
year shall not exceed 600,000 in the aggregate or 20,000 with respect to any
individual Employee.
(B) TYPE OF OPTION AND PRICE.
(i) Options granted under the Plan may be Incentive Stock Options that
are intended to qualify as "incentive stock options" within the meaning of
section 422 of the Code or Nonqualified Stock Options that are not intended
so to qualify or any combination of Incentive Stock Options and
Nonqualified Stock Options, all in accordance with the terms and conditions
set forth herein.
(ii) The purchase price (the "Exercise Price") of each share of
Company Stock subject to an Option shall not be less than the Fair Market
Value (as defined below) of a share of Company Stock on the date the Option
is granted; provided, however, that an Incentive Stock Option may not be
granted to an Employee who, at the time of grant, owns stock possessing
more than 10 percent of the total combined voting power of all classes of
stock of the Company or any parent or Subsidiary of the Company, unless the
Exercise Price per share is not less than 110% of the Fair Market Value of
a share of Company Stock on the date of grant.
(iii) The Fair Market Value per share shall be the closing sale price
of a share of Company Stock on the composite tape of New York Stock
Exchange, or if there is not such sale on the relevant date, then on the
last previous day on which a sale was reported.
(C) OPTION TERM. The term of any Option shall not exceed ten years from the
date of grant. However, an Incentive Stock Option that is granted to an Employee
who, at the time of grant, owns stock possessing more than 10 percent of the
total combined voting power of all classes of stock of the Company, or any
parent or Subsidiary of the Company, may not have a term that exceeds five years
from the date of grant.
(D) EXERCISABILITY OF OPTIONS. Options shall become exercisable in
accordance with such terms and conditions, consistent with the Plan, as may be
determined by the Committee and specified in the Grant Instrument or an
amendment to the Grant Instrument. The Committee may accelerate the
exercisability of any or all outstanding Options at any time for any reason.
(E) TERMINATION OF EMPLOYMENT, DISABILITY, OR DEATH.
(i) Unless otherwise specified in the Grant Instrument relating to an
Option, if a Grantee's employment by the Company terminates by reason of
Retirement, death, or Disability, then on the date of such Retirement,
death, or Disability, such Option shall become exercisable as to all of the
shares of Company Stock remaining subject to such Option and may (1) in the
cases of Retirement or Disability, be exercised by such Grantee or his or
her legal representative, Successor Grantee, or permitted transferee, as
the case may be, on or before the fifth
48
APPENDIX B--(CONTINUED)
anniversary of the date of such termination of employment or, if earlier,
the last day of the term of such Option or (2) in the case of death, be
exercised by such Grantee's legal representative, Successor Grantee, or
permitted transferees, as the case may be, on or before the third
anniversary of the date the of death or, if earlier, the last day of the
term of such Option.
(ii) Unless otherwise specified in the Grant Instrument relating to an
Option, if a Grantee's employment is terminated by the Company for Cause or
by the Grantee (other than due to Retirement or for Good Reason following a
Change in Control), such Grantee's Option shall expire on the effective
date of such termination of employment and shall not thereafter be
exercisable.
(iii) Unless otherwise specified in the Grant Instrument relating to
an Option and subject to Section 5(e)(iv), if a Grantee's employment by the
Company terminates for any reason other than Retirement, death, or
Disability, or as specified in Section 5(e)(ii), such Grantee's Option
shall be exercisable only to the extent it is exercisable on the effective
date of such termination of employment and may thereafter be exercised by
such Grantee or his or her legal representative, Successor Grantee or
permitted transferee, as the case may be, until and including the earlier
to occur of (i) the date which is 90 days after the effective date of such
termination of employment and (ii) the last day of the term of the Option.
(iv) Notwithstanding any provision of this Section 5 or any Grant
Instrument to the contrary, if within 24 months following a Change in
Control, a Grantee's employment is terminated (i) by the Company other than
for Cause, or (ii) with respect to a Grantee whose position is at least
salary band VII (or its equivalent), by the Grantee for Good Reason, such
Grantee's outstanding Options shall immediately become fully exercisable
and may thereafter be exercised by such Grantee or his or her legal
representative, Successor Grantee or permitted transferee, as the case may
be, on or before the fifth anniversary of the date of such termination of
employment or, if earlier, the last day of the term of such Option;
provided however, that a termination of employment with the Company or a
subsidiary thereof followed by immediate reemployment by an entity which
purchases or otherwise acquires Company assets shall not be a termination
of employment within the meaning of this Section 5(e)(iv).
(v) For purposes of this Section 5(e) and Sections 6, 7 and 8:
(1) "Change in Control" shall mean, except as otherwise provided
below, the first to occur of any of the following events:
(a) any SEC Person becomes the Beneficial Owner of 20% or more
of the then outstanding common stock of the Company or of Voting
Securities representing 20% or more of the combined voting power of
all the then outstanding Voting Securities of the Company (such an
SEC Person, a "20% Owner"); provided, however, that for purposes of
this subsection (a), the following acquisitions shall not constitute
a Change in Control: (1) any acquisition directly from the Company
(excluding any acquisition resulting from the exercise of an
exercise, conversion or exchange privilege unless the security being
so exercised, converted or exchanged was acquired directly from the
Company), (2) any acquisition by the Company, (3) any acquisition by
an employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company (a
"Company Plan"), or (4) any acquisition by any corporation pursuant
to a transaction which complies with clauses (i), (ii) and (iii) of
subsection (c) of this definition; provided further, that for
purposes of clause (2), if any 20% Owner of the Company other than
the Company or any Company Plan becomes a 20% Owner by reason of an
acquisition by the Company, and such 20% Owner of the Company shall,
after such acquisition by the Company, become the beneficial owner of
49
APPENDIX B--(CONTINUED)
any additional outstanding common shares of the Company or any
additional outstanding Voting Securities of the Company (other than
pursuant to any dividend reinvestment plan or arrangement maintained
by the Company) and such beneficial ownership is publicly announced,
such additional beneficial ownership shall constitute a Change in
Control; or
(b) Individuals who, as of the effective date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Incumbent Board; provided, however, that
any individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest (as such terms are used in Rule 14a-11 promulgated
under the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board;
or
(c) Consummation of a reorganization, merger or consolidation
("Merger"), or the sale or other disposition of more than 50% of the
operating assets of the Company (determined on a consolidated basis),
other than in connection with a sale-leaseback or other arrangement
resulting in the continued utilization of such assets (or the
operating products of such assets) by the Company (such
reorganization, merger, consolidation, sale or other disposition, a
"Corporate Transaction"); excluding, however, a Corporate Transaction
pursuant to which:
(i) all or substantially all of the individuals and entities
who are the Beneficial Owners, respectively, of the outstanding
common stock of Company and outstanding Voting Securities of the
Company immediately prior to such Corporate Transaction
beneficially own, directly or indirectly, more than 60% of,
respectively, the then-outstanding shares of common stock and the
combined voting power of the then-outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Corporate
Transaction (including, without limitation, a corporation which,
as a result of such transaction, owns the Company or all or
substantially all of the assets of the Company either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership immediately prior to such
Corporate Transaction of the outstanding common stock of Company
and outstanding Voting Securities of the Company, as the case may
be;
(ii) no SEC Person (other than the corporation resulting
from such Corporate Transaction, and any Person which
beneficially owned, immediately prior to such corporate
Transaction, directly or indirectly, 20% or more of the
outstanding common stock of the Company or the outstanding Voting
Securities of the Company, as the case may be) becomes a 20%
Owner, directly or indirectly, of the then-outstanding common
stock of the corporation resulting from such Corporate
Transaction or the combined voting power of the outstanding
voting securities of such corporation; and
(iii) individuals who were members of the Incumbent Board
will constitute at least a majority of the members of the board
of directors of the corporation resulting from such Corporate
Transaction; or
50
APPENDIX B--(CONTINUED)
(d) Approval by the Company's shareholders of a plan of complete
liquidation or dissolution of the Company, other than a plan of
liquidation or dissolution which results in the acquisition of all or
substantially all of the assets of the Company by an affiliated
company.
Notwithstanding the occurrence of any of the foregoing events, a
Change in Control shall not occur with respect to a Grantee if, in
advance of such event, such Grantee agrees in writing that such event
shall not constitute a Change in Control.
For purposes of the definition of a Change in Control herein, the
following terms shall have the following respective meanings:
(A) "Affiliate" means any Person (including a subsidiary) that
directly or indirectly controls, is controlled by, or is under common
control with, the Company. For purposes of this definition the term
"control" with respect to any Person means the power to direct or
cause the direction of management or policies of such Person,
directly or indirectly, whether through the ownership of Voting
Securities, by contract or otherwise.
(B) "Beneficial Owner" means such term as defined in Rule 13d-3
of the SEC under the Exchange Act.
(C) "Person" means any individual, sole proprietorship,
partnership, joint venture, limited liability company, trust,
unincorporated organization, association, corporation, institution,
public benefit corporation, entity or government instrumentality,
division, agency, body or department.
(D) "SEC Person" means any person (as such term is used in Rule
13d-5 of the SEC under the Exchange Act) or group (as such term is
defined in Sections 3(a)(9) and 13(d)(3) of the Exchange Act), other
than (i) the Company or an Affiliate, or (ii) any employee benefit
plan (or any related trust) or Company or any of its Affiliates.
(E) "Voting Securities" means with respect to a corporation,
securities of such corporation that are entitled to vote generally in
the election of directors of such corporation.
(2) "Cause" means (i) with respect to a Grantee whose entitlement
to severance benefits upon termination of employment is governed by an
individual change in control agreement, the meaning of such term
specified in such agreement, (ii) with respect to a Grantee whose
entitlement to severance benefits upon termination of employment is
governed by the Second Amended and Restated Exelon Corporation Key
Management Severance Plan, as amended from time to time, or any
successor plan thereto, the meaning of such term specified in such plan,
or (iii) with respect to any other Grantee, any of the following:
(a) the Grantee's willful commission of acts or omissions which
have, have had, or are likely to have a material adverse effect on
the business, operations, financial condition or reputation of the
Company or any of its affiliates;
(b) the Grantee's conviction (including a plea of guilty or nolo
contendre) of a felony or any crime of fraud, theft, dishonesty or
moral turpitude; or,
(c) the Grantee's material violation of any statutory or common
law duty of loyalty to the Company or any of its affiliates.
51
APPENDIX B--(CONTINUED)
(3) "Disability" shall have the meaning specified in any long term
disability plan or arrangement maintained by the Company in which the
Employee is eligible to participate or, if no such plan or arrangement
is then in effect, as determined by the Committee.
(4) "Good Reason" means (i) with respect to a Grantee whose
entitlement to severance benefits upon termination of employment is
governed by an individual change in control agreement, the meaning of
such term specified in such agreement, or (ii) with respect to a Grantee
whose entitlement to severance benefits upon termination of employment
is governed by the Second Amended and Restated Exelon Corporation Key
Management Severance Plan, as amended from time to time, or any
successor plan thereto, the meaning of such term specified in such plan.
(5) "Retirement" shall mean retirement from the employment of the
Company on or after attaining the minimum age specified for early or
normal retirement in any then effective qualified defined benefit
retirement plan of the Company in which the Grantee is a participant
after a minimum of ten years of service with the Company and the
Subsidiaries, provided that if the Grantee is a participant in the
Exelon Corporation Cash Balance Pension Plan, such Grantee shall have
attained at least age 55 as of the date of such retirement. For purposes
of this definition, the Grantee's age and service shall be determined
taking into account any deemed age or service awarded to the Grantee
pursuant to the qualified defined benefit retirement plan or severance
plan of the Company in which the Grantee is a participant or such other
individual agreement then in effect between such Grantee and the
Company.
(f) EXERCISE OF OPTIONS. A Grantee may exercise an Option that has become
exercisable, in whole or in part, by delivering a notice of exercise to the
Company with payment of the Exercise Price. The Grantee shall pay the Exercise
Price for an Option as specified by the Committee (x) in cash, (y) with the
approval of the Committee, by delivering shares of Company Stock owned by the
Grantee (including Company Stock acquired in connection with the exercise of an
Option, subject to such restrictions as the Committee deems appropriate) and
having a Fair Market Value on the date of exercise equal to the Exercise Price
or (z) by such other method as the Committee may approve, including attestation
(on a form prescribed by the Committee) to ownership of shares of Company Stock
having a Fair Market Value on the date of exercise equal to the Exercise Price,
or payment through a broker in accordance with procedures permitted by
Regulation T of the Federal Reserve Board. In addition, the Committee may
authorize loans by the Company to Grantees in connection with the exercise of an
Option, upon such terms and conditions that the Committee, in its sole
discretion, deems appropriate. Shares of Company Stock used to exercise an
Option shall have been held by the Grantee for the requisite period of time to
avoid adverse accounting consequences to the Company with respect to the Option.
The Grantee shall pay the Exercise Price and the amount of any withholding tax
due (pursuant to Section 11) at the time of exercise. Shares of the Company
Stock shall not be issued upon exercise of an Option until the Exercise Price is
fully paid and any required withholding is made. In the event that shares of
Company Stock are used to exercise an Option, the terms of such Option may
provide for a Grant of additional Options, or the Committee may grant additional
Options, to purchase, at Fair Market Value as of the date of exercise of the
Option or the date of grant of such additional Options, whichever is later, for
a term equal to the unexpired term of the exercised Option, a number of shares
of Company Stock equal to the sum of the number of whole shares used to exercise
the Option and the number of whole shares, if any, withheld in payment of any
withholding taxes.
(G) LIMITS ON INCENTIVE STOCK OPTIONS. Each Incentive Stock Option shall
provide that, if the aggregate Fair Market Value of the stock on the date of
grant with respect to which Incentive Stock Options are exercisable for the
first time by a Grantee during any calendar year, under the Plan or
52
APPENDIX B--(CONTINUED)
any other stock option plan of the Company or a parent or Subsidiary, exceeds
one hundred thousand dollars, then the Option, as to the excess, shall be
treated as a Nonqualified Stock Option.
(H) DIVIDEND EQUIVALENTS. The Committee may grant dividend equivalents in
connection with Options granted under the Plan. Such dividends may be paid
currently or accrued as contingent cash obligations and may be payable in cash
or shares of Company Stock, upon such terms as the Committee may establish,
including the achievement of specific performance goals.
6. RESTRICTED STOCK GRANTS.
The Committee may issue or transfer shares of Company Stock subject to
lapse or non-lapse restrictions to a Grantee under a Grant of Restricted Stock,
upon such terms as the Committee deems appropriate; provided, that the Chief
Executive Officer(s) of the Company may make special Restricted Stock Grants to
Employees who are not "covered persons" within the meaning of Section 162(m) of
the Code, officers subject to Section 16 of the Exchange Act or persons whose
title is "senior vice president" or higher, provided that the number of shares
of Company Stock subject to such Grants awarded in any single year shall not,
when combined with any other special Grants (excluding Options) awarded by the
Chief Executive Officer(s) for such year, exceed 300,000 in the aggregate or
10,000 with respect to any individual Employee. The following provisions are
applicable to Restricted Stock:
(A) GENERAL REQUIREMENTS. Shares of Company Stock issued or transferred
pursuant to Restricted Stock Grants may be issued or transferred for
consideration or for no consideration, as determined by the Committee. The
Committee may establish conditions under which restrictions on shares of
Restricted Stock shall lapse over a period of time or according to such other
criteria as the Committee deems appropriate including, without limitation,
restrictions based upon the achievement of specific performance goals. The
period of time during which the Restricted Stock will remain subject to
restrictions is referred to herein as the "Restriction Period."
(b) NUMBER OF SHARES. The Committee shall determine the number of shares of
Company Stock to be issued or transferred pursuant to a Restricted Stock Grant
and the restrictions applicable to such shares.
(c) REQUIREMENT OF EMPLOYMENT. Unless otherwise set forth in the Grant
Instrument relating a Restricted Stock Grant, if the Grantee ceases to be
employed by the Company during the Restriction Period, the Restricted Stock
Grant shall terminate and be forfeited with respect to all shares covered by the
Grant as to which the restrictions have not lapsed at the close of business on
the Grantee's last day of employment, and those shares of Company Stock must be
immediately returned to the Company. The Committee may, however, accelerate the
termination of the restrictions for all or a portion of such Restricted Stock as
it deems appropriate.
(d) RESTRICTIONS ON TRANSFER AND LEGEND ON STOCK CERTIFICATE. During the
Restriction Period, a Grantee may not sell, assign, transfer, pledge, or
otherwise dispose of the shares of Restricted Stock except to a Successor
Grantee under Section 12(a). Each Grant of shares of Restricted Stock issued in
certificated form shall contain a legend giving appropriate notice of the
restrictions in the Grant. The Grantee shall be entitled to have the legend
removed from the stock certificate covering the shares subject to restrictions
when all restrictions on such shares have lapsed. The Committee may determine
that the Company will not issue certificates for shares of Restricted Stock
until all restrictions on such shares have lapsed, or that the Company will
retain possession of certificates for shares of Restricted Stock until all
restrictions on such shares have lapsed.
(e) RIGHT TO VOTE AND TO RECEIVE DIVIDENDS. Unless the Committee determines
otherwise, during the Restriction Period the Grantee shall have the right to
vote shares of Restricted Stock and to receive any dividends or other
distributions paid on such shares, subject to any restrictions
53
APPENDIX B--(CONTINUED)
deemed appropriate by the Committee. Such dividends may be paid currently,
accrued as contingent cash obligations, or converted into additional shares of
Restricted Stock, upon such terms as the Committee may establish, including the
achievement of specific performance goals.
(f) LAPSE OF RESTRICTIONS. All restrictions imposed on Restricted Stock
shall lapse upon the expiration of the applicable Restriction Period and the
satisfaction of all conditions imposed by the Committee. The Committee may
terminate the restrictions, as to any or all Restricted Stock Grants, without
regard to any Restriction Period.
7. STOCK APPRECIATION RIGHTS.
(a) GENERAL REQUIREMENTS. The Committee may grant stock appreciate rights
to a Grantee separately or in tandem with any Option (for all or a portion of
the applicable Option); provided, that the Chief Executive Officer(s) of the
Company may make special SAR Grants to Employees who are not "covered persons"
within the meaning of Section 162(m) of the Code, officers subject to Section 16
of the Exchange Act or persons whose title is "senior vice president" or higher,
provided that the number of shares of Company Stock subject to such SARs awarded
in any single year shall not, when combined with any other special Grants
(excluding Options) awarded by the Chief Executive Officer(s) for such year,
exceed 300,000 in the aggregate or 10,000 with respect to any individual
Employee. Tandem SARs may be granted either at the time the Option is granted or
at any time thereafter while the Option remains outstanding; provided, however,
that, in the case of an Incentive Stock Option, SARs may be granted only at the
time of grant of the Incentive Stock Option. The Committee shall establish the
base amount of the SAR at the time the SAR is granted. Unless the Committee
determines otherwise, the base amount of each SAR shall be equal to the per
share Exercise Price of the related Option or, if there is no related Option,
the Fair Market Value of a share of Company Stock as of the date of grant of the
SAR.
(b) TANDEM SARS. In the case of tandem SARs, the number of SARs granted to
a Grantee that shall be exercisable during a specified period shall not exceed
the number of shares of Company Stock that the Grantee may purchase upon the
exercise of the related Option during such period. Upon the exercise of an
Option, the SARs relating to the Company Stock covered by such Option shall
terminate. Upon the exercise of SARs, the related Option shall terminate to the
extent of an equal number of shares of Company Stock.
(c) EXERCISABILITY. An SAR shall be exercisable during the period specified
by the Committee in the Grant Instrument and shall be subject to such vesting
and other restrictions as may be specified in the Grant Instrument; provided,
however, that the term of the SAR shall not exceed ten years. The Committee may
accelerate the exercisability of any or all outstanding SARs at any time for any
reason. SARs may only be exercised while the Grantee is employed by the Company
or during the applicable period after termination of employment as described in
Section 5(e) for Options. For purposes of the preceding sentence, the rules
applicable to a tandem SAR shall be the rules applicable under Section 5(e) to
the Option to which it relates, and the rules applicable to any other SAR shall
be the rules applicable under Section 5(e) and a Nonqualified Stock Option. A
tandem SAR shall be exercisable only during the period when the Option to which
it is related is also exercisable.
(d) VALUE OF SARS. When a Grantee exercises SARs, the Grantee shall receive
in settlement of such SARs an amount equal to the value of the stock
appreciation for the number of SARs exercised, payable in cash, Company Stock,
or a combination thereof. The stock appreciation for a SAR is the amount by
which the Fair Market Value of the underlying Company Stock on the date of
exercise of the SAR exceeds the aggregate base amount of the SAR as described in
Subsection (a).
(e) FORM OF PAYMENT. The Committee shall determine whether the appreciation
in a SAR shall be paid in the form of cash, shares of Company Stock, or a
combination of the two, in such
54
APPENDIX B--(CONTINUED)
proportion as the Committee deems appropriate. For purposes of calculating the
number of shares of Company Stock to be received, shares of Company Stock shall
be valued at their Fair Market Value on the date of exercise of the SAR. If
shares of Company Stock are to be received upon exercise of a SAR, cash shall be
delivered in lieu of any fractional share.
8. PERFORMANCE UNITS AND PERFORMANCE SHARES.
(a) GENERAL REQUIREMENTS. The Committee may grant Performance Units or
Performance Shares to a Grantee; provided, that the Chief Executive Officer(s)
of the Company may make special Performance Share Grants to Employees who are
not "covered persons" within the meaning of Section 162(m) of the Code, officers
subject to Section 16 of the Exchange Act or persons whose title is "senior vice
president" or higher, provided that the number of shares of Company Stock
subject to such Performance Share Grants awarded in any single year shall not,
when combined with any other special Grants (excluding Options) awarded by the
Chief Executive Officer(s) for such year, exceed 300,000 in the aggregate or
10,000 with respect to any individual Employee. Each Performance Unit/Share
shall represent the right of the Grantee to receive an amount based on the value
of the Performance Unit/Share, if performance goals established by the Committee
are met. A Performance Unit shall have a value based on such measurements or
criteria as the Committee determines. A Performance Share shall have a value
equal to the Fair Market Value of a share of Company Stock. The Committee shall
determine the number of Performance Units/Shares to be granted and the
requirements applicable to such Units/Shares.
(b) PERFORMANCE PERIOD AND PERFORMANCE GOALS. When Performance Units/Shares
are granted, the Committee shall establish the performance period during which
performance shall be measured (the "Performance Period"), performance goals
applicable to the Units/Shares ("Performance Goals") and such other conditions
of the Grant as the Committee deems appropriate.
(c) PAYMENT WITH RESPECT TO PERFORMANCE UNITS/SHARES. At the end of each
Performance Period, the Committee shall determine to what extent the Performance
Goals and other conditions of the Performance Units/Shares are met, the value of
the Performance Units (if applicable) and the amount, if any, to be paid with
respect to the number of Performance Units/Shares that have been earned.
Payments with respect to Performance Units/Shares shall be made in cash, in
Company Stock, or in a combination of the two, as determined by the Committee.
(d) REQUIREMENT OF EMPLOYMENT. Unless otherwise specified in the Grant
Instrument relating to a Performance Unit/Share, if the Grantee ceases to be
employed by the Company during a Performance Period, the Grantee's Performance
Units/Shares shall be forfeited at the close of business on the Grantee's last
day of employment. The Committee may, however, provide for complete or partial
exceptions to this requirement as it deems appropriate. If the Grantee ceases to
be employed by the Company after the expiration of a Performance Period but
prior to payment, payment shall be made to the Grantee or the Successor Grantee,
if applicable.
9. PHANTOM STOCK.
(a) GENERAL REQUIREMENTS. The Committee may grant Phantom Stock to a
Grantee in such amounts and upon such terms, and at any time and from time to
time, as shall be determined by the Committee; provided, that the Chief
Executive Officer(s) of the Company may make special Phantom Stock Grants to
Employees who are not "covered persons" within the meaning of Section 162(m) of
the Code, officers subject to Section 16 of the Exchange Act or persons whose
title is "senior vice president" or higher, provided that the number of shares
of Company Stock subject to such Phantom Stock Grants awarded in any single year
shall not, when combined with any other special Grants (excluding Options)
awarded by the Chief Executive Officer(s) for such year, exceed 300,000 in the
aggregate or 10,000 with respect to any individual Employee.
55
APPENDIX B--(CONTINUED)
(b) VALUE OF PHANTOM STOCK. The Committee shall establish the initial value
of the Phantom Stock at the time of grant which may be greater than, equal to or
less than the Fair Market Value of a share of Company Stock.
(c) DIVIDEND EQUIVALENTS. The Committee may grant dividend equivalents in
connection with Phantom Stock granted under the Plan. Such dividends may be paid
currently or accrued as contingent cash obligations and may be payable in cash
or shares of Company Stock, upon such terms as the Committee may establish,
including the achievement of specific performance goals.
(d) FORM AND TIMING OF PAYMENT. The Committee shall determine whether the
Phantom Stock shall be paid in the form of cash, shares of Company Stock or a
combination of the two, in such proportion as the Committee deems appropriate.
Cash payments shall be in an amount equal to the Fair Market Value on the
payment date of the number of shares of Company Stock equal to the number of
shares of Phantom Stock with respect to which payment is made. The number of
shares of Company Stock distributed in settlement of a Phantom Stock Grant shall
equal the number of shares of Phantom Stock with respect to which settlement is
made. Payment shall be made in accordance with the terms and at such times as
determined by the Committee at the time of grant.
(e) REQUIREMENT OF EMPLOYMENT. Unless otherwise specified in the Grant
Instrument relating to a Phantom Stock Grant, if the Grantee ceases to be
employed by the Company prior to becoming vested or otherwise entitled to
payment, the Grantee's non-vested Phantom Stock shall be forfeited at the close
of business on the Grantee's last day of employment. The Committee may, however,
provide for complete or partial exceptions to this requirement as it deems
appropriate.
10. DIVIDEND EQUIVALENTS.
(a) GENERAL REQUIREMENTS. The Committee may grant Dividend Equivalents to a
Grantee in such number and upon such other terms, including in either case the
achievement of specific performance goals, and at any time and from time to
time, as shall be determined by the Committee. Each Dividend Equivalent shall
represent the right to receive an amount in cash, or shares of Company Stock
having a Fair Market Value, equal to the amount of dividends paid on one share
of Company Stock during such period as may be established by the Committee.
(b) FORM AND TIMING OF PAYMENT. Dividend Equivalents may be paid currently
or accrued as contingent cash obligations, upon such terms as the Committee may
establish. The Committee shall determine whether Dividend Equivalents shall be
paid in the form of cash, shares of Company Stock or a combination of the two,
in such proportion as the Committee deems appropriate. The number of any shares
of Company Stock payable in satisfaction of Dividend Equivalents shall be
determined by dividing the amount credited to the Grantee with respect to such
Dividend Equivalents by the Fair Market Value on the day instructions are given
to the Company's Treasurer or transfer agent to issue or purchase such shares.
Cash shall be delivered in lieu of any fractional shares. Payment shall be made
at such times as determined by the Committee at the time of grant.
(c) REQUIREMENT OF EMPLOYMENT. If the Grantee ceases to be employed by the
Company prior to becoming entitled to payment, the Grantee's Dividend
Equivalents shall be forfeited at the close of business on the Grantee's last
day of employment. The Committee may, however, provide for complete or partial
exceptions to this requirement as it deems appropriate.
11. WITHHOLDING OF TAXES.
(a) REQUIRED WITHHOLDING. All Grants under the Plan shall be subject to
applicable federal (including FICA), state, and local tax withholding
requirements. The Company shall have the right to deduct from all Grants paid in
cash, or from other wages paid to the Grantee, any federal, state or local taxes
required by law to be withheld with respect to such Grants. In the case of
Options and other Grants paid in Company Stock, the Company may require the
Grantee or other person
56
APPENDIX B--(CONTINUED)
receiving such shares to pay to the Company the amount of any such taxes that
the Company is required to withhold with respect to such Grants, or the Company
may deduct from other wages paid by the Company the amount of any withholding
taxes due with respect to such Grants.
(b) ELECTION TO WITHHOLD SHARES. If the Committee so permits, a Grantee may
elect to satisfy the Company's income tax withholding obligation with respect to
an Option, SAR, Restricted Stock, Performance Units, Performance Shares, Phantom
Stock, or Dividend Equivalents, any of which is paid in Company Stock, by having
shares withheld having a Fair Market Value up to an amount that does not exceed
the Grantee's minimum applicable withholding tax rate for federal (including
FICA), state, and local tax liabilities. The election must be in a form and
manner prescribed by the Committee and shall be subject to the prior approval of
the Committee.
12. TRANSFERABILITY OF GRANTS.
(a) NONTRANSFERABILITY OF GRANTS. Except as provided below, only the
Grantee may exercise rights under a Grant during the Grantee's lifetime. A
Grantee may not transfer those rights except by will or by the laws of descent
and distribution or, with respect to Grants other than Incentive Stock Options,
if permitted in any specific case by the Committee, pursuant to a domestic
relations order (as defined under the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the regulations thereunder). When a
Grantee dies, the personal representative or other person entitled to succeed to
the rights of the Grantee ("Successor Grantee") may exercise such rights which
have not been extinguished by the Grantee's death. A Successor Grantee must
furnish proof satisfactory to the Company of his or her right to receive the
Grant under the Grantee's will or under the applicable laws of descent and
distribution.
(b) TRANSFER OF NONQUALIFIED STOCK OPTIONS. Notwithstanding the foregoing,
the Committee may provide in a Grant Instrument that a Grantee may transfer
Nonqualified Stock Options to family members or other persons or entities
according to such terms as the Committee may determine; provided that the
Grantee receives no consideration for the transfer of an Option and the
transferred Option shall continue to be subject to the same terms and conditions
as were applicable to the Option immediately before the transfer.
13. GRANTS SUBJECT TO CODE SECTION 162(m).
(a) PERFORMANCE BASED GRANTS. Any Grant to a Grantee who is a "covered
employee" within the meaning of Code Section 162(m), the exercisability or
settlement of which is subject to the achievement of performance goals, shall
qualify as "qualified performance-based compensation" within the meaning of Code
Section 162(m) and regulations thereunder. The performance goals for such a
Grant shall consist of one or more of the business criteria set forth in Section
13(b), below, and a targeted level or levels of performance with respect to such
criteria, as specified by the Committee in writing prior to (or within 90 days
after commencement of ) the applicable performance period. Performance goals
shall be objective and shall otherwise meet the requirements of Section
162(m)(4)(C) of the Code and regulations thereunder. Performance goals may
differ for such Grants to different Grantees. The Committee shall specify the
weighting to be given to each performance goal for purposes of determining the
final amount payable with respect to any such Grant. The Committee may, in its
discretion, reduce the amount of a payout otherwise to be made in connection
with such a Grant, but may not exercise discretion to increase such amount. All
determinations by the Committee as to the achievement of performance goals shall
be certified in writing prior to payment under the Plan, in the form of minutes
of a meeting of the Committee or otherwise.
(b) BUSINESS CRITERIA. Unless and until the Committee proposes for
shareholder approval and the Company's shareholders approve a change in the
general business criteria set forth in this Section, the attainment of which may
determine the amount and/or vesting with respect to Grants,
57
APPENDIX B--(CONTINUED)
the business criteria to be used for purposes of establishing performance goals
for such Grants shall be selected from among the following alternatives, each of
which may be based on absolute standards or peer industry group comparatives and
may be applied at various organizational levels (e.g., corporate, business unit,
division): (1) cumulative shareholder value added (SVA), (2) customer
satisfaction, (3) revenue, (4) primary or fully-diluted earnings per share of
Company Stock, (5) net income, (6) total shareholder return, (7) earnings before
interest taxes (EBIT), (8) cash flow, including operating cash flows, free cash
flow, discounted cash flow return on investment and cash flow in excess of cost
of capital, or any combination thereof, (9) economic value added, (10) return on
equity, (11) return on capital, (12) return on assets, (13) net operating
profits after taxes, (14) stock price increase, (15) return on sales, (16) debt
to equity ratio, (17) payout ratio, (18) asset turnover, (19) ratio of share
price to book value of shares, (20) price/earnings ratio, (21) employee
satisfaction, (22) diversity, (23) market share, (24) operating income, (25)
pre-tax income, (26) safety, (27) diversification of business opportunities,
(28) expense ratios, (29) total expenditures, (30) completion of key projects,
(31) dividend payout as percentage of net income, (32) earnings before interest,
taxes, depreciation and amortization (EBITDA), or (33) any individual
performance objective which is measured solely in terms of quantitative targets
related to the Company, any Subsidiary or the Company's or Subsidiary's
business. Such individual performance measures related to the Company,
Subsidiary or the Company's or Subsidiary's business may include: (A)
production-related factors such as generating capacity factor, performance
against the INPO index, generating equivalent availability, heat rates and
production cost, (B) transmission and distribution-related factors such as
customer satisfaction, reliability (based on outage frequency and duration), and
cost, (C) customer service-related factors such as customer satisfaction,
service levels and responsiveness and bad debt collections or losses, and (D)
relative performance against other similar companies in targeted areas. The
measures may be weighted differently for Grantees based on their management
level and the extent to which their responsibilities are primarily corporate or
business unit-related, and may be based in whole or in part on the performance
of the Company, a Subsidiary, division and/or other operational unit under one
or more of such measures.
In the event that Code Section 162(m) or applicable tax and/or securities
laws change to permit Committee discretion to alter the governing performance
measures without disclosing to shareholders and obtaining shareholder approval
of such changes and without thereby exposing the Company to potentially adverse
tax or other legal consequences, the Committee shall have sole discretion to
make such changes without obtaining shareholder approval.
14. DEFERRALS.
The Committee may permit or require a Grantee to defer receipt of the
payment of cash or the delivery of Shares that would otherwise be due to such
Grantee by virtue of the exercise of any Option or SAR, the lapse or waiver of
restrictions applicable to Restricted Stock, the satisfaction of any
requirements or objectives with respect to Performance Units/Shares, or the
vesting or satisfaction of any terms applicable to Phantom Stock or Dividend
Equivalents. If any such deferral election is permitted or required, the
Committee shall, in its sole discretion, establish rules and procedures for such
deferrals.
15. REQUIREMENTS FOR ISSUANCE OR TRANSFER OF SHARES.
No Company Stock shall be issued or transferred in connection with any
Grant hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Grant made to any Grantee hereunder on such Grantee's undertaking in writing
to comply with such restrictions on his or her subsequent disposition of such
shares of Company Stock as the Committee shall deem necessary or advisable as a
result of any applicable law, regulation or official interpretation thereof, and
certificates representing such shares may be legended to reflect
58
APPENDIX B--(CONTINUED)
any such restrictions. Certificates representing shares of Company Stock issued
or transferred under the Plan will be subject to such stop-transfer orders and
other restrictions as may be required by applicable laws, regulations, and
interpretations, including any requirement that a legend be placed thereon.
16. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT. The Committee may amend or terminate the Plan at any time.
The Committee shall not amend the Plan without shareholder approval if such
approval is required by Section 162(m) of the Code or the rules of any stock
exchange on which Company Stock is listed.
(b) TERMINATION OF PLAN. The Plan shall terminate on the day immediately
preceding the tenth anniversary of its effective date, unless the Plan is
terminated earlier by the Committee or is extended by the Committee with the
approval of the shareholders.
(c) TERMINATION AND AMENDMENT OF OUTSTANDING GRANTS. A termination or
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the
Committee acts under Section 22(b). The termination of the Plan shall not impair
the power and authority of the Committee with respect to an outstanding Grant.
Whether or not the Plan has terminated, an outstanding Grant may be terminated
or amended under Section 22(b) or may be amended by agreement of the Company and
the Grantee consistent with the Plan.
(d) GOVERNING DOCUMENT. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
17. FUNDING OF THE PLAN.
This Plan shall be unfunded. Exelon shall not be required to establish any
special or separate fund or to make any other segregation of assets to assure
the payment of any Grants under this Plan. In no event shall interest be paid or
accrued on any Grant, including unpaid installments of Grants.
18. RIGHTS OF PARTICIPANTS.
Nothing in this Plan shall entitle any Employee or other person to any
claim or right to be granted a Grant under this Plan, and no Grant shall entitle
any Employee or other person to any future Grant. Neither this Plan nor any
action taken hereunder shall be construed as giving any individual any rights to
be retained by or in the employ of the Company or any other employment rights.
No person shall have any right as a stockholder of the Company with respect to
any shares of Company Stock or other equity security of the Company which is
subject to a Grant hereunder unless and until such person becomes a stockholder
of record with respect to such shares of Company Stock or equity security.
19. NO FRACTIONAL SHARES.
No fractional shares of Company Stock shall be issued or delivered pursuant
to the Plan or any Grant. The Committee shall determine whether cash, other
awards or other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.
20. HEADINGS.
Section headings are for reference only. In the event of a conflict between
a title and the content of a Section, the content of the Section shall control.
59
APPENDIX B--(CONTINUED)
21. EFFECTIVE DATE OF THE PLAN.
This Plan was originally effective in 1989, as approved by the shareholders
of PECO on April 12, 1989. The Board of Directors of PECO and PECO's
shareholders approved the extension of the Plan effective April 19, 1997 and
such date shall be the effective date of the Plan for purposes of future Grants
of Incentive Stock Options and other Grants hereunder, and for purposes of
termination of the Plan in accordance with Section 16(b) hereof.
22. MISCELLANEOUS.
(a) GRANTS IN CONNECTION WITH CERTAIN CORPORATE TRANSACTIONS AND
OTHERWISE. Nothing contained in this Plan shall be construed to (i) limit the
right of the Committee to make Grants under this Plan in connection with the
acquisition, by purchase, lease, merger, consolidation, or otherwise, of the
business or assets of any corporation, firm or association, including Grants to
employees thereof who become Employees of the Company, or for other proper
corporate purposes, or (ii) limit the right of the Company to grant stock
options or make other awards outside of this Plan. Without limiting the
foregoing, the Committee may make a Grant to an employee of another corporation
who becomes an Employee by reason of a corporate merger, consolidation,
acquisition of stock or property, reorganization or liquidation involving the
Company or any of its Subsidiaries in substitution for a stock option or
restricted stock grant made by such corporation. The terms and conditions of the
substitute grants may vary from the terms and conditions required by the Plan
and from those of the substituted stock incentives. The Committee shall
prescribe the provisions of the substitute grants.
(b) COMPLIANCE WITH LAW. The Plan, the exercise of Options and SARs, and
the obligations of the Company to issue or transfer shares of Company Stock
under Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. With respect to persons
subject to Section 16 of the Exchange Act, it is the intent of the Company that
the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act. In
particular, and without otherwise limiting the provisions of this Section 21(b),
no Grantee subject to section 16 of the Exchange Act may exercise any Option or
SAR except in accordance with applicable requirements of Rule 16b-3 or its
successors under the Exchange Act. The Committee may revoke any Grant if it is
contrary to law or modify a Grant to bring it into compliance with any valid and
mandatory government regulation. The Committee may also adopt rules regarding
the withholding of taxes on payments to Grantees. The Committee may, in its sole
discretion, agree to limit its authority under this Section.
(c) GOVERNING LAW. The validity, construction, interpretation, and effect
of the Plan and Grant Instruments issued under the Plan shall exclusively be
governed by and determined in accordance with the law of the Commonwealth of
Pennsylvania without regard to principles of conflicts of law.
60
THE PARK HYATT PHILADELPHIA AT THE BELLEVUE
BROAD AND WALNUT STREETS
PHILADELPHIA, PENNSYLVANIA, 19102
(215) 893-1234
FROM THE NORTH (I-95)--Follow I-95 South to Central Philadelphia exit 676 West.
Follow 676 West to first exit-Broad Street exit. This automatically puts you on
15th Street going south. Go (9) lights to Locust Street, then make a left onto
Locust Street and go (1) block to Broad Street. Make a left onto Broad Street
and go immediately in the center lane. From the center lane make a left either
into the garage entrance or into the driveway.
FROM THE NORTH (NEW YORK OR NORTHERN NEW JERSEY)--Take Exit #4 off the New
Jersey Turnpike to Route 73 North. Route 73 North will take you to Route 38 West
which will lead you to US 30 West. US 30 will take you to the Benjamin Franklin
Bridge. Cross the Ben Franklin into Philadelphia. Take 6th Street to Walnut
Street and make a right. Go (8) blocks to Broad Street, then make a left. The
entrance to the hotel and garage are immediately on the right hand side.
FROM THE SOUTH (I-95 AND THE AIRPORT)--Follow I-95 North to Exit 14 - Broad
Street/Route 611. This puts you on Broad Street going north. The hotel is
located approximately 2.5 miles up Broad Street on your left between Locust and
Walnut Streets. You will need to enter the center lane to make a left either
into the garage entrance or Chancellor Court.
FROM THE EAST (WALT WHITMAN BRIDGE)--Take the Atlantic City Expressway to 41
North to the Walt Whitman Bridge. Cross the Walt Whitman and exit Broad Street.
Continue (2) miles north on Broad Street. Hotel entrance will be on your
immediate left just past Locust Street.
FROM THE EAST (BENJAMIN FRANKLIN BRIDGE)--Take Exit 4 off New Jersey Turnpike to
Route 73 to Route 30 West. Route 30 West takes you to the Benjamin Franklin
Bridge. Cross the bridge and exit 6th Street to Walnut Street. Turn right on
Walnut Street. Follow Walnut Street to Broad Street and turn left on Broad
Street. Hotel entrance is immediately on your right.
FROM THE WEST (PENNSYLVANIA TURNPIKE)--Exit from Exit 24 - Valley Forge
Interchange to Route 76 East. Take Route 76 East to Route 676 East (note: this
exits from the inside lane). Go only 1/2 mile to the Broad Street exit. At the
top of the Broad Street exit ramp make a right onto 15th Street, go (9) lights
to Locust Street. On Locust Street turn left and go (1) block to Broad Street.
Make a left onto Broad Street and enter into the center lane. You can make a
left either into the parking garage or into Chancellor Court.
FROM THE NORTHEAST EXTENSION--Take the Northeast Extension to the Pennsylvania
Turnpike - Exit 25A. Then take Route 476 South to Route 76 East. The directions
after this point are the same as above after you are on Route 76 East.
[MAP]
DOWNTOWN PHILADELPHIA
EXELON CORPORATION
2002 COMMON STOCK PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
P ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON TUESDAY, APRIL 23, 2002 AT
9:30 A.M. AT THE PARK HYATT PHILADELPHIA AT THE BELLEVUE, PHILADEL-
R PHIA, PENNSYLVANIA.
O RANDALL E. MEHRBERG and KATHERINE K. COMBS, or either of them with
power of substitution are hereby appointed proxies to vote as
X specified all shares of Common Stock which the Shareholder(s) named on
the reverse side is entitled to vote at the above Annual Meeting or at
Y any adjournment thereof, and in their discretion to vote upon all
other matters as may properly be brought before the Meeting.
EquiServe Trust Company, N.A., as Custodian under the Dividend
Reinvestment and Employee Stock Purchase Plan, and Exelon Corporation
as Custodian for the 401(k) Employee Savings Plan, are hereby
authorized to execute a proxy with identical instructions for any
shares of Common Stock held for the benefit of the Shareholder(s) named
on the reverse side.
Nominees for election to the Board of Directors for Class II terms
expiring in 2005 are:
01. Edward A. Brennan, 02. Bruce DeMars, 03. Richard H. Glanton, 04.
John W. Rowe, and 05. Ronald Rubin.
Please sign and date on the reverse side and mail promptly in the
enclosed postage paid envelope or otherwise to P.O. Box 8647, Edison,
New Jersey, 08818-8647.
SEE REVERSE
SIDE
--------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
ADMISSION TICKET
PLEASE BRING THE BOTTOM PORTION OF THIS CARD WITH YOU FOR
ADMISSION TO THE ANNUAL SHAREHOLDERS MEETING OF EXELON CORPORATION.
TUESDAY, APRIL 23, 2002
9:30 A.M.
THE PARK HYATT PHILADELPHIA
AT THE BELLEVUE
BROAD AND WALNUT STREETS
PHILADELPHIA, PENNSYLVANIA
THIS TICKET IS NOT TRANSFERABLE
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 2; FOR PROPOSAL 3; FOR PROPOSAL 4; AGAINST PROPOSAL 5, AND FOR THE DIRECTOR NOMINEES:
EDWARD A. BRENNAN, BRUCE DEMARS, RICHARD H. GLANTON; JOHN W. ROWE, AND RONALD RUBIN.
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Election of / / / / 2. Ratification of / / / / / / 4. Approval of Amendments / / / / / /
Directors Independent to Long Term Incentive
(see reverse) Accountants Plan
For, except vote withheld from 3. Approval of / / / / / / 5. Shareholder Proposal to / / / / / /
the following nominee(s): Employee Stock require investment
Purchase Plan in Clean Energy
__________________________________
SIGNATURE(S) _______________________________________________________________________ DATE ____________________
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title as such.
------------------------------------------------------------------------------------------------------------------------------------
- FOLD AND DETACH HERE ONLY IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL -
EXELON(SM)
Dear Shareholder:
Exelon Corporation encourages you to take advantage of new and
convenient ways by which you can vote your shares. You can vote your
shares electronically through the internet or the telephone. This
eliminates the need to return the proxy card.
To vote your shares electronically you must use the control number
printed in the box above, just below the perforation. The series of
numbers that appear in the box above is your personal code to access
the system.
1. To vote over the internet:
- Log on to the internet and go to the web site HTTP://WWW.EPROXYVOTE.COM/EXC
2. To vote over the telephone:
- On a touch-tone telephone call 1-877-779-8683 24 hours a day, 7 days a week
Your electronic vote authorizes the named proxies in the same manner as if you marked, signed, dated
and returned the proxy card.
If you choose to vote your shares electronically, do not mail back your proxy card.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.