SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Check the appropriate box:
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RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
EXELON CORPORATION
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(Name of Registrant as Specified In Its Charter)
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NOTICE OF 2001
ANNUAL MEETING
AND
PROXY STATEMENT
MARCH 23, 2001 [Exelon Logo]
Dear Shareholder:
Please come to our first annual meeting on April 24, 2001. We
are holding the meeting this year at the Hyatt Regency O'Hare, 9300
West Bryn Mawr Avenue, in Rosemont, Illinois. It is the first since
Exelon Corporation was formed through the merger of PECO Energy
Company and Unicom Corporation on October 20, 2000. You will hear
about our 2000 performance and have the opportunity to ask questions.
Enclosed with this proxy statement are your voting card and the 2000
annual report.
We are offering you the chance to cast your vote on-line. If you
have access to the Internet, it is a very easy way to vote. Whether
you choose to vote by proxy card, telephone or Internet, it would
help if you would vote as soon as possible.
We look forward to seeing you at the annual meeting.
Sincerely,
/s/ Corbin A. McNeill, Jr. /s/ John W. Rowe
Corbin A. McNeill, Jr. John W. Rowe
Chairman and President and
Co-Chief Executive Officer Co-Chief Executive Officer
Notice of Annual Meeting of Shareholders [Exelon Logo]
April 24, 2001
March 23, 2001
We will hold the annual meeting of shareholders of Exelon
Corporation on Tuesday, April 24, 2001, at 9:30 a.m., at the Hyatt
Regency O'Hare, 9300 West Bryn Mawr Avenue, in Rosemont, Illinois.
The purpose of the annual meeting is to consider and take action on
the following:
1. Election of six directors: Carlos H. Cantu, Daniel L. Cooper, G.
Fred DiBona, Jr., Sue L. Gin, Edgar D. Jannotta, and Corbin A.
McNeill, Jr., each for a term of three years.
2. Ratification of PricewaterhouseCoopers, LLP as Exelon Corporation's
independent accountants for 2001.
3. Any other business that properly comes before the annual meeting.
Shareholders of record as of March 1, 2001 can vote at the annual
meeting. This proxy statement, voting instructions and 2000 annual
report to shareholders are being distributed on or about March 23,
2001.
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 Combs
Katherine Combs
Vice President 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 PricewaterhouseCoopers, LLP as Exelon
Corporation's Independent Accountants for 2001.................... 4
Beneficial Ownership....................................................... 6
Board of Directors......................................................... 7
Board Committees........................................................... 11
Board Compensation......................................................... 13
Report of the Compensation Committee....................................... 14
Performance Graph.......................................................... 19
Summary Compensation Table................................................. 20
Option Grants in 2000...................................................... 21
Option Exercises and Year-end Value........................................ 22
Long-Term Incentive Plans.................................................. 23
Retirement Plans........................................................... 24
Employment Agreements...................................................... 26
Report of the Audit Committee.............................................. 31
Other Information.......................................................... 32
APPENDIX: Audit Committee Charter.......................................... 33
For directions to the annual meeting, please refer to the inside back cover.
COMMONLY ASKED
QUESTIONS AND ANSWERS
ABOUT THE ANNUAL MEETING
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Q:What am I voting on?
A:. Proposal 1: Election of six directors: Carlos H. Cantu, Daniel L. Cooper,
G. Fred DiBona, Jr., Sue L. Gin, Edgar D. Jannotta, and Corbin A. McNeill,
Jr.; and
. Proposal 2: Ratification of PricewaterhouseCoopers, LLP as Exelon
Corporation's independent accountants for 2001.
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Q.Who can vote?
A: Common shareholders of Exelon Corporation as of the close of business on the
record date, March 1, 2001, can vote at the annual meeting. Each share of
Exelon Corporation common stock gets one vote.
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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 proposal.
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.
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.
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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.
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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.
1
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Q:What constitutes a quorum?
A: As of the record date, March 1, 2001, 320,068,089 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.
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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 six 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.
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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 $12,000, 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.
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Q:How does a shareholder nominate someone to be a director of Exelon
Corporation?
A: The deadline for submitting nominations for the 2001 annual meeting passed
before the proxy statement was sent to shareholders, and you cannot nominate
a candidate from the floor of this year's annual meeting. 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, IL 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 23, 2001.
2
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Q: When are the shareholder proposals for the annual meeting held in the year
2002 due?
A: In order to be considered for next year's annual meeting you must submit
proposals in writing to Katherine K. Combs, Vice President and Corporate
Secretary, Exelon Corporation, 10 South Dearborn Street, 37th Floor, P.O.
Box 805398, Chicago, IL 60680-5398. Under the Bylaws, no proposal can be
considered at the 2002 annual meeting unless it is received by the Corporate
Secretary before the close of business on November 23, 2001. 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 six
Class I directors will expire at the 2001 annual meeting.
The corporate governance committee has recommended, and the board
nominates, the following Class I directors for re-election: Carlos H. Cantu,
Daniel L. Cooper, G. Fred DiBona, Jr., Sue L. Gin, Edgar D. Jannotta, and
Corbin A. McNeill, Jr. Each has consented to serve for a three-year term.
If any director is unable to stand for re-election, the board may reduce
the number of directors, or designate a substitute. In that case, shares
represented by proxies may be voted for a substitute 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 2001
PricewaterhouseCoopers and its predecessor firm Coopers & Lybrand have been
the independent accountants for PECO Energy Company for many years. The Board
of Directors retained PricewaterhouseCoopers to be the independent accountants
for Exelon Corporation and its subsidiaries for 2000. The audit committee and
the board of directors believe that PricewaterhouseCooper's knowledge of Exelon
Corporation and PECO Energy Company is invaluable, especially as Exelon
Corporation moves to 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 2000, the audit committee reviewed the PricewaterhouseCoopers Audit Plan
for 2001 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 PECO Energy's and Exelon's annual
financial statements for the fiscal year ended December 31, 2000 and for the
reviews of the financial statements for the two companies included in the Forms
10-Q they filed were $1,320,837.
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
PECO Energy and Exelon for the fiscal year ended December 31, 2000 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, 2000, were $7,930,746. Such services included
other accounting and audit services, information technology assurance services,
tax services, due diligence, and management consulting services.
The audit committee and the board of directors recommend a vote "FOR"
PricewaterhouseCoopers, LLP as Exelon Corporation's independent accountants for
2001.
5
BENEFICIAL OWNERSHIP
No person is known to Exelon Corporation to be the beneficial owner of more
than five percent of Exelon Corporation common stock. This table indicates how
much Exelon Corporation common stock was owned by the Company's directors and
executive officers as of December 31, 2000.
. The shares listed as "Beneficially Owned" include stock options
exercisable within 60 days of December 31, 2000.
. 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, 2000.
. 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.
DEFERRED
BENEFICIALLY MAY BE SHARE
OWNED SHARES ACQUIRED EQUIVALENTS TOTAL
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Edward A. Brennan Director 5,604 1,724 7,327
Carlos H. Cantu Director 2,812 233 3,045
Daniel L. Cooper Director 180 4,145 4,325
M. Walter D'Alessio Director 1,140 6,000 9,823 16,963
Bruce DeMars Director 4,001 626 4,627
G. Fred DiBona, Jr. Director 500 3,465 3,965
Sue L. Gin Director 12,209 1,381 13,590
Richard H. Glanton Director 585 5,488 6,073
Rosemarie B. Greco Director 1,000 4,500 5,500
Edgar D. Jannotta Director 6,622 5,452 12,074
John M. Palms, Ph.D. Director 1,139 6,000 10,146 17,285
John W. Rogers, Jr. Director 2,187 1,472 3,659
Ronald Rubin Director 1,359 6,000 10,163 17,523
Richard L. Thomas Director 9,300 3,714 13,014
John W. Rowe Director & Officer 364,344 380,699 60,251 805,294
Corbin A. McNeill, Jr. Director & Officer 864,809 350,566 120,577 1,335,953
Michael J. Egan Officer 419,260 117,400 4,243 540,902
Oliver D. Kingsley, Jr. Officer 102,098 223,249 64,744 390,090
Pamela B. Strobel Officer 78,573 126,999 21,619 227,191
Paul A. Elbert Officer 101,532 101,532
David R. Helwig Officer 51,957 27,549 21,746 101,252
Directors & Executive
Officers as a group
(27) 2,205,406 1,871,292 428,347 4,505,046
This table does not include 489,023 shares of common stock held under PECO
Energy Company's Service Annuity Plan. Mr. McNeill, Mr. Rowe, Mr. D'Alessio,
Ms. Greco, Mr. Jannotta and Mr. Thomas are members of the executive committee
which monitors the investment policy and performance of the investments under
that plan.
6
BOARD OF DIRECTORS
[PHOTO]
CORBIN A. [PHOTO]
McNEILL, JR.
[PHOTO] EDWARD A. [PHOTO]
JOHN W. ROWE BRENNAN CARLOS H. CANTU
CORBIN A. McNEILL, JR.
Mr. McNeill, age 61. Director, Chairman, and co-CEO of Exelon Corporation since
October 20, 2000. Former chairman, president and CEO of PECO Energy Company.
Other directorship: Associated Electric and Gas Insurance Services Limited.
JOHN W. ROWE
Mr. Rowe, age 55. Director, President, and co-CEO of Exelon Corporation since
October 20, 2000. Former chairman, president, and CEO of Unicom Corporation and
Commonwealth Edison Company. Former president and CEO of New England Electric
System. Other directorships: Fleet Boston Financial, UnumProvident Corporation,
and Wisconsin Central Transportation Corporation.
EDWARD A. BRENNAN
Mr. Brennan, age 67. Director of Exelon Corporation since October 20, 2000.
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, Dean Foods Company,
Minnesota Mining and Manufacturing Company, and Morgan Stanley Dean Witter &
Co.
CARLOS H. CANTU
Mr. Cantu, age 67. Director of Exelon Corporation since October 20, 2000.
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.
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BOARD OF DIRECTORS
[PHOTO]
DANIEL L. COOPER [PHOTO]
[PHOTO] BRUCE DeMARS [PHOTO]
M. WALTER G. FRED DiBONA,
D'ALESSIO JR.
DANIEL L. COOPER
Admiral Cooper, age 66. Director of Exelon Corporation since October 20, 2000.
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 67. Director of Exelon Corporation since October 20, 2000.
President 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 65. Director of Exelon Corporation since October 20, 2000.
CEO, Nonproliferation Trust. Partner, Trident Merchant Group. Retired Admiral,
U.S. Navy, and former Director of the Naval Nuclear Propulsion Program. Former
director of Unicom Corporation and Commonwealth Edison Company. Other
directorship: McDermott International.
G. FRED DiBONA, JR.
Mr. DiBona, age 50. Director of Exelon Corporation since October 20, 2000.
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.
8
BOARD OF DIRECTORS
[Photo]
SUE L. GIN [Photo]
[Photo] ROSEMARIE B. [Photo]
RICHARD H. GRECO EDGAR D.
GLANTON JANNOTTA
SUE L. GIN
Ms. Gin, age 58. Director of Exelon Corporation since October 20, 2000.
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 54. Director of Exelon Corporation since October 20, 2000.
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 54. Director of Exelon Corporation since October 20, 2000.
Principal of Greco Ventures. 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, Cardone Industries, Inc., Genuardi's
Family Markets, Inc., PWRT ComServe, Inc., SEI Investments Management
Corporation, and Radian Group, Inc.
EDGAR D. JANNOTTA
Mr. Jannotta, age 69. Director of Exelon Corporation since October 20, 2000.
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 Corporation, Aon Corporation, Bandag, Incorporated,
Inforte Corp., and Molex Incorporated.
9
BOARD OF DIRECTORS
[Photo]
JOHN M. PALMS, [Photo]
Ph.D.
[Photo] RONALD RUBIN [Photo]
JOHN W. ROGERS, RICHARD L.
JR. THOMAS
JOHN M. PALMS, Ph.D.
Dr. Palms, age 65. Director of Exelon Corporation since October 20, 2000.
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., National Merit Scholarship Corporation, National Collegiate
Athletic Association (NCAA); chairman of the Board of Trustees of the Institute
for Defense Analyses, and a member of the Advisory Council for the Institute of
Nuclear Power Operations.
JOHN W. ROGERS, JR.
Mr. Rogers, age 43. Director of Exelon Corporation since October 20, 2000.
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 69. Director of Exelon Corporation since October 20, 2000. 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 70. Director of Exelon Corporation since October 20, 2000.
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.
10
BOARD COMMITTEES
COMMITTEE MEMBERSHIP ROSTER
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Energy
Corporate Genco Delivery Enterprises
Name Board Executive Audit Compensation Governance Oversight Oversight Oversight
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C. A. McNeill, Jr. X* X
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J. W. Rowe X X*
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E. A. Brennan X X* X
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C. H. Cantu X X* X
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D. L. Cooper X X X
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M. W. D'Alessio X X X*
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B. DeMars X X X
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G. F. DiBona, Jr. X X X
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S. L. Gin X X X*
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R. H. Glanton X X X
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R. B. Greco X X X*
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E. D. Jannotta X X X
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J. M. Palms X X X*
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J. W. Rogers, Jr. X X X
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R. Rubin X X X
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R. L. Thomas X X X
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No. of Meetings in 2000 11 9 4 6 2 11 1 1
*Chairperson
The number of meetings held in 2000 reflects meetings of Exelon's board and
committees and PECO's board and comparable committees.
Each Exelon committee adopted its charter on October 20, 2000. Each
committee will conduct an annual assessment of its own performance. These
committee self-assessments will be reviewed by the corporate governance
committee and reported 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
11
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 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-CEOs 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.
12
Prior to October 20, 2000, the Company's predecessors, Unicom and PECO
Energy, had the following committees of their respective boards of directors,
which performed functions similar to the functions performed by the committees
of the Company's board of directors after October 20, 2000: For Unicom, the
Audit and Compliance Committee met four times in 2000, the Business Development
Committee met two times in 2000, the Compensation Committee met three times in
2000, and the Governance and Nominating Committee met one time in 2000. For
PECO Energy, the Audit Committee met three times in 2000, the Compensation
Committee met four times in 2000, the Corporate Governance Committee met two
times in 2000, the Finance Committee met eight times in 2000, the Nuclear
Committee met ten times in 2000 and the Public Affairs Committee met one time
in 2000.
Each director attended at least seventy-five percent of the meetings of the
board and the meetings of committees of which he or she was a member.
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 is the median of the general industry average.
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
$50,000 Annual grant of deferred stock units ($ 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 receive all or a portion of their compensation in
stock or to defer receiving their 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 one or more of seventeen 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 2000, the firm received
approximately $175,000 in fees. In 2001, it is estimated that the firm will
receive approximately $200,000 in fees. 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 PECO Energy Company
during 2000. 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.
13
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 2000, Exelon directed its focus to
compensating executives in a manner 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, 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
2000. This analysis was conducted by a leading external management compensation
consulting firm and included an assessment of business plans and strategic and
competitive compensation levels compared with the external market.
While overall, 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)
could be more effectively aligned with the competitive market. Based on those
results, Exelon's pay-for-performance philosophy was refined to increase the
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.
14
Mr. McNeill's and Mr. Rowe's 2000 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.
Mr. McNeill's total annual salary in 2000 was increased from $693,000 to
$860,000 on March 1, 2000, and increased to $1,050,000 effective October 20,
2000, the merger closing date.
Mr. Rowe's total annual salary in 2000 was increased from $975,000 to
$1,050,000 effective October 20, 2000.
Other Named Executives' 2000 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.
How Are 2000 Annual Incentives Determined?
Exelon will establish 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 assess corporate and business unit performance.
The annual incentive awards paid to Exelon executives for 2000 were
determined in accordance with the PECO Energy and Unicom 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 plans were designed to tie executive
annual incentives to the achievement of key goals of PECO Energy or Unicom, as
applicable, and of the executive's particular business unit.
For 2000, Mr. McNeill's annual incentive payout was determined using the
following corporate performance measures:
. Net Income,
. Cash Flow,
. Average Customer Retention of PECO Energy's Distribution Division,
. Customer Value Index of PECO Energy's Distribution Division,
. Employee Commitment,
. Safety,
. Generating Company Capacity Growth,
. Exelon Portfolio Growth, and
. Merger Integration.
15
For 2000, Mr. Rowe's annual incentive payout was determined using the
following corporate performance measures:
. Earnings Per Share,
. Shareholder Value Added,
. Customer Focus Index,
. Merger Goals, and
. Diversity Goals.
2000 Annual Incentive Award: In evaluating Mr. McNeill's and Mr. Rowe's
performance, the Committee considered the overall performance of PECO Energy
and Unicom 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 $1,081,472 and Mr. Rowe's approved award
was $1,180,269.
Other Named Executive Officers' 2000 Annual Incentives: The final 2000
incentive award 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 based on each
individual's performance.
How Is Compensation Used To Focus Management On Long-Term Value Creation?
In 1997, the shareholders of PECO Energy approved an amended long-term
incentive plan. The amended plan provides for performance-based awards
allowing flexibility in executive compensation practices for a competitive,
deregulated business environment.
Exelon adopted the PECO Energy long-term incentive plan, and has
established a long-term incentive program under the plan that includes a
combination of non-qualified stock options (75%) and performance shares (25%).
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.
Mr. McNeill and Mr. Rowe each received grants of 266,700 non-qualified
stock options on October 20, 2000 and 233,300 non-qualified stock options 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 these 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 of stock options to all executives
will occur in 2002.
Shortly before the merger became effective, PECO Energy and Unicom
terminated and distributed long-term incentive awards to executives under
their respective long-term incentive plans (described below). The new Exelon
program was launched to focus executives on creating an innovative new company
that will be instrumental in changing an entire industry while increasing
shareholder value.
16
PECO Energy Long-Term Incentives
Restricted Stock
Long-term incentives were awarded in the form of restricted stock to retain
key executives engaged in positioning PECO Energy. Awards were determined based
upon the successful completion of strategic goals designed to achieve long-term
business success and increased shareholder value. Depending upon PECO Energy's
progress each year, the compensation committee could award restricted stock
with prohibitions on sale or transfer until the restrictions lapse.
Restricted stock was awarded to key executives after a review of the
progress made in repositioning PECO Energy to compete successfully over the
long term.
The PECO Energy Company Board of Directors approved Mr. McNeill's
restricted stock awards of 25,000 shares in 1999 and 32,500 shares in 2000.
Stock Options
In 2000, Mr. McNeill and other named executives who were executives of PECO
Energy received a grant of stock options to align compensation directly to
increases in shareholder value. Mr. McNeill's award was for 125,800 stock
options.
Unicom Long-Term Incentives
Performance Units
The Unicom long-term performance unit award program was established in 1994
to focus employees on long range performance by linking certain incentive
payments to specific performance measures. Incentive opportunities were
expressed as a percentage of base salary, and increased with the executive's
management level. The awards payable for the period 1999-2000 were based on the
total returns of Unicom common stock relative to that of other companies
constituting the Dow Jones Utility Index. The awards payable for the period
1999-2001 were based on cumulative shareholder value added and a customer
satisfaction index. The awards payable for the period 2000-2002 were based on
cumulative earnings per share.
Unicom terminated the outstanding long-term incentive awards for the
outstanding periods and distributed them as indicated below:
. January 1, 1998-December 31, 2000 (full award),
. January 1, 1999-December 31, 2001 (two-thirds award), and
. January 1, 2000-December 31, 2002 (one-third award).
Mr. Rowe's total award under the three programs was $2,143,756.
Stock Options
In 2000, Mr. Rowe and other named executives of Unicom received grants of
stock options to align compensation directly to increases in shareholder value.
Mr. Rowe's award was 125,000 Unicom stock options, which were converted to
118,750 Exelon stock options, effective with the merger.
17
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 that does not qualify as performance-based
compensation under Code Section 162(m), and accordingly, to the extent receipt
of such compensation is not deferred, the amount of such incentive compensation
and salary in excess of $1 million will not be deductible by Exelon for
purposes of corporate income taxes. In 2000, Mr. McNeill deferred 50% of his
annual and 100% of his long-term incentive awards. Mr. Rowe deferred the
portion of his long-term incentive that was payable in 2000 in Unicom common
stock under the Unicom Corporation Stock Bonus Deferral Plan.
Compensation Committee
Edward A. Brennan, Chairman
G. Fred DiBona, Jr.
Ronald Rubin
Richard L. Thomas
18
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 1996 through 2000.
This performance chart assumes:
. $100 invested on December 31, 1995 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.
DECEMBER 31,
- ------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000
- ------------------------------------------------------------------------------
PECO
Energy/Exelon $100.00 89.54 93.22 166.29 141.83 293.43
-----------------
- ------------------------------------------------------------------------------
S&P 500 Stock
Index - - - - - - - - - $100.00 122.96 163.98 210.84 255.22 231.98
- ------------------------------------------------------------------------------
S&P Utility
Average ................. $100.00 103.12 128.55 147.53 134.44 214.66
[This page includes a line chart with the vertical axis showing dollars from
zero to 350, in increments of 50. The horizontal axis shows end of quarter dates
beginning at 12/95 and ending at 12/00.]
[The quarterly data points are as follows.]
EXELON S & P 500 S & P UTILITIES
CORPORATION
12/95 100.00000 100.00000 100.00000
3/96 89.62696 105.36757 95.24481
6/96 89.00880 110.09604 100.04639
9/96 82.80318 113.49870 96.67453
12/96 89.54199 122.95992 103.12261
3/97 73.67557 126.25651 99.65000
6/97 77.63350 148.29829 105.50188
9/97 88.34436 159.40704 110.57154
12/97 93.22000 163.98341 128.54648
3/98 86.11107 186.85715 135.77029
6/98 114.63121 193.02725 137.41273
9/98 145.48229 173.82575 143.77490
12/98 166.29288 210.84424 147.53056
3/99 185.43261 221.35017 133.72510
6/99 168.74610 236.95403 149.25317
9/99 152.00222 222.15903 142.09894
12/99 141.83185 255.21510 134.43695
3/00 151.43694 261.06902 145.31033
6/00 166.47192 254.13114 155.05087
9/00 251.37982 251.67034 205.36625
12/00 293.42640 231.97686 214.66141
19
SUMMARY COMPENSATION TABLE
Compensation of Executive Officers
Annual Compensation Long Term Compensation
- ------------------------------------------------------------------------------------------------------------------------
Bonus Awards Payouts
---------------------
--------------------- Restricted
Stock
Name and Stock Award(s) Options(/3/) Stock
Principal Position Year Salary ($) Cash ($) Based(/1/)($) Other(/2/)($) ($) (#) Cash ($) Based(/1/)($)
- -------------------------------------------------------------------------------------------------------------------------------
Corbin A. McNeill, Jr. 2000 855,830 1,081,472 0 0 2,803,513 392,500 0 0
Co-CEO & Chairman, 1999 659,857 1,000,000 0 0 942,188 0 0 0
Exelon Corp.; 1998 585,476 708,100 0 0 0 500,000 0 0
Chairman & President,
Exelon Generation
- -------------------------------------------------------------------------------------------------------------------------------
John W. Rowe 2000 989,423 1,180,269 0 134,473 0 385,450 1,071,878 1,071,878(/4/)
Co-CEO & President, 1999 957,692 529,125 529,125* 55,112 0 116,850 475,2460 203,677 *
Exelon Corp.; 1998 726,923 484,209 484,209* 215,117 0 237,500 343,219 52,537 *
Chairman, Exelon
Energy Delivery &
Exelon Enterprises
- -------------------------------------------------------------------------------------------------------------------------------
Oliver D. Kingsley, Jr. 2000 609,615 677,354 0 98,677 0 223,250 547,251 547,251 *
EVP, Exelon Corp.; 1999 544,385 0 594,000* 175,502 231,562 38,000 0 322,488 *
President & Chief 1998 475,000 0 383,332* 220,713 0 33,250 0 187,984 *
Nuclear Officer
- -------------------------------------------------------------------------------------------------------------------------------
Pamela B. Strobel 2000 377,423 269,824 0 0 0 122,250 331,618 331,618 *
EVP, Exelon Corp.; 1999 375,131 208,961 69,654* 0 0 28,500 84,410 84,410 *
Vice Chair, Exelon 1998 341,000 137,341 58,861* 0 0 19,000 42,528 42,528 *
Energy Delivery
- -------------------------------------------------------------------------------------------------------------------------------
Michael J. Egan 2000 386,231 306,394 0 0 1,140,149 127,100 0 0
EVP, Exelon Corp.; 1999 326,312 311,400 0 0 150,750 0 0 0
President, Exelon 1998 317,439 235,700 0 0 0 125,000 0 0
Enterprises
- -------------------------------------------------------------------------------------------------------------------------------
Ian P. McLean(/5/) 2000 314,154 220,596 0 0 429,588 83,000 361,900 0
Sr. VP, Exelon Corp.; 1999 72,692 63,900 0 0 1,009,200 125,000 0 0
President Power Team,
Exelon Generation
- -------------------------------------------------------------------------------------------------------------------------------
Paul A. Elbert(/6/) 2000 438,462 261,250 0 2,230,953 0 38,000 450,000 450,007
Former EVP, 1999 120,577 261,250 0 96,921 1,299,375 38,000 322,488 0
Unicom
- -------------------------------------------------------------------------------------------------------------------------------
David R. Helwig(/7/) 2000 356,923 327,901 0 0 0 77,750 285,413 285,413 *
Sr. VP, Exelon 1999 355,115 177,071 177,071* 0 479,256 23,750 0 144,206 *
Energy Delivery 1998 312,500 0 196,727* 0 0 20,900 0 85,747 *
All Other
Compen-
Name and sation
Principal Position ($)
- -------------------------------------------------------------------------------------------------------------------------------
Corbin A. McNeill, Jr. 3,200
Co-CEO & Chairman, 3,200
Exelon Corp.; 3,200
Chairman & President,
Exelon Generation
- -------------------------------------------------------------------------------------------------------------------------------
John W. Rowe 60,293
Co-CEO & President, 42,478
Exelon Corp.; 2,728,076
Chairman, Exelon
Energy Delivery &
Exelon Enterprises
- -------------------------------------------------------------------------------------------------------------------------------
Oliver D. Kingsley, Jr. 37,745
EVP, Exelon Corp.; 24,139
President & Chief 20,994
Nuclear Officer
- -------------------------------------------------------------------------------------------------------------------------------
Pamela B. Strobel 19,181
EVP, Exelon Corp.; 16,483
Vice Chair, Exelon 20,347
Energy Delivery
- -------------------------------------------------------------------------------------------------------------------------------
Michael J. Egan 0
EVP, Exelon Corp.; 0
President, Exelon 0
Enterprises
- -------------------------------------------------------------------------------------------------------------------------------
Ian P. McLean(/5/) 0
Sr. VP, Exelon Corp.; 0
President Power Team,
Exelon Generation
- -------------------------------------------------------------------------------------------------------------------------------
Paul A. Elbert(/6/) 2,498,074
Former EVP, 254,768
Unicom
- -------------------------------------------------------------------------------------------------------------------------------
David R. Helwig(/7/) 20,290
Sr. VP, Exelon 15,702
Energy Delivery 285,875
/1/All of the amounts shown under "Bonus--Stock-Based" and "LTIP Payouts--
Stock-Based" were either paid in shares of Unicom common stock or were
deferred and are deemed to be invested in shares of Unicom's 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 2000, includes $44,533 and
$39,906 paid to Mr. Rowe and Mr. Kingsley, respectively, for the payment
of FICA taxes and $52,445, $39,941 and $2,185,924 paid to Mr. Rowe, Mr.
Kingsley, and Mr. Elbert, respectively, for the payment of other taxes.
/3/Grants of options to acquire shares of Unicom common stock made to Mr.
Rowe, Mr. Kingsley, Ms. Strobel, Mr. Elbert, and Mr. Helwig 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/Elected to defer 30% of overall payout (50% cash, 20% stock, 30% SBDP)
/5/Mr. McLean commenced employment on September 22, 1999.
/6/Mr. Elbert was hired on October 1, 1999 and terminated employment on
December 1, 2000.
/7/Mr. Helwig was an executive officer of Unicom prior to the merger.
20
OPTION GRANTS IN 2000
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 Unicom grants, which expire on January 24, 2010, were
adjusted to reflect the substitution of Exelon shares for Unicom shares in
accordance with the merger agreement. The original strike price was $37.063.
The assumptions used for the Black-Scholes models are as follows:
Dividend Risk-Free
Expiration Date Volatility Yield Interest Rate Time of Exercise
- ------------------------------------------------------------------------------
October 19, 2010 37.23% 3.35% 5.68% 5 years
- ------------------------------------------------------------------------------
January 24, 2010 33.64% 4.80% 6.68% 5 years
- ------------------------------------------------------------------------------
February 28, 2010 35.18% 4.35% 6.68% 5 years
Grant Date
Individual Grants Value
------------------------------------------------------------
% of
Total
Number of Options
Securities Granted Grant Date
Underlying to Exercise or Present
Name and Options Employees Base Price Expiration Value
Principal Position Granted (#) in 2000 ($/Sh.) Date ($)
- -------------------------------------------------------------------------------
Corbin A. McNeill,
Jr. 266,700 3.41% 59.50 10/19/2010 $4,859,274
Co-CEO & Chairman, 125,800 1.61% 37.3125 02/28/2010 $1,308,320
Exelon Corp.;
Chairman &
President,
Exelon Generation
- -------------------------------------------------------------------------------
John W. Rowe 266,700 3.41% 59.50 10/19/2010 $4,859,274
Co-CEO & President, 118,750 1.52% 39.02 01/24/2010 $1,121,000
Exelon Corp.;
Chairman, Exelon
Energy Delivery &
Exelon Enterprises
- -------------------------------------------------------------------------------
Oliver D. Kingsley,
Jr. 152,000 1.94% 59.50 10/19/2010 $2,769,440
EVP, Exelon Corp.; 71,250 0.91% 39.02 01/24/2010 $ 672,600
President & Chief
Nuclear Officer,
Exelon Nuclear
- -------------------------------------------------------------------------------
Pamela B. Strobel 89,000 1.14% 59.50 10/19/2010 $1,621,580
EVP, Exelon Corp.; 33,250 0.42% 39.02 01/24/2010 $ 313,880
Vice Chair, Exelon
Energy Delivery
- -------------------------------------------------------------------------------
Michael J. Egan 98,000 1.25% 59.50 10/19/2010 $1,785,560
EVP, Exelon Corp.; 29,100 0.37% 37.3125 02/28/2010 $ 302,640
President, Exelon
Enterprises
- -------------------------------------------------------------------------------
Ian P. McLean 63,000 0.80% 59.50 10/19/2010 $1,147,860
Sr. VP, Exelon
Corp.; 20,000 0.26% 37.3125 02/28/2010 $ 208,000
President Power
Team,
Exelon Generation
- -------------------------------------------------------------------------------
Paul A. Elbert 38,000 0.48% 39.02 01/24/2010 $ 358,720
Former EVP, Unicom
- -------------------------------------------------------------------------------
David R. Helwig 54,000 0.69% 59.50 10/19/2010 $ 983,880
Sr. VP, Exelon 23,750 39.02 01/24/2010 $ 224,200
Energy Delivery
21
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 2000. Value is determined using
the market value of Exelon common stock at the year-end price of $70.21 per
share, minus the value of Exelon common stock at the exercise price. All
options whose exercise price exceeds the market value are valued at zero.
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at 12/31/2000 at 12/31/2000
- ------------------------------------------------------------------------------------------
Shares
Acquired (#) ($)
Name and Principal of Value Exercisable Exercisable
Position Exercise (#) Realized ($) Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------
Corbin A. McNeill, 17,000 374,471 E806,500 E39,013,365
Jr.
Co-CEO & U392,500 U 6,994,863
Chairman, Exelon
Corp.; Chairman &
President, Exelon
Generation
- ------------------------------------------------------------------------------------------
John W. Rowe 0 0 E284,683 E 9,854,095
Co-CEO & U455,117 U 8,829,224
President, Exelon
Corp.; Chairman,
Exelon Energy
Delivery & Exelon
Enterprises
- ------------------------------------------------------------------------------------------
Oliver D. 0 0 E 58,584 E 2,101,881
Kingsley, Jr.
EVP, Exelon U259,666 U 5,036,277
Corp.; President
& Chief Nuclear
Officer,
Exelon Nuclear
- ------------------------------------------------------------------------------------------
Pamela B. Strobel 0 0 E 50,192 E 1,993,003
EVP, Exelon Corp; U147,583 U 2,815,353
Vice Chair,
Exelon Energy
Delivery
- ------------------------------------------------------------------------------------------
Michael J. Egan 54,000 1,872,492 E369,000 E17,705,091
EVP, Exelon U127,100 U 2,006,897
Corp.;
President, Exelon
Enterprises
- ------------------------------------------------------------------------------------------
Ian P. McLean 0 0 E 41,666 E 1,336,854
Sr. VP, Exelon U166,334 U 4,006,451
Corp.; President
Power Team,
Exelon Generation
- ------------------------------------------------------------------------------------------
Paul A. Elbert 0 0 E 76,000 E 2,368,160
Former EVP, U -- U --
Unicom
- ------------------------------------------------------------------------------------------
David R. Helwig 0 0 E 40,850 E 1,362,689
Sr. VP, Exelon U 81,550 U 1,453,794
Energy Delivery
22
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
Estimated Future Payouts
Under Non-
Stock Price-Based Plans
-----------------------------
Performance
or Other
Period
Number of Until
Shares, Units or Maturation Threshold Target Maximum
Name Other Rights or Payout Number Number Number
- -------------------------------------------------------------------------------------
Corbin A. McNeill, Jr. N/A N/A N/A N/A N/A
John W. Rowe 13,758.75 3 years 6,879.38 13,758.75 25,517.50
Oliver D. Kingsley, Jr. 7,620.23 3 years 3,810.12 7,620.23 15,240.46
Pamela B. Strobel 4,233.46 3 years 2,116.73 4,233.46 8,466.92
Michael J. Egan N/A N/A N/A N/A N/A
Ian P. McLean N/A N/A N/A N/A N/A
Paul A. Elbert 6,032.68 3 years 3,016.34 6,032.68 12,065.36
David R. Helwig 3,506.72 3 years 1,753.36 3,506.72 7,013.44
Long-term performance unit awards were granted under the Unicorn
Corporation Long-Term Incentive Plan. Mr. McNeill, Mr. Egan, and Mr. McLean
were not officers of Unicom Corporation, and were accordingly not eligible for
awards under this plan. The awards are based on a three-year performance
period. For the awards described in the table, the number of units initially
awarded to a participant is determined by dividing a percentage of base salary
by $35,432. The applicable percentages for the individuals shown in the table
are: 50% for Mr. Rowe; 45% for Mr. Kingsley; 40% for Ms. Strobel; 45% for Mr.
Elbert; and 35% for Mr. Helwig. Payouts were to be based on achievement of a
cumulative earnings per share goal over the three-year performance period
ending December 31, 2002. The dollar value of a payout would be determined by
multiplying (a) the number of units applicable by (b) the average closing price
of Unicorn common stock as reported in the Wall Street Journal as New York
Stock Exchange Composite Transactions during the calendar quarter ending on
December 31, 2002 by (c) the level of performance achieved. The three-year
period was pro-rated through September 30, 2000 due to the merger, and the
amounts paid out are included in the column headed "Long-Term Compensation--
Payouts" in the Summary Compensation Table.
23
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 PECO
Energy's and Unicom's (by its subsidiary, Commonwealth Edison Company
("ComEd")) non-contributory retirement plans. 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 Plan and for the highest four-year period under the
ComEd Service Annuity System.
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, PECO Energy and ComEd
sponsored supplemental plans which allow the payment out of general funds of
PECO Energy or ComEd, as applicable, any benefits calculated under provisions
of the applicable retirement plan which may be above these limits. Exelon
assumed sponsorship of the non-contributory retirement plans and the
supplemental plans.
PECO Energy Pension Plan 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. Egan have 33 and 3 credited years of service,
respectively, under PECO Energy Company's pension program.
24
Commonwealth Edison Pension Plan Table
Highest Annual Normal Retirement Benefits After Specified
4-Year Years of Service
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, 23 years; Oliver D. Kingsley, 23 years; Pamela B.
Strobel, 8 years; and David R. Helwig, 8 years; Paul A. Elbert, 19 years. In
connection with his resignation, and in accordance with his election, Mr.
Elbert received a discounted lump sum payment of $2,677,493 under the
supplemental management retirement plan instead of an annuity.
25
EMPLOYMENT AGREEMENTS
Employment Agreement with John W. Rowe
Exelon entered into an amended employment agreement with Mr. Rowe 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 of:
. at least $900,000 through March 15, 2001, but not less than his base
salary immediately prior to the completion of the merger ($975,000), or
. Mr. McNeill's base salary, whichever is higher.
After March 15, 2001, Mr. Rowe's base salary will be 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 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 on a basis that is not less than that of Mr. McNeill's or on
which Mr. McNeill participates.
Under his amended employment agreement, Mr. Rowe will 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
. he voluntarily terminates on or after the first anniversary of the
completion of the merger 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), and
26
. if 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.
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
. the termination occurs at any other time on or after the completion of
the merger 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.
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.
27
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 options became exercisable in equal installments on
November 1 of 1998, 1999 and 2000, and expire 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.
The employment agreement with Mr. Kingsley provides that Mr. Kingsley will
participate in Unicom's Annual Incentive Award Program and will receive an
annual incentive award for 1998 and 1999 at least equal to the target award of
$213,750.
Mr. Kingsley participates in the Unicom Long-Term Performance Unit Award
Program, and any award payable under such Program with respect to the three-
year performance periods ending on December 31, 1997, 1998, or 1999 will be
made as though he had participated in the Program throughout such performance
periods (except in the case of a termination of employment). In addition, 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.
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.
Severance Agreement with Paul Elbert
Paul Elbert's resignation from all offices on December 1, 2000 was a
qualifying termination under his change in control severance agreement.
Pursuant to the agreement, he received a severance payment equal to $2,208,750
(three times the sum of his annual base salary and target incentive award at
the time of his termination). He also received a retirement benefit under the
Supplemental Management Retirement Plan (SERP) equal to the retirement benefit
that would have been payable under the Service Annuity System (and the SERP) to
employees who retire at age 60
28
calculated as though he had completed 18 years of credited service as well as
his actual years of credited service. In addition, medical and other welfare
benefits continue to be provided for three years, after which Mr. Elbert is
entitled to elect post retirement coverage for himself and his eligible
dependents. Mr. Elbert received payment of an amount equal to his target annual
incentive for 2000. Unvested options become exercisable as of his termination
date and the restrictions on his awards of restricted stock lapsed as of that
date. Pursuant to the agreement, Mr. Elbert also received a payment of
$2,154,968 to cover the excise taxes imposed under Section 4999 of the Internal
Revenue Code.
Change in Control Severance Arrangements
PECO Energy and Unicom entered into change in control agreements with
certain senior executives which became effective upon the completion of the
merger. The agreements cover employment through October 20, 2002 and generally
protect executives' positions and compensation levels through that date. A
material adverse change in such compensation or position is included in the
definition of "good reason" for purposes of the agreements. If an executives
resigns for good reason before October 20, 2001 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 agreements include:
. Severance payments equal to 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 and 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.
29
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 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's safe harbor amount.
30
REPORT OF THE AUDIT COMMITTEE
The Audit Committee reviews Exelon Corporation's financial reporting
process on behalf of the Board of Directors. In fulfilling its
responsibilities, the committee has reviewed and discussed the audited
financial statements contained in the 2000 Annual Report on SEC Form 10-K with
Exelon Corporation's management and the independent auditors. Management is
responsible for the financial statements and the reporting process, including
the system of internal controls. The independent auditors are responsible for
expressing an opinion on the conformity of those audited financial statements
with accounting principles generally accepted in the United States.
The committee discussed with the independent auditors 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 auditors the auditors' 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, 2000, for filing with the
Securities and Exchange Commission
Audit Committee
Carlos H. Cantu, Chair
Sue L. Gin
Richard H. Glanton
John M. Palms
31
OTHER INFORMATION
Transactions with Management: Pamela B. Strobel, is an Executive Vice
President of Exelon Corporation, the President of Exelon Energy Delivery
Company, and the Vice Chair of Commonwealth Edison Company (ComEd), both of
which are subsidiaries of Exelon Corporation. Ms. Strobel's husband, Russ M.
Strobel, was elected Senior Vice President, General Counsel and Secretary of
Nicor Inc. ("Nicor") in January 2001. Since January 1, 2000, Nicor Gas 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 2000, Nicor Gas billed ComEd approximately
$3,000,000 under the interim agreement, and ComEd billed Nicor Gas
approximately $3,950,000. For year 2001, Nicor Gas estimates that it will bill
ComEd $4,450,000 and that ComEd will bill Nicor Gas $12,575,000; (2) Nicor Gas
has made a proposal to utilize approximately 23 miles of ComEd's right of way
starting in 2001 in connection with a pipeline project. No agreement has been
reached and no consideration has been agreed to; (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 2000, Nicor Gas received approximately $3,100,000 in payments
under this agreement, and Nicor Gas estimates that it will receive payments of
approximately $2,400,000 in 2001; (4) Nicor Energy, L.L.C. (Nicor Energy), in
its capacity as a power marketer, purchases electricity from ComEd for resale
to certain Nicor Energy customers. In 2000, the total amount of such purchases
by Nicor Energy was approximately $48,530,000, and in 2001 such purchases are
expected to approximate $64,425,000.
Section 16(a) Beneficial Ownership Reporting Compliance: Based solely upon
a review of copies of Section 16 reports provided to Exelon Corporation and
written representatives received from directors and executive officers that no
other reports were required during 2000, Exelon believes that its directors and
executive officers made all required filings during 2000 with one exception.
Mr. Brennan acquired shares of Exelon as the result of the conversion of Unicom
Corporation shares that he acquired prior to Unicom's merger with Exelon. The
Unicom shares were acquired for Mr. Brennan by a broker having the
discretionary authority to do so under a standing brokerage account. Mr.
Brennan was not aware of the share acquisition, and did not file a timely
report. Mr. Brennan became aware of the acquisition after the shares were sold
in January 2001, and that sale was timely reported.
Discretionary Voting Authority: A shareholder submitted a proposal to adopt
a policy on investing in clean energy. The shareholder was ineligible to have
the proposal included in the proxy statement and it was excluded under the
rules of the Securities and Exchange Commission. In the event this proposal
were to properly come before the 2001 Annual Meeting, it is the intention of
the individuals serving as proxies to vote against the proposal. 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.
32
APPENDIX
AUDIT COMMITTEE CHARTER
ORGANIZATION
Membership
The Committee shall consist of at least three directors, all of whom are
"independent", which means that they have no relationship to the Company that
may interfere with the exercise of their independence from management and the
Company. Membership is determined by the Board on the recommendation of the
Corporate Governance Committee. During the Merger Transition Period, the
committee will be comprised of an equal number of members of the former PECO
and Unicom Boards. Each member of the Committee shall be "financially
literate", or shall become financially literate within a reasonable period of
time after his or her appointment to the Committee. The Board has defined
"financial literacy" to mean familiarity with the Company's financial
statements, including its balance sheet, income statement and cash flow
statement, and general knowledge of key business and financial risks and
related controls or control processes. Such knowledge may be acquired after
appointment to the committee through company-sponsored education or review of
educational materials or other resources. At least one member of the Committee
shall have "accounting or related financial management expertise". The Board
has defined accounting or related financial management expertise to mean a
solid background in finance, accounting or auditing, acquired through past
employment experience, professional certification, or any other comparable
experience that results in the individual's financial sophistication, including
being or having been a chief executive officer or other senior officer with
significant financial oversight responsibilities.
In addition to the definition of "independent" above, the following
restrictions shall apply to every Committee member:
1. Employees. A director who is an employee (including non-employee executive
officers) of the Company or any of its affiliates may not serve on the
Committee until three years following the termination of his or her
employment. In the event the employment relationship is with a former parent
or predecessor of the Company, the director could serve on the Committee
after three years following the termination of the relationship between the
Company and the former parent or predecessor.
2. Immediate Family. A director who is an immediate family member (including
parents, spouse, children, in-laws, siblings and anyone who shares such a
person's home) of an executive officer of the Company or any of its
affiliates can not serve on the Committee until three years following the
termination of the officer's employment.
3. Business Relationship. A director who is a partner, controlling shareholder,
or executive officer of an organization that has a business relationship
with the Company (e.g., supplier or customer), or who has a direct business
relationship with the Company (e.g., attorney, consultant, advisor) may
serve on the Committee only if the Board determines in its business
judgment, considering the materiality of the relationship, that the
relationship does not interfere with the director's exercise of independent
judgment. The Board has the sole discretion to determine whether any such
relationship is "significant" on a case by case basis, depending on the
volume of business, its importance to the director, his or her business or
the Company, and the degree to which the
33
relationship could affect the judgment of a person in the director's
position. Three years after the termination of the business or partnership
relationship, the director may serve on the Committee without any
requirement that the Board make such a determination.
4. Cross Compensation Committee Link. A director who is employed as an
executive of another corporation where any of the Company's executives
serves on that corporation's compensation committee may not serve on the
Audit Committee.
5. Independence Override. One director who is no longer an employee, or who is
an immediate family member of a former executive officer, but who would not
be considered independent due to the three year restriction period, may be
appointed, under exceptional and limited circumstances, to the Committee if
the Board determines in its business judgment that membership is required by
the best interests of the Company and its shareholders, and the Company
discloses in the next annual proxy statement the nature of the relationship
and the reason for that determination.
Meetings
The Committee meets quarterly, or more frequently as circumstances require.
Regular meetings are scheduled in accordance with the annual schedule approved
by the Board. A majority of the members of the Committee shall constitute a
quorum for the transaction of business. Minutes are recorded by the Secretary
to the Committee. Approval by a majority of the members present at a meeting at
which a quorum is present shall constitute approval by the Committee. The
Committee may also act by unanimous written consent without a meeting. The
Chairman, the Co-CEOs, the other Senior Officers of the Company, the Internal
Auditor and representatives of the Company's outside auditors attend meetings
at the invitation of the Committee.
BASIC FUNCTION AND PURPOSE
The Audit Committee assists the Board of Directors in fulfilling its
responsibility to oversee and review the Company's financial reporting and
accounting practices, audit functions and internal controls. The Committee also
reviews and makes recommendations to the Board on risk management policy and
risk limits. In addition, the Committee oversees and reviews officers' and
directors' expenses, compliance with appropriate policies, and the Code of
Business Conduct, and environmental, legal and regulatory compliance.
RESPONSIBILITIES
Outside Auditors
The Committee shall:
1. Recommend to the Board of Directors the selection and retention of an
outside auditor to perform the annual audit of financial statements and
the appropriate fees to compensate the outside auditor. The outside
auditor is ultimately accountable to the Board and the Committee. The
Board and the Committee have the ultimate authority to select,
evaluate, and, where appropriate, replace the outside auditor, subject
to ratification by the shareholders.
34
2. Consider, in consultation with the outside auditor and management, the
planned scope of the annual audit of financial statements, including a
review of staffing and coordination of audit efforts between the
outside auditor and the internal auditor.
3. Review and satisfy itself of the independence of the outside auditor,
including a review of any out-of-scope services, and related
compensation provided to the outside auditor. To that end, the
Committee shall request that the outside auditor submit to the
Committee on a periodic basis a formal written statement delineating
all relationships between the auditor and the Company consistent with
Independence Standards Board Standard No. 1. The Committee is
responsible for actively engaging in a dialogue with the outside
auditor with respect to any disclosed relationships or services that
may effect the objectivity and independence of the outside auditor, and
for recommending that the Board take appropriate action to satisfy
itself of the outside auditor's independence.
4. Consider and review with the outside auditor and management: a) the
adequacy of the Company's internal controls; b) the Company's annual
financial statements and related footnotes; c) emerging accounting
standards and issues affecting the Company; d) any significant and
related findings and recommendations of the outside auditor, together
with management's response. The Committee shall discuss with the
outside auditor the auditor's judgments about the quality, not just the
adequacy, of the Company's accounting principles as applied in its
financial statements. This discussion, usually with management present,
will include such matters as consistency, clarity and completeness of
the disclosures, as well as items having a significant impact on the
representational faithfulness, verifiability, neutrality and
consistency of the accounting information.
5. Direct the outside auditor to conduct an SAS 71 interim review of
quarterly financial statements prior to filing of the quarterly report
on Form 10-Q with the Securities and Exchange Commission. The outside
auditor and/or financial management will attempt to discuss with the
Committee, or at least the Committee chair, the results of the SAS 71
review if the SAS 71 review reveals significant adjustments, management
adjustments and accounting estimates, significant new accounting
policies or disagreements with management. The discussion should be
attempted prior to the quarterly report on Form 10-Q, or as soon as
practicable afterwards.
6. At least annually, at a regularly scheduled meeting of the Committee,
meet privately with the outside auditor without members of management
in attendance.
Internal Auditing
The Committee shall:
1. Consider and review with management the annual work plan and planned
activities of the internal auditor, the budget and staffing for the
internal audit function, the Charter of the internal auditor, and the
degree of compliance of the internal audit function with the Standards
for the Professional Practice of Internal Auditing (IIA).
2. Consider and review the coordination of audit efforts between the
internal audit staff and the outside auditor to ensure completeness of
coverage and efficient use of audit resources.
35
3. Consider and review with management and the internal auditor significant
internal auditing findings and recommendations related to the adequacy
of internal controls, compliance with policies and procedures, and
effective and efficient use of Company resources; also consider and
review management's response to the audit recommendations.
4. Meet privately with the internal auditor, as the Committee deems
appropriate. At least annually, meet in executive session with the
internal auditor at a regularly scheduled meeting of the Committee.
Risk Management Policy and Risk Limits
The Committee shall review and make recommendations to the Board on risk
management policy and risk limits.
Officers' and Directors' Expenses, Code of Business Conduct and
Environmental, Legal and Regulatory Compliance
The Committee shall:
1. Review policies and procedures with respect to officers' and directors'
expense accounts and perquisites, including their use of corporate
assets; and consider the results of and reviews of officers and
directors expenses and perquisites by the internal auditor or the
outside auditor.
2. Review policies and procedures with respect to prevention of illegal
payments, conflicts of interest, or other questionable practices; and
consider the results of monitoring of compliance with the Code of
Business Conduct, particularly by officers and directors.
3. Review policies and procedures with respect to environmental compliance
programs and recognition of contingent liabilities resulting from
identified environmental problems; and consider the results of any
environmental compliance assessments performed by Environmental Affairs,
Internal Auditing, or the outside auditor.
4. Review significant legal matters, including the Company's compliance
with applicable laws and regulations. Review the Company's use of
outside counsel to provide legal services and the fees for those
services.
ANNUAL ASSESSMENT OF PERFORMANCE AND CHARTER REVIEW
The charter shall be approved by the Board of Directors. The Committee
shall annually assess its own performance and review the adequacy of its
charter. The text of the charter will be included in the proxy statement at
least once every three years.
REPORTING RESPONSIBILITY
1. All action taken by the Audit Committee shall be reported to the Board
of Directors at its next meeting succeeding such action.
2. The Committee shall make annual reports to the NYSE stating: (a) whether
the Board made any determination regarding the independence of
directors; (b) whether all members of the
36
Committee are financially literate; (c) whether at least one member of
the Committee has accounting or related financial management expertise;
and (d) whether the Committee reviewed and assessed the adequacy of the
Committee charter.
3. The Committee shall include in the annual proxy statement a report
disclosing whether the Committee has a charter that has been approved
by the Board; the text of the charter will be included in the proxy
statement every three years. The Committee will annually disclose
whether the discussions with management, the inside and outside
auditors took place, and whether, based on its review of the financial
statements, the Committee recommended to the Board that it include the
financial statements in the annual report on Form 10-K.
37
HYATT REGENCY O'HARE
9300 West Bryn Mawr Avenue
River Road at Kennedy Expressway
Rosemont, Illinois 60018
(847) 696-1234
Parking is available at the Hyatt Regency O'Hare for attendees of the Exelon
Corporation 2001 Annual Meeting at a reduced rate of $6.00.
O'HARE INTERNATIONAL AIRPORT--
Take the River Road South Exit.
TRI-STATE SOUTH (294) / NORTHWEST TOLLWAY (90)--Follow the signs for O'Hare
International Airport and exit at Mannheim South, pass over the expressway and
circle back down the ramp marked 190 East Chicago. Then take River Road South
Exit. Turn right onto River Road, the hotel will be on the left side.
TRI-STATE NORTH--Follow signs to O'Hare Field and exit at River Road. Turn
right, Hyatt is located on left.
FROM CHICAGO--Kennedy Expressway (90) West and follow the signs for O'Hare
International Airport and exit at River Road South. Turn right onto River Road,
the hotel will be on left side.
FROM WEST of O'HARE--Pass through the tollgate and proceed to the second exit,
Mannheim South. Stay to the right, and take the ramp marked "190 East-Chicago."
Then, drive two miles and exit at River Road South. The hotel will be across
the street and to the left.
[On the remainder of this page there is a map showing the Interstate highways in
the vicinity of O'Hare Airport. There is an enlargement of the area immediately
around the hotel showing the highway interchange, the major local streets and
the location of the commuter train station.]
PROXY
EXELON CORPORATION
2001 COMMON STOCK PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 24, 2001, AT 9:30 a.m. AT THE HYATT
REGENCY O'HARE, ROSEMONT, ILLINOIS
RANDALL E. MEHRBERG and KATHERINE K. COMBS, or either of them, with power of
substitution are hereby appointed proxies to vote as 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 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
Stock Purchase Plan, and PECO Energy Company, 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 I terms expiring in
2004 are:
01. Carlos H. Cantu, 02. Daniel L. Cooper, 03. G. Fred DiBona, Jr., 04. Sue L.
Gin, 05. Edgar D. Jannotta, and 06. Corbin A. McNeill, Jr.
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 /\
Annual Meeting of Stockholders
April 24, 2001
9:30 a.m.
Hyatt Regency O'Hare
Rosemont, Illinois
Your Vote is Important
Thank you for Voting.
Please mark your 6021
[X] 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, and the
Director Nominees: Carlos H. Cantu, Daniel L. Cooper, G. Fred Dibona, Jr., Sue
L. Gin, Edgar D. Jannotta, and Corbin A. McNeill, Jr.
The Board of Directors Recommends a vote FOR proposal 1 and 2.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Ratification of [ ] [ ] [ ]
Directors Independent
(see reverse) Accountants
For, except vote withheld from the following nominee(s):
________________________________________________________
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/\
[LOGO] 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.