ComEd 2015 Annual Report Download - page 65

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Exelon and PHI have proposed conditions for approval in the filings that have been made with the DCPSC and other regulatory
commissions. The conditions of approval of the Merger by the DCPSC will trigger the “most favored nation” provisions in the approvals of the
Merger by the DPSC, MDPSC, and the NJBPU.
Exelon cannot provide assurance that all required regulatory consents or approvals will be obtained or that these consents or approvals will
not contain terms, conditions or restrictions that would be unacceptable. The Merger Agreement generally permits Exelon to terminate the Merger
Agreement if the final terms of any of the required regulatory consents or approvals include burdensome conditions (as defined in the Merger
Agreement).
Failure to obtain regulatory approval could result in Exelon’s payment of a reverse termination fee.
If the Merger Agreement is terminated under certain circumstances due to the failure to obtain regulatory approvals, the failure to obtain
regulatory approvals without burdensome conditions, or the breach by Exelon of its obligations in respect of obtaining regulatory approvals, Exelon
will be required to pay PHI a reverse termination fee of $180 million, which would occur by means of PHI’s election to redeem the outstanding
nonvoting preferred securities purchased by Exelon in connection with the execution of the Merger Agreement for no consideration other than the
nominal par value of the stock. In these circumstances, Exelon will also be required to reimburse PHI for up to $40 million of its documented out-
of-pocket expenses for the Merger.
Failure to complete the Merger could negatively impact the share price and the future business and financial results of Exelon.
If the Merger is not completed, the ongoing businesses of Exelon could be negatively impacted and Exelon will be subject to several risks,
including:
• having to pay certain significant costs relating to the Merger without receiving the benefits of the Merger, including a termination fee of
up to $180 million payable by Exelon to PHI under certain circumstances; and
• the share price of Exelon could decline if and to the extent that the current market prices reflect an assumption by the market that the
Merger will be completed.
Exelon and PHI have incurred and will incur significant transaction and Merger-related costs in connection with the Merger.
Exelon and PHI have incurred and expect to incur non-recurring costs associated with combining the operations of the two companies. Most
of these costs will be transaction costs, including fees paid to financial and legal advisors related to the Merger and related financing
arrangements, and employment-related costs, including change-in- control related payments made to certain PHI executives. In addition, until the
closing of the Merger, Exelon will be required to pay financing costs without having realized any benefits from the Merger during the period of
delay. Exelon will also incur transition costs related to formulating integration plans. Exelon expects that the elimination of costs, as well as the
realization of other efficiencies related to the integration of the businesses, will exceed incremental transaction and Merger-related costs over time.
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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