ComEd 2015 Annual Report Download - page 67

Table of Contents
The combined company’s assets, liabilities or results of operations could be negatively impacted by unknown or unexpected events,
conditions or actions that might occur at PHI prior to the closing of the Merger.
The PHI assets, liabilities, business, financial condition, cash flows, operating results and prospects to be acquired or assumed by Exelon
by reason of the Merger could be negatively impacted before or after the Merger closing as a result of previously unknown events or conditions
occurring or existing before the Merger closing. Adverse changes in PHI’s business or operations could occur or arise as a result of actions by
PHI, legal or regulatory developments including the emergence or unfavorable resolution of pre-acquisition loss contingencies, deteriorating general
business, market, industry or economic conditions, and other factors both within and beyond the control of PHI. A significant decline in the value
of PHI assets to be acquired by Exelon or a significant increase in PHI liabilities to be assumed by Exelon could negatively impact the combined
company’s future business, operating results, cash flows, financial conditions or prospects.
Exelon could record goodwill that could become impaired and adversely affect its operating results.
In accordance with GAAP, the Merger will be accounted for as an acquisition of PHI common stock by Exelon and will follow the acquisition
method of accounting for business combinations. The assets and liabilities of PHI will be consolidated with those of Exelon. The excess of the
purchase price over the fair values of PHI’s assets and liabilities, if any, will be recorded as goodwill.
The amount of goodwill, which could be material, will be allocated to the appropriate reporting units of the combined company. Exelon is
required to assess goodwill for impairment at least annually by comparing the fair value of reporting units to the carrying value of those reporting
units. To the extent the carrying value of any of those reporting units is greater than the fair value, a second step comparing the implied fair value
of goodwill to the carrying amount would be required to determine if the goodwill is impaired. Such a potential impairment could result in a material
non-cash charge that would have a material impact on Exelon’s future operating results or financial positions.
Legal proceedings in connection with the Merger, the outcomes of which are uncertain, could delay or prevent the completion of the
Merger.
One of the conditions to the closing of the Merger is that no judgment (whether preliminary, temporary or permanent) or other order by any
court or other governmental entity shall be in effect that restrains, enjoins or otherwise prohibits or makes illegal the consummation of the Merger.
PHI and its directors have been named as defendants in purported class action lawsuits filed on behalf of named plaintiffs and other public
stockholders challenging the proposed Merger and seeking, among other things, to enjoin the defendants from consummating the Merger on the
agreed-upon terms. Exelon has been named as a defendant in these lawsuits. Exelon has also been named in a federal court case with similar
claims. In September 2014, the parties reached a proposed settlement which is subject to court approval. Final court approval of the proposed
settlement is not expected to occur until approximately 90 days after the Merger closing date.
If a plaintiff in these or any other litigation claims that may be filed in the future is successful in obtaining an injunction prohibiting the parties
from completing the Merger on the terms contemplated by the Merger Agreement, the injunction could prevent the completion of the Merger in the
expected time frame or altogether. If completion of the Merger is prevented or delayed, it could result in substantial costs to Exelon. In addition,
Exelon could incur significant costs in connection with the lawsuits, including costs associated with the indemnification of PHI’s directors and
officers.
60
Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.