Exhibit 10.2

 

LOGO [g42323ex10_2.jpg]    Execution Copy

Master Confirmation of OTC Collared ASAP

 

Date:    September 4, 2007    ML Ref: • To:    Exelon Corporation
(“Counterparty”)    Attention:    Thomas Miller    From:    Merrill Lynch
International (“MLI”)       Merrill Lynch Financial Centre       2 King Edward
Street       London EC1A 1HQ   

 

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Dear Sir / Madam:

The purpose of this letter agreement (the “Master Confirmation”) and the
supplemental confirmation attached hereto as Exhibit A (“Supplemental
Confirmation”, and the Supplemental Confirmation, together with the Master
Confirmation, this “Confirmation”) is to confirm the terms and conditions of the
transaction entered into between Counterparty and MLI through its agent Merrill
Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Agent”) on the Trade
Date specified below (“Transaction”). This Confirmation constitutes a
“Confirmation” both on behalf of MLI, as referred to in the ISDA Master
Agreement specified below, and on behalf of MLPF&S, as agent of MLI.

1. The definitions and provisions contained in the 2000 ISDA Definitions (the
“Swap Definitions”) and the 2002 ISDA Equity Derivatives Definitions (the
“Equity Definitions” and, together with the Swap Definitions, the
“Definitions”), in each case as published by the International Swaps and
Derivatives Association, Inc., are incorporated into this Confirmation. In the
event of any inconsistency between the Swap Definitions and the Equity
Definitions, the Equity Definitions will govern, in the event of any
inconsistency between the Definitions and the Master Confirmation, the Master
Confirmation will govern, and in the event of any inconsistency between the
Master Confirmation and the Supplemental Confirmation, the Supplemental
Confirmation will govern. References herein to any “Transaction” shall be deemed
to be references to a “Share Forward Transaction” for purposes of the Equity
Definitions and a “Swap Transaction” for the purposes of the Swap Definitions.

This Confirmation evidences a complete binding agreement between you and us as
to the terms of the Transactions to which this Confirmation relates. This
Confirmation (notwithstanding anything to the contrary herein), shall be subject
to an agreement in the 1992 form of the ISDA Master Agreement (Multicurrency
Cross Border) (the “Master Agreement” or “Agreement”) as if we had executed an
agreement in such form (but without any Schedule and with elections specified in
the “ISDA Master Agreement” Section of the Master Confirmation) on the Trade
Date of the Transaction. In the event of any inconsistency between the
provisions of that agreement and this Confirmation, this Confirmation will
prevail for the purpose of the Transaction.

2. The terms of the Transaction to which the Master Confirmation relates are as
follows:

General Terms:

 

Trade:    With respect to the Transaction, Counterparty, subject to the terms
and conditions and in reliance upon the representations and warranties set forth
herein, will purchase from MLI Shares in an amount equal to the Number of
Shares, provided that the Number of Shares shall not be less than the Minimum

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   Shares and shall not be greater than the Maximum Shares (the “Repurchase
Shares”). On the Prepayment Date, Counterparty will make payment for the
Repurchase Shares by delivering the Prepayment Amount by wire transfer of
immediately available funds to an account designated by MLI. On the first
Exchange Business Day immediately following the Hedging Completion Date (as
defined in Schedule A), MLI will deliver the Initial Shares to Counterparty. On
the Settlement Date, MLI will deliver to Counterparty Shares in an amount equal
to the difference, if any, between the Initial Shares and the Repurchase Shares.
The parties understand and agree that the delivery of Shares by or on behalf of
MLI on each of the first Exchange Business Day immediately following the Hedging
Completion Date and the Settlement Date is irrevocable and that as of such date
Counterparty shall be the sole beneficial owner of the delivered Shares for all
purposes. Trade Date:    September 4, 2007. Buyer:    Counterparty. Seller:   
MLI. Shares:    Shares of common stock, no par value per share, of Counterparty
(NYSE Symbol: “EXC”). Number of Shares:    The Prepayment Amount divided by the
Settlement Price. Minimum Shares:    As provided in Schedule A, as set forth in
the corresponding Supplemental Confirmation. Maximum Shares:    As provided in
Schedule A, as set forth in the corresponding Supplemental Confirmation. Initial
Shares:    The Minimum Shares. Initial Share Price:    The arithmetic mean of
the VWAP Prices of the Shares for each Scheduled Trading Day in the Hedge
Period. Forward Price:    Settlement Price. Prepayment:    Applicable.
Prepayment Amount:    As set forth in Schedule A. Prepayment Date:    The
Exchange Business Day immediately following the Trade Date. Hedge Period:    As
set forth in Schedule A. Hedging Initiation Date:    As set forth in Schedule A.
Hedging Completion Date:    As set forth in Schedule A. Exchange:    NYSE.
Related Exchange(s):    All Exchanges.

 

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Market Disruption Event:    The first sentence of Section 6.3(a) of the Equity
Definitions is hereby amended by replacing clause (ii) in its entirety with
“(ii) an Exchange Disruption, which in either case the Calculation Agent
reasonably determines is material, at any time on any Scheduled Trading Day
during the Valuation Period,” and by adding “, or (iv) a Regulatory Disruption”
at the end thereof. Regulatory Disruption:    A “Regulatory Disruption” shall
occur if MLI determines in its reasonable discretion that it is appropriate in
light of legal, regulatory or self-regulatory requirements for MLI to refrain
from all or any part of the market activity in which it would otherwise engage
in connection with the Transaction. Valuation:    Valuation Period:    Each of
the Scheduled Trading Days set forth in Schedule A. Valuation Time:    The close
of trading on the Exchange, without regard to extended trading hours. Suspension
Event:    Each and every one of the following events: (i) MLI reasonably
concludes, in its sole discretion, that Counterparty will be engaged in a
distribution of the Shares for purposes of Regulation M or that the “restricted
period” in respect of such distribution has not yet been completed; (ii) MLI
reasonably concludes, in its sole discretion, that it is appropriate with
respect to any legal, regulatory or self-regulatory requirements, for it to
refrain from purchasing Shares during any part of the Valuation Period; or (iii)
Counterparty is subject to a third-party tender offer. Each day on which a
Suspension Event occurs is referred to herein as a “Suspension Event Day”.
Exclusion Mechanics:    With respect to each Suspension Event Day or Disrupted
Day (each, an “Exclusion Day”), the Calculation Agent must determine whether (i)
such Exclusion Day should be excluded in full, in which case such Exclusion Day
shall not be included for purposes of determining the Settlement Price and the
Valuation Period shall be extended to account for such exclusion, or (ii) such
Exclusion Day should only be partially excluded, in which case the VWAP Price
for such Exclusion Day shall be determined by the Calculation Agent based on
Rule 10b-18 eligible transactions in the Shares on such Exclusion Day effected
during the portion of the Scheduled Trading Day unaffected by such event or
events, and the Valuation Period shall be extended to account for such
exclusion. If a Disrupted Day occurs during the Valuation Period, and each of
the nine (9) immediately following Scheduled Trading Days in the Valuation
Period is a Disrupted Day, then the Calculation Agent, in its reasonable
discretion, may either (i) determine the VWAP Price for such ninth Scheduled
Trading Day and adjust the weighting of the VWAP Prices for the relevant
Scheduled Trading Days during the Valuation Period as it reasonably deems
appropriate for purposes of determining the Settlement Price based on, among
other factors, the duration of any Market Disruption Event and the volume,
historical trading patterns and price of the Shares or (ii) disregard such day
for purposes of determining the Settlement Price and further postpone the
Valuation Date, in either case, as it deems appropriate to determine the VWAP
Price. Valuation Date    The date set forth in Schedule A (as the same may be
postponed in accordance with the provisions hereof.

 

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Settlement Terms:    Physical Settlement:    Applicable. Settlement Currency:   
USD. Settlement Method Election:    Not Applicable. Settlement Price:    The
arithmetic mean of the VWAP Prices of the Shares for each Scheduled Trading Day
in the Valuation Period. Settlement Date:    The Exchange Business Day
immediately following the Valuation Date. VWAP Price:    The daily volume
weighted average price per Share. For the purpose of calculating the VWAP Price,
the Calculation Agent will include only those trades which are reported during
the period of time during which Counterparty could purchase its own shares under
Rule 10b-18(b)(2) under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and pursuant to the conditions of Rule 10b-18(b)(3) and (b)(4)
under the Exchange Act. Counterparty acknowledges that MLI may refer to the
Bloomberg Page “EXC.N <Equity> AQR SEC” (or any successor thereto), in its
discretion, to determine the VWAP Price.

Number of Shares to be Delivered: The Repurchase Shares minus the Initial
Shares.

 

Share Adjustments:    Method of Adjustment:    Calculation Agent Adjustment;
provided, however, that an Extraordinary Dividend Event occurring with respect
to the Transaction shall be an Additional Termination Event under the Agreement
with respect to such Transaction, with such Transaction being an Affected
Transaction and Counterparty being the sole Affected Party. Extraordinary
Dividends:    Each dividend or distribution payment (other than any dividend or
distribution of the type described in Section 11.2(e)(i) or Section
11.2(e)(ii)(A) or (B) of the Equity Definitions) having an ex-dividend date
during the Valuation Period, other than the payment of the Ordinary Dividend
Amount on each Scheduled Dividend Date. For the avoidance of doubt, the
rescheduling of a Scheduled Dividend Date to a date that is five or more
Exchange Business Days prior to the expected date shall result in an Ordinary
Dividend Amount payable on such rescheduled day becoming an Extraordinary
Dividend. Ordinary Dividend Amount:    As set forth in Schedule A. Scheduled
Dividend Dates:    As set forth in Schedule A.

 

Extraordinary Events:    Consequences of Merger Events:   

Share-for-Share:

   Modified Calculation Agent Adjustment.

Share-for-Other:

   Cancellation and Payment; for the avoidance of doubt, the value of any
embedded optionality in the Transaction shall be taken into account in
determining the Cancellation Amount.

 

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Share-for-Combined:

   Component Adjustment.

Determining Party:

   MLI. Consequences of Tender Offers:   

Share-for-Share:

   Modified Calculation Agent Adjustment.

Share-for-Other:

   Cancellation and Payment; for the avoidance of doubt, the value of any
embedded optionality in the Transaction shall be taken into account in
determining the Cancellation Amount.

Share-for-Combined:

   Component Adjustment.

Determining Party:

   MLI. New Share:    The definition of “New Shares” in Section 12.1 of the
Equity Definitions shall be amended by inserting at the beginning of subsection
(i) the following: “(i) where the Exchange is located in the United States,
publicly quoted, traded or listed on the New York Stock Exchange, the American
Stock Exchange or the NASDAQ Stock Market LLC (or their respective successors)
or otherwise,”. Announcement Event:    If an Announcement Event occurs, the
Calculation Agent will determine in good faith and in a commercially reasonable
manner the economic effect of the Announcement Event on the theoretical value of
the Transaction from the Announcement Date to the Valuation Date. If such
economic effect is material, the Calculation Agent will adjust the terms of the
Transaction to reflect such economic effect. “Announcement Event” shall mean the
occurrence of the Announcement Date of a Merger Event or Tender Offer.
Composition of Combined    Consideration:    Not Applicable. Nationalization,
Insolvency or    Delisting:    Cancellation and Payment; provided that in
addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it
shall also constitute a Delisting (other than pursuant to a Merger Event or
Tender Offer) if the Exchange is located in the United States and the Shares are
not immediately re-listed, re-traded or re-quoted on any of the New York Stock
Exchange, the American Stock Exchange or The NASDAQ National Market (or their
respective successors); and if the Shares are immediately re-listed, re-traded
or re-quoted on any such exchange or quotation system, such exchange or
quotation system shall be deemed to be the Exchange.

Determining Party:

   MLI. Additional Disruption Events:   

Change in Law:

   Applicable.

Insolvency Filing:

   Applicable.

Increased Cost of Stock Borrow:

   Applicable; provided that Sections 12.9(a)(vii) and 12.9(b)(iv) of the Equity
Definitions are amended by deleting the words “at a rate equal to or less than
the Initial Stock Loan Rate” and replacing them with “at a rate of equal to or
less than 50 basis points”.

 

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Hedging Party:

   MLI.

Determining Party:

   MLI. Hedging Disruption:    Not Applicable. Increased Cost of Hedging    Not
Applicable.

Non-Reliance/Agreements and

Acknowledgements Regarding

Hedging Activities/Additional

   Acknowledgements:    Applicable.

 

  3. [Intentionally omitted].

 

  4. Partial Early Settlement:

Notwithstanding any other provisions of this Confirmation or the Supplemental
Confirmation, if MLI (together with its affiliates, as such term is defined
under the Exchange Act) acquire or hold a number of Shares or other equity
securities of Counterparty exchangeable for or convertible into Shares which in
aggregate would equal or exceed 4.75% of all Shares then issued and outstanding
(the “Ownership Limit”), MLI may at any time and from time to time during the
term of the Transaction deliver to Counterparty a number of Shares to cause MLI
and its affiliates to hold less than the Ownership Limit and Counterparty agrees
to take ownership of any such Shares, provided that MLI has furnished to
Counterparty three days’ prior notice in writing specifying a date for
settlement (each, a “Special Settlement Date”) and the number of Shares to be
delivered by MLI to Counterparty on the Special Settlement Date. The parties
understand and agree that (i) the delivery of the Shares by or on behalf of MLI
is irrevocable and that as of any Special Settlement Date Counterparty will be
the sole beneficial owner of the Shares for all purposes and (ii) the number of
Shares delivered by MLI on any such Special Settlement Date will reduce the
Number of Shares to be Delivered by MLI on the Settlement Date. For the
avoidance of doubt, Counterparty will under no circumstances be required to
return to MLI any Shares delivered to Counterparty on any Special Settlement
Date.

 

  5. Registration:

Counterparty hereby agrees that if, in the good faith reasonable judgment of
MLI, any Shares (“Hedge Shares”) acquired by MLI for the purpose of hedging its
obligations pursuant to any Transaction cannot be sold in the public market by
MLI without registration under the Securities Act, Counterparty shall, at its
election, either (i) in order to allow MLI to sell such Hedge Shares in a
registered offering, make available to MLI an effective registration statement
under the Securities Act and enter into an agreement, in form and substance
satisfactory to MLI, substantially in the form of an underwriting agreement for
a registered secondary offering; provided, however, that if MLI, in its sole
reasonable discretion, is not satisfied with access to due diligence materials,
the results of its due diligence investigation, or the procedures and
documentation for the registered offering referred to above, then clause (ii) or
clause (iii) of this paragraph shall apply at the election of Counterparty,
(ii) in order to allow MLI to sell such Hedge Shares in a private placement,
enter into a private placement agreement substantially similar to private
placement purchase agreements customary for private placements of equity
securities, in form and substance satisfactory to MLI (in which case, the
Calculation Agent shall make any adjustments to the terms of such Transaction
that are necessary, in its reasonable judgment, to compensate MLI for any
discount from the public market price of the Shares incurred on the sale of
Hedge Shares in a private placement), or (iii) purchase such Hedge Shares from
MLI at the Relevant Price on such Exchange Business Days, and in the amounts,
requested by MLI.

 

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  6. Additional Agreements, Representations and Covenants:

 

  a. Counterparty hereby represents and warrants to MLI that during the Hedge
Period:

 

  (i) except for transactions in connection with Counterparty’s company benefit
plans and with the prior written consent of MLI, Counterparty shall not
purchase, and shall cause its “affiliated purchasers” (as defined in Rule 10b-18
promulgated under the Exchange Act) not to directly or indirectly purchase, any
Shares (or equivalent interests or securities exchangeable, convertible or
exercisable into Shares), or be a party to any repurchase or similar agreements
pursuant to which a valuation, averaging or hedging period or similar such
period occurs on a Scheduled Trading Day in the Hedge Period.

 

  (ii) Counterparty will not be engaged in a distribution of Shares or other
securities for which the Shares are a reference security for purposes of Rule
102 of Regulation M under the Exchange Act.

 

  b. MLI hereby represents and warrants to Counterparty that during the Hedge
Period, it and each person or entity subject to its control or acting on its
behalf will purchase Shares to establish its initial hedge position in
compliance with the time of purchase, price of purchase and volume of purchase
provisions of Rule 10b-18 under the Exchange Act, as if such rule could be
applied to such purchases.

 

  7. Compliance with Securities Laws:

 

  a. Each party represents and agrees that it has complied, and will comply, in
connection with the Transaction and all related or contemporaneous sales and
purchases of Shares, with the applicable provisions of the Securities Act, and
the Exchange Act, and the rules and regulations each thereunder, including,
without limitation, Rules 10b-5 and Regulation M under the Exchange Act;
provided that each party shall be entitled to rely conclusively on any
information communicated by the other party concerning such other party’s market
activities.

 

  b. Each party further represents and warrants that if such party (“X”)
purchases any Shares from the other party pursuant to the Transaction, such
purchase(s) will comply in all material respects with (i) all laws and
regulations applicable to X and (ii) all contractual obligations of X.

 

  c. Each party acknowledges that the offer and sale of the Transaction to it is
intended to be exempt from registration under the Securities Act by virtue of
Section 4(2) thereof and the provisions of Regulation D thereunder (“Regulation
D”). Accordingly, each party represents and warrants to the other that (i) it
has the financial ability to bear the economic risk of its investment in each
Transaction and is able to bear a total loss of its investment, (ii) it is an
“accredited investor” as that term is defined under Regulation D, (iii) it will
purchase the Transaction for investment and not with a view to the distribution
or resale thereof, and (iv) the disposition of the Transaction is restricted
under this Confirmation, the Securities Act and state securities laws.

 

  d. Counterparty represents and warrants as of the date hereof and each Trade
Date that:

 

  (i) each of its filings under the Exchange Act that are required to be filed
from and including the ending date of Counterparty’s most recent prior fiscal
year have been filed, and that, as of the respective dates thereof and hereof,
there is no misstatement of material fact contained therein or omission of a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading;

 

  (ii) Counterparty is not in possession of material non-public information
regarding the Shares or the Counterparty;

 

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  (iii) Counterparty is not entering into the Transaction to facilitate a
distribution of the common stock or in connection with a future distribution of
securities;

 

  (iv) Counterparty is not entering into the Transaction to create actual or
apparent trading activity in the Shares (or any security convertible into or
exchangeable for Shares) or to manipulate the price of the Shares (or any
security convertible into or exchangeable for Shares);

 

  (v) Counterparty is entering into the Transaction in good faith and not as
part of a plan or scheme to evade the prohibitions of Rule 10b5-1 under the
Exchange Act (“Rule 10b5-1”); it is the intent of the parties that the
Transaction comply with the requirements of Rule l0b5-l(c)(1)(i)(A) and (B) and
each Transaction shall be interpreted to comply with the requirements of Rule
10b5-l(c) (the “Plan”); Counterparty will not seek to control or influence MLI
or MLPF&S to make “purchases or sales” (within the meaning of Rule
10b5-1(c)(l)(i)(B)(3)) under the Transaction, including, without limitation, any
decision to enter into any hedging transactions; Counterparty represents and
warrants that it has consulted with its own advisors as to the legal aspects of
its adoption and implementation of each Transaction under Rule 10b5-1;

 

  (vi) neither it nor any “affiliated purchaser” (as defined in Rule 10b-18
under the Exchange Act) has made any purchases of blocks pursuant to the proviso
in Rule 10b-18(b)(4) under the Exchange Act during the four full calendar weeks
immediately preceding the applicable Trade Date;

 

  (vii) the purchase or writing of the Transaction will not violate Rule 13e-1
or Rule 13e-4 under the Exchange Act, and Counterparty is not entering into any
Transaction in anticipation of, or in connection with, or to facilitate a
self-tender offer or a third-party tender offer;

 

  (viii) the Transaction is consistent with the publicly announced program of
Counterparty to repurchase, from time to time, Shares (the “Repurchase
Program”); and

 

  (ix) Counterparty has full power and authority to undertake the Repurchase
Program, and the Repurchase Program has been duly authorized and remains valid.

 

  8. Additional Counterparty Covenants and Agreements:

Counterparty hereby represents and warrants:

 

  (a) during the term of the Transaction to promptly notify MLI telephonically
(which oral communication shall be promptly confirmed by telecopy to MLI) if
Counterparty determines that as a result of an acquisition or other business
transaction or for any other reason Counterparty will be engaged in a
distribution of Shares or other securities for which the Shares are a reference
security for purposes of Rule 102 of Regulation M under the Exchange Act and to
promptly notify MLI by telecopy of the period commencing on the date that is one
(1) business day before the commencement of such distribution and ending on the
day on which Counterparty completes the distribution (the “Distribution
Period”); for the purposes of this Confirmation, the “term” of a Transaction
shall not be considered to have been completed until all Shares required to be
transferred to party hereto have been duly transferred and all cash amounts
required to be paid to a party hereto have been duly paid;

 

  (b)

except for transactions in connection with Counterparty’s company benefit plans,
Counterparty shall not purchase, and shall cause its “affiliated purchasers” (as
defined in Rule 10b-18 promulgated under the Exchange Act) not to directly or
indirectly purchase, any Shares (or equivalent interests or securities
exchangeable, convertible or exercisable into Shares), or be a

 

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party to any repurchase or similar agreements pursuant to which a valuation,
averaging or hedging period or similar such period occurs on a Scheduled Trading
Day in the Valuation Period; Counterparty shall not take any action or omit to
take any action that would or could cause MLI’s or MLPF&S’s purchases of Shares
during any Transaction term not to comply with the time of purchase, price of
purchase and volume of purchase provisions of Rule 10b-18 under the Exchange
Act, as if such rule could be applied to such Transaction; and

 

  (c) to report the Transaction as required in any applicable report filed by
the Counterparty pursuant to the Exchange Act in compliance with Regulation S-K
and/or Regulation S-B under the Exchange Act, as applicable; and

 

  (d) that Counterparty acknowledges and agrees that:

 

  (i) in connection with the Transaction, MLI will engage in customary hedging
activities in its sole discretion and for its own account and that such
activities may involve sales or purchases at an average price that may be
greater than, or less than, the price paid by Counterparty under the terms of
the Transaction; and

 

  (ii) notwithstanding the generality of Section 13.1 of the Equity Definitions,
MLI is not making any representations or warranties with respect to the
treatment of any Transaction under FASB Statements 133 as amended or 150, EITF
00-19 (or any successor issue statements) or under FASB’s Liabilities & Equity
Project.

 

  9. Account Details:

 

Account for payment to MLI:     JP Morgan Chase Bank, New York     ABA#
021000021     FAO: MLI Equity Derivatives     A/C: 066213118

 

  10. Bankruptcy Rights:

In the event of Counterparty’s bankruptcy, MLI’s rights in connection with any
Transaction shall not exceed those rights held by common shareholders. For the
avoidance of doubt, the parties acknowledge and agree that MLI’s rights with
respect to any other claim arising from any Transaction prior to Counterparty’s
bankruptcy shall remain in full force and effect and shall not be otherwise
abridged or modified in connection herewith.

 

  11. Set-Off:

Subject to “Netting of Payments” below, obligations under the Transaction shall
not be netted, recouped or set off (including pursuant to Section 6 of the
Agreement) against any other obligations of the parties, whether arising under
the Agreement, this Confirmation, under any other agreement between the parties
hereto, by operation of law or otherwise, and no other obligations of the
parties shall be netted, recouped or set off (including pursuant to Section 6 of
the Agreement) against obligations under the Transaction, whether arising under
the Agreement, this Confirmation, under any other agreement between the parties
hereto, by operation of law or otherwise, and each party hereby waives any such
right of setoff, netting or recoupment.

 

  12. Collateral:

None.

 

  13. Transfer:

Counterparty may transfer any of its rights or delegate its obligations under
the Transaction with the prior written consent of MLI. MLI may assign and
delegate its rights and obligations under the Transaction (the “Transferred
Obligations”) to any subsidiary of ML & Co. (the “Assignee”) by notice
specifying the effective date

 

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of such transfer (“Effective Date”) and including an executed acceptance and
assumption by the Assignee of the Transferred Obligations; provided that
(i) Counterparty will not, as a result of such transfer, be required to pay to
the Assignee an amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) of the Agreement (except in respect of interest under
Section 2(e), 6(d)(ii), or 6(e)) greater than the amount in respect of which
Counterparty would have been required to pay to MLI in the absence of such
transfer; (ii) the Assignee will not, as a result of such transfer, be required
to withhold or deduct on account of a Tax under Section 2(d)(i) of the Agreement
(except in respect of interest under Section 2(e), 6(d)(ii), or 6(e)) an amount
in excess of that which MLI would have been required to withhold or deduct in
the absence of such transfer, unless the Assignee would be required to make
additional payments pursuant to Section 2(d)(i)(4) of the Agreement
corresponding to such excess; and (iii) the obligations of Assignee will be
guaranteed by ML&Co. pursuant to a guarantee substantially in the form attached
hereto as Exhibit B. On the Effective Date, (a) MLI shall be released from all
obligations and liabilities arising under the Transferred Obligations; and
(b) if MLI has not assigned and delegated its rights and obligations under the
Agreement and all Transactions thereunder, the Transferred Obligations shall
cease to be a Transaction under the Agreement and shall be deemed to be a
Transaction under the master agreement, if any, between Assignee and
Counterparty, provided that, if at such time Assignee and Counterparty have not
entered into a master agreement, Assignee and Counterparty shall be deemed to
have entered into an ISDA form of Master Agreement (Multicurrency-Cross Border)
and Schedule substantially in the form of the Agreement but amended to reflect
the name of the Assignee and the address for notices and any amended
representations under Part 2 of the Agreement as may be specified in the notice
of transfer.

 

  14. Regulation:

MLI is regulated by The Securities and Futures Authority Limited and has entered
into the Transaction as principal.

 

  15. Indemnity:

Counterparty agrees to indemnify MLI, its Affiliates and their respective
directors, officers, agents and controlling parties (MLI and each such person
being an “MLI Indemnified Party”) from and against any and all losses, claims,
damages and liabilities, joint and several, to which such MLI Indemnified Party
may become subject because of the untruth of any representation by Counterparty
or a breach by Counterparty of any agreement or covenant under this
Confirmation, in the Agreement, the Plan or any other agreement relating to the
Agreement or the Transaction and will reimburse any MLI Indemnified Party for
all reasonable expenses (including reasonable legal fees and expenses) as they
are incurred in connection with the investigation of, preparation for, or
defense of, any pending or threatened claim or any action or proceeding arising
therefrom, whether or not such Indemnified Party is a party thereto.

MLI agrees to indemnify Counterparty, its Affiliates and their respective
directors, officers, agents and controlling parties (Counterparty and each such
person being an “Counterparty Indemnified Party”) from and against any and all
losses, claims, damages and liabilities, joint and several, to which such
Counterparty Indemnified Party may become subject because of the untruth of any
representation by MLI or a breach by MLI of any agreement or covenant under this
Confirmation, in the Agreement or any other agreement relating to the Agreement
or the Transaction and will reimburse any Counterparty Indemnified Party for all
reasonable expenses (including reasonable legal fees and expenses) as they are
incurred in connection with the investigation of, preparation for, or defense
of, any pending or threatened claim or any action or proceeding arising
therefrom, whether or not such Counterparty Indemnified Party is a party
thereto.

 

  16. Special Provisions for Counterparty Payments:

MLI and Counterparty agree that, notwithstanding anything to the contrary herein
or in the Agreement, in the event that (i) an Early Termination Date (whether as
a result of an Event of Default or Termination Event) occurs or is designated
with respect to any Transaction and, as a result, Counterparty owes to MLI an
amount calculated under Section 6(e) of the Agreement or (ii) an Extraordinary
Event occurs that results in the termination or cancellation of any Transaction
pursuant to Article 12 of the Equity Definitions and, as a result, Counterparty
owes to MLI a Cancellation Amount or any other amount in respect to the
Transaction, such amount shall be deemed to be zero. For the avoidance of doubt,
the Counterparty shall not be required to make any additional cash payments
(other than the Prepayment Amount) or deliver or return any Shares pursuant to
the terms of the Transaction (including, without limitation, the Minimum Shares
delivered on the Exchange Business Day immediately following the Hedging
Completion Date).

 

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  17. ISDA Master Agreement:

With respect to the Agreement, MLI and Counterparty each agree as follows:

Specified Entities:

(i) in relation to MLI, for the purposes of:

Section 5(a)(v): not applicable

Section 5(a)(vi): not applicable

Section 5(a)(vii): not applicable

Section 5(b)(iv): not applicable

and (ii) in relation to Counterparty, for the purposes of:

Section 5(a)(v): not applicable

Section 5(a)(vi): not applicable

Section 5(a)(vii): not applicable

Section 5(b)(iv): not applicable

“Specified Transaction” will have the meaning specified in Section 14 of the
Agreement.

The “Credit Event Upon Merger” provisions of Section 5(b)(iv) of the Agreement
will not apply to MLI and Counterparty.

The “Automatic Early Termination” provision of Section 6(a) of the Agreement
will not apply to MLI or to Counterparty.

Payments on Early Termination for the purpose of Section 6(e) of the Agreement:
(i) Market Quotation shall apply; and (ii) the Second Method shall apply.

“Termination Currency” means USD.

Tax Representations:

 

  (I) For the purpose of Section 3(e) of the Agreement, each party represents to
the other party that it is not required by any applicable law, as modified by
the practice of any relevant governmental revenue authority, of any Relevant
Jurisdiction to make any deduction or withholding for or on account of any Tax
from any payment (other than interest under Section 2(e), 6(d)(ii), or 6(e) of
the Agreement) to be made by it to the other party under the Agreement. In
making this representation, each party may rely on (i) the accuracy of any
representations made by the other party pursuant to Section 3(f) of the
Agreement, (ii) the satisfaction of the agreement contained in Section 4(a)(i)
or 4(a)(iii) of the Agreement, and the accuracy and effectiveness of any
document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of
the Agreement, and (iii) the satisfaction of the agreement of the other party
contained in Section 4(d) of the Agreement; provided that it will not be a
breach of this representation where reliance is placed on clause (ii) above and
the other party does not deliver a form or document under Section 4(a)(iii) of
the Agreement by reason of material prejudice to its legal or commercial
position.

 

  (II) For the purpose of Section 3(f) of the Agreement, each party makes the
following representations to the other party:

 

  (i) MLI represents that it is a company organized under the laws of England
and Wales.

 

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  (ii) Counterparty represents that it is a corporation incorporated under the
laws of Pennsylvania.

Delivery Requirements: For the purpose of Sections 3(d), 4(a)(i) and (ii) of the
Agreement, each party agrees to deliver the following documents:

Tax forms, documents or certificates to be delivered are:

Each party agrees to complete (accurately and in a manner reasonably
satisfactory to the other party), execute, and deliver to the other party,
United States Internal Revenue Service Form W-9 or W-8 BEN, or any successor of
such form(s): (i) before the first payment date under this agreement;
(ii) promptly upon reasonable demand by the other party; and (iii) promptly upon
learning that any such form(s) previously provided by the other party has become
obsolete or incorrect.

Other documents to be delivered:

 

Party Required to

Deliver Document

  

Document Required to be Delivered

  

When Required

  

Covered by
Section 3(d)
Representation

Counterparty    Evidence of the authority and true signatures of each official
or representative signing this Confirmation    Upon or before execution and
delivery of this Confirmation    Yes Counterparty    Certified copy of the
resolution of the Board of Directors or equivalent document authorizing the
execution and delivery of this Confirmation    Upon or before execution and
delivery of this Confirmation    Yes Each party    Executed Supplemental
Confirmation, in the form of Exhibit A hereto    On or before the Exchange
Business Day immediately following the Hedging Completion Date    Yes MLI   
Guarantee of its Credit Support Provider, substantially in the form of Exhibit B
attached hereto, together with evidence of the authority and true signatures of
the signatories, if applicable    Upon or before execution and delivery of this
Confirmation    Yes

Addresses for Notices: For the purpose of Section 12(a) of the Agreement:

Address for notices or communications to MLI:

 

Address:    Merrill Lynch International    Merrill Lynch Financial Centre    2
King Edward Street, London EC1A 1HQ    Attention: Gary Rosenblum   
Facsimile No.: (212) 449-2615    Telephone No.: (212) 449-6309

(For all purposes)

 

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Additionally, a copy of all notices pursuant to Sections 5, 6, and 7 as well as
any changes to Counterparty’s address, telephone number or facsimile number
should be sent to:

 

  Address: GMI Counsel   Merrill Lynch World Headquarters   4 World Financial
Center, 5th Floor   New York, New York 10080   Attention: Global Equity
Derivatives   Facsimile No.: 212 449-6576    Telephone No.: 212 449-6309

Address for notices or communications to Counterparty for all purposes:

 

  Thomas Miller   10 South Dearborn Street   Chicago, Illinois 60680  
Facsimile No.: 312-394-4082    Telephone No.: 312-394-7450

Additionally, a copy of all notices pursuant to Sections 5, 6, and 7 as well as
any changes to MLI’s address, telephone number or facsimile number should be
sent to:

 

  Bruce Wilson, Esq.   10 South Dearborn Street   Chicago, Illinois 60680  
Facsimile No.: 312-394-4462    Telephone No.: 312-394-4065

Process Agent: For the purpose of Section 13(c) of the Agreement, MLI appoints
as its process agent:

 

  Merrill Lynch, Pierce, Fenner & Smith Incorporated   222 Broadway, 16th Floor
  New York, NY 10038   Attention: Litigation Department   Counterparty does not
appoint a Process Agent.

Multibranch Party. For the purpose of Section 10(c) of the Agreement: Neither
MLI nor Counterparty is a Multibranch Party.

Calculation Agent. The Calculation Agent is MLI, whose judgments, determinations
and calculations in the Transaction and any related hedging transaction between
the parties shall be made in good faith and in a commercially reasonable manner.
Following any calculation by the Calculation Agent hereunder, upon a written
request by Counterparty, the Calculation Agent will provide to Counterparty by
e-mail to the e-mail address provided by Counterparty in such a prior written
request a report displaying in reasonable detail the basis for such calculation.

Credit Support Document.

MLI: Guarantee of ML&Co in the form attached hereto as Exhibit B.

Counterparty: Not Applicable

Credit Support Provider.

With respect to MLI: Merrill Lynch and Co. and with respect to Counterparty, Not
Applicable.

 

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Governing Law. This Confirmation will be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to any
choice of law provision or rule that would cause the application of the laws of
any jurisdiction other than New York.

Netting of Payments. The provisions of Section 2(c) of the Agreement shall not
be applicable to the Transaction; provided, however, that with respect to this
Agreement or any other ISDA Master Agreement between the parties, any Share
delivery obligations on any day of Counterparty, on the one hand, and MLI, on
the other hand, shall be netted. The resulting Share delivery obligation of a
party upon such netting shall be rounded down to the nearest number of whole
Shares, such that neither party shall be required to deliver any fractional
Shares.

Accuracy of Specified Information. Section 3(d) of the Agreement is hereby
amended by adding in the third line thereof after the word “respect” and before
the period the words “or, in the case of audited or unaudited financial
statements or balance sheets, a fair presentation of the financial condition of
the relevant person.”

Basic Representations. Section 3(a) of the Agreement is hereby amended by the
deletion of “and” at the end of Section 3(a)(iv); the substitution of a
semicolon for the period at the end of Section 3(a)(v) and the addition of
Sections 3(a)(vi), as follows:

Eligible Contract Participant; Line of Business. It is an “eligible contract
participant” as defined in the Commodity Futures Modernization Act of 2000, and
it has entered into this Confirmation and each Transaction in connection with
its business or a line of business (including financial intermediation), or the
financing of its business.

Amendment of Section 3(a)(iii). Section 3(a)(iii) of the Agreement is modified
to read as follows:

No Violation or Conflict. Such execution, delivery and performance do not
materially violate or conflict with any law known by it to be applicable to it,
any provision of its constitutional documents, any order or judgment of any
court or agency of government applicable to it or any of its assets or any
material contractual restriction relating to Specified Indebtedness binding on
or affecting it or any of its assets.

Amendment of Section 3(a)(iv). Section 3(a)(iv) of the Agreement is modified by
inserting the following at the beginning thereof:

“To such party’s best knowledge,”

Additional Representations:

Counterparty Representations. As of the date hereof and the Trade Date,
Counterparty represents and warrants that it: (i) has such knowledge and
experience in financial and business affairs as to be capable of evaluating the
merits and risks of entering into the Transaction; (ii) has consulted with its
own legal, financial, accounting and tax advisors in connection with the
Transaction; and (iii) is entering into the Transaction for a bona fide business
purpose to hedge or repurchase Shares.

As of the date hereof and the Trade Date, Counterparty represents and warrants
that it is not and has not been the subject of any civil proceeding of a
judicial or administrative body of competent jurisdiction that could reasonably
be expected to impair materially Counterparty’s ability to perform its
obligations hereunder.

As of the date hereof and the Trade Date, Counterparty is not insolvent.

Acknowledgements:

(1) The parties acknowledge and agree that there are no other representations,
agreements or other undertakings of the parties in relation to the Transaction,
except as set forth in this Confirmation.

 

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(2) The parties hereto intend for:

(a) the Transaction to be a “securities contract” as defined in Section 741(7)
of Title 11 of the United States Code (the “Bankruptcy Code”), qualifying for
the protections under Section 555 of the Bankruptcy Code;

(b) a party’s right to liquidate the Transaction and to exercise any other
remedies upon the occurrence of any Event of Default under the Agreement with
respect to the other party to constitute a “contractual right” as defined in the
Bankruptcy Code;

(c) all payments for, under or in connection with the Transaction, all payments
for the Shares and the transfer of such Shares to constitute “settlement
payments” as defined in the Bankruptcy Code.

Amendment of Section 6(d)(ii). Section 6(d)(ii) of the Agreement is modified by
deleting the words “on the day” in the second line thereof and substituting
therefor “on the day that is three Local Business Days after the day”.
Section 6(d)(ii) is further modified by deleting the words “two Local Business
Days” in the fourth line thereof and substituting therefor “three Local Business
Days.”

Amendment of Definition of Reference Market-Makers. The definition of “Reference
Market-Makers” in Section 14 is hereby amended by adding in clause (a) after the
word “credit” and before the word “and” the words “or to enter into transactions
similar in nature to Transactions”.

Consent to Recording. Each party consents to the recording of the telephone
conversations of trading and marketing personnel of the parties and their
Affiliates in connection with this Confirmation. To the extent that one party
records telephone conversations (the “Recording Party”) and the other party does
not (the “Non-Recording Party”), the Recording Party shall in the event of any
dispute, make a complete and unedited copy of such party’s tape of the entire
day’s conversations with the Non-Recording Party’s personnel available to the
Non-Recording Party. The Recording Party’s tapes may be used by either party in
any forum in which a dispute is sought to be resolved and the Recording Party
will retain tapes for a consistent period of time in accordance with the
Recording Party’s policy unless one party notifies the other that a particular
transaction is under review and warrants further retention.

Disclosure. Each party hereby acknowledges and agrees that MLI has authorized
Counterparty to disclose the Transaction and any related hedging transaction
between the parties if and to the extent that Counterparty reasonably determines
(after consultation with MLI) that such disclosure is required by law or by the
rules of any securities exchange or similar trading platform.

Severability. If any term, provision, covenant or condition of this
Confirmation, or the application thereof to any party or circumstance, shall be
held to be invalid or unenforceable in whole or in part for any reason, the
remaining terms, provisions, covenants, and conditions hereof shall continue in
full force and effect as if this Confirmation had been executed with the invalid
or unenforceable provision eliminated, so long as this Confirmation as so
modified continues to express, without material change, the original intentions
of the parties as to the subject matter of this Confirmation and the deletion of
such portion of this Confirmation will not substantially impair the respective
benefits or expectations of parties to this Agreement; provided, however, that
this severability provision shall not be applicable if any provision of
Section 2, 5, 6 or 13 of the Agreement (or any definition or provision in
Section 14 to the extent that it relates to, or is used in or in connection with
any such Section) shall be so held to be invalid or unenforceable.

Affected Parties. For purposes of Section 6(e) of the Agreement, each party
shall be deemed to be an Affected Party in connection with Illegality and any
Tax Event.

[Signatures to follow on separate page]

 

15

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Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Master Confirmation enclosed for that
purpose and returning it to us.

Very truly yours,

 

MERRILL LYNCH INTERNATIONAL

By:

 

 

Name:

 

Title:

 

Confirmed as of the date first above written:

 

EXELON CORPORATION

By:

 

 

Name:

 

Title:

 

Acknowledged and agreed as to matters relating to the Agent:

 

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

solely in its capacity as Agent hereunder

By:

 

 

Name:

 

Title:

 

 

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