Company Name: Exelon Corp.
Public Availability Date: January 20, 2006Document Sections:INQUIRY LETTER
APPENDIX
STAFF REPLY LETTER
[INQUIRY LETTER]
December 14, 2005 Via Overnight Delivery Division of Corporation Finance
Office of the Chief Counsel
450 Fifth Street, N.W.
Washington D.C. 20549 Re: Exelon CorporationShareholder Proposals of Bernard H. Meyer Ladies and Gentlemen: This letter is to inform you that our client, Exelon Corporation ("Exelon"), in accordance with Rule 14a-8(j) under the Securities Exchange Act of 1934, as amended, intends to omit from its proxy statement and form of proxy for its 2006 Annual Meeting of Shareholders (collectively, the "2006 Proxy Materials") a set of five shareholder proposals (collectively, the "Proposals") received from Bernard H. Meyer (the "Proponent").
1 The Proposals are attached hereto as Exhibit A. On behalf of Exelon, we respectfully request that the staff of the Division of Corporation Finance (the "Staff") concur in our view that: (1) the Proposals may be omitted under Rules 14a-8(b) and 14a-8(f) because the Proponent has not demonstrated that he continuously held, for at least one year by the date on which the Proposals were submitted, at least $2,000 in market value, or 1%, of Exelon's securities entitled to be voted on the Proposals at the meeting in question; (2) each of the Termination Proposal, the Recovery Proposal, the Board Approval Proposal and the Shareholder Approval Proposal may be omitted under Rule 14a-8(i)(7) because it deals with a matter relating to Exelon's ordinary business operations; (3) each of the Board Approval Proposal and the Political Contribution Proposal may be omitted under Rule 14a-8(i)(10) because such proposal has been substantially implemented; and (4) the Proposals may be omitted under Rule 14a-8(i)(1) because they are not a proper subject for action by shareholders under the laws of the Commonwealth of Pennsylvania. To the extent the reasons for such omission are based on matters of state law, this letter constitutes an opinion of counsel pursuant to Rule 14a-8(j)(2)(ii). The signatory of this letter is a duly licensed attorney in the Commonwealth of Pennsylvania. Pursuant to Rule 14a-8(j), enclosed herewith are six (6) copies of this letter and its attachments. Also, in accordance with Rule 14a-8(j), a copy of this letter and its attachments are being mailed on this date to the Proponent, informing him of Exelon's intention to omit the Proposal from the 2006 Proxy Materials. Pursuant to Rule 14a-8(j), this letter is being filed with the Securities and Exchange Commission (the "Commission") no later than eighty (80) calendar days before Exelon intends to file its definitive 2006 Proxy Materials with the Commission. On behalf of Exelon, we hereby agree to promptly forward to the Proponent any Staff response to this no-action request that the Staff transmits by facsimile to us only. THE PROPOSALS The Proposals recommend action by Exelon on five separate matters: 1. The termination of the employment of those Exelon/PECO executives who approved a contribution of $17 million dollars to the Citizens Alliance for Better Neighborhoods (the "Termination Proposal").
2 2. The recovery and return of the funds in question to both Exelon customers and shareholders" (the "Recovery Proposal"). 3. The requirement that charitable contributions by Exelon over $50,000 be approved by the Board of Directors (the "Board Approval Proposal"). 4. The requirement that contributions by Exelon over $1 million require shareholder approval (the "Shareholder Approval Proposal"). 5. A prohibition on political contributions (the "Political Contribution Proposal"). ANALYSIS I. The Proposals may be omitted under Rules 14a-8(b) and 14a-8(f) because the Proponent has not demonstrated that he continuously held, for at least one year by the date on which the Proposals were submitted, at least $2,000 in market value, or 1%, of Exelon's securities entitled to be voted on the Proposals at the meeting in question. The Proposals were submitted by the Proponent on February 8, 2005
3 and received by Exelon on February 14, 2005.
4 The Proponent alleges in the Proposals that he was the owner of 46 shares of Exelon's common stock as of January 1, 2005. On February 28, 2005, Exelon sent to the Proponent (by overnight delivery and e-mail) a letter informing him that Exelon's records do not show the Proponent as a registered holder of shares and suggesting that, if the Proponent holds his shares in a brokerage or similar account, he have the broker submit a written statement verifying that the Proponent's status as shareholder. See Exhibit B attached hereto. While Exelon did receive by e-mail a brief response to Exelon's February 28thletter, the Proponent has not provided Exelon with any details regarding his alleged ownership of Exelon's common stock. See Exhibit C attached hereto. To date, Exelon has not been able to confirm whether the Proponent holds any shares of Exelon's common stock. As Rule 14a-8(b) requires that the Proponent, to be eligible to submit a proposal, have continuously held, for at least one year by the date on which the proposal is submitted, at least $2,000 in market value, or 1%, of Exelon's securities entitled to be voted on the proposal at the meeting in question and the Proponent has failed to meet this threshold, the Proposals are properly excluded under Rules 14a-8(b) and 14a-8(f). See The Charles Schwab Corporation (February 2, 2005) (request for no-action relief granted pursuant to Rules 14a-8(b) and 14a-8(f) where the proponent failed to supply within 14 days of receipt of request documentary support sufficiently evidencing that he satisfied the minimum ownership requirement for the one-year period as of the date that he submitted a proposal); AT&T Corp. (December 23, 2004); Johnson & Johnson (January 3, 2005) (same). II. The Proposals may be omitted under Rules 14a-8(c), 14a-8(d) and 14a-8(f)(1) because the Proponent has submitted substantially distinct multiple proposals. As noted, the Proposals consist of five separate resolutions, each concerning a distinct topic. Rule 14a-8(c) provides that each stockholder may submit no more than one proposal to a company for a particular stockholders meeting, and Exelon informed the Proponent of this in its February 28, 2005 letter to him. In that letter, Exelon requested that the Proponent advise Exelon as to which of the five Proposals he wished to raise. The Proponent's response was to "[w]rap my proposals in one with subsets," a cosmetic change that does not mask the reality that the Proponent has proposed substantially distinct multiple proposals. The Staff has consistently concluded that substantially distinct multiple proposals will not be considered as a single proposal and has permitted the exclusion of shareholder proposals containing multiple unrelated concepts. See, e.g., Downey Financial Corp. (December 27, 2004); AT&T Corp. (Feb. 19, 2004); Ford Motor Company (April 4, 2003). As Rule 14a-8(c) provides that each stockholder may submit no more than one proposal to a company for a particular stockholders meeting and the Proponent - despite notice and an opportunity to cure the deficiencies in his Proposals - continues to advocate for five separate Proposals, the Proposals are properly excluded under Rules 14a-8(c), 14a-8(d) and 14a-8(f)(1). See Downey Financial Corp. (December 27, 2004) (granting relief where the proponent submitted multiple proposals relating to director compensation and independent directors); AT&T Corp. (February 19, 2004) (granting relief where the proponent submitted four separate proposals, including proposals requiring sales credit and compensation for closed sales and requiring an employee grievance/dispute process). III. Each of the Termination Proposal, the Recovery Proposal, the Board Approval Proposal and the Shareholder Approval Proposal may be omitted under Rule 14a-8(i)(7) because it deals with a matter relating to Exelon's ordinary business operations. Under Rule 14a-8(i)(7), a company may omit a shareholder proposal from its proxy materials if the proposal deals with a matter relating to the company's ordinary business operations. The acknowledged purpose of Rule 14a-8(i)(7) is to allow companies to exclude shareholder proposals that deal with ordinary business matters on which shareholders, as a group, "would not be qualified to make an informed judgment, due to their lack of business experience and their lack of intimate knowledge of the issuer's business." See Exchange Act Release No. 34-12999 (November 22, 1976). A. Termination Proposal The Staff has consistently held that proposals relating to the dismissal, termination or hiring of executive officers are matters that are more appropriately addressed by the board of directors and may be omitted pursuant to Rule 14a-8(i)(7), because they relate to ordinary business operations. See, e.g., The MONY Group Inc. (March 1, 2004); Walt Disney Company (December 16, 2002); Wachovia Corporation (February 17, 2002); Merrill Lynch & Co. (February 8, 2002); Spartan Motors, Inc. (March 13, 2001); Wisconsin Energy Corporation (January 30, 2001); and U.S. Bancorp (February 27, 2000).
5 As the Termination Proposal seeks the dismissal of certain Exelon employees, its relates to Exelon's ordinary business operations and may be excluded from the 2006 Proxy Materials pursuant to Rule 14a-8(i)(7). B. The Recovery Proposal, the Board Approval Proposal and the Shareholder Approval Proposal. In a series of letters, the Commission has repeatedly taken the position that shareholder proposals relating to a corporation's charitable contributions are excludable under Rule 14a-8(i)(7) (formerly Rule 14a-8(c)(7)). See, e.g., Delta Air Lines, Inc. (July 29, 1999) (proposal that contributions in excess of $25,000 per year be approved by shareholders properly excluded under Rule 14a-8(i)(7)); see also, e.g., Pacific Gas & Electric Company (January 22, 1997) (proposal advocating that registrant cease funding of a particular charity properly excluded under former Rule 14a-8(c)(7)); Wells Fargo & Company (January 26, 1993) (proposal advocating that registrant provide funding to a particular charity properly excluded under form Rule 14a-8(c)(7)); American Express Co. (February 28, 1992) (proposal advocating that registrant refrain from making contributions in support of organizations that advocate or perform abortions properly excluded under former Rule 14a-8(c)(7)); U.S. West (February 25, 1992) (same); Exxon Corporation (February 19, 1992) (same). As the Staff has also noted, the mere fact that a proposal may be tied to a social issue would not remove it from the sphere of "ordinary business operations" for purposes of Rule 14a-8(i)(7) (formerly Rule 14a-8(c)(7)). PepsiCo, Inc. (March 24, 1993). Under the Pennsylvania Business Corporation Law (the "PBCL"), the allocation of charitable contributions is a matter that a business corporation is permitted to relegate to its ordinary business operations. Charitable contributions and donations are specifically authorized by Section 1502(a)(9) of the PBCL, which provides that corporations may "make contributions and donations." 15 Pa. C.S.A. §1502(a)(9). Under the PBCL, decisions concerning the allocation of charitable contributions need not be approved by the shareholders or the board of directors and, as a result, are permitted to be treated by the corporation as a matter relating to the conduct of its ordinary business operations. Exelon and its subsidiaries contribute on a regular basis to numerous charities and non-profit organizations that serve the communities in which they do business. Exelon treats the allocation of charitable contributions as part of the ordinary business operations of it and its subsidiaries. Exelon's charitable contributions program is overseen by a Corporate Citizenship Review Committee, a committee authorized by Exelon's Board of Directors (the "Board") and comprised of various Exelon officers. The Corporate Governance Committee of the Board reviews Exelon's policies and practices with respect to its charitable contributions program. Pursuant to the terms of Exelon's Contribution Guidelines (adopted by the Board and Exelon's Chief Executive Officer in April 2004), which guidelines apply to Exelon and its subsidiaries, (1) contributions
6 of less than $50,000 require the approval of an officer acting pursuant to authority delegated to such officer by the Board, (2) contributions of more than $50,000 but less than $1,000,000 require the approval of the Corporate Citizenship Review Committee and (3) contributions of more than $1,000,000 require the approval of the Board. In these circumstances, the Recovery Proposal, the Board Approval Proposal and the Shareholder Proposaleach of which falls squarely within the area of proposals that the Staff has stated may be excluded under Rule 14a-8(i)(7)may properly be omitted by Exelon from the 2006 Proxy Materials. See Delta Air Lines, Inc. (July 29, 1999) (proposal that contributions in excess of $25,000 per year be approved by shareholders properly excluded under Rule 14a-8(i)(7)). IV. The Board Approval Proposal may be omitted under Rule 14a-8(i)(10) because such proposal has been substantially implemented. Rule 14a-8(i)(10) permits the exclusion of a proposal if the company has already substantially implemented the proposal. As noted above, pursuant to the terms of Exelon's Contribution Guidelines adopted in April 2004, which guidelines apply to Exelon and its subsidiaries, contributions of more than $50,000 but less than $1,000,000 require the approval of the Corporate Citizenship Review Committee. As the Corporate Citizenship Review Committee acts pursuant to authority delegated to it by the Board,
7 the Board Approval Proposal, that contributions by Exelon over $50,000 should be approved by the Board of Directors, has been substantially implemented and may be properly omitted by Exelon from the 2006 Proxy Materials under Rule 14a-8(i)(10). CONCLUSION Based upon the foregoing analysis, we respectfully request that the Staff of the Commission concur that it will take no action if Exelon excludes the Proposals from its 2006 Proxy Materials. We would be happy to provide you with any additional information and answer any questions that you may have regarding this subject. If you disagree with the conclusions set forth in this letter, we respectfully request the opportunity to confer with you prior to the determination of the Staff's final position. If we can be of any further assistance in this matter, please do not hesitate to call me at 215-864-8526 or Scott N. Peters, Exelon's Assistant Secretary, at (312) 394-7252. Sincerely, /s/ Robert C. Gerlach RCG/ejg Enclosures cc: Katherine K. Combs, Esquire (via overnight delivery)
Edmond J. Ghisu, Esquire
Bernard H. Meyer (via overnight delivery)
Scott N. Peters, Esquire (via overnight delivery) -----FOOTNOTES-----
1 The separate proposals are defined below as the Termination Proposal, the Recovery Proposal, the Board Approval Proposal, the Shareholder Approval Proposal and the Political Contribution Proposal and are referred to collectively herein as the Proposals. See Exhibit A.
2 The Citizens Alliance for Better Neighborhoods is a Pennsylvania non-profit corporation formed in July 1991 for charitable purposes.
3 Notably, the Proposals duplicate - virtually verbatim - a set of shareholder proposals that were submitted by the Proponent on January 4, 2004. Those prior proposals suffered from the same defects addressed herein, and, in a letter dated March 14, 2005, the Office of Chief Counsel informed Exelon that it would not recommend enforcement action to the Commission if Exelon omitted the proposals in question from its 2005 proxy materials in reliance on Rules 14a-8(b) and 14a-8(f).
4 The timestamp of Exelon's Office of the Corp. Secretary on the Proposal erroneously reads "2004."
5 In Walt Disney Company (December 16, 2002), the Staff concluded that a proposal to recommend and request that the board of directors consider removing the chief executive officer from the company's employment and terminating his contract was excludable under Rule 14a-8(i)(7) as it related to the termination, hiring or promotion of employees. In Wachovia Corporation (February 17, 2002), the Staff concluded that a proposal requesting that the board of directors seek and hire a competent CEO may be excluded as ordinary business as it related to the termination, hiring or promotion of employees. In Merrill Lynch (February 8, 2002), the Staff determined that a shareholder proposal requesting the chief executive officer's resignation may be excluded pursuant to Rule 14a-8(i)(7) as it related to the company's ordinary business of termination, hiring or promotion of employees. In Spartan Motors, Inc. (March 13, 2001), the Staff held that a shareholder proposal to remove the chief executive officer was excludable under Rule 14a-8(i)(7) as it related to the termination, hiring or promotion of employees. In Wisconsin Energy Corporation (January 30, 2001), the Staff concluded that a proposal relating to a vote of no confidence in management and requesting that the directors seek the resignation of the CEO and president of the company may be excluded under Rule 14a-8(i)(7) as it related to the company's ordinary business of termination, hiring or promotion of employees. In U.S. Bancorp (February 27, 2000), the Staff held that a shareholder proposal to remove the officers and directors from office may be excluded under Rule 14a-8(i)(7) as it related to the company's ordinary business of termination, hiring or promotion of employees. See also Middle South Utilities, Inc. (January 25, 1988) (shareholder proposal to replace chairman of the board and president excluded under Rule 14a-8(c)(7) as ordinary business as it related to the decision to alter or terminate the duties of executive personnel) and Continental Illinois Corporation (February 24, 1983) (shareholder proposal that recommended that the chairman of the board and the president be terminated as employees excluded under Rule 14a-8(c)(7) as ordinary business as it related to the employment of executive personnel).
6 "Contribution" is defined in the guidelines to mean any gift or other transfer of money or any gift or other transfer of property (including real estate and equipment) or any provision of services (including the use of property, facilities or personnel) to any person, organization or entity (including a charity, a governmental unit, or a civic or community development organization) at a price or other consideration to the Company below fair value or below applicable tariffed rates for the property or service provided.
7 See 15 Pa. C.S.A. §1731(a) (board of directors of business corporation has authority to create one or more committees, which committee shall have and may exercise all of powers and authority of board of directors, subject to certain limited exceptions); 15 Pa. C.S.A. §1732(b) (officers of business corporation shall have such authority and perform such duties as may be determined pursuant to resolutions or orders of board of directors).
[APPENDIX]
Exhibit A February 8, 2005 Ms. Katherine K. Combs
Vice President, Corporate
Secretary and Deputy General Counsel
Exelon Corporation,
10 South Dearborn Street, 37th Floor
P.O. Box 805398,
Chicago, Illinois 60680-5398 Dear Ms. Combs: Below is my proxy statement proposal for 2006. Please respond as soon as possible if there are errors or required additions. Based on the following information: http://pittsburghcitypaper.ws/archive.cfm?type=Political%20Footballs&action=getComplete&ref=1304 and similar newspaper and TV news releases: "The Philadelphia Inquirer reported that Senator Fumo had used his political leverage to convince energy company PECO and the Delaware River Port Authority to secretly donate nearly $27 million to a community group which is controlled by his staff, and which operates mostly in his district. The deals were made in the late 1990s and 2000, when Fumo was involved in electricity deregulation and in negotiating payments by DRPA to the City of Philadelphia." A. Proposal #1- It is recommended that Exelon/PECO executives who approved these payments have their employment terminated. B. Proposal #2- It is recommended that the donated monies be recovered and returned to both Exelon customers and shareholders. C. Proposal #3- It is recommended that company charitable contributions over $50,000 be approved by the board of directors. D. Proposal #4- It is recommended that contributions over $1 million dollars require stockholder approval. E. Proposal #5- It is recommended that political contributions not be permitted. Note: If this proposal passes your review yet does not appear on the 2006 proxy statement, I will immediately notify the SEC, the State of Pennsylvania's Attorney General's Office and the PUC to investigate why it was not so posted. As of 1/1/2005, I currently own 46 shares of Exelon common stock. Value as of 2/8/2005 was $2,108,64. The stock is held in my Wachovia On-line Brokerage account. /s/, 2/9/2005 Bernard H. Meyer, Exelon stockholder,
31 Newtown Woods Road
Newtown Square, PA 10973
610-353-4737
internautbhm2@comcast.net
[STAFF REPLY LETTER]
January 20, 2006 Response of the Office of Chief Counsel Division of Corporation Finance Re: Exelon Corporation Incoming letter dated December 14, 2005 The proposals relate to contributions. There appears to be some basis for your view that Exelon may exclude the proposal under Rule 14a-8(f). We note that the proponent appears to have failed to supply, within 14 days of receipt of Exelon's request, documentary support sufficiently evidencing that he satisfied the minimum ownership requirement for the one-year period as of the date that he submitted the proposal as required by Rule 14a-8(b). Accordingly, we will not recommend enforcement action to the Commission if Exelon omits the proposal from its proxy materials in reliance on rules 14a-8(b) and 14a-8(f). In reaching this position, we have not found it necessary to address the alternative bases for omission upon which Exelon relies. Sincerely, /s/ Geoffrey M. Ossias
Attorney-Adviser | 
