Registration No. 333-.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CONSTELLATION ENERGY GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
MARYLAND 52-1964611
(State of Incorporation) (IRS Employer Identification Number)
E. Follin Smith, Senior Vice President and Chief Financial Officer
750 E. Pratt Street
Baltimore, Maryland 21202
(410) 783-3014
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices
and agent for service)
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Approximate date of commencement of proposed sale to the public: After the
effective date of this Registration Statement as determined by market
conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.[ ]
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CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (6)(7) UNIT(8)(9) PRICE(5)(6)(7)(9) REGISTRATION FEE(10)
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Unsecured Debt Securities (1)(2)(3)
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Common Stock (1)(2)(3)
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Preferred Stock (1)(2)(3)
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Warrants (1)(4)
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Stock Purchase Contracts (1)(5)
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Units (1)
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Total $ 2,000,000,000 $ 2,000,000,000 $ 184,000
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(1) Such indeterminate number, principal amount or liquidation amount of
unsecured debt securities, common stock, preferred stock, warrants, stock
purchase contracts and units as may from time to time be issued at
indeterminate prices. The securities registered hereunder shall not have
an aggregate offering price which exceeds $2,000,000,000 in United States
dollars or the equivalent in any other currency.
(2) Also includes such indeterminate number of unsecured debt securities and
shares of common stock and preferred stock as may be issued upon
conversion or exchange of any unsecured debt securities and preferred
stock that provide for conversion or exchange into other securities or
upon exercise of warrants for such securities.
(3) No separate consideration will be received for the unsecured debt
securities, common stock or preferred stock issuable upon conversion of
or in exchange for unsecured debt securities or preferred stock.
(4) Warrants may be sold separately or with unsecured debt securities,
preferred stock or common stock.
(5) Includes an indeterminate number of shares of common stock or preferred
stock, as applicable, to be issuable upon settlement of stock purchase
contracts.
(6) In United States dollars or the equivalent thereof in any other currency,
currency unit or units, or composite currency or currencies.
(7) Such amount represents the principal amount of any unsecured debt
securities issued at their principal amount, the issue price rather than
the principal amount of any unsecured debt securities issued at an
original issue discount, the liquidation preference of any preferred
stock, the amount computed pursuant to Rule 457(c) for any common stock,
the issue price of any warrants and the exercise price of any securities
issuable upon exercise of the warrants.
(8) Estimated solely for the purposes of computing the registration fee.
(9) Exclusive of accrued interest and distributions, if any.
(10) Calculated pursuant to Rule 457(o) of the rules and regulations under the
Securities Act.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
Subject to Completion January 24, 2003
[LOGO OF CONSTELLATION ENERGY GROUP]
$ 2,000,000,000
UNSECURED DEBT
SECURITIES Constellation Energy Group, Inc.
COMMON STOCK 750 E. Pratt Street
PREFERRED STOCK Baltimore, Maryland 21202
WARRANTS (410) 783-2800
STOCK PURCHASE
CONTRACTS
UNITS
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P R O S P E C T U S
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This prospectus is part of a registration statement that we filed with the SEC
utilizing a "shelf" registration process. Under this shelf process, we may, from
time to time, sell any combination of the securities described in this
prospectus in one or more offerings up to a total dollar amount of
$2,000,000,000. Our common stock is listed on the New York Stock Exchange under
the symbol "CEG."
This prospectus provides you with a general description of the securities we may
offer. Each time we sell securities, we will provide a prospectus supplement
that will contain specific information about the terms of that offering. The
supplement may also add, update or change information contained in this
prospectus.
There are risks involved with purchasing these securities. Please refer to the
"RISK FACTORS" discussion beginning on page 3 of this prospectus.
We urge you to carefully read this prospectus and the prospectus supplement,
which will describe the specific terms of the offering together with additional
information described under the heading "WHERE YOU CAN FIND MORE INFORMATION"
before you make your investment decision.
Neither the Securities and Exchange Commission nor any other regulatory body has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
(Once the registration statement is effective, the date of the prospectus will
be inserted here.)
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell these securities, and it is not soliciting an
offer to buy these securities in any jurisdiction where the offer or sale is not
permitted.
TABLE OF CONTENTS
Page
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FORWARD LOOKING STATEMENTS.....................................................................................1
THE COMPANY....................................................................................................2
RISK FACTORS...................................................................................................3
USE OF PROCEEDS................................................................................................8
RATIO OF EARNINGS TO FIXED CHARGES.............................................................................9
DESCRIPTION OF THE DEBT SECURITIES............................................................................10
DESCRIPTION OF CAPITAL STOCK..................................................................................21
DESCRIPTION OF WARRANTS.......................................................................................24
DESCRIPTION OF STOCK PURCHASE CONTRACTS.......................................................................25
DESCRIPTION OF UNITS..........................................................................................26
PLAN OF DISTRIBUTION..........................................................................................27
VALIDITY OF THE SECURITIES....................................................................................29
EXPERTS.......................................................................................................29
WHERE YOU CAN FIND MORE INFORMATION...........................................................................29
You should rely only on the information contained in or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this prospectus is accurate only as
of its date.
When we refer to "Constellation Energy," "the Company," "we," "us," or
"our" in this prospectus, we mean Constellation Energy Group, Inc.
FORWARD LOOKING STATEMENTS
We make statements in this prospectus and may make statements in any prospectus
supplement that are considered forward looking statements within the meaning of
the Securities Act of 1933 and the Securities Exchange Act of 1934. Sometimes
these statements will contain words such as "believes," "expects," "intends,"
"plans," and other similar words. These statements are not guarantees of our
future performance and are subject to risks, uncertainties and other important
factors that could cause our actual performance or achievements to be materially
different from those we project. These risks, uncertainties, and factors
include, but are not limited to:
. the timing and extent of changes in commodity prices for energy
including coal, natural gas, oil, electricity and emissions
allowances;
. the timing and extent of deregulation of, and competition in, the
energy markets in North America, and the rules and regulations adopted
on a transitional basis in those markets;
. the conditions of the capital markets, interest rates, availability of
credit, liquidity and general economic conditions, as well as
Constellation Energy's and Baltimore Gas and Electric Company's (BGE)
ability to maintain their current credit ratings;
. the effectiveness of Constellation Energy's and BGE's risk management
policies and procedures and the ability of their counterparties to
satisfy their financial and performance commitments;
. the liquidity and competitiveness of wholesale trading markets for
energy commodities;
. operational factors affecting the start-up or ongoing commercial
operations of our generating facilities (including nuclear facilities)
and BGE's transmission and distribution facilities, including
catastrophic weather related damages, unscheduled outages or repairs,
unanticipated changes in fuel costs or availability, unavailability of
gas transportation or electric transmission services, workforce
issues, terrorism, liabilities associated with catastrophic events and
other events beyond our control;
. the inability of BGE to recover all its costs associated with
providing electric retail customers service during the electric rate
freeze period;
. the effect of weather and general economic and business conditions on
energy supply, demand and prices;
. regulatory or legislative developments that affect deregulation in
Maryland, in the Pennsylvania-New Jersey-Maryland Interconnection or
other regions in which we operate, transmission or distribution rates
and revenues, demand for energy, or increase costs, including costs
related to nuclear power plants, safety or environmental compliance;
. the actual outcome of uncertainties associated with assumptions and
estimates using judgment when applying critical accounting policies
and preparing financial statements, including factors that are
estimated in applying mark-to-market accounting, such as variable
contract quantities and the value of mark-to-market assets and
liabilities determined using models;
. changes in accounting principles or practices;
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. the ability to attract and retain customers in our competitive supply
business;
. losses on the sale or write down of assets due to impairment events or
changes in management intent with regard to either holding or selling
certain assets;
. cost and other effects of legal and administrative proceedings that
may not be covered by insurance, including environmental liabilities;
and
. operation of our generation assets in a deregulated market without the
benefit of a fuel rate adjustment clause.
THESE FACTORS AND THE OTHER RISK FACTORS DISCUSSED IN THIS PROSPECTUS, INCLUDING
UNDER THE HEADING, "RISK FACTORS" ARE NOT NECESSARILY ALL OF THE IMPORTANT
FACTORS THAT COULD CAUSE CONSTELLATION ENERGY'S ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE EXPRESSED IN ANY OF ITS FORWARD LOOKING STATEMENTS. OTHER
UNKNOWN OR UNPREDICTABLE FACTORS ALSO COULD HAVE MATERIAL ADVERSE EFFECTS ON OUR
FUTURE RESULTS. GIVEN THESE UNCERTAINTIES, YOU SHOULD NOT PLACE UNDUE RELIANCE
ON THESE FORWARD LOOKING STATEMENTS. PLEASE SEE CONSTELLATION ENERGY'S PERIODIC
REPORTS FILED WITH THE SEC FOR MORE INFORMATION ON THESE FACTORS. THE FORWARD
LOOKING STATEMENTS INCLUDED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT ARE
MADE ONLY AS OF THE DATE OF THIS PROSPECTUS OR SUCH PROSPECTUS SUPPLEMENT.
THE COMPANY
Constellation Energy Group, Inc., or Constellation Energy, is a North American
energy company that conducts its business through various subsidiaries including
a merchant energy business and Baltimore Gas and Electric Company, or BGE. Our
merchant energy business has electric generation assets located in various
regions of the United States and engages in power marketing and risk management
and competitive supply activities, providing energy solutions to meet customers'
needs throughout North America. This business includes:
. fossil, nuclear and hydroelectric generating facilities, interests in
power projects in the United States and nuclear consulting services;
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. power marketing, origination transactions (such as load-serving,
tolling contracts, and power purchase agreements), and risk management
services; and
. supply of electricity, gas and consulting services to large commercial
and industrial customers.
BGE is a regulated electric and gas public transmission and distribution company
with a service territory that includes the City of Baltimore and all or part of
ten counties in central Maryland. BGE's electric delivery territory is an area
of approximately 2,300 square miles with an estimated population of 2.7 million.
BGE's gas service territory is an area of approximately 800 square miles with an
estimated population of 2.0 million.
Our other nonregulated businesses provide:
. energy products and services to commercial customers;
. home improvements, the service of heating, air conditioning, plumbing,
electrical and indoor air quality systems and residential electric and
gas retail marketing; and
. cooling services for commercial customers in Baltimore, Maryland.
In addition, we have several financial investments, own several real estate
assets and own interests in a Latin American distribution project and a fund
that holds interests in two Latin American energy projects.
RISK FACTORS
Constellation Energy's revenues and results of operations are subject to market
risks that are beyond its control.
Constellation Energy sells electricity from its power generation facilities into
the competitive power markets on a contractual basis or into the spot market. No
rate of return on capital investments is guaranteed through mandated rates, and
revenues and results of operations are likely to depend, in large part, upon
prevailing market prices for electricity in regional markets and other
competitive markets. These market prices may fluctuate substantially over
relatively short periods of time. In addition, the Federal Energy Regulatory
Commission, or FERC, which has jurisdiction over wholesale power rates, as well
as independent system operators that oversee some of these markets, may impose
price limitations, bidding rules and other mechanisms to address some of the
volatility in these markets. Fluctuations in market prices and regulatory
actions by FERC or independent system operators could reduce revenues from power
sales.
Currently, Constellation Energy's power generation facilities purchase a portion
of their fuel through short-term contracts or on the spot market. Fuel prices
may also be volatile, and the price that can be obtained for power sales may not
change at the same rate as changes in fuel costs. Also, Constellation Energy's
trading, marketing and risk management operations expose it to other risks,
including the credit risk of counterparties to agreements and other risks
relating to counterparties' failure to perform, and to the risk of commodity
price fluctuations. BGE is also exposed to market risk if its electricity
suppliers are unable to perform their obligations. Fuel price increases and
defaults by suppliers and other counterparties may adversely affect our results
of operations.
Volatility in market prices for fuel and electricity may result from among other
things:
. weather conditions,
. seasonality,
. electricity usage,
. illiquid markets,
. transmission or transportation constraints or inefficiencies,
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. availability of competitively priced alternative energy sources,
. demand for energy commodities,
. natural gas, crude oil and refined products, and coal production
levels,
. natural disasters, wars, embargoes and other catastrophic events, and
. federal and state energy and environmental regulation, legislation and
policies.
Operation of power generation facilities involves significant risks that could
negatively affect Constellation Energy's revenues and results of operations.
Constellation Energy is exposed to risks relating to the breakdown or failure of
equipment or processes, fuel supply interruptions, shortages of equipment,
material and labor, and operating performance below expected levels of output or
efficiency. A portion of Constellation Energy's generation facilities were
constructed many years ago. Older generating equipment may require significant
capital expenditures to keep it operating at peak efficiency. This equipment is
also likely to require periodic upgrading and improvement.
Any event which results in reduced power generation, may cause a shortfall in
power generation. Constellation Energy may then have to purchase power to cover
any shortfalls in its generation in the spot market, the cost of which may be
substantially higher than the cost of generating that power, which may result in
reduced earnings.
Constellation Energy may be liable for significant environmental costs.
In connection with its electric generation facilities and the activities of BGE,
we may be liable for costs of environmental remediation, including costs
resulting from the operations of third-party owners as well as the potential
costs of complying with new or revised regulatory requirements. The actual cost
of compliance and remediation could be significantly higher than the recorded
liabilities.
We may also be required to assume these types of environmental liabilities, as
well as others, in connection with future acquisitions. As a result, we may be
liable for significant environmental remediation costs and other liabilities
arising from the operation of its facilities, which could reduce our earnings.
Constellation Energy is exposed to risks relating to the ownership and operation
of nuclear power plants.
Constellation Energy owns and operates nuclear electric generation plants.
Ownership and operation of these plants expose Constellation Energy to risks in
addition to those that result from owning and operating non-nuclear electric
generation facilities. Risks associated specifically with the operation and cost
of operation of nuclear plants include changing federal and state environmental
requirements relating specifically to nuclear facilities, safety, terrorism,
accidents at the nuclear plants, nuclear plant decommissioning costs, storage
and ultimate disposal of spent nuclear fuel, disposal of hazardous materials and
waste, monitoring of discharges into the environment and any required
remediation of any site that is identified as contaminated. Any of these risks
could result in substantial liabilities or expenses for us and reduce our
earnings or harm our liquidity. In addition, the Nuclear Regulatory Commission
has the authority to modify, suspend or revoke the operating license for any of
our nuclear power facilities if it determines that such action is necessary to
ensure the public health and safety. Such action would have a negative impact on
our revenues.
Constellation Energy often relies on single suppliers and at times on single
customers at its facilities, exposing Constellation Energy to significant
financial risks if either should fail to perform its obligations.
Constellation Energy often relies on a single supplier for the provision of
fuel, water and
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other services required for operation of a facility, and at times, it relies on
a single customer or a few customers to purchase all or a significant portion of
a facility's output, in some cases under long-term agreements that provide the
support for any project debt used to finance the facility. The failure of any
one customer or supplier to fulfill its contractual obligations to the facility
could negatively imipact such facility's financial results. Consequently, our
financial performance depends on the continued performance by customers and
suppliers of their obligations under these long-term agreements.
Reduced liquidity in the markets in which Constellation Energy operates could
impair our ability appropriately manage the risks of our operations.
As a result of recent market events (such as government investigations, changes
in market design and deteriorating credit quality), several merchant energy
businesses have ended or significantly reduced their energy trading activities.
As a result, beginning in the second quarter of 2002, several regional energy
markets experienced a significant decline in liquidity. Reduced market
liquidity, may restrict our ability to manage our risks, and thereby weaken our
operating results and financial position.
Constellation Energy may not fully hedge its generation assets, competitive
supply or market positions against changes in commodity prices, and its hedging
procedures may not work as planned.
To lower its financial exposure related to commodity price fluctuations,
Constellation Energy routinely enters into contracts to hedge a portion of its
purchase and sale commitments, weather positions, fuel requirements, inventories
of natural gas, coal and other commodities, and competitive supply. As part of
this strategy, Constellation Energy routinely utilizes fixed-price forward
physical purchase and sales contracts, futures, financial swaps and option
contracts traded in the over-the-counter markets or on exchanges. However,
Constellation Energy may not cover the entire exposure of its assets or
positions to market price volatility and the coverage will vary over time.
Fluctuating commodity prices may negatively impact our financial results and
financial position to the extent we have unhedged positions.
Our risk management policies and procedures may not always work as planned. As a
result of these and other factors, Constellation Energy cannot predict with
precision the impact that risk management decisions may have on its businesses,
operating results or financial position.
Constellation Energy is exposed to the risk that counterparties which owe it
money or energy as a result of market transactions will not perform their
obligations. Should the counterparties to these arrangements fail to perform,
Constellation Energy might be forced to acquire alternative hedging arrangements
or honor the underlying commitment at then-current market prices. In such event,
Constellation Energy might incur additional costs to the extent of amounts, if
any, already paid to the counterparties.
In connection with its operations, Constellation Energy has, and will continue
to, guarantee or indemnify the performance of a portion of the obligations of
its subsidiaries. Some of these guarantees and indemnities are for fixed
amounts, others have a fixed maximum amount and others do not specify a maximum
amount. Constellation Energy might not be able to satisfy all of these
guarantees and indemnification obligations if they were to come due at the same
time.
Constellation Energy operates in the deregulating segments of the electric power
industry created by restructuring initiatives at both state and federal levels.
If competitive restructuring of the electric power industry is reversed,
discontinued or delayed, Constellation Energy's business prospects and financial
condition could be materially adversely impaired.
5
The regulatory environment applicable to the electric power industry has
recently undergone substantial changes as a result of restructuring initiatives
at both the state and federal levels. These initiatives have had a significant
impact on the nature of the industry and the manner in which its participants
conduct their business. Constellation Energy has targeted the deregulating
segments of the electric power and natural gas industries created by these
initiatives. These changes are ongoing and Constellation Energy cannot predict
the future development of deregulation in these markets or the ultimate effect
that this changing regulatory environment will have on its business.
Moreover, existing regulations may be revised or reinterpreted, new laws and
regulations may be adopted or become applicable to Constellation Energy or its
facilities, and future changes in laws and regulations may have a detrimental
effect on its business. Certain restructured markets (most notably California)
have recently experienced supply problems and price volatility. These supply
problems and volatility have been the subject of a significant amount of
publicity, much of which has been critical of the restructuring initiatives. In
some of these markets, including California, proposals have been made by
governmental agencies and/or other interested parties to re-regulate areas of
these markets which have previously been deregulated. Other proposals to
re-regulate may be made and legislative or other attention to the electric power
restructuring process may delay or reverse the deregulation process. If
competitive restructuring of the power and natural gas markets is reversed,
discontinued or delayed, Constellation Energy's business prospects and financial
condition could be negatively impacted.
Constellation Energy's results may fluctuate on a seasonal and quarterly basis.
Our business is affected by weather conditions and usually is seasonal.
Consequently, the overall operating results of Constellation Energy may
fluctuate substantially on a seasonal basis, and the pattern of this fluctuation
may change depending on the nature and location of any facilities Constellation
Energy acquires and the terms of any contract to which it becomes a party. The
demand for energy by Constellation Energy's customers is directly affected by
weather conditions. Generally, demand for power peaks in winter and summer.
Typically, when winters are warmer than expected and summers are cooler than
expected, demand for energy is lower, resulting in less electric and gas
consumption than forecasted. These and other unexpected conditions may reduce
our revenues and results of operations. First and third quarter results of
operations will be substantially dependent on weather conditions, and may make
period comparisons less relevant. Any substantial fluctuations in operating
results for fiscal quarters or on a year to year basis may cause Constellation
Energy's stock price to be volatile.
A downgrade in our credit ratings could negatively affect our ability to access
capital and/or operate our power marketing, origination and risk management
business.
If any of our credit ratings were to be downgraded, especially below investment
grade, our ability to access the capital markets, including the commercial paper
markets, could be hindered, and our borrowing costs would increase.
Additionally, the business prospects of our power marketing, origination and
risk management and competitive supply businesses, which in many cases rely on
the creditworthiness of Constellation Energy, would be negatively impacted. Some
of the factors that affect credit ratings are cash flows, liquidity and the
amount of debt as a component of total capitalization. An example of factors
that could cause our debt as a component of total capitalization to increase,
which in turn could negatively effect our credit ratings, would be the need to
borrow money to pay for unexpected repairs at a generating facility caused by a
catastrophic event, or replacement power costs due to an unplanned outage,
neither of which were covered by insurance.
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Constellation Energy, and BGE particularly, are subject to state and federal
regulation. Changes in regulations could have a material adverse impact on
Constellation Energy's results of operations.
Constellation Energy and BGE are subject to federal and state regulation,
including environmental regulation. BGE is also subject to extensive regulation
from both the State of Maryland and the federal government, particularly the
FERC. Regulation that impacts BGE includes rate regulation by the Maryland
Public Service Commission and FERC regulation regarding electric transmission
assets and rates. In addition, areas of our business that are currently subject
to less regulation (for example energy trading) could become subject to more
extensive regulation. We cannot predict the future development of regulations or
the ultimate effect that a changing regulatory environment will have on
Constellation Energy's or BGE's business.
Several examples of regulation are:
. The Clean Air Act and many state laws require significant reductions
in sulfur dioxide and nitrogen oxide emissions that are emitted by our
generation plants, particularly our coal plants. In addition, the
Environmental Protection Agency is evaluating the health impacts of
mercury emissions from our coal-fired plants. Current or future
rulemakings in either of these areas could have a material impact on
Constellation Energy's operations or revenues.
. The electric restructuring Maryland enacted in 1999 could be changed
in the future in ways that would be adverse to our business. As part
of the restructuring, BGE's electric base rates are frozen until 2004
for certain commercial customers and 2006 for residential customers.
BGE may not be able to recover increased operations, maintenance or
capital costs it may experience while its rates are frozen. In
addition, BGE is currently involved in settlement proceedings with the
Maryland Public Service Commission that address BGE's obligations to
provide "standard offer service" to commercial and industrial
customers after June 30, 2004 and to residential customers after June
30, 2006. Since these proceedings are ongoing, we do not yet know
whether the final settlement will have a negative impact on
Constellation Energy's operations or revenues.
Anti-takeover provisions in Constellation Energy's charter and bylaws and under
Maryland law could prevent or delay transactions that Constellation Energy's
stockholders may favor.
Provisions of Constellation Energy's charter and bylaws may discourage, delay or
prevent a merger or acquisition that its stockholders may consider favorable,
including transactions in which stockholders might otherwise receive a premium
for their equity. For example, these provisions:
. authorize the issuance of "blank check" preferred stock without any
need for action by stockholders;
. provide for a classified board of directors with staggered three-year
terms;
. allow for directors to be removed only for cause and upon the vote of
a majority of the stockholders; and
. establish procedures and restrictions for nominations for election to
the board of directors or for proposing matters that can be acted on
by stockholders at stockholder meetings.
While Constellation Energy has not adopted a stockholder rights plan intended to
protect stockholders in the event of an unfair or coercive offer to acquire
Constellation Energy, Maryland law permits us to adopt such a plan at any time
without approval of the stockholders. If adopted, the stockholder rights plan
would have anti-takeover effects. The rights plan would cause substantial
dilution to a person or group
7
that attempts to acquire Constellation Energy and would discourage, delay or
prevent a merger or acquisition that stockholders may consider favorable,
including transactions in which stockholders might otherwise receive a premium
for their shares.
Constellation Energy has opted out of the provisions of Maryland's control share
statute, which provides that shares acquired in a controlled share acquisition
(shares with more than one-tenth, one-third, and a majority of the power to vote
generally in an election of directors) have no voting rights except as approved
by the affirmative vote of two-thirds of all disinterested stockholders.
However, Our board of directors may opt back into the statute as an
anti-takeover measure.
USE OF PROCEEDS
Except as otherwise provided in a prospectus supplement, the net proceeds from
the sale of the securities will be used for general corporate purposes relating
to our merchant energy business. If we do not use the net proceeds immediately,
we may temporarily invest them in short-term, interest-bearing obligations.
8
RATIO OF EARNINGS TO FIXED CHARGES
The Ratio of Earnings to Fixed Charges for each of the periods indicated is as
follows:
NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
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2002 2001 2000 1999 1998 1997
---- ---- ---- ---- ---- ----
2.60 1.18 2.78 2.87 2.60 2.35
The lower number for 2001 reflects the impact of $533 million of special items
incurred in the fourth quarter of 2001. For a more complete discussion of these
special items (which include workforce reduction programs, impairments of
certain assets and the cost associated with the termination of a business
services agreement), please refer to our Annual Report on Form 10-K for the year
ended December 31, 2001. For current information on the Ratio of Earnings to
Fixed Charges, please see our most recent reports on Form 10-K or Form 10-Q. See
"Where You Can Find More Information."
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DESCRIPTION OF THE DEBT SECURITIES
GENERAL
This section summarizes terms of the debt securities that we may offer with this
prospectus. Most of the specific terms of a series of debt securities will be
described in a prospectus supplement attached to this prospectus and may vary
from the terms described herein. For a complete description of the terms of a
particular offering of debt securities, you should read both this prospectus and
the prospectus supplement relating to that particular offering.
We will issue the debt securities under an indenture. The indenture is a
contract between us and the trustee, The Bank of New York, dated as of March 24,
1999 as supplemented on January 24, 2003. The trustee has two main roles. First,
the trustee can enforce the rights of holders of the debt securities against us
if we default. There are some limitations on the extent to which the trustee
acts on your behalf, described later in this section under "Events of Default."
Second, the trustee performs certain administrative duties for the holders of
debt securities, such as sending interest payments and notices, and implementing
transfers of debt securities.
A copy of the indenture has been filed with the SEC and is an exhibit to the
registration statement which contains this prospectus. See "Where You Can Find
More Information" to find out how to locate our filings with the SEC. The
indenture and the debt securities are governed by New York law.
The indenture is summarized below. Because it is a summary, it does not contain
all of the information that may be important to you. You should read the
indenture to get a complete understanding of your rights and our obligations
under the provisions described in this section under "Events of Default,"
"Supplemental Indentures," and "Consolidation, Merger or Sale." This summary is
subject to, and qualified in its entirety by, reference to all the provisions of
the indenture. We include references in parentheses to certain sections of the
indenture. This summary also is subject to, and qualified by, reference to the
description of the particular terms of each series of debt securities described
in the applicable prospectus supplement.
The indenture does not limit the amount of debt securities that may be issued.
There are existing series of debt securities outstanding under the indenture and
we may issue additional multiple and distinct series of debt securities. For
current information on our debt outstanding see our most recent Form 10-K and
10-Q. See Where You Can Find More Information.
The debt securities are unsecured and will rank equally with all our unsecured
indebtedness unless expressly subordinated. The debt securities will be
subordinate to all of our secured indebtedness, if any. The indenture does not
limit the amount of indebtedness that our subsidiaries may incur. This
subsidiary debt effectively ranks senior to any debt securities we may issue.
For current information on our subsidiary debt outstanding, see our most recent
Form 10-K and 10-Q. See Where You Can Find More Information.
The debt securities will be denominated in U.S. dollars and we will pay
principal and interest in U.S. dollars. The applicable prospectus supplement
will describe whether the debt securities will be subject to any conversion,
amortization, or sinking or similar fund. It is anticipated that the debt
securities will be "book-entry," represented by a permanent global debt security
registered in the name of The
10
Depository Trust Company, or its nominee. However, we reserve the right to issue
debt securities in certificated form registered in the name of the debt security
holders.
Unless the applicable prospectus supplement states otherwise, we may from time
to time, without the consent of the applicable existing note holders, create and
issue further notes of each series ranking equally with the other notes of the
series having the same terms and conditions as the notes of such series being
offered hereby in all respects, except for issue date, issue price and if
applicable, the first payment of interest therein. Additional notes issued in
this manner will form a single series with the previously outstanding notes of
that series.
In the discussion that follows, whenever we talk about paying principal on the
debt securities, we mean at maturity, redemption or repurchase. Also, in
discussing the time for notices and how the different interest rates are
calculated, all times are New York City time, unless otherwise noted.
The applicable prospectus supplement will describe the terms for the debt
securities including:
.. title of the securities,
.. any limit on the aggregate principal amount of the debt securities of that
series,
.. maturity date,
.. interest rate or rates (or the method to calculate such rate)
.. remarketing provisions,
.. redemption or repurchase provisions,
.. if other than the principal amount, the portion of the principal amount
payable upon maturity (known as discounted debt securities)
.. whether, and on what terms and at what prices, the debt securities may be
converted into or exercised or exchanged for our common stock, preferred
stock or any other type of security, and
.. any other provisions. (Section 3.01)
OWNERSHIP OF THE DEBT SECURITIES
DIRECT SECURITYHOLDERS
Only registered holders of debt securities will have rights under the indenture.
As noted below, we do not have obligations to you if you hold in "street name"
or other indirect means, either because you choose to hold debt securities in
that manner or because the debt securities are issued in the form of global debt
securities as described below. For example, once we make payment to the
registered securityholder, we have no further responsibility for the payment
even if that securityholder is legally required to pass the payment along to you
as a "street name" customer but does not do so.
"STREET NAME" AND OTHER INDIRECT HOLDERS
Investors who hold debt securities in accounts at banks or brokers will
generally not be recognized by us as legal securityholders. This is called
holding in "street name." Instead, we recognize only the bank or broker, or the
financial institution the bank or broker uses to hold its debt securities. These
intermediary banks, brokers and other financial institutions pass along
principal, interest and other payments on the debt securities to their
customers. If you hold debt securities in "street name," you should check with
your own institution to find out:
.. how it handles securities payments and notices,
.. whether it imposes fees or charges,
.. how it would handle voting if ever required,
.. whether and how you can instruct it to send you debt securities registered
in your own name so you can be a direct securityholder
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as described below to the extent permitted, and
.. how it would pursue rights under the debt securities if there were a
default or other event triggering the need for securityholders to act to
protect their interests.
GLOBAL SECURITIES
A global security is a special type of indirectly held security. This means that
we will not issue certificates to each beneficial owner. If we choose to issue
debt securities in the form of global debt securities, the ultimate beneficial
owners can only be indirect holders. We do this by requiring that the global
debt security be registered in the name of a financial institution which we
select and by requiring that the debt securities included in the global debt
security not be transferred to the name of any other direct securityholder
unless the special circumstances described below occur. The financial
institution that acts as the sole direct securityholder of the global debt
securities is called the "depositary." Any person wishing to own a debt security
must do so indirectly by virtue of an account with a broker, bank or other
financial institution that in turn is a participant with the depositary. The
applicable prospectus supplement will indicate whether your series of debt
securities will be issued only in the form of global debt securities.
An indirect holder's rights relating to a global debt security will be governed
by the account rules of the investor's financial institution and the depositary,
as well as general laws relating to securities transfers. We do not recognize
this type of investor as a securityholder and instead deal only with the
depositary.
An investor should be aware that if debt securities are issued only in the form
of global debt securities:
.. the investor cannot get debt securities registered in his or her own name,
and
.. the investor cannot receive physical certificates for his or her interest
in the debt securities. This means these securities may not be pledged as
security under the laws of some jurisdictions.
DTC has provided us the following information: DTC is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the United States
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered under the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds
securities that its participants ("Direct Participants") deposit with DTC. DTC
also records the settlement among Direct Participants of securities
transactions, such as transfers and pledges, in deposited securities through
computerized records for Direct Participant's accounts. This eliminates the need
to exchange certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations.
DTC's book-entry system is also used by other organizations such as securities
brokers and dealers, banks and trust companies that work through a Direct
Participant. The rules that apply to DTC and its participants are on file with
the SEC.
DTC is owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., The American Stock Exchange, LLC, and the National Association
of Securities Dealers, Inc.
When applicable, we will wire principal and interest payments to DTC's nominee.
We and the trustee will treat DTC's nominee as the owner of the global
securities for all purposes. Accordingly, we, the trustee and any paying agent
will have no direct responsibility or liability to pay amounts due on the global
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securities to owners of beneficial interests in the global securities.
It is DTC's current practice, upon receipt of any payment of principal or
interest, to credit Direct Participants' accounts on the payment date according
to their respective holdings of beneficial interests in the global securities as
shown on DTC's records. In addition, it is DTC's current practice to assign any
consenting or voting rights to Direct Participants whose accounts are credited
with debt securities on a record date, by using an omnibus proxy. Payments by
participants to owners of beneficial interests in the global securities, and
voting by participants, will be governed by the customary practices between the
participants and owners of beneficial interests, as is the case with debt
securities held for the account of customers registered in "street name."
However, payments will be the responsibility of the participants and not of DTC,
the trustee or us.
Global securities will be exchangeable for certificated debt securities with the
same terms in authorized denominations only if:
.. the depositary notifies us that it is unwilling or unable to continue as
depositary or if it ceases to be a clearing agency registered under
applicable law and a successor depositary is not appointed by us within 90
days;
.. an event of default with respect to the debt securities of that series has
occurred and has not been cured (see "Events of Default"); or
.. we determine not to have the debt securities of a series to be represented
by a global debt security and notify the trustee of our decision. (Section
3.04)
The applicable prospectus supplement may also list additional situations for
requiring a global debt security to be exchanged for a certificated security
that would apply only to the particular series of debt securities covered by
that prospectus supplement. When a global debt security terminates, the
depositary (and not we or the trustee) is responsible for deciding the names of
the institutions that will be the initial direct securityholders. (Section 3.04)
In the remainder of this description "you" means direct securityholders and not
"street name" or other indirect holders.
ADDITIONAL MECHANICS
FORM, EXCHANGE AND TRANSFER
In the absence of any contrary provision described in the prospectus supplement
for any specific series of debt securities, the debt securities will be issued:
.. in registered form;
.. without interest coupons; and
.. in denominations that are multiples of $1,000. (Section 3.02)
You may have your debt securities exchanged into more debt securities of smaller
denominations, with a minimum of $1,000, or combined into fewer debt securities
of larger denominations, as long as the total principal amount is not changed.
(Section 3.04) This is called an "exchange."
You may exchange or transfer debt securities at the office of the trustee or at
an agency to be maintained by us for such purpose. The trustee acts as our agent
for registering debt securities in the names of securityholders and transferring
debt securities. We may change this appointment to another entity or perform it
ourselves. The entity performing the role of maintaining the list of registered
holders is called the "security registrar." It will also perform transfers.
(Section 3.04)
The rules for exchange described above apply to exchange of debt securities for
other debt securities of the same series and kind. If a debt security is
convertible, exercisable or
13
exchangeable into or for a different kind of security, such as one that we have
not issued, or for other property, the rule governing that type of conversion,
exercise or exchange will be described in the applicable prospectus supplement.
You will not be required to pay a service charge to transfer or exchange debt
securities, but you may be required to pay for any tax or other governmental
charge associated with the exchange or transfer. The transfer or exchange will
only be made if we and the security registrar are satisfied with your proof of
ownership. (Section 3.04)
PAYMENT AND PAYING AGENTS
We will pay interest to you if you are a securityholder listed in the trustee's
records at the close of business on a particular day in advance of each due date
for interest, even if you no longer own the debt security on the interest due
date. That particular day, usually about two weeks in advance of the interest
due date, is called the "record date" and is stated in the prospectus
supplement. (Sections 3.02 and 5.01) Securityholders buying and selling debt
securities must work out between them how to compensate for the fact that we
will pay all the interest for an interest period to the one who is the
registered securityholder on the regular record date. The most common manner is
to adjust the sales price of the debt securities to pro rate interest fairly
between buyer and seller.
We have appointed the trustee as paying agent, and we will pay interest,
principal and any other money due on the debt securities at the principal office
of the trustee in New York City. That office is currently located at 101 Barclay
Street, Floor 8 West, New York, New York 10286; Attention: Corporate Trust
Administration. We may also have additional payment offices or change them, or
act as our own paying agent. (Section 5.02)
Single holders of over $5 million in principal amount of debt securities can
request that payment of principal and interest be wired to them by contacting
the paying agent at the address set forth above at least three (3) business days
prior to the payment date. Otherwise, payments will be made by check. (Section
3.02)
"Street name" and other indirect holders should consult their banks or brokers
for information on how they will receive payments.
REMARKETING
We may issue debt securities with remarketing features that allow
securityholders the option to sell their debt securities back to us. In turn, we
may have the option to retire those debt securities or remarket and sell them to
new holders.
REDEMPTION
We may have the right to redeem or otherwise repurchase debt securities at our
option. If the debt securities are redeemable, except as otherwise set forth in
the note for such series, we may partially redeem the debt securities only in
multiples of $1,000. (Section 4.01) Notice of redemption will be provided at
least 30, but no more than 60, days prior to the date of redemption. (Section
4.04) If we do not redeem all debt securities in a series at one time, the
trustee will select the debt securities to be redeemed in a manner it determines
to be appropriate and fair. (Section 4.03) If a debt security is only partially
redeemed, we will issue a new debt security of the same series in an amount
equal to the unredeemed portion of the debt security. (Section 4.06)
REPURCHASE
If the debt securities are subject to a repurchase option, the debt
securityholder may have the right to cause us to repurchase the debt securities.
For global debt securities, unless otherwise provided in the applicable
prospectus
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supplement, participants, on behalf of the owners of beneficial interests in the
global debt securities, may exercise the repurchase option by delivering written
notice to our paying agent, The Bank of New York, at least 30, but no more than
60, days prior to the date of repurchase (101 Barclay Street, Floor 8 West, New
York, New York 10286, Attention: Corporate Trust Administration). The paying
agent must receive notice by 5:00 p.m. on the last day for giving notice.
Procedures for the owners of beneficial interests in global debt securities to
notify their participants of their desire to have their debt security
repurchased will be governed by the customary practices of the participant. The
written notice to the paying agent must state the principal amount to be
repurchased. It is irrevocable, and a duly authorized officer of the participant
(with signatures guaranteed) must sign it.
Unless otherwise specified in the applicable prospectus supplement, debt
securityholders who hold their securities directly and who desire to exercise
their repurchase option must notify the paying agent at least 30, but not more
than 45, days prior to the repayment date by providing the paying agent:
.. the certificated debt security, with the section entitled "Option to Elect
Repayment" on the reverse of the debt security completed; or
.. a fax or letter (first class, postage prepaid) from a member of a national
securities exchange, the National Association of Securities Dealers, or a
bank or trust company in the United States which states the following:
. the name of the holder;
. the principal amount of the debt security and the amount to be
repurchased;
. the certificate number or the maturity and a description of the terms
of the security;
. a statement that you wish to sell all or a portion of your note; and
.. A guaranty that the debt security with the section entitled "Option to
Elect Repayment" on the reverse of the debt security completed, will be
received by the paying agent within 5 business days.
The debt security and form must be received by the paying agent by such 5th
business day. Your notice of repurchase is irrevocable.
If you sell a portion of a debt security, the old debt security will be canceled
and a new debt security for the remaining principal amount will be issued to
you.
INTEREST RATE
The following terms will apply to any issue of debt securities unless otherwise
indicated in the applicable prospectus supplement. The interest rate on the debt
securities will either be fixed or floating as indicated in the applicable
prospectus supplement. The interest paid will include interest accrued to, but
excluding, the date of maturity, redemption or repurchase. Interest is generally
payable to the person in whose name the debt security is registered at the close
of business on the record date applicable to each interest payment date.
Interest payable at maturity, redemption, or repurchase, however, will be
payable to the person to whom principal is payable.
The interest payment on any debt security originally issued between a record
date and interest payment date or on an interest payment date will be made on
the interest payment date after the next record date. Interest payments, other
than those payable at maturity, redemption or repurchase will be paid, at our
option, by check or wire transfer.
EVENTS OF DEFAULT
An "Event of Default" with respect to a series of securities means any of the
following:
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.. we fail to pay the principal of (or premium, if any, on) any debt security
of that series when due and payable;
.. we fail to pay any interest on any debt security of that series for 30 days
after such is due;
.. we fail to observe or perform any other covenants or agreements set forth
in the debt securities of that series, or in the indenture in regard to
such debt securities, continuously for 60 days after notice (which must be
sent either by the Trustee or holders of at least 33% of the principal
amount of the affected series);
.. we file for bankruptcy or certain other events of bankruptcy, insolvency or
reorganization occur; or
.. any other event of default described in the prospectus supplement.
An Event of Default for a particular series of debt securities does not
necessarily mean that an Event of Default has occurred for any other series of
debt securities issued under the indenture. If an Event of Default has occurred
and has not been cured, the trustee or the holders of not less than 33% of the
principal amount of the debt securities of the affected series may declare the
entire principal of the debt securities of such series due and payable
immediately. Subject to certain conditions, if we deposit with the trustee
enough money to remedy the default and there is no default continuing, this
acceleration of payment may be rescinded by the holders of at least a majority
in aggregate principal amount of the debt securities of the series. (Section
7.01)
The trustee must within 90 days after a default occurs, notify the holders of
the debt securities of the series of the default if we have not remedied it
(default is defined to include the events specified above without the grace
periods or notice). The trustee may withhold notice to the holders of such debt
securities of any default (except in the payment of principal or interest) if it
in good faith considers such withholding in the interest of the holders.
(Section 7.08) We are required to file an annual certificate with the trustee,
signed by an officer, stating any default by us under any provisions of the
indenture. (Section 5.06)
Prior to any declaration of acceleration of maturity, the holders holding a
majority of the principal amount of the debt securities of the particular series
affected, on behalf of the holders of all debt securities of that series, may
waive any past default or Event of Default. We cannot, however, obtain a waiver
of a payment default. (Section 7.07)
Except in cases of default, where the trustee has some special duties, the
trustee is not required to take any action under the indenture at the request of
any holders unless such holders offer the trustee reasonable indemnity. (Section
8.02(d)) Subject to the provisions for indemnification and certain other
limitations, the holders of a majority in principal amount of the debt
securities of any series may direct the time, method and place of conducting any
proceedings for any remedy available to the trustee with respect to such debt
securities. (Section 7.07)
In order to bypass the trustee and take steps to enforce your rights or protect
your interests relating to the debt securities, the following must occur:
.. you must give the trustee written notice that an Event of Default has
occurred and remains uncured;
.. the holders of 25% of the principal amount of all outstanding debt
securities of the relevant series must make a written request that the
trustee take action because of the default, and must offer reasonable
indemnity to the trustee against the cost and other liabilities of taking
that action; and
16
.. the trustee must have not taken action for 60 days after receipt of the
above notice and offer of indemnity.
However, you are entitled at any time to bring a lawsuit for the payment of
money due on your debt security on or after its due date. (Section 7.04)
"Street name" and other indirect holders should consult their banks or brokers
for information on how to give notice or direction to, or make a request of, the
trustee and to make or cancel a declaration of acceleration.
SUPPLEMENTAL INDENTURES
There are three types of changes we can make to the indenture and the debt
securities.
Changes Requiring Each Holder's Approval. The following changes require the
approval of each holder of debt securities:
.. extend the fixed maturity of any debt security;
.. reduce the interest rate (or change the method used to establish the
interest rate) or extend the time of payment of interest;
.. reduce any premium payable upon redemption;
.. reduce the principal amount;
.. reduce the amount of principal payable upon acceleration of the maturity of
a discounted debt security following default;
.. change the currency of payment on a debt security; or
.. reduce the percentage of securityholders whose consent is required to
modify or amend the indenture (Section 11.02)
Changes Not Requiring Holder Approval. These types of changes are limited to
those changes specified in the indenture, including those which are of an
administrative nature or are changes that would not adversely affect holders of
the debt securities.
(Section 11.01)
Changes Requiring 66-2/3% of all Holders to Approve. A vote in favor by
securityholders owning not less than 66-2/3% of the principal amount of the debt
securities of the particular series affected is required for any other matter
listed in the indenture or in a particular security. (Section 11.02)
"Street name" and other indirect holders should consult their banks or brokers
for information on how approval may be granted or denied if we seek to change
the indenture or the debt securities or request a waiver.
CONSOLIDATION, MERGER OR SALE
We may not merge or consolidate with any corporation or sell substantially all
of our assets as an entirety unless:
.. we are the continuing corporation or the successor corporation expressly
assumes the payment of principal, and premium, if any, and interest on the
debt securities and the performance and observance of all the covenants and
conditions of the indenture binding on us (Section 12.01); and
.. we, or the successor corporation, are not immediately after the merger,
consolidation, or sale in default in the performance of a covenant or
condition in the indenture. (Section 12.02)
DISCHARGE
The indenture provides that we can discharge and satisfy all of our obligations
under any series of notes that are payable within one year, or under any series
of notes that we deliver to the trustee (and that have not already been
cancelled), by depositing with the trustee or any paying agent, enough funds to
pay the principal
17
and interest due or to become due on the notes until their maturity date.
(Section 13.01)
CONVERSION
GENERAL
We may issue debt securities that may be converted into or exercised or
exchanged for our common stock, preferred stock or any of our other securities.
Debt securities will not be convertible unless the applicable prospectus
supplement expressly so states. We refer to these securities as convertible debt
securities. The discussion that follows contemplates that the debt securities we
may issue will be convertible into common stock. The applicable prospectus
supplement will discuss the terms of any debt securities that may be convertible
into any other type of security.
Any convertible debt securities will be issued pursuant to a supplemental
indenture to the indenture between us and The Bank of New York dated January 24,
2003. For clarity, we have used the designation "FSI" when discussing the
provisions of the supplemental indenture below.The applicable prospectus
supplement for any series of convertible debt securities will set forth the
terms of the convertible debt securities, including the conversion rate at which
the holder of any convertible debt security of that series may initially convert
that security into common stock. The conversion rate for any series of
outstanding convertible debt securities will be expressed as a number of shares
per $1,000 principal amount of convertible debt securities, and will be adjusted
in certain circumstances as described in "Adjustment of Conversion Rate" below.
The right to convert a convertible debt security called for redemption or
delivered for repurchase will terminate at the close of business on the business
day immediately preceding the redemption date for that security, unless we
default in making the payment due upon redemption. (FSI Section 2.1)
EXERCISE OF CONVERSION PRIVILEGE
Securityholders may convert all or part of any convertible debt security by
delivering the convertible debt security at an office or agency maintained for
that purpose. Unless the applicable prospectus supplement for a series of
convertible debt securities states otherwise, that office will be the corporate
trust office of the trustee at 101 Barclay Street, Floor 8 West, New York, New
York, 10286; Attention: Corporate Trust Administration, and the trustee will
serve as conversion agent. The convertible debt security surrendered for
conversion must be accompanied by a duly signed and completed conversion notice,
a copy of which may be obtained from the trustee. The conversion date will be
the date on which the convertible debt security and the duly signed and
completed conversion notice are so delivered. (FSI Section 2.2)
As promptly as practicable on or after the conversion date, we will issue and
deliver to the trustee a certificate or certificates for the number of full
shares of our common stock issuable upon conversion, together with payment in
lieu of any fraction of a share. The certificates will then be sent by the
trustee to the conversion agent for delivery to the holder of the convertible
debt security being converted. The shares of our common stock issuable upon
conversion of the convertible debt securities will be fully paid and
nonassessable and will rank equally with the other shares of our common stock.
(FSI Sections 2.2 and 2.3)
"Street name" and other indirect holders should consult their banks or brokers
for information on how to exercise their conversion privilege.
INTEREST AND OTHER PAYMENTS IN CONNECTION WITH CONVERTIBLE DEBT SECURITIES
If a securityholder surrenders a convertible debt security for conversion on a
date that is not an interest payment date, that securityholder will not be
entitled to receive any interest for the period from the preceding interest
payment date to the conversion date, except as described
18
below. However, a securityholder of a convertible debt security on a regular
record date, including a convertible debt security surrendered for conversion
after the regular record date, will receive the interest payable on such
convertible debt security on the next interest payment date. Thus to correct for
this overpayment of interest, any convertible debt security surrendered for
conversion during the period from the close of business on a regular record date
to the opening of business on the next interest payment date must be accompanied
by payment of an amount equal to the interest payable on such interest payment
date on the principal amount of convertible debt securities being surrendered
for conversion. However, a securityholder will not be required to make that
payment if he or she is converting a convertible debt security, or a portion of
a convertible debt security, that we have called for redemption if such
securityholder's conversion right would terminate because of the redemption
between the regular record date and the close of business on the next interest
payment date. (FSI Section 2.2)
No other payment or adjustment for interest, or for any dividends in respect of
our common stock, will be made upon conversion. Holders of our common stock
issued upon conversion will not be entitled to receive any dividends payable to
holders of our common stock as of any record time or date before the close of
business on the conversion date. We will not issue fractional shares upon
conversion. Instead, we will pay cash in lieu of fractional shares based on the
market price of our common stock at the close of business on the conversion
date. (FSI Section 2.3)
If a securityholder delivers a convertible debt security for conversion, the
securityholder will not be required to pay any taxes or duties in respect of the
issue or delivery of common stock on conversion. However, the securityholder
will be required to pay any tax or duty that may be payable in respect of any
transfer involved in the issue or delivery of the common stock in a name other
than that of the holder of the convertible debt security. We will not issue or
deliver certificates representing shares of common stock unless the person
requesting the issuance or delivery has paid to us the amount of any such tax or
duty or has established to our satisfaction that such tax or duty has been paid.
(FSI Section 2.8)
"Street name" and other indirect holders should consult their banks or brokers
for information on how they will receive payments.
ADJUSTMENT OF CONVERSION RATE
The conversion rate will be subject to adjustment for, among other things:
.. dividends and other distributions payable in our common stock on shares of
our capital stock;
.. the issuance to all holders of our common stock of rights, options or
warrants entitling them to subscribe for or purchase our common stock at
less than the then current market price of such common stock as of the
record date for stockholders entitled to receive such rights, options or
warrants;
.. subdivisions, combinations and reclassifications of our common stock;
.. distributions to all holders of our common stock of evidences of our
indebtedness, shares of capital stock, cash or assets, including
securities, but excluding:
. those dividends, rights, options, warrants and distributions referred
to above;
. dividends and distributions paid exclusively in cash, subject to
certain exceptions; and
. distributions upon mergers or consolidations discussed below;
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.. distributions consisting exclusively of cash, excluding cash distributed
upon a merger or consolidation discussed below, to all holders of our
common stock in an aggregate amount that, combined together with:
. other all-cash distributions made within the preceding 365-day period
in respect of which no adjustment has been made; and
. any cash and the fair market value of other consideration payable in
connection with any tender offer by us or any of our subsidiaries for
our common stock concluded within the preceding 365-day period in
respect of which no adjustment has been made,
exceeds 10% of our market capitalization on the record date for the
distribution, being the product of the current market price per share of
our common stock on the record date for such distribution and the number of
shares of common stock then outstanding; and
.. the completion of a tender offer made by us or any of our subsidiaries for
our common stock which involves an aggregate consideration that, together
with:
. any cash and the fair market value of other consideration payable in a
tender offer by us or any of our subsidiaries for our common stock
expiring within the 365-day period preceding the expiration of that
tender offer in respect of which no adjustments have been made; and
. the aggregate amount of any cash distributions to all holders of our
common stock within the 365-day period preceding the expiration of
that tender offer in respect of which no adjustments have been made,
exceeds 10% of our market capitalization on the expiration of such tender
offer.
We reserve the right to effect such increases in the conversion rate in addition
to those required by the foregoing provisions as we consider to be advisable in
order to avoid or diminish any income tax to holders of our common stock
resulting from certain dividends, distributions or issuances of rights or
warrants. We will not be required to make any adjustment to the conversion rate
until the cumulative adjustments amount to 1% or more of the conversion rate.
(FSI Section 2.4)
To the extent permitted by law, we may increase the conversion rate for any
period of at least 20 days if the increase is irrevocable during such period and
our board of directors determines that the increase would be in our best
interest. The board of directors' determination in this regard will be
conclusive. We will give holders of convertible debt securities at least 15
days' notice of such an increase in the conversion rate. (FSI Section 2.4(12))
We will compute all adjustments to the conversion rate and will give notice by
mail to holders of the registered convertible debt securities of any
adjustments. (FSI Section 2.5)
PROVISION IN CASE OF CONSOLIDATION, MERGER OR SALE OF ASSETS
If we consolidate or merge with or into another entity or another entity is
merged into us, or in case of any sale or transfer of all or substantially all
of our assets, each convertible debt security then outstanding will become
convertible only into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer by a holder of the
number of shares of common stock into which the convertible debt securities were
convertible immediately prior to the consolidation, merger, sale or transfer.
This
20
calculation will be made on the assumption that the holder of common stock
failed to exercise any rights of election that the holder may have to select a
particular type of consideration. This paragraph will not apply to a merger or
sale of all or substantially all of our assets that does not result in any
reclassification, conversion, exchange or cancellation of the common stock. (FSI
Section 2.11)
OUR RELATIONSHIP WITH THE TRUSTEE
The trustee under the indenture, and/or one or more of its affiliates, may be
lenders under our, or our subsidiaries' and affiliates', credit agreements and
may provide other commercial banking, investment banking and other services to
us and/or our subsidiaries and affiliates. The trustee will be permitted to
engage in other transactions with us and/or our subsidiaries and affiliates.
However, if the trustee acquires any conflicting interest, as defined in the
Trust Indenture Act, it must eliminate the conflict or resign.
The trustee will perform only those duties that are specifically set forth in
the indenture, unless an event of default occurs and is continuing. In case, the
trustee will exercise the same degree of care and skill as a prudent individual
would exercise in the conduct of his or her own affairs.
DESCRIPTION OF CAPITAL STOCK
The following briefly summarizes the provisions of our charter and bylaws. The
following description may not be complete and is subject to, and qualified in
its entirety by reference to, the terms and provisions of our charter and
bylaws. See "Where You Can Find More Information."
AUTHORIZED COMMON STOCK
Our authorized capital stock includes 250,000,000 shares of common stock without
par value. As of January 14, 2003, 198,349,772 shares have either been issued
and are now outstanding or have been reserved for issuance, and 51,650,228
shares are authorized but unissued and unreserved.
AUTHORIZED PREFERRED STOCK
Our Board of Directors can, without further action by our shareholders,
establish from the 25,000,000 undesignated shares of preferred stock , $0.01 per
share par value, authorized by our charter one or more series of preferred
stock. As of January 14, 2003, none of our preferred stock is issued or reserved
for issuance.
DESCRIPTION OF COMMON STOCK
DIVIDEND RIGHTS
We will pay dividends on our common stock when declared by our board of
directors. However, we must first pay all dividends and any redemption payments
due on any outstanding shares of our preferred stock before paying common stock
dividends.
VOTING RIGHTS
Holders of our common stock are entitled to one vote per share on all matters on
which shareholders vote. There are no cumulative voting rights.
LIQUIDATION
If we liquidate or dissolve, common stockholders will share equally in any
assets remaining after full payment of liabilities to our creditors and the
liquidation value per share plus accrued dividends due to holders of any
outstanding shares of our preferred stock.
GENERAL
Holders of our common stock do not have any preemptive or special rights to
purchase any shares of common stock we may issue at a later date. In addition,
as holders of common stock, you have no redemption, conversion or sinking
21
fund rights. When issued to you, the common stock will be legally issued, fully
paid and nonassessable.
DESCRIPTION OF PREFERRED STOCK
We may issue preferred stock in one or more series, as described below. The
following briefly summarizes the provisions of our charter that would be
important to holders of our preferred stock. The following description may not
be complete and is subject to, and qualified in its entirety by reference to,
the terms and provisions of our charter. See "Where You Can Find More
Information."
The description of most of the financial and other specific terms of each series
will be in the prospectus supplement in connection with the offering of that
series. Those terms may vary from the terms described herein.
As you read this section, please remember that the specific terms of each series
of preferred stock as described in the applicable prospectus supplement will
supplement and, if applicable, may modify or replace the general terms described
in this section. If there are differences between the prospectus supplement and
this prospectus, the prospectus supplement will control. Thus, the statements we
make in this section may not apply to every series of preferred stock.
Reference to a series of preferred stock means all of the shares of preferred
stock issued as part of the same series under articles supplementary filed as
part of our charter. Reference to the applicable prospectus supplement means the
prospectus supplement describing the specific terms of that offering of
preferred stock you purchase. The terms used in your prospectus supplement will
have the meanings described in this prospectus, unless otherwise specified.
The prospectus supplement relating to a particular series of preferred stock
will contain a description of the specific terms of that series as fixed by our
Board, including, as applicable:
. the number of shares;
. the designation;
. the voting powers;
. votes per share (which cannot be greater than one vote per share);
. liquidation preferences;
. relative participating, optional or other rights;
. conversion or exchange rights;
. redemption rights;
. put and sinking fund provisions;
. dividend rights;
. the terms or conditions of redemption; and
. any other applicable terms.
In some cases, the issuance of preferred stock could delay a change in control
of Constellation Energy and make it harder to remove present management. Under
certain circumstances, preferred stock could also restrict dividend payments to
holders of our common stock.
When we issue and receive payment for the preferred stock, the shares will be
fully paid and non-assessable. Unless otherwise specified in the applicable
prospectus supplement, the preferred stock will rank on a parity in all respects
with any outstanding shares of our preferred stock and will have priority over
our common stock as to dividends and distributions of assets. Therefore, the
rights of any preferred stock that may subsequently be issued may limit the
rights of the holders of our common stock and preferred stock.
22
The transfer agent, registrar, and dividend disbursement agent for a series of
preferred stock will be named in a prospectus supplement. The registrar for
shares of preferred stock will send notices to shareholders of any meetings at
which holders of the preferred stock have the right to elect directors or to
vote on any other matter.
The applicable prospectus supplement relating to any series of preferred stock
that is convertible, exercisable or exchangeable will state the terms on which
shares of that series are convertible into or exercisable or exchangeable for
shares of common stock, another series of preferred stock or other securities of
Constellation Energy, or debt or equity securities of third parties.
MARYLAND GENERAL CORPORATION LAW AND THE CHARTER AND BYLAWS
Constellation Energy is a Maryland corporation. Provisions of Maryland's General
Corporation Law ("Maryland Law"), in addition to provisions of our charter and
bylaws, address corporate governance issues, including the rights of
shareholders. Some of these provisions could hinder management changes while
others could have an anti-takeover effect. This anti-takeover effect may, in
some circumstances, reduce the control premium that might otherwise be reflected
in the value of our stock.
We have summarized the key provisions of Maryland Law and our charter and bylaws
below. Because it is a summary, it does not contain all of the information that
may be important to you. You should read our charter and bylaws (see Where You
Can Find More Information), and the relevant sections of Maryland Law to get a
complete understanding of your rights. This summary is subject to, and qualified
in its entirety by, reference to all the provisions of our charter, bylaws and
Maryland Law.
Business Combination Statute. Subject to certain exceptions, Maryland Law
prohibits certain business combinations between a corporation and an interested
stockholder for five years after the most recent date on which the stockholder
becomes an interested stockholder, and thereafter imposes special appraisal
rights and special stockholder voting requirements. The statute requires a
business combination which is not excepted and which takes place after the
five-year moratorium to be approved by the affirmative vote of at least (1) 80%
of the votes entitled to be cast by the outstanding shares of voting stock of
the corporation, voting together as a group; and (2) two-thirds of the votes
entitled to be cast by holders of voting stock other than the interested
stockholder who is a party to the combination, voting together as a group. An
interested stockholder is defined as a beneficial owner, directly or indirectly,
of ten percent or more of the voting power of the outstanding voting stock of
the corporation. However, a person is not an interested stockholder if, prior to
the most recent time at which such person would otherwise have become an
interested stockholder, the board of directors of the corporation approved the
transaction which otherwise would have resulted in the person's becoming an
interested stockholder (which approval may be made subject to compliance at or
after the time of approval, with any terms and conditions determined by the
board, e.g., a standstill requirement). Maryland Law allows companies to opt out
of this provision. We have not opted out.
Control Share Statute. Maryland Law provides, with certain exceptions, that
control shares (generally, shares with more than one-tenth, one-third and a
majority of the power to vote generally in the election of directors) of a
corporation acquired in a control share acquisition have no voting rights except
to the extent approved by the stockholders by the affirmative vote of at least
two-thirds of all votes entitled to be cast on the matter, excluding interested
shares. If the stockholders do not accord voting rights to the control shares,
the corporation may redeem the control shares under certain circumstances.
Unless the charter or bylaws provide otherwise, if voting rights are
23
approved, and as a result the interested stockholder becomes entitled to
exercise a majority or more of the voting power of all shares of the
corporation, non-interested stockholders will have dissenters' rights. Maryland
Law allows companies to opt out of this provision. We have opted out, but can
opt back in at our option.
Corporate Governance. Shareholders of Constellation Energy may remove directors
only for cause upon the affirmative vote of the holders of at least a majority
of the combined voting powers of the classes of capital stock entitled to vote
in the election of directors. The number of directors may be fixed only by vote
of the board of directors and vacancies on the board may be filled only by the
affirmative vote of a majority of the remaining directors in office. Directors
have staggered terms of office and each director is elected for a 3-year term.
Shareholder proposals and nominations are subject to specified restrictions and
procedures contained in our bylaws. The effect of these provisions could be to
delay the shareholders' ability to elect a majority of new directors.
DESCRIPTION OF WARRANTS
GENERAL
We may issue warrants to purchase debt securities, preferred stock, common stock
or any combination of these securities and these warrants may be issued by us
independently or together with any underlying securities and may be attached or
separate from the underlying securities. We will issue each series of warrants
under a separate warrant agreement to be entered into between us and a warrant
agent. We currently expect The Bank of New York to act as warrant agent if we
issue any warrants. The warrant agent will act solely as our agent in connection
with the warrants of the series for which it is appointed and will not assume
any obligation or relationship of agency for or with holders or beneficial
owners of warrants of that series.
The following outlines some of the general terms and provisions of the warrants.
Further terms of the warrants and the applicable warrant agreement will be
stated in the applicable prospectus supplement. The following description and
any description of the warrants in a prospectus supplement may not be complete
and is subject to and qualified in its entirety by reference to the terms and
provisions of the warrant agreement, a form of which has been filed as an
exhibit to the registration statement which contains this prospectus.
The applicable prospectus supplement will describe the terms of any warrants
that we may offer, including the following:
. the title of the warrants;
. the total number of warrants;
. the price or prices at which the warrants will be issued;
. the currency or currencies investors may use to pay for the warrants;
. the designation and terms of the underlying securities purchasable
upon exercise of the warrants;
. the price at which and the currency or currencies, including composite
currencies, in which investors may purchase the underlying securities
purchasable upon exercise of the warrants;
. the date on which the right to exercise the warrants will commence and
the date on which the right will expire;
. whether the warrants will be issued in registered form or bearer form;
. information with respect to book-entry procedures, if any;
24
. if applicable, the minimum or maximum amount of warrants which may be
exercised at any one time;
. if applicable, the designation and terms of the underlying securities
with which the warrants are issued and the number of warrants issued
with each underlying security;
. if applicable, the date on and after which the warrants and the
related underlying securities will be separately transferable;
. if applicable, a discussion of material United States federal income
tax considerations;
. the identity of the warrant agent;
. the procedures and conditions relating to the exercise of the
warrants; and
. any other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants.
Warrant certificates may be exchanged for new warrant certificates of different
denominations, and warrants may be exercised at the warrant agent's corporate
trust office or any other office indicated in the applicable prospectus
supplement. Prior to the exercise of their warrants, holders of warrants
exercisable for debt securities will not have any of the rights of holders of
the debt securities purchasable upon such exercise and will not be entitled to
payments of principal (or premium, if any) or interest, if any, on the debt
securities purchasable upon such exercise. Prior to the exercise of their
warrants, holders of warrants exercisable for shares of preferred stock or
common stock will not have any rights of holders of the preferred stock or
common stock and will not be entitled to dividend payments, if any, or voting
rights of the preferred stock or common stock.
EXERCISE OF WARRANTS
A warrant will entitle the holder to purchase for cash an amount of securities
at an exercise price that will be stated in, or that will be determinable as
described in, the applicable prospectus supplement. The exercise price for the
warrants will be subject to adjustment in accordance with the applicable
prospectus supplement. Warrants may be exercised at any time up to the close of
business on the expiration date set forth in the applicable prospectus
supplement. After the close of business on the expiration date, unexercised
warrants will become void.
Warrants may be exercised as set forth in the applicable prospectus supplement.
Upon receipt of payment and the warrant certificate properly completed and duly
executed at the corporate trust office of the warrant agent or any other office
indicated in the prospectus supplement, we will, as soon as practicable, forward
the securities purchasable upon such exercise. If less than all of the warrants
represented by such warrant certificate are exercised, a new warrant certificate
will be issued for the remaining warrants.
ENFORCEABILITY OF RIGHTS
The holders of warrants, without the consent of the warrant agent, may, on their
own behalf and for their own benefit, enforce, and may institute and maintain
any suit, action or proceeding against us to enforce their rights to exercise
and receive the securities purchasable upon exercise of their warrants.
DESCRIPTION OF STOCK PURCHASE CONTRACTS
We may issue stock purchase contracts, representing contracts obligating holders
to purchase from or sell to us, and obligating us to purchase from or sell to
the holders, a specified number of shares of our common stock or
25
preferred stock, as applicable, at a future date or dates. The price per share
of common stock or preferred stock, as applicable, may be fixed at the time the
stock purchase contracts are issued or may be determined by reference to a
specific formula contained in the stock purchase contracts. We may issue stock
purchase contracts in such amounts and in as many distinct series as we wish.
The stock purchase contracts may be issued separately or as part of units
consisting of a stock purchase contract and beneficial interests in debt
securities, preferred stock or debt obligations of third parties, including U.S.
treasury securities, securing the holders' obligations to purchase the common
stock under the stock purchase contracts, which we refer to in this prospectus
as units. The stock purchase contracts may require us to make periodic payments
to the holders of the stock purchase units or vice versa, and these payments may
be unsecured or prefunded on some basis. The stock purchase contracts may
require holders to secure their obligations under those contracts in a specified
manner.
The applicable prospectus supplement may contain, where applicable, the
following information about the stock purchase contracts issued under it:
. whether the stock purchase contracts obligate the holder to purchase
or sell, or both purchase and sell, our common stock or preferred
stock, as applicable, and the nature and amount of each of those
securities, or the method of determining those amounts;
. whether the stock purchase contracts are to be prepaid or not;
. whether the stock purchase contracts are to be settled by delivery, or
by reference or linkage to the value, performance or level of our
common stock or preferred stock;
. any acceleration, cancellation, termination or other provisions
relating to the settlement of the stock purchase contracts;
. whether the stock purchase contracts will be issued in fully
registered or global form; and
. any other terms of the stock purchase contracts.
DESCRIPTION OF UNITS
We may, from time to time, issue units comprised of one or more of the other
securities described in this prospectus in any combination. Each unit will be
issued so that the holder of the unit is also the holder of each security
included in the unit. Thus, the holder of a unit will have the rights and
obligations of a holder of each included security. The unit agreement under
which a unit is issued may provide that the securities included in the unit may
not be held or transferred separately, at any time or at any time before a
specified date.
The applicable prospectus supplement may describe:
. the designation and terms of the units and of the securities
comprising the units, including whether and under what circumstances
those securities may be held or transferred separately;
. any provisions for the issuance, payment, settlement, transfer or
exchange of the units or of the securities comprising the units; and
. whether the units will be issued in fully registered or global form.
The applicable prospectus supplement will describe the terms of any units. The
preceding description and any description of units in the applicable prospectus
supplement does not purport to be complete and is subject to and is qualified in
its entirety by reference to the
26
relevant unit agreement and, if applicable, collateral arrangements and
depositary arrangements relating to such units.
PLAN OF DISTRIBUTION
We may sell the securities offered (a) through agents; (b) by underwriters or
dealers; (c) directly to one or more purchasers; or (d) through a combination of
any of these methods of sale.
In some cases we may also repurchase the securities and reoffer them to the
public by one or more of the methods described above.
This prospectus may be used in connection with any offering of securities
through any of these methods or other methods described in the applicable
prospectus supplement.
Any underwriter or agent involved in the offer and sale of the securities will
be named in the applicable prospectus supplement.
BY AGENTS
Offered securities may be sold on a one time or a continuing basis by agents
designated by us. The agents agree to use their reasonable efforts to solicit
purchases for the period of their appointment under the terms of an agency
agreement between the agents and us.
BY UNDERWRITERS OR DEALERS
If underwriters are used in the sale, the underwriters may be designated by us
or selected through a bidding process. The securities will be acquired by the
underwriters for their own account. The underwriters may resell the securities
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale.
Underwriters may sell the securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as
agents. The obligations of the underwriters to purchase the securities will be
subject to certain conditions. The underwriters will be obligated to purchase
all the securities of the series offered if any of the securities are purchased.
Any initial public offering price and any discounts or concessions allowed or
re-allowed or paid to dealers may be changed from time to time.
Only underwriters named in the applicable prospectus supplement are deemed to be
underwriters in connection with the securities offered hereby.
If dealers are utilized in the sale of the securities, we will sell the
securities to the dealers as principals. The dealers may then resell the
securities to the public at varying prices to be determined by such dealers at
the time of resale. The names of the dealers and the terms of the transaction
will be set forth in the applicable prospectus supplement.
DIRECT SALES
We may also sell securities directly to the public. In this case, no
underwriters or agents would be involved.
GENERAL INFORMATION
We may authorize agents, underwriters or dealers to solicit offers by certain
institutions to purchase securities from us at the public offering price
pursuant to delayed delivery contracts providing for payment and delivery on a
later date or dates, all as described in the applicable prospectus supplement.
Each delayed delivery contract will be for an amount not less than, and the
aggregate amount of the securities shall be not less nor more than, the
respective amounts stated in the prospectus supplement. Institutions with whom
the delayed delivery contracts, when authorized, may be made include commercial
and savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions, and other
27
institutions, but will in all cases be subject to our approval. The delayed
delivery contracts will not be subject to any conditions except:
. the purchase by an institution of the securities covered by its
delayed delivery contract shall not, at any time of delivery, be
prohibited under the laws of any jurisdiction in the United States to
which such jurisdiction is subject; and
. if the securities are being sold to underwriters, we shall have sold
to those underwriters the total amount of the securities less the
amount thereof covered by the delayed delivery contracts. The
underwriters will not have any responsibility in respect of the
validity or performance of the delayed delivery contracts.
Unless otherwise specified in the related prospectus supplement, each series of
the securities will be a new issue with no established trading market, other
than the common stock. Any common stock sold pursuant to a prospectus supplement
or issuable upon conversion of another offered security will be listed on the
NYSE, subject to official notice of issuance. We may elect to list any of the
other securities on an exchange, but are not obligated to do so. It is possible
that one or more underwriters may make a market in a series of the securities,
but no underwriter will be obligated to do so and any underwriter may
discontinue any market making at any time without notice. We cannot predict the
activity of trading in, or liquidity of, our securities.
In connection with sales by an agent or in an underwritten offering, the SEC
rules permit the underwriters or agents to engage in transactions that stabilize
the price of the securities. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters or agents of a greater
number of securities than they are required to purchase in an offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the
securities while an offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a particular
underwriter repays to the underwriters a portion of the underwriting discount
received by it because the underwriters have repurchased securities sold by or
for the account of that underwriter in stabilizing or short-covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise affect
the market price of the securities. As a result, the price of the securities may
be higher than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by the underwriters at any
time. These transactions may be effected on an exchange or automated quotation
system, if the securities are listed on that exchange or admitted for trading on
that automated quotation system, in the over-the-counter market or otherwise.
We may from time to time, without the consent of the existing security holders,
create and issue further securities having the same terms and conditions as the
securities being offered hereby in all respects, except for issue date, issue
price and if applicable, the first payment of interest or dividends therein or
other terms as noted in the applicable prospectus supplement. Additional
securities issued in this manner will be consolidated with, and will form a
single series with the previously outstanding securities.
Underwriters, dealers, and agents that participate in the distribution of the
securities may be underwriters as defined in the Securities Act of 1933, and any
discounts or commissions received by them from us and any profit on the resale
of the securities by them may be treated as underwriting discounts and
commissions under the Securities Act.
We may have agreements with the underwriters, dealers and agents to indemnify
them against
28
certain civil liabilities, including liabilities under the Securities Act, or to
contribute with respect to payments which the underwriters, dealers or agents
may be required to make.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, us or our subsidiaries in the ordinary course of their businesses.
VALIDITY OF THE SECURITIES
Unless otherwise noted in the applicable prospectus supplement, one of our
lawyers will issue an opinion regarding the validity of the securities offered
pursuant to this prospectus. Our lawyer may rely as to matters of New York law
on the opinion of Sullivan & Cromwell LLP, New York, New York. Unless otherwise
noted in the applicable prospectus supplement, Cahill Gordon & Reindel, New
York, NY will issue an opinion regarding certain legal matters for any
underwriters, dealers or agents. Cahill Gordon & Reindel represents
Constellation Energy and BGE from time to time. Cahill Gordon & Reindel will
rely on the opinion of our lawyers as to matters of Maryland law and the
applicability of the Public Utility Holding Company Act of 1935.
EXPERTS
The financial statements and financial statement schedule incorporated in this
Prospectus by reference to the Annual Report on Form 10-K of Constellation
Energy Group, Inc. for the year ended December 31, 2001 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
Constellation Energy files annual, quarterly and special reports, proxy
statements and other information with the SEC. Prior to Constellation Energy
becoming BGE's holding company, reports, statements and other information were
filed by BGE under the name "Baltimore Gas and Electric Company." You may read
and copy any document filed by BGE or Constellation Energy at the SEC's public
reference room at 450 Fifth Street, N.W., Washington, D.C., 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference room.
The SEC maintains an internet site at http://www.sec.gov that contains reports,
proxy and information statements, and other information, regarding companies
(including Constellation Energy and BGE) that file documents with the SEC
electronically. Constellation Energy's SEC filings may also be obtained from our
web site at http://www.constellationenergy.com.
The addresses for both the SEC's and Constellation Energy's website are inactive
textual references only and the contents of those sites (other than the
documents incorporated by reference as set forth below) are not a part of this
prospectus.
This prospectus is part of a registration statement we filed with the SEC. In
addition, the SEC allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 from now until the time the registration
29
becomes effective and thereafter until we sell all the securities.
. Annual Report on Form 10-K for the year ended December 31, 2001.
. Quarterly Reports on Form 10-Q for the quarters ended March 31, 2002,
June 30, 2002 and September 30, 2002.
. Current Reports on Form 8-K filed on January 30, 2002, January 31,
2002, March 19, 2002, August 14, 2002 and August 23, 2002.
. Description of the Common Stock and Preferred Stock under the caption
"Proposal No. 1, Approval of the Share Exchange and Formation of the
Holding Company--Constellation Energy Capital Stock" in the Proxy
Statement and Prospectus contained in Amendment No. 1 to Constellation
Energy's Registration Statement on Form S-4 (Reg. No. 33-64799).
Any person, including any beneficial owner, may request a copy of these filings,
at no cost, by writing or telephoning us at the following address:
Shareholder Services
Constellation Energy Group, Inc.
39 W. Lexington Street
Baltimore, Maryland 21201
410-783-5920
You should rely only on the information incorporated by reference or provided in
this prospectus or any supplement. We have not authorized anyone else to provide
you with different information. We are not making an offer of these securities
in any state where the offer is not permitted. You should not assume that the
information in this prospectus or any supplement is accurate as of any date
other than the date on the front of those documents.
30
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[LOGO OF CONSTELLATION ENERGY GROUP]
$2,000,000,000
UNSECURED DEBT SECURITIES
COMMON STOCK
PREFERRED STOCK
WARRANTS
STOCK PURCHASE CONTRACT
UNITS
--------------------------------------------------------------------------------
PROSPECTUS
(Once the registration statement is effective, the date of the Prospectus will
be inserted here)
--------------------------------------------------------------------------------
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Securities and Exchange Commission Registration Fee........... $ 184,000
*Services of Independent Accountants.......................... 75,000
*Trustee Fees and Expenses.................................... 25,000
*Legal Fees and Expenses...................................... 200,000
*Debt Securities Rating Fees.................................. 500,000
*Printing and Delivery Expenses............................... 75,000
*Listing Fees................................................. 175,000
*Transfer Agent and Fees...................................... 10,000
*Miscellaneous Expenses....................................... 41,000
-----------
Total $ 1,285,000
----------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The following description of indemnification allowed under Maryland
statutory law is a summary rather than a complete description. Reference is made
to Section 2-418 of the Corporations and Associations Article of the Maryland
Annotated Code, which is incorporated herein by reference, and the following
summary is qualified in its entirety by such reference.
By a Maryland statute, a Maryland corporation may indemnify any director
who was or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative ("Proceeding") by reason of the fact that he is
a present or former director of the corporation and any person who, while a
director of the corporation, is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee, or agent of another
corporation, partnership, joint venture, trust, other enterprise, or employee
benefit plan ("Director"). Such indemnification may be against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by him
in connection with the Proceeding unless it is proven that (a) the act or
omission of the Director was material to the matter giving rise to the
Proceeding and (i) was committed in bad faith, or (ii) was the result of active
and deliberate dishonesty; or (b) the Director actually received an improper
personal benefit in money, property, or services; or (c) in the case of any
criminal proceeding, the Director had reasonable cause to believe his act or
omission was unlawful. However, the corporation may not indemnify any Director
in connection with a Proceeding by or in the right of the corporation if the
Director has been adjudged to be liable to the corporation. A Director or
officer who has been successful in the defense of any Proceeding described above
shall be indemnified against reasonable expenses incurred in connection with the
Proceeding. The corporation may not indemnify a Director in respect of any
Proceeding charging improper personal benefits to the Director in which the
Director was adjudged to be liable on the basis that personal benefit was
improperly received. The corporation may not indemnify a director or advance
expenses for a proceeding brought by the director against the corporation except
if the proceeding is brought to enforce indemnification by the corporation or if
the corporation's charter or bylaws, a board resolution or contract provides
otherwise. Notwithstanding the above provisions, a court of appropriate
jurisdiction, upon application of the Director, may order
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indemnification if it determines that in view of all the relevant circumstances,
the Director is fairly and reasonably entitled to indemnification; however,
indemnification with respect to any Proceeding by or in the right of the
corporation or in which liability was adjudged on the basis that personal
benefit was improperly received shall be limited to expenses. A corporation may
advance reasonable expenses to a Director under certain circumstances, including
a written undertaking by or on behalf of such Director to repay the amount if it
shall ultimately be determined that the standard of conduct necessary for
indemnification by the corporation has not been met.
A corporation may indemnify and advance expenses to an officer of the
corporation to the same extent that it may indemnify Directors under the
statute.
The indemnification and advancement of expenses provided by statute is not
exclusive of any other rights, by indemnification or otherwise, to which a
Director or officer may be entitled under the charter, by-laws, a resolution of
shareholders or directors, an agreement or otherwise.
A corporation may purchase and maintain insurance on behalf of any person
who is or was a Director or officer, whether or not the corporation would have
the power to indemnify a Director or officer against liability under the
provision of this section of Maryland law. Further, a corporation may provide
similar protection, including a trust fund, letter of credit or surety bond, not
inconsistent with the statute.
Article Eighth of the Company's Charter reads as follows:
"(a)(i) The Corporation shall indemnify
(A) Its Directors and Officers, whether serving the Corporation
or at its request any other entity, to the full extent required or permitted by
the general laws of the State of Maryland, now or hereafter in force, including
the advance of expenses, under the procedures and to the full extent permitted
by law, and
(B) other employees and agents, to such extent as shall be
authorized by the Board of Directors or the Corporation's by-laws and be
permitted by law.
(ii) The foregoing rights of indemnification shall not be exclusive
of any other rights to which those seeking indemnification may be entitled.
(iii) The Board of Directors may take such action as is necessary to
carry out these indemnification provisions and is expressly empowered to adopt,
approve and amend from time to time such by-laws, resolutions or contracts
implementing such provisions or such further indemnification arrangements as may
be permitted by law. No amendment of the Charter of the Corporation or repeal of
any of its provisions shall limit or eliminate the right to indemnification
provided hereunder with respect to any act or omission occurring prior to such
amendment or repeal.
(b)To the fullest extent permitted by Maryland statutory or decisional
law, as amended or interpreted, no Director or Officer of this Corporation shall
be personally liable to the Corporation or its stockholders for money damages.
No amendment of the Charter of the Corporation or repeal of any of its
provisions shall limit or eliminate the limitation on liability provided to
Directors and Officers hereunder with respect to any act or omission occurring
prior to such amendment or repeal."
Article V of the Company's By-Laws reads as follows:
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"The Corporation shall indemnify all Directors, Officers and employees to
the fullest extent permitted by the general laws of the State of Maryland
and shall provide indemnification expenses in advance to the extent
permitted thereby. The Corporation will follow the procedures required by
applicable law in determining persons eligible for indemnification and in
making indemnification payments and advances.
The Indemnification and advance of expenses provided by the Charter and
these by-laws shall not be deemed exclusive of any other rights to which a
person seeking indemnification or advance of expenses may be entitled under
any law (common or statutory), or any agreement, vote of stockholders or
disinterested Directors or other provision that is consistent with law,
both as to action in his or her official capacity and as to action in
another capacity while holding office or while employed by or acting as
agent for the Corporation, shall continue in respect of all events
occurring while a person was a Director or Officer after such person has
ceased to be a Director or Officer, and shall inure to the benefit of the
estate, heirs, executors and administrators of such person. All rights to
indemnification and advance of expenses under the Charter of the
Corporation and hereunder shall be deemed to be a contract between the
Corporation and each Director or Officer of the Corporation who serves or
served in such capacity at any time while this by-law is in effect. Nothing
herein shall prevent the amendment of this by-law, provided that no such
amendment shall diminish the rights of any person hereunder with respect to
events occurring or claims made before its adoption or as to claims made
after its adoption in respect of events occurring before its adoption. Any
repeal or modification of this by-law shall not in any way diminish any
rights to indemnification or advance of expenses of such Director or
Officer or the obligations of the Corporation arising hereunder with
respect to events occurring, or claims made, while this by-law or any
provision hereof is in force."
The Directors and officers of the Company are covered by insurance
indemnifying them against certain liabilities which might be incurred by them in
their capacities as such, including certain liabilities arising under the
Securities Act of 1933. The premium for this insurance is paid by the Company.
Also, see indemnification provisions in the Forms of Purchase Agreements,
included as Exhibits 1(a) and 1(b) to this Registration Statement.
ITEM 16. EXHIBITS.
Reference is made to the Exhibit Index filed as a part of this Registration
Statement.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities
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offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the Registration Statement is on Form S-3, Form S-8, or Form F-3 and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by the Registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes (1) to use its best efforts to
distribute prior to the opening of bids, to prospective bidders, underwriters,
and dealers, a reasonable number of copies of a prospectus which at that time
meets the requirements of section 10(a) of the Act, and relating to the
securities offered at competitive bidding, as contained in the registration
statement, together with any supplements thereto, and (2) to file an amendment
to the registration statement reflecting the results of bidding, the terms of
the reoffering and related matters to the extent required by the applicable
form, not later than the first use, authorized by the issuer after the opening
of bids, of a prospectus relating to the securities offered at competitive
bidding, unless no further public offering of such securities by the issuer and
no reoffering of such securities by the purchasers is proposed to be made.
(d) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to Directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted
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by such Director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Constellation
Energy Group, Inc., the Registrant, certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland on the 24th day of January, 2003.
CONSTELLATION ENERGY GROUP, INC.
(Registrant)
By: /s/ E. Follin Smith
-----------------------------
E. Follin Smith,
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Principal executive
officer and director:
*M. A. Shattuck, III Chairman of the Board, January 24, 2003
Chief Executive Officer,
President and Director
Principal financial and
accounting officer:
/s/ E. Follin Smith Senior Vice President January 24, 2003
-------------------- and Chief Financial Officer
E. Follin Smith
*Douglas L. Becker
*James T. Brady Directors January 24, 2003
*Frank P. Bramble
*Beverly B. Byron
*Edward A. Crooke
*James R. Curtiss
*Roger W. Gale
*Freeman A. Hrabowski, III
*Edward J. Kelly, III
*Nancy Lampton
*Robert J. Lawless
*Christian H. Poindexter
*Michael D. Sullivan
* By: /s/ E. Follin Smith
-----------------------------------
E. Follin Smith, Attorney-in-Fact
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EXHIBIT INDEX
EXHIBIT
NUMBER
-------
1(a) - Form of Purchase Agreement, including Standard Purchase Provisions for Unsecured Debt
Securities.
1(b)* - Form of Purchase Agreement, including Standard Purchase Provisions for Convertible Debt
Securities.
1(c)* - Form of Agency Agreement.
1(d) - Form of Purchase Agreement, including Standard Purchase Provisions for common stock.
1(e)* - Form of Purchase Agreement, including Standard Purchase Provisions for preferred stock.
1(f)* - Form of Purchase Agreement, including Standard Purchase Provisions for stock purchase contracts.
1(g)* - Form of Purchase Agreement, including Standard Purchase Provisions for units.
3(a)** - Articles of Amendment and Restatement of the Charter of Constellation Energy Group, Inc. as of
April 30, 1999. (Designated as Appendix B to the Proxy Statement and Prospectus in Part I of
Post-Effective Amendment No. 1 to the Registration Statement on Form S-4 of the Registrant,
Reg. No. 33-64799).
3(b)** - Articles Supplementary to the Charter of Constellation Energy Group, Inc., as of July 19,
1999. (Designated as Exhibit No. 3(a) in Form 10-Q dated August 13, 1999, File No. 1-12869.)
3(c)** - Certificate of Correction to the Charter of Constellation Energy Group, Inc. as of September
13, 1999. (Designated as Exhibit 3(c) in Form 10-K dated March 20, 2000, File No. 1-12869.)
3(d)** - Articles Supplementary to the Charter of Constellation Energy Group, Inc. as of November 20,
2001. (Designated as Exhibit 3(e) in Form 10-K dated March 29, 2002, File No. 1-12869.)
3(e) - Bylaws of Constellation Energy Group, Inc. as amended effective January 24, 2003.
4(a)** - Indenture dated as of March 24, 1999 between the Company and The Bank of New York. (Designated
as Exhibit 4(a) to Form S-3 Registration Statement, Reg. No. 333-75217 filed March 29, 1999).
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4(b) - First Supplemental Indenture dated as of January 24, 2003, to Indenture dated as of March 24, 1999
between the Company and The Bank of New York.
4(c)** - Common Stock certificate (designated as Exhibit 4(c) to Form S-3 Registration Statement, Reg.
Nos. 333-59601 and 33-57658 filed March 25, 1999).
4(d)* - Preferred Stock certificate.
4(e) - Form of Warrant Agreement.
4(f) - Form of Unsecured Debt Security (Fixed Rate).
4(g) - Form of Unsecured Debt Security (Floating Rate).
4(h) - Form of Interest Calculation Agency Agreement.
4(i)* - Stock Purchase Contract, including form of security certificate.
4(j)* - Unit Agreement, including form of security certificate.
4(k)* - Pledge Agreement.
4(l)* - Remarketing Agreement.
4(m)* - Convertible Debt Security.
5(a) - Opinion of Company Counsel.
5(b) - Opinion of Sullivan & Cromwell LLP, New York, New York.
12** - Computation of Ratio of Earnings to Fixed Charges (Designated as Exhibit 12(a) in Form 10-Q
for the quarter ended September 30, 2002, filed November 14, 2002, File No. 1-12869).
23(a) - Consent of Company Counsel (included in Exhibit 5).
23(b) - Consent of Sullivan & Cromwell, LLP, New York, New York (included in Exhibit 5).
23(c) - Consent of PricewaterhouseCoopers LLP, Independent Accountants.
24 - Power of Attorney.
25 - Statement of Eligibility under the Trust Indenture Act of 1939 (Form T-1) of The Bank of New
York, Trustee.
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26* - Invitation for Competitive Bids
----------
*To be filed by amendment or as an exhibit to a document to be incorporated
by reference herein in connection with an offering of the securities.
** Incorporated by reference.
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