Exhibit 10.4
CONSTELLATION ENERGY GROUP, INC.
INVESTOR RIGHTS AGREEMENT
SEPTEMBER 19, 2008

 

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TABLE OF CONTENTS

                      Page  
1.
  Registration Rights. The Company covenants and agrees as follows:     1  
 
  1.1.      Definitions     1  
 
  1.2.      Request for Registration     2  
 
  1.3.      Company Registration     4  
 
  1.4.      Obligations of the Company     4  
 
  1.5.      Furnish Information     6  
 
  1.6.      Expenses of Demand Registration     6  
 
  1.7.      Expenses of Company Registration     6  
 
  1.8.      Underwriting Requirements     6  
 
  1.9.      Indemnification     7  
 
  1.10.    Reports Under Securities Exchange Act of 193     9  
 
  1.11.    Form S-3 Registration     10  
 
  1.12.    Assignment of Registration Rights     11  
 
  1.13.    Termination of Registration Rights     12  
 
           
2.
  Corporate Governance     12  
 
  2.1.      Preferred Director     12  
 
  2.2.      Board Observer     12  
 
           
3.
  Covenants of the Company     13  
 
  3.1.      Delivery of Financial Statements     13  
 
  3.2.      Inspection     14  
 
           
4.
  Miscellaneous     14  
 
  4.1.      Successors and Assigns     14  
 
  4.2.      Governing Law     15  
 
  4.3.      Counterparts     15  
 
  4.4.      Titles and Subtitles     15  
 
  4.5.      Notices     15  
 
  4.6.      Expenses     15  
 
  4.7.      Amendments and Waivers     15  
 
  4.8.      Severability     15  
 
  4.9.      Aggregation of Stock     15  

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INVESTOR RIGHTS AGREEMENT
     THIS INVESTOR RIGHTS AGREEMENT (this “Agreement”) is made as of the 19th
day of September 2008, by and between Constellation Energy Group, Inc., a
Maryland corporation (the “Company”) and Mid American Energy Holdings, Inc., an
Iowa corporation (the “Investor”).
RECITALS
     WHEREAS, the Investor has, pursuant to that certain Series A Preferred
Stock Purchase Agreement dated as of the date hereof (the “Securities Purchase
Agreement”) between the Company and the Investor, agreed to purchase shares of
the Company’s Series A Convertible Preferred Stock, par value $0.01 per share
(the “Series A Preferred Stock”);
     WHEREAS, the shares of Series A Preferred Stock are convertible into shares
of the Company’s Common Stock, without par value (the “Common Stock”);
     WHEREAS, in order to induce the Investor to invest funds in the Company,
the Company agreed to grant the Investor certain registration rights and other
rights as set forth herein;
     NOW, THEREFORE, in consideration of the promises, covenants, and conditions
set forth herein, the parties hereto hereby agree as follows:
     1. Registration Rights. The Company covenants and agrees as follows:
          1.1. Definitions. For purposes of this Agreement:
               (a) The term “Act” means the Securities Act of 1933, as amended.
               (b) The term “Affiliate” means, with respect to any Person, any
other Person directly or indirectly controlling, controlled by or under direct
or indirect common control with such Person. For the purposes of this
definition, “control” when used with respect to any specified Person shall mean
the power to direct the management and policies of such Person, directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms “controlled by” and “controlled” have meanings
correlative to the foregoing.
               (c) The term “Form S-3” means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC that permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
               (d) The term “Holder” means any person owning Registrable
Securities or any assignee thereof in accordance with Section 1.13 hereof.

 

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               (e) The term “1934 Act” shall mean the Securities Exchange Act of
1934, as amended.
               (f) The term “register,” “registered,” and “registration” refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
               (g) The term “Registrable Securities” means (i) the Series A
Preferred Stock, (ii) the Common Stock issuable or issued upon conversion of the
Series A Preferred Stock, (iii) the 14% Senior Notes (as defined in the
Securities Purchase Agreement) issued or issuable upon conversion of the
Series A Preferred Stock, (iv) any other shares of Common Stock acquired by the
Investor and (v) any Common Stock issued as (or issuable upon the conversion or
exercise of any warrant, right or other security that is issued as) a dividend
or other distribution with respect to, or in exchange for, or in replacement of,
the shares referenced in (i), (ii) and (iv) above; provided, however, that the
term “Registrable Securities” shall exclude in all cases any Registrable
Securities sold by a person in a transaction in which such person’s rights under
this Section 1 are not assigned.
               (h) The number of shares of “Registrable Securities then
outstanding” when referring to (i) the Common Stock, shall be determined by the
number of shares of Common Stock outstanding that are, and the number of shares
of Common Stock issuable pursuant to then exercisable or convertible securities
that are, Registrable Securities or (ii) the 14% Senior Notes, shall be
determined by the total aggregate principal amount of 14% Senior Notes
outstanding at such time.
               (i) The term “SEC” shall mean the Securities and Exchange
Commission.
          1.2. Request for Registration.
               (a) Subject to the conditions of this Section 1.2 if the Company
shall receive at any time a written request from the Investor, requesting that
the Company file a registration statement under the Act covering the
registration of a portion of the Registrable Securities then outstanding having
an aggregate price to the public (net of any underwriter’s discounts or
commissions) of not less than $25,000,000, then the Company shall:
                    (i) within ten (10) days of the receipt thereof, give
written notice of such request to all Holders; and
                    (ii) effect as soon as practicable, and in any event within
sixty (60) days of the receipt of such request, the registration under the Act
of all Registrable Securities that the Holders request to be registered,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request pursuant to the terms of this Agreement subject
to the limitations of subsection 1.2(b), within fifteen (15) days of the mailing
of such notice by the Company in accordance with Section 4.5.

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               (b) If the Investor intends to distribute the Registrable
Securities covered by its request by means of an underwriting, it shall so
advise the Company as a part of its request made pursuant to subsection 1.2(a)
and the Company shall include such information in the written notice referred to
in subsection 1.2(a)(i). The underwriter will be selected by the Investor and
shall be reasonably acceptable to the Company. In such event, the right of any
Holder to include Registrable Securities in such registration shall be
conditioned upon such Holder’s participation in such underwriting to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in
subsection 1.4(e)) enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting. Notwithstanding
any other provision of this Section 1.2, if the underwriter advises the Investor
in writing that marketing factors require a limitation of the number of shares
to be underwritten, then the Investor shall so advise all Holders of Registrable
Securities that would otherwise be underwritten pursuant hereto, and the number
of shares of Registrable Securities that may be included in the underwriting
shall be allocated among all Holders electing to include shares in the offering
in proportion (as nearly as practicable) to the amount of Registrable Securities
of the Company owned by each Holder; provided, however, that the number of
shares of Registrable Securities to be included in such underwriting by the
Investor shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
               (c) Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of a majority of the Board of Directors of the Company it would
require the disclosure of material nonpublic information concerning the Company,
its business or prospects and that such premature disclosure would be materially
adverse to the Company, and/or materially interfere with a pending transaction
involving the Company or a subsidiary or controlled Affiliate of the Company,
the Company shall have the right to defer taking action with respect to such
filing for a period of not more than ninety (90) days after receipt of the
request of the Investor; provided, however, that the Company may not utilize
this right more than once in any twelve (12) month period.
               (d) In addition, the Company shall not be obligated to effect, or
to take any action to effect, any registration pursuant to this Section 1.2:
                    (i) after the Company has effected two (2) registrations
pursuant to this Section 1.2 and such registrations have been declared or
ordered effective;
                    (ii) during the period starting with the date sixty
(60) days prior to the Company’s good faith estimate of the date of filing of,
and ending on a date one hundred eighty (180) days after the effective date of,
a registration statement filed by the Company subject to Section 1.3 hereof;
provided that the Company is actively employing in good faith all reasonable
efforts to cause such registration statement to be effective; or
                    (iii) if the Investor proposes to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3 pursuant
to a request made pursuant to Section 1.12 below.

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          1.3. Company Registration. If the Company proposes to register
(including for this purpose a registration effected by the Company for
stockholders other than the Holders) any of its stock or other securities under
the Act in connection with the public offering of such securities solely for
cash (other than a registration relating solely to the sale of securities to
participants in an employee stock plan or with respect to corporate
reorganizations or other transactions under Rule 145 of the Securities Act, or a
registration on any form that does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Holder written notice of such registration at least ten
(10) days prior to the initial filing with the SEC of such registration
statement. Upon the written request of each Holder given within twenty (20) days
after mailing of such notice, the Company shall, subject to the provisions of
Section 1.8, include in the registration statement all of the Registrable
Securities that each such Holder has requested to be registered; provided, that
the Company may limit, to the extent so advised by the underwriters, the amount
of securities to be included in the registration by the Company’s stockholders
(including the Holders); provided, however, that the aggregate value of
securities (including Registrable Securities) to be included in such
registration by the Company’s stockholders (including the Holders) may not be so
reduced to less than twenty-five percent (25%) of the total value of all
securities included in such registration.
          1.4. Obligations of the Company. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
               (a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its reasonable best efforts to
cause such registration statement to become effective, and, upon the request of
the Holders of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for a period of up to one hundred
eighty (180) days;
               (b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement until the earlier of;
                    (i) the time all of such securities have been disposed of;
or
                    (ii) the expiration of one hundred eighty (180) days.
               (c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them;
               (d) Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company

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shall not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of process in any
such states or jurisdictions;
               (e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering (each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement);
               (f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing; and at
the request of any such Holder promptly prepare and furnish to such Holder a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the purchaser
of such shares such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or incomplete in light
of the circumstances then existing;
               (g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange or nationally recognized
quotation system on which similar securities issued by the Company are then
listed;
               (h) Use its reasonable best efforts to furnish, at the request of
any Holder requesting registration of Registrable Securities pursuant to this
Section 1, on the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to this
Section 1, if such securities are being sold through underwriters, (i) an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in substantially the form as may be given to the
underwriters in such public offering, addressed to the underwriters, if any, and
to the Holders requesting registration of Registrable Securities solely for the
purpose of establishing a “due diligence” defense and (ii) a letter dated such
date, from the independent certified public accountants of the Company, in
substantially the form as may be given by independent certified public
accountants to underwriters in such public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of Registrable
Securities; provided in any such case, the Company is required to provide such
opinion or letter, as the case may be, to the underwriters in such offering;
               (i) Make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney or accountant retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company’s officers and
directors to supply all information reasonably requested by any such seller,
underwriter, attorney or accountant in connection with such registration
statement; provided, however, that such seller, underwriter, attorney or
accountant shall agree to hold in confidence and trust all information so
provided;

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               (j) Furnish to each selling Holder a copy of all documents filed
with and all correspondence from or to the SEC in connection with any such
offering other than non-substantive cover letters and the like; and
               (k) Otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve (12) months, but not more than eighteen (18) months,
beginning with the first month after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act.
          1.5. Furnish Information.
     It shall be a condition precedent to the obligations of the Company to take
any action pursuant to this Section 1 with respect to the Registrable Securities
of any selling Holder that such Holder shall furnish to the Company such
information regarding itself, the Registrable Securities held by it, and the
intended method of disposition of such securities as shall be required to effect
the registration of such Holder’s Registrable Securities.
          1.6. Expenses of Demand Registration. All expenses (other than
underwriting discounts and commissions) incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers’
and accounting fees, blue sky fees and expenses and fees and the reasonable
disbursements of counsel for the Company and one counsel for the Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 1.2; provided
further, however, that if at the time of such withdrawal, the Holders have
learned of an adverse change in the condition, business, or prospects of the
Company from that known to the Holders at the time of their request and have
withdrawn the request with reasonable promptness following disclosure by the
Company of such adverse change, then the Holders shall not be required to pay
any of such expenses and shall not forfeit their right to one demand
registration pursuant to Section 1.2.
          1.7. Expenses of Company Registration. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.12), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto, blue sky fees and expenses and the reasonable fees and disbursements of
counsel for the Company and one counsel for the selling Holders selected by
them, but excluding underwriting discounts and commissions relating to
Registrable Securities.
          1.8. Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company’s capital stock, the Company
shall not be

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required under Section 1.3 to include any of the Holders’ securities in such
underwriting unless they accept the terms of the underwriting reasonably
necessary to effect the offer or sale of the Registrable Securities and as
agreed upon between the Company and the underwriters selected by it (or by other
persons entitled to select the underwriters), and then only in such quantity as
the underwriters determine in their sole discretion, in good faith, will not,
jeopardize the success of the offering by the Company or Holders requesting the
offering. If the total amount of securities, including Registrable Securities
requested by stockholders to be included in such offering, exceeds the amount of
securities sold other than by the Company that the underwriters determine in
their sole discretion is compatible with the success of the offering, then the
Company shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters determine
in their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling stockholders
according to the total amount of securities entitled to be included therein
owned by each selling stockholder or in such other proportions as shall mutually
be agreed to by such selling stockholders), but in no event shall (i) the amount
of securities of the selling Holders included in the offering be reduced unless
securities of all other selling stockholders are excluded entirely or
(ii) notwithstanding (i) above, any shares being sold by a stockholder
exercising a demand registration right similar to that granted in Section 1.2 be
excluded from such offering. For purposes of the preceding parenthetical
concerning apportionment, for any selling stockholder which is a holder of
Registrable Securities and which is a partnership or corporation, the partners,
retired partners and stockholders of such holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single “selling
stockholder,” and any pro-rata reduction with respect to such “selling
stockholder” shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
“selling stockholder,” as defined in this sentence.
          1.9. Indemnification.
               (a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, each of its officers, directors, Affiliates, any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Act or the 1934
Act, against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Act, or the 1934 Act or other federal or
state securities law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a “Violation”):
(i) any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary prospectus
or final prospectus, offering circular or other documents contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, or the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this subsection 1.9(a) shall not

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apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or action
to the extent that it arises out of or is based upon a Violation that occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person.
               (b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, the 1934 Act or other federal or state
securities law, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this subsection 1.9(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 1.9(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this
subsection 1.9(b) exceed the net proceeds from the offering received by such
Holder.
               (c) Promptly after receipt by an indemnified party under this
Section 1.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.9, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.9.
               (d) If the indemnification provided for in this Section 1.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect

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to any loss, liability, claim, damage, or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall, to the extent permitted by applicable law, contribute to the amount paid
or payable by such indemnified party as a result of such loss, liability, claim,
damage, or expense in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and of the indemnified party on
the other in connection with the statements or omissions that resulted in such
loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations; provided, however, that in no event shall any Holder’s
cumulative, aggregate liability under this Section 1.9(d), or under
Section 1.9(b), or under such sections together, exceed the net proceeds from
the offering received by such Holder. Notwithstanding anything to the contrary
herein, no party shall be liable for contribution under this Section 1.9(d),
except to the extent and under the circumstances as such party would have been
liable to indemnity under Section 1.9(a) or Section 1.9(b), as the case may be,
if such indemnification were enforceable under applicable law. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The relative fault of the indemnifying party and
of the indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties’ relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
               (e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control with respect to the parties to such agreement.
               (f) The obligations of the Company and Holders under this
Section 1.9 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
          1.10. Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act (“Rule 144”) and any other rule or regulation of the SEC that may at any
time permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
               (a) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times after the effective date of
the first registration statement filed by the Company for the offering of its
securities to the general public;
               (b) if required to file reports with the SEC under the Act, file
with the SEC in a timely manner all reports and other documents required of the
Company under the Act and the 1934 Act; and
               (c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has

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complied with the reporting requirements of Rule 144 (at any time after ninety
(90) days after the effective date of the first registration statement filed by
the Company), the Act and the 1934 Act (at any time after it has become subject
to such reporting requirements), or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested in availing any
Holder of any rule or regulation of the SEC that permits the selling of any such
securities without registration or pursuant to such form.
          1.11. Form S-3 Registration.
               (a) In case the Company shall receive from any Holder or Holders
a written request or requests that the Company effect a registration on Form S-3
and any related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, the Company will:
                           (i) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
                           (ii) as soon as practicable, effect such registration
and all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder’s or Holders’ Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within fifteen (15) days after receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to effect
any such registration, qualification or compliance, pursuant to this
Section 1.12:

  (1)   if Form S-3 is not available for such offering by the Holders;     (2)  
if the Holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public (net of any underwriters’ discounts or commissions) of less than
$1,000,000;     (3)   if the Company shall furnish to the Holders a certificate
signed by the President of the Company stating that in the good faith judgment
of a majority of the Board of Directors of the Company, it would require the
disclosure of material nonpublic information concerning the Company, its
business or prospects and that such premature disclosure would be materially
adverse to the Company, and/or materially interfere with a pending transaction
involving the Company or a subsidiary or controlled Affiliate of the Company, in
which event the Company shall have the right to defer the filing of the Form

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      S-3 registration statement for a period of not more than ninety (90) days
after receipt of the request of the Holder or Holders under this Section 1.12;
provided, however, that the Company shall not utilize this right more than once
in any twelve (12) month period;     (4)   if the Company has, within the twelve
(12) month period preceding the date of such request, already effected two
(2) registrations on Form S-3 for the Holders pursuant to this Section 1.12;    
(5)   in any particular jurisdiction in which the Company would be required to
qualify to do business or to execute a general consent to service of process in
effecting such registration, qualification or compliance.

                    (iii) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with a
registration requested pursuant to Section 1.12 (other than underwriting
discounts and commissions and fees and disbursements of counsel for the
Holders), including (without limitation) all registration, filing,
qualification, printer’s and accounting fees and counsel for the Company, shall
be borne by the Company. Registrations effected pursuant to this Section 1.12
shall not be counted as demands for registration or registrations effected
pursuant to Sections 1.2 or 1.3, respectively.
               (b) Contemporaneously with the issuance of the Common Stock
issuable upon the conversion of the Series A Preferred Stock, the Company shall
file and as promptly as practicable thereafter have declared effective a
registration statement on Form S-3 covering the newly issued Common Stock as if
a written request therefor had been made pursuant to Section 1.12(a).
          1.12. Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned by a Holder to a transferee or assignee of such securities provided
(a) the Company is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned;
(b) such transferee or assignee agrees in writing to be bound by and subject to
the terms and conditions of this Agreement, including without limitation the
provisions of Section 1.14 below; and (c) such assignment shall be effective
only if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Act. For the
purposes of determining the number of shares of Registrable Securities held by a
transferee or assignee, the holdings of transferees and assignees of a
partnership who are partners or retired partners of such partnership (including
spouses and ancestors, lineal descendants and siblings of such partners or
spouses who acquire Registrable Securities by gift, will or intestate
succession) shall be aggregated together and with the partnership; provided that
all assignees and transferees who would not qualify individually for assignment
of registration

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rights shall have a single attorney-in-fact for the purpose of exercising any
rights, receiving notices or taking any action under this Section 1.
          1.13. Termination of Registration Rights. No Holder shall be entitled
to exercise any right provided for in this Section 1 after the earlier of
(i) three (3) years following the consummation of the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the initial firm commitment underwritten offering of its
securities to the general public or (ii) as to any Holder, such time at which
all Registrable Securities held by such Holder can be sold in any 90 day period
without registration in compliance with Rule 144 of the Act.
          1.14 Automatic Shelf Registration. To the extent the Company is a
well-known seasoned issuer (as defined in Rule 405 under the Act) (a “WKSI”) at
the time any Registration request is submitted to the Company, and such
Registration request requests that the Company file an automatic shelf
registration statement (as defined in Rule 405 under the Act) (an “automatic
shelf registration statement”) on Form S-3, the Company shall file an automatic
shelf registration statement which covers those Registrable Securities which are
requested to be registered. Subject to Section 1.13, if the automatic shelf
registration statement has been outstanding for at least three years, at the end
of the third year the Company shall, upon written request by the Holders, refile
a new automatic shelf registration statement covering the Registrable
Securities, if there are any remaining Registrable Securities covered
thereunder. If at any time when the Company is required to re-evaluate its WKSI
status the Company determines that it is not a WKSI, the Company shall use its
commercially reasonable efforts to refile the shelf registration statement on
Form S-3 and keep such registration statement effective during the period during
which such registration statement is required to be kept effective.
     2. Corporate Governance
               (a) Investor Nominee. At any time following the conversion of the
Preferred Stock into Common Stock and Senior Notes, the Investor shall have the
right to nominate one (1) individual (herein referred to as the “Investor
Nominee”) to the Board of Directors. The Board of Directors shall cause the
Company to include the Investor Nominee in the slate of nominees recommended by
the Board of Directors to the holders of Common Stock for election at the first
annual meeting of stockholders of the Company following the date the Preffered
Stock is converted into Common Stock and Senior Notes and for reelection at
every meeting thereafter and shall use all commercially reasonable efforts to
cause the election of the Investor Nominee, including soliciting proxies in
favor of his or her election. In the event the Investor Nominee or the Preferred
Nominee (as defined in the Articles Supplementary designating the terms of the
Preferred Stock) resigns, is unable to serve as a member of the Board of
Directors, is removed from the Board of Directors or fails to be elected as a
member of the Board of Directors at any annual stockholders meeting, the
Investor shall have the right to nominate another individual (a “Substitute
Nominee”) and the Board of Directors shall appoint such Substitute Nominee to
fill the vacancy created by the resignation or removal of the prior Investor
Nominee or the Preferred Nominee, as the case may be, at which point such
Substitute Nominee shall be deemed to be the Investor Nominee.

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               (b) Committees. For so long as such membership does not conflict
with any applicable law or regulation or listing requirement of the NYSE or any
other Approved Market (as determined in good faith by the Board of Directors of
the Company) that the Common Stock is listed for trading, the Investor Nominee
shall be entitled to serve as a member of each committee of the Board of
Directors, except for any committee formed to consider a transaction between the
Company and the Investor, its Affiliates or any Holder that is Affiliated with
the Investor Nominee or an Affiliate of any Holder that is Affiliated with the
Investor Nominee.
               (c) Board Observer. If the Investor has not exercised its right
to nominate a Investor Nominee but is entitled to do so pursuant to this
Section 2(a), it may appoint a board observer (the “Board Observer”) who shall
have the right to attend and participate in all meetings of, and receive all
material distributed to, the Board of Directors, but shall not be entitled to
vote at meetings of the Board of Directors or any committees thereof. The Board
Observer shall be entitled to attend and participate in each committee of the
Board of Directors, except for any committee formed to consider a transaction
between the Company and the Investor, its Affiliates or any Holder that is
Affiliated with the Investor Nominee or an Affiliate of any Holder that is
Affiliated with the Investor Nominee. The Company shall reimburse the Board
Observer for all costs and expenses reasonably incurred in connection with
attending any meetings of the Board of Directors or committees thereof.
Notwithstanding the above, the Company has the right to withhold any information
from the Board Observer and to exclude the Board Observer from any meeting or
portion thereof if access to such information or attendance at such meeting,
could:
                    (i) based on the advise of the Company’s outside counsel,
adversely affect the attorney-client privilege between the Company and its
counsel;
                    (ii) cause the Board of Directors to breach its fiduciary
duties; or
                    (iii) result in a conflict between interests of the Company,
on the one hand, and those of the Board Observer or its Affiliates, on the other
hand.
     The Company will use its reasonable best efforts to ensure that any
withholding of information or any restriction on attendance is strictly limited
only to the extent necessary set forth in the preceding sentence.
                    (d) Limitations. Notwithstanding the foregoing, at such time
as the outstanding shares of Common Stock Beneficially Owned by the Investor and
its Affiliates are less than 50% of the shares of Common Stock issued to the
Investor and its Affiliates upon the conversion of the Series A Preferred Stock,
the Investor shall not be entitled to nominate the Investor Nominee or the Board
Observer under this Section 2.
     3. Covenants of the Company.
          3.1. Delivery of Financial Statements. At any time that the Company is
not required to file periodic reports with the SEC, the Company shall deliver to
the Investor:

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               (a) as soon as practicable, but in any event within ninety
(90) days after the end of each fiscal year of the Company, an income statement
for such fiscal year, a balance sheet of the Company and statement of
stockholder’s equity as of the end of such fiscal year, and a statement of cash
flows for such fiscal year, such year-end financial reports to be in reasonable
detail, prepared in accordance with generally accepted accounting principles
(“GAAP”), and audited and certified by (i) a “Big 4” independent (or its
successor) accounting firm selected by the Company or (ii) a Nationally
recognized accounting firm reasonably acceptable to the Investor;
               (b) as soon as practicable, but in any event within thirty
(30) days after the end of each of the first three (3) quarters of each fiscal
year of the Company, an unaudited income statement for such quarter, statement
of cash flows for such quarter and an unaudited balance sheet as of the end of
such quarter;
               (c) within thirty (30) days of the end of each month, an
unaudited income statement and statement of cash flows for such month, and a
balance sheet for and as of the end of such month, in reasonable detail;
               (d) with respect to the financial statements called for in
subsections (b) and (c) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such financial
statements were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by GAAP) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment;
               (e) notices of events that have or may have a material effect on
the Company as soon as practicable following the occurrence of any such event;
and
               (f) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Investor or any
assignee of the Investor may from time to time reasonably request; provided,
however, that the Company shall not be obligated under this subsection (e) or
any other subsection of Section 2.1 to provide information that it deems in good
faith to be a trade secret or similar confidential information.
          3.2. Inspection. The Company shall permit each Investor, at such
Investor’s expense, to visit and inspect the Company’s properties, to examine
its books of account and records and to discuss the Company’s affairs, finances
and accounts with its officers, all at such reasonable times as may be requested
by the Investor; provided, however, that the Company shall not be obligated
pursuant to this Section 2.2 to provide access to any information which it
reasonably considers to be a trade secret or similar confidential information.
     4. Miscellaneous.
          4.1. Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this Agreement,
express or implied, is intended to confer

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upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
          4.2. Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York without giving effect to any conflicts
of laws that would apply the laws of another jurisdiction.
          4.3. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
          4.4. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
          4.5. Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
delivery by confirmed facsimile transmission or nationally recognized overnight
courier service or upon deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the party to be
notified at the address indicated for such party on the signature page hereof,
or at such other address as such party may designate by ten (10) days’ advance
written notice to the other parties.
          4.6. Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys’ fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
          4.7. Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the holders of at least a majority
of the Registrable Securities then outstanding. Any amendment or waiver effected
in accordance with this paragraph shall be binding upon each holder of
Registrable Securities then outstanding, each future holder of all such
Registrable Securities and the Company.
          4.8. Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement, and the balance of the Agreement shall be interpreted as if
such provision were so excluded, and shall be enforceable in accordance with its
terms.
          4.9. Aggregation of Stock. All shares of Registrable Securities of the
Company held or acquired by a stockholder and its affiliates (as defined in
Rule 144 of the Act) shall be aggregated together for the purpose of determining
the availability of any rights under this Agreement.

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          4.10. Termination. This agreement shall terminate with respect to any
Holder when such Holder Beneficially Owns no shares of Preferred Stock and less
than 2% of the total outstanding Common Stock.
          4.11. Confidentiality. The Investor agrees to keep any information
obtained hereunder confidential.
[Signature Page Follows]

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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

            CONSTELLATION ENERGY GROUP, INC.
      By:   /s/ Mayo A. Shattuck III         Name:   Mayo A. Shattuck III       
Title:   Chairman, President and Chief Executive Officer        MIDAMERICAN
ENERGY HOLDINGS COMPANY
      By:   /s/ Gregory E. Abel         Name:   Gregory E. Abel         Title:  
President and Chief Executive Officer     

S-1