-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, kpyF7ltClgORtU8Fu++N6nEKocml9XNnSxgHCt1k9RLTpwUVfJ0Dka3EOBnLo23X nEXZJuoOQH7Y3zhTWNI/rw== 0000009466-95-000002.txt : 19950516 0000009466-95-000002.hdr.sgml : 19950516 ACCESSION NUMBER: 0000009466-95-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BALTIMORE GAS & ELECTRIC CO CENTRAL INDEX KEY: 0000009466 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 520280210 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01910 FILM NUMBER: 95538676 BUSINESS ADDRESS: STREET 1: GAS & ELECTRIC BLDG STREET 2: CHARLES CTR CITY: BALTIMORE STATE: MD ZIP: 21201 BUSINESS PHONE: 4107835920 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarterly Period Ended March 31, 1995 Commission file number 1-1910 BALTIMORE GAS AND ELECTRIC COMPANY - ----------------------------------------------------------------- (Exact name of registrant as specified in its charter) Maryland 52-0280210 - ----------------------------------------------------------------- (State of incorporation) (IRS Employer Identification No.) Gas and Electric Building, Charles Center, Baltimore, Maryland 21201 - ----------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 410-783-5920 Not Applicable - ----------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No Common Stock, without par value - 147,527,114 shares outstanding on April 30, 1995. BALTIMORE GAS AND ELECTRIC COMPANY PART I. FINANCIAL INFORMATION CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Quarter Ended March 31, 1995 1994 (In Thousands, Except Per-Share Amounts) Revenues Electric ................................................ $ 507,825 $ 517,147 Gas ..................................................... 152,784 205,186 Diversified businesses .................................. 54,642 45,353 Total revenues ............................................. 715,251 767,686 Expenses Other Than Interest and In Electric fuel and purchased energy ...................... 147,454 126,554 Gas purchased for resale ................................ 81,803 126,926 Operations .............................................. 131,535 150,139 Maintenance ............................................. 36,881 45,446 Diversified businesses - selling, general, and administrativ 38,649 33,489 Depreciation and amortization ........................... 76,648 69,778 Taxes other than income taxes ........................... 54,122 52,795 Total expenses other than interest and income taxes ..... 567,092 605,127 Income From Operations .................................... 148,159 162,559 Other Income Allowance for equity funds used during construction ..... 5,369 5,074 Equity in earnings of Safe Harbor Water Power Corporation 1,107 1,089 Net other income and deductions ......................... (2,578) 607 Total other income ...................................... 3,898 6,770 Income Before Interest and Income Taxes ................... 152,057 169,329 Interest Expense Interest charges ........................................ 54,977 52,199 Capitalized interest .................................... (3,484) (2,801) Allowance for borrowed funds used during construction ... (2,905) (2,742) Net interest expense .................................... 48,588 46,656 Income Before Income Taxes ................................ 103,469 122,673 Income Taxes Current ................................................. (3,059) 13,144 Deferred ................................................ 37,702 29,423 Investment tax credit adjustments ....................... (2,027) (2,039) Total income taxes ...................................... 32,616 40,528 Net Income ................................................ 70,853 82,145 Preferred and Preference Stock Dividends .................. 9,951 10,031 Earnings Applicable to Common Stock ....................... $ 60,902 $ 72,114 Average Shares of Common Stock Outstanding ............... 147,527 146,437 Earnings Per Share of Common Stock ........................ $0.41 $0.49 Dividends Declared Per Share of Common Stock .............. $0.3 $0.37 Certain prior-year amounts have been restated to conform with the current year's presentation. See Notes to Consolidated Financial Statements.
PART I. FINANCIAL INFORMATION (Continued) CONSOLIDATED BALANCE SHEETS March 31, December 31,
1995 * 1994 (In Thousands) ASSETS Current Assets Cash and cash equivalents ................................... $ 34,131 $ 38,590 Accounts receivable (net of allowance for uncollectibles).... 324,105 314,842 Fuel stocks ................................................... 48,968 70,627 Materials and supplies ........................................ 149,030 149,614 Prepaid taxes other than income taxes ......................... 27,365 57,740 Other ......................................................... 55,790 47,022 Total current assets .......................................... 639,389 678,435 Investments and Other Assets Real estate projects .......................................... 481,073 471,435 Power generation systems ...................................... 323,423 311,960 Financial investments ......................................... 209,142 224,340 Nuclear decommissioning trust fund ............................ 72,282 66,891 Safe Harbor Water Power Corporation ........................... 34,175 34,168 Senior living facilities ...................................... 10,775 11,540 Other ........................................................ 58,144 58,824 Total investments and other assets ............................ 1,189,014 1,179,158 Utility Plant Plant in service Electric .................................................... 6,001,230 5,929,996 Gas ......................................................... 634,418 616,823 Common ...................................................... 516,392 511,016 Total plant in service ...................................... 7,152,040 7,057,835 Accumulated depreciation ......................................(2,358,359) (2,305,372) Net plant in service .......................................... 4,793,681 4,752,463 Construction work in progress ................................. 473,343 506,030 Nuclear fuel (net of amortization) ............................ 127,211 134,012 Plant held for future use ..................................... 24,411 24,320 Net utility plant ............................................. 5,418,646 5,416,825 Deferred Charges Regulatory assets ............................................. 765,011 773,034 Other deferred charges ........................................ 92,691 96,086 Total deferred charges ........................................ 857,702 869,120 TOTAL ASSETS .................................................. $ 8,104,751 $ 8,143,538
* Unaudited See Notes to Consolidated Financial Statements. PART I. FINANCIAL INFORMATION (Continued) CONSOLIDATED BALANCE SHEETS March 31, December 31,
1995 * 1994 (In Thousands) LIABILITIES AND CAPITALIZATION Current Liabilities Short-term borrowings ....................................... $ 27,800 $ 63,700 Current portions of long-term debt and preference stock ....... 334,146 323,675 Accounts payable .............................................. 144,606 181,931 Customer deposits ............................................. 25,576 24,891 Accrued taxes ................................................. 25,686 19,585 Accrued interest .............................................. 60,457 60,348 Dividends declared ............................................ 66,012 66,012 Accrued vacation costs ........................................ 32,834 30,917 Other ......................................................... 11,286 30,857 Total current liabilities ..................................... 728,403 801,916 Deferred Credits and Other Liabilities Deferred income taxes ......................................... 1,195,904 1,156,429 Deferred investment tax credits ............................... 147,411 149,394 Pension and postemployment benefits ........................... 135,546 138,835 Decommissioning of federal uranium enrichment facilities ...... 45,637 45,836 Other ......................................................... 57,884 59,645 Total deferred credits and other liabilities .................. 1,582,382 1,550,139 Capitalization Long-term Debt First refunding mortgage bonds of BGE ......................... 1,744,385 1,744,385 Other long-term debt of BGE ................................... 544,550 544,550 Long-term debt of Constellation Companies ..................... 580,618 575,765 Unamortized discount and premium .............................. (17,066) (17,593) Current portion of long-term debt ............................. (272,646) (262,175) Total long-term debt .......................................... 2,579,841 2,584,932 Preferred Stock ................................................. 59,185 59,185 Redeemable Preference Stock ..................................... 341,000 341,000 Current portion of redeemable preference stock ................ (61,500) (61,500) Total redeemable preference stock ............................. 279,500 279,500 Preference Stock Not Subject to Mandatory Redemption ............ 150,000 150,000 Common Shareholders' Equity Common stock .................................................. 1,425,391 1,425,378 Retained earnings ............................................. 1,317,497 1,312,655 Pension liability adjustment ................................ (16,521) (16,521) Net unrealized loss on available-for-sale securities ........ (927) (3,646) Total common shareholders' equity ............................. 2,725,440 2,717,866 Total capitalization .......................................... 5,793,966 5,791,483 TOTAL LIABILITIES AND CAPITALIZATION .......................... $ 8,104,751 $ 8,143,538
* Unaudited See Notes to Consolidated Financial Statements. PART I. FINANCIAL INFORMATION (Continued) CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, 1995 1994 (In Thousands) Cash Flows From Operating Activities Net income ................................................... $ 70,853 $ 82,145 Adjustments to reconcile to net cash provided by operating activities Depreciation and amortization .............................. 92,102 81,598 Deferred income taxes ...................................... 37,753 29,423 Investment tax credit adjustments .......................... (2,017) (2,039) Deferred fuel costs ........................................ 10,366 (13,537) Accrued pension and postemployment benefits ................ (5,198) (38,426) Allowance for equity funds used during construction......... (5,369) (5,074) Equity in earnings of affiliates and joint ventures 2,995 2,870 Changes in current assets, other than sale of accounts receivable ... 30,893 30,119 Changes in current liabilities, other than short-te......... (43,687) (29,277) Other ...................................................... 9,097 13,397 Net cash provided by operating activities .................... 197,788 151,199 Cash Flows From Financing Activities Proceeds from issuance of Short-term borrowings (net) ................................ (35,900) - Long-term debt ............................................. 10,641 124,090 Common stock ............................................... 14 11,588 Reacquisition of long-term debt .............................. (5,789) (79,180) Common stock dividends paid .................................. (56,060) (54,033) Preferred and preference stock dividends paid ................ (9,952) (9,934) Other ........................................................ (748) 11 Net cash used in financing activities ........................ (97,794) (7,458) Cash Flows From Investing Activities Utility construction expenditures ............................ (80,484) (93,357) Allowance for equity funds used during construction .......... 5,369 5,074 Nuclear fuel expenditures .................................... (6,346) (7,659) Deferred nuclear expenditures ................................ - (2,132) Deferred energy conservation expenditures .................... (10,226) (9,495) Contributions to nuclear decommissioning trust fund .......... (2,445) (2,445) Purchases of marketable equity securities .................... (4,395) (21,809) Sales of marketable equity securities ........................ 18,127 10,815 Other financial investments .................................. 5,041 533 Real estate projects ......................................... (11,266) (3,383) Power generation systems ..................................... (15,960) (4,412) Other ........................................................ (1,868) 679 Net cash used in investing activities ........................ (104,453) (127,591) ......... Net Increase (Decrease) in Cash and Cash Equivalents ........... (4,459) 16,150 Cash and Cash Equivalents at Beginning of Period ...... 38,590 84,236 ......... Cash and Cash Equivalents at End of Period ............ $ 34,131 $ 100,386 Other Cash Flow Information Cash paid during the period for: ......... Interest (net of amounts capitalized) ...................... $ 47,403 $ 47,470 Income taxes ............................................... $ 82 $ 64
See Notes to Consolidated Financial Statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Results for interim periods, which can be largely influenced by weather conditions, are not necessarily indicative of results to be expected for the year. The preceding interim financial statements of Baltimore Gas and Electric Company (BGE) and Subsidiaries (collectively, the Company) reflect all adjustments which are, in the opinion of Management, necessary for the fair presentation of the Company's financial position and results of operations for such interim periods. These adjustments are of a normal recurring nature. Statement of Financial Accounting Standards No. 121 In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 121 regarding accounting for asset impairments. This statement, which must be adopted by the Company by January 1, 1996, requires the Company to review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Additionally, the statement requires rate-regulated companies to write-off regulatory assets against earnings whenever those assets no longer meet the criteria for recognition of a regulatory asset as defined by SFAS No. 71, Accounting for the Effects of Certain Types of Regulation. Adoption of SFAS No. 121 is not expected to have a material impact on the Company's financial statements. BGE Financing Activity No issuances or early redemptions of long-term debt or preference stock have occurred or have been announced during the period January 1, 1995 through the date of this Report. Diversified Business Financing Matters See Management's Discussion and Analysis of Financial Condition and Results of Operations - Diversified Businesses Capital Requirements for additional information about the debt of Constellation Holdings, Inc. and its subsidiaries. Environmental Matters The Clean Air Act of 1990 (the Act) contains two titles designed to reduce emissions of sulfur dioxide and nitrogen oxide (NOx) from electric generating stations. Title IV contains provisions for compliance in two separate phases. Phase I of Title IV became effective January 1, 1995, and Phase II of Title IV must be implemented by 2000. BGE met the requirements of Phase I by installing flue gas desulfurization systems and fuel switching and through unit retirements. BGE is currently examining what actions will be required in order to comply with Phase II of the Act. However, BGE anticipates that compliance will be attained by some combination of fuel switching, flue gas desulfurization, unit retirements, or allowance trading. At this time, plans for complying with NOx control requirements under Title I of the Act are less certain because all implementation regulations have not yet been finalized by the government. It is expected that by the year 1999 these regulations will require additional NOx controls for ozone attainment at BGE's generating plants and at other BGE facilities. The controls will result in additional expenditures that are difficult to predict prior to the issuance of such regulations. Based on existing and proposed ozone nonattainment regulations, BGE currently estimates that the NOx controls at BGE's generating plants will cost approximately $70 million. BGE is currently unable to predict the cost of compliance with the additional requirements at other BGE facilities. BGE has been notified by the Environmental Protection Agency and several state agencies that it is being considered a potentially responsible party with respect to the cleanup of certain environmentally contaminated sites owned and operated by third parties. In addition, a subsidiary of Constellation Holdings, Inc. has been named as a defendant in a case concerning an alleged environmentally contaminated site owned and operated by a third party. Cleanup costs for these sites cannot be estimated, except that BGE's 15.79% share of the possible cleanup costs at one of these sites, Metal Bank of America, a metal reclaimer in Philadelphia, could exceed amounts recognized by up to approximately $14 million based on the highest estimate of costs in the range of reasonably possible alternatives. Although the cleanup costs for certain of the remaining sites could be significant, BGE believes that the resolution of these matters will not have a material effect on its financial position or results of operations. Also, BGE is coordinating investigation of several former gas manufacturing plant sites, including exploration of corrective action options to remove tar. However, no formal legal proceedings have been instituted against BGE. BGE has recognized estimated environmental costs at these sites totaling $38.6 million as of March 31, 1995. These costs, net of accumulated amortization, have been deferred as a regulatory asset. The technology for cleaning up such sites is still developing, and potential remedies for these sites have not been identified. Cleanup costs in excess of the amounts recognized, which could be significant in total, cannot presently be estimated. Nuclear Insurance An accident or an extended outage at either unit of the Calvert Cliffs Nuclear Power Plant could have a substantial adverse effect on BGE. The primary contingencies resulting from an incident at the Calvert Cliffs plant would involve the physical damage to the plant, the recoverability of replacement power costs, and BGE's liability to third parties for property damage and bodily injury. BGE maintains various insurance policies for these contingencies. The costs that could result from a major accident or an extended outage at either of the Calvert Cliffs units could exceed the coverage limits. In addition, in the event of an incident at any commercial nuclear power plant in the country, BGE could be assessed for a portion of any third party claims associated with the incident. Under the provisions of the Price Anderson Act, the limit for third party claims from a nuclear incident is $8.92 billion. If third party claims relating to such an incident exceed $200 million (the amount of primary insurance), BGE's share of the total liability for third party claims could be up to $159 million per incident, that would be payable at a rate of $20 million per year. BGE and other operators of commercial nuclear power plants in the United States are required to purchase insurance to cover claims of certain nuclear workers. Other non-governmental commercial nuclear facilities may also purchase such insurance. Coverage of up to $400 million is provided for claims against BGE or others insured by these policies for radiation injuries. If certain claims were made under these policies, BGE and all policyholders could be assessed, with BGE's share being up to $6.08 million in any one year. For physical damage to Calvert Cliffs, BGE has $2.75 billion of property insurance, including $1.4 billion from an industry mutual insurance company. If an outage at Calvert Cliffs is caused by an insured physical damage loss and lasts more than 21 weeks, BGE has up to $473.2 million per unit of insurance, provided by the same industry mutual insurance company, for replacement power costs. This amount can be reduced by up to $94.6 million per unit if an outage to both units at Calvert Cliffs is caused by a singular insured physical damage loss. If accidents at any insured plants cause a shortfall of funds at the industry mutual, BGE and all policyholders could be assessed, with BGE's share being up to $23.7 million. Recoverability of Electric Fuel Costs By statute, actual electric fuel costs are recoverable so long as the Public Service Commission of Maryland (PSC) finds that BGE demonstrates that, among other things, it has maintained the productive capacity of its generating plants at a reasonable level. The PSC and Maryland's highest appellate court have interpreted this as permitting a subjective evaluation of each unplanned outage at BGE's generating plants to determine whether or not BGE had implemented all reasonable and cost-effective maintenance and operating control procedures appropriate for preventing the outage. Effective January 1, 1987, the PSC authorized the establishment of a Generating Unit Performance Program (GUPP) to measure, annually, utility compliance with maintaining the productive capacity of generating plants at reasonable levels by establishing a system-wide generating performance target and individual performance targets for each base load generating unit. In future fuel rate hearings, actual generating performance after adjustment for planned outages will be compared to the system-wide target and, if met, should signify that BGE has complied with the requirements of Maryland law. Failure to meet the system-wide target will result in review of each unit's adjusted actual generating performance versus its performance target in determining compliance with the law and the basis for possibly imposing a penalty on BGE. Parties to fuel rate hearings may still question the prudence of BGE's actions or inactions with respect to any given generating plant outage, which could result in the disallowance of replacement energy costs by the PSC. Since the two units at BGE's Calvert Cliffs Nuclear Power Plant utilize BGE's lowest cost fuel, replacement energy costs associated with outages at these units can be significant. BGE cannot estimate the amount of replacement energy costs that could be challenged or disallowed in future fuel rate proceedings, but such amounts could be material. In October 1988, BGE filed its first fuel rate application for a change in its electric fuel rate under GUPP. The resultant case before the PSC covers BGE's operating performance in calendar year 1987, and BGE's filing demonstrated that it met the system-wide and individual nuclear plant performance targets for 1987. In November 1989, testimony was filed on behalf of the Maryland People's Counsel (People's Counsel) alleging that seven outages at the Calvert Cliffs plant in 1987 were due to management imprudence and that the replacement energy costs associated with those outages should be disallowed by the Commission. Total replacement energy costs associated with the 1987 outages were approximately $33 million. In May 1989, BGE filed its fuel rate case in which 1988 performance was examined. BGE met the system-wide and nuclear plant performance targets in 1988. People's Counsel alleged that BGE imprudently managed several outages at Calvert Cliffs, and BGE estimates that the total replacement energy costs associated with these 1988 outages were approximately $2 million. On November 14, 1991, a Hearing Examiner at the PSC issued a proposed Order, which became final on December 17, 1991 and concluded that no disallowance was warranted. The Hearing Examiner found that BGE maintained the productive capacity of the Plant at a reasonable level, noting that it produced a near record amount of power and exceeded the GUPP standard. Based on this record, the Order concluded there was sufficient cause to excuse any avoidable failures to maintain productive capacity at higher levels. During 1989, 1990, and 1991, BGE experienced extended outages at its Calvert Cliffs Nuclear Power Plant. In the Spring of 1989, a leak was discovered around the Unit 2 pressurizer heater sleeves during a refueling outage. BGE shut down Unit 1 as a precautionary measure on May 6, 1989, to inspect for similar leaks and none were found. However, Unit 1 was out of service for the remainder of 1989 and 285 days of 1990 to undergo maintenance and modification work to enhance the reliability of various safety systems, to repair equipment, and to perform required periodic surveillance tests. Unit 2, which returned to service on May 4, 1991, remained out of service for the remainder of 1989, 1990, and the first part of 1991 to repair the pressurizer, perform maintenance and modification work, and complete the refueling. The replacement energy costs associated with these extended outages for both units at Calvert Cliffs, concluding with the return to service of Unit 2, are estimated to be $458 million. In a December 1990 order issued by the PSC in a BGE base rate proceeding, the PSC found that certain operations and maintenance expenses incurred at Calvert Cliffs during the test year should not be recovered from ratepayers. The PSC found that this work, which was performed during the 1989-1990 Unit 1 outage and fell within the test year, was avoidable and caused by BGE actions which were deficient. The PSC noted in the order that its review and findings on these issues pertain to the reasonableness of BGE's test-year operations and maintenance expenses for purposes of setting base rates and not to the responsibility for replacement power costs associated with the outages at Calvert Cliffs. The PSC stated that its decision in the base rate case will have no res judicata (binding) effect in the fuel rate proceeding examining the 1989- 1991 outages. The work characterized as avoidable significantly increased the duration of the Unit 1 outage. Despite the PSC's statement regarding no binding effect, BGE recognizes that the views expressed by the PSC make the full recovery of all of the replacement energy costs associated with the Unit 1 outage doubtful. Therefore, in December 1990, BGE recorded a provision of $35 million against the possible disallowance of such costs. BGE cannot determine whether replacement energy costs may be disallowed in the present fuel rate proceeding in excess of the provision, but such amounts could be material. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The financial condition and results of operations of Baltimore Gas and Electric Company (BGE) and its subsidiaries (collectively, the Company) are set forth in the Consolidated Financial Statements and Notes to Consolidated Financial Statements (Notes) sections of this Report. Factors significantly affecting results of operations, liquidity, and capital resources are discussed below. RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1995 COMPARED WITH THE CORRESPONDING PERIOD OF 1994 Earnings per Share of Common Stock Consolidated earnings per share were $.41 for the quarter ended March 31, 1995 and $.49 for the quarter ended March 31, 1994. The $.08 decrease in earnings per share reflects a lower level of earnings applicable to common stock and a slight increase in the number of common shares outstanding. The earnings per share are summarized as follows: Quarter Ended March 31 1995 1994 Utility operations $.38 $.48 Diversified businesses .03 .01 Total $.41 $.49 Earnings Applicable to Common Stock Earnings applicable to common stock decreased $11.2 million during the quarter ended March 31, 1995. The 1995 decrease reflects lower earnings from the utility operations. Earnings from utility operations were lower in the first quarter of 1995 compared to the first quarter of 1994 primarily due to lower electric and gas sales resulting from substantially milder winter weather in 1995. The effect of weather on utility sales is discussed on pages 12 and 13. Depreciation and amortization expense also increased during the first quarter. These factors were offset partially by lower operations and maintenance expenses due to the Company's continuing cost control efforts. The following factors influence BGE's utility operations earnings: regulation by the Public Service Commission of Maryland (PSC), the effect of weather and economic conditions on sales, and competition in the generation and sale of electricity. Several electric fuel rate cases now pending before the PSC discussed in Notes 1 and 13 of the Form 10-K for the year ended December 31, 1994 (Form 10-K) could also affect future years' earnings. Electric utilities presently face competition in the construction of generating units to meet future load growth and in the sale of electricity in the bulk power markets. Electric utilities also face the future prospect of competition for electric sales to retail customers. It is not possible to predict currently the ultimate effect competition will have on BGE's earnings in future years. In response to the competitive forces and regulatory changes, as discussed in Part 1 of the Form 10-K under the heading Regulatory Matters and Competition, BGE from time to time will consider various strategies designed to enhance its competitive position and to increase its ability to adapt to and anticipate regulatory changes in its utility business. These strategies may include internal restructurings involving the complete or partial separation of its generation, transmission and distribution businesses, acquisitions of related or unrelated businesses, business combinations, and additions to or dispositions of portions of its franchised service territories. BGE may from time to time be engaged in preliminary discussions, either internally or with third parties, regarding one or more of these potential strategies. No assurances can be given as to whether any potential transaction of the type described above may actually occur, or as to the ultimate effect thereof on the financial condition or competitive position of BGE. Earnings from diversified businesses, which primarily represent the operations of Constellation Holdings, Inc. and its subsidiaries (collectively, the Constellation Companies) and BGE Home Products & Services, Inc. (HPS) and its subsidiary were higher during the quarter ended March 31, 1995. Diversified businesses' earnings are discussed on pages 19 through 21. Effect of Weather on Utility Sales Weather conditions affect BGE's utility sales. BGE measures weather conditions using degree days. A degree day is the difference between the average daily actual temperature and the baseline temperature of 65 degrees. Colder weather during the winter, as measured by greater heating degree days, results in greater demand for electricity and gas to operate heating systems. Conversely, warmer weather during the winter, measured by fewer heating degree days, results in less demand for electricity and gas to operate heating systems. Hotter weather during the summer, measured by more cooling degree days, results in greater demand for electricity to operate cooling systems. Conversely, cooler weather during the summer, measured by fewer cooling degree days, results in less demand for electricity to operate cooling systems. The degree-days chart on the following page presents information regarding heating degree days for the quarters ended March 31, 1995 and 1994. Quarter Ended March 31 1995 1994 Heating degree days............ 2,240 2,752 Percent change compared to prior period.................. (18.6)% BGE Utility Revenues and Sales Electric revenues decreased in the first quarter of 1995 because of the following factors: Quarter Ended March 31 1995 vs. 1994 (In millions) System sales volumes $(24.2) Base rates 1.4 Fuel rates (8.7) Revenues from system sales (31.5) Interchange sales 24.2 Other revenues (2.0) Total $(9.3) Electric system sales represent volumes sold to customers within BGE's service territory at rates determined by the PSC. These amounts exclude interchange sales, which are discussed separately. Below is a comparison of the changes in electric system sales volumes: Quarter Ended March 31 1995 vs. 1994 Residential (11.1)% Commercial (1.9) Industrial 13.5 Total (4.1) The overall decrease in sales to electric customers is attributable to the very mild winter weather conditions during the first quarter of 1995 compared to the extremely cold weather conditions experienced last year. This decrease was offset partially by moderate customer growth in all classes. Sales to industrial customers reflect primarily an increase in the sale of electricity to Bethlehem Steel, which is now purchasing its full electricity requirements from BGE. Bethlehem Steel is still producing power with its own generating facility, but is now selling the output from this facility to BGE rather than using the power to reduce its requirements. Base rates are affected by two principal items: rate orders by the PSC and recovery of eligible electric conservation program costs through the energy conservation surcharge. Base rates were essentially unchanged during the quarter ended March 31, 1995. Under the energy conservation surcharge, if the PSC determines that BGE is earning in excess of its authorized rate of return, BGE will have to refund (by means of lowering future surcharges) a portion of energy conservation surcharge revenues to its customers. The portion subject to the refund is compensation for foregone sales from conservation programs and incentives for achieving conservation goals and will be refunded to customers with interest beginning in the ensuing July when the annual resetting of the conservation surcharge rates occur. BGE earned in excess of its authorized rate of return on electric operations for the period July 1, 1993 through June 30, 1994. As a result, BGE deferred the portion of electric energy conservation revenues subject to refund for the period December 1993 through November 1994. The deferral of these billings totaled $20.1 million, of which $4.6 million occurred during the quarter ended March 31, 1994. Changes in fuel rate revenues result from the operation of the electric fuel rate formula. The fuel rate formula is designed to recover the actual cost of fuel, net of revenues from interchange sales. (See Notes 1 and 13 of the Form 10-K.) Changes in fuel rate revenues and interchange sales normally do not affect earnings. However, if the PSC were to disallow recovery of any part of these costs, earnings would be reduced as discussed in Note 13 of the Form 10-K. Fuel rate revenues were lower for the first quarter of 1995 as compared to the first quarter of 1994 as a result of decreased electric system sales volumes and a lower fuel rate. The fuel rate was lower because of a less costly twenty-four month generation mix due to greater generation at the Calvert Cliffs Nuclear Power Plant. BGE expects electric fuel rate revenues to remain relatively constant during the remainder of 1995. Interchange sales are sales of BGE's energy to the Pennsylvania - New Jersey - Maryland Interconnection (PJM), a regional power pool of eight member companies including BGE. Interchange sales occur after BGE has satisfied the demand for its own system sales of electricity, if BGE's available generation is the least costly available to PJM utilities. Interchange sales increased for the quarter ended March 31, 1995 because BGE had a less costly generation mix than other PJM utilities due to greater generation from the Brandon Shores Power Plant and continued operation of the Calvert Cliffs Nuclear Power Plant. Gas revenues decreased in the first quarter of 1995 because of the following factors: Quarter Ended March 31 1995 vs. 1994 (In millions) Sales volumes $(7.7) Base rates 1.4 Gas cost adjustment revenues (46.0) Other revenues (0.1) Total $(52.4) Below is a comparison of the changes in gas sales volumes: Quarter Ended March 31 1995 vs. 1994 Residential (14.3)% Commercial (8.7) Industrial 13.8 Total (6.9) Total gas sales for the first quarter decreased, as compared with the same period last year, as a result of the mild 1995 weather in contrast to the extremely cold 1994 winter heating season. The decrease in sales to residential and commercial customers was offset partially by an increase in the number of customers. Sales to industrial customers increased due to greater usage of gas per customer, an increase in sales to Bethlehem Steel, and fewer customer interruptions in the first quarter of 1995, due to the milder weather, as compared to the same period last year. Interruptible customers maintain alternate fuel sources and pay reduced rates for natural gas in exchange for BGE's right to interrupt service during periods of peak demand. Base rates were essentially unchanged in the first quarter of 1995. Gas base rate revenues may be impacted positively by the Maryland Commissions anticipated November 1995 order in response to BGE's April 21, 1995 application for $30 million of increased gas base rates. Changes in gas cost adjustment revenues result primarily from the operation of the purchased gas adjustment clause, commodity charge adjustment clause, and the actual cost adjustment clause which are designed to recover actual gas costs. (See Note 1 of the Form 10-K.) Changes in gas cost adjustment revenues normally do not affect earnings. Gas cost adjustment revenues decreased for the first quarter of 1995 because of lower prices for purchased gas and lower sales volumes subject to gas cost adjustment clauses. Delivery service sales volumes are not subject to gas cost adjustment clauses because these customers purchase their gas directly from third parties. BGE Utility Fuel and Energy Expenses Electric fuel and purchased energy expenses were as follows: Quarter Ended March 31 1995 1994 (In millions) Actual costs $138.6 $153.4 Net (deferral) recovery of costs under electric fuel rate clause (see Note 1 of the Form 10-K) 8.9 (26.8) Total $147.5 $126.6 Electric fuel and purchased energy expenses increased during the quarter ended March 31, 1995 primarily as a result of the operation of the electric fuel rate clause. BGE recovered $8.9 million of deferred fuel costs during the first quarter of 1995 compared to a deferral of $26.8 million of fuel costs during the first quarter of 1994. The resulting increase in electric fuel and purchased energy expense was offset partially by the decrease in actual fuel and purchased energy costs. Actual electric fuel and purchased energy costs decreased for the quarter ended March 31, 1995 primarily as a result of a less costly generation mix. The cost of BGE's generation mix decreased due to higher purchased energy costs and refueling and maintenance outages at the Calvert Cliffs Nuclear Power Plant during the first quarter of 1994. Purchased gas expenses were as follows: Quarter Ended March 31 1995 1994 (In millions) Actual costs $87.3 $122.7 Net (deferral) recovery of costs under purchased gas adjustment clause (see Note 1 of the Form 10-K) (5.5) 4.2 Total $81.8 $126.9 Purchased gas expenses decreased during the quarter ended March 31, 1995 as the result of lower actual gas costs and the operation of the purchased gas adjustment clause. Actual purchased gas costs decreased due to the lower output associated with the decreased demand for BGE gas and lower gas prices. The decreased demand for BGE gas and the lower gas prices reflect the much milder weather experienced during the first quarter of 1995 compared to the first quarter of 1994. Purchased gas costs exclude gas purchased by delivery service customers, including Bethlehem Steel, who obtain gas directly from third parties. Future purchased gas costs are expected to be increased by transition costs incurred by BGE gas pipeline suppliers in implementing FERC Order No. 636. These transition costs, if approved by FERC, will be passed on to BGE customers through the purchased gas adjustment clause. Other Operating Expenses Operations expense decreased for the quarter ended March 31, 1995 for three principal reasons: operations expense for the first quarter of 1994 reflected a $10.0 million one-time bonus paid to employees in lieu of a general wage increase; continuing labor and other savings in 1995 resulting from the Company's ongoing cost control efforts; and higher expenses attributable to the winter storms in the first quarter of 1994. Operations expense is expected to continue to decline during 1995 due to ongoing cost control efforts of the Company. Maintenance expense decreased during the quarter ended March 31, 1995 due primarily to less maintenance needed due to the mild winter weather during 1995 and lower costs at the Calvert Cliffs Nuclear Power Plant. Depreciation and amortization expense increased during the quarter ended March 31, 1995 because of higher depreciable plant in service, higher levels of energy conservation program costs, and the completion of a facility-specific study of the cost to decommission the Calvert Cliffs Nuclear Power Plant. This study generated a higher decommissioning cost than the prior estimate which will increase depreciation expense by $9 million annually, $2.2 million of which occurred during the first quarter of 1995. Other Income and Expenses Other income and deductions decreased for the quarter ended March 31, 1995 due primarily to lower other interest, dividend and finance charge income. Interest expense increased for the quarter ended March 31, 1995 due to higher interest expense on notes payable, offset partially by more capitalized interest. Income tax expense decreased for the quarter ended March 31, 1995 because of lower taxable income. Diversified Businesses Earnings Earnings per share from diversified businesses were: Quarter Ended March 31 1995 1994 Constellation Holdings, Inc. Power generation systems $.02 $.01 Financial investments .02 .01 Real estate development and senior living facilities (.01) (.01) Total Constellation Holdings, Inc. .03 .01 BGE Home Products & Services, Inc. .00 .00 Total diversified businesses $.03 $.01 The Constellation Companies' power generation systems business includes the development, ownership, management, and operation of wholesale power generating projects in which the Constellation Companies hold ownership interests, as well as the provision of services to power generation projects under operation and maintenance contracts. Power generation systems earnings increased in the first quarter of 1995 due primarily to higher equity earnings from Constellation Companies' energy projects. The Constellation Companies' investment in wholesale power generating projects includes $174 million representing ownership interests in 16 projects that sell electricity in California under Interim Standard Offer No. 4 power purchase agreements. Under these agreements, the projects supply electricity to purchasing utilities at a fixed rate for the first ten years of the agreements and at variable rates based on the utilities' avoided cost for the remaining term of the agreements. Avoided cost generally represents a utility's next lowest cost generation to service the demands on its system. These power generation projects are scheduled to convert to supplying electricity at avoided cost rates in various years beginning in late 1996 through the end of 2000. As a result of declines in purchasing utilities' avoided costs subsequent to the inception of these agreements, revenues at these projects based on current avoided cost levels would be substantially lower than revenues presently being realized under the fixed price terms of the agreements. If current avoided cost levels were to continue into 1996 and beyond, the Constellation Companies could experience reduced earnings or incur losses associated with these projects, which could be significant. The Constellation Companies are investigating and pursuing alternatives for certain of these power generation projects including, but not limited to, repowering the projects to reduce operating costs, renegotiating the power purchase agreements, and selling its ownership interests in the projects. Two of these wholesale power generating projects, in which the Constellation Companies' investment totals $27 million, have executed agreements with Pacific Gas & Electric (PG&E) providing for the curtailment of output through the end of the fixed price period in return for payments from PG&E. The payments from PG&E during the curtailment period will be sufficient to fully amortize the existing project finance debt. However, following the curtailment period, the projects remain contractually obligated to commence production of electricity at the avoided cost rates, which could result in reduced earnings or losses for the reasons described above. The Company cannot predict the impact that these matters regarding any of the 16 projects may have on the Constellation Companies or the Company, but the impact could be material. Earnings from the Constellation Companies' portfolio of financial investments include capital gains and losses, dividends, income from financial limited partnerships, and income from financial guaranty insurance companies. Financial investment earnings were higher for the quarter ended March 31, 1995 due to favorable earnings on the Companies' investment portfolio and realized gains from a financial partnership. The Constellation Companies' real estate development business includes land under development; office buildings; retail projects; commercial projects; an entertainment, dining and retail complex in Orlando, Florida; a mixed-use planned-unit- development; and senior living facilities. The majority of these projects are in the Baltimore-Washington corridor. They have been affected adversely by the depressed real estate market and economic conditions, resulting in reduced demand for the purchase or lease of available land, office, and retail space. Earnings from real estate development and senior living facilities for the quarter ended March 31, 1995 are unchanged from the prior year. The Constellation Companies' real estate portfolio has experienced continuing carrying costs and depreciation. Additionally, the Constellation Companies have been expensing rather than capitalizing interest on certain undeveloped land where development activities were at minimal levels. These factors have affected earnings negatively and are expected to continue to do so until the levels of undeveloped land are reduced. Cash flow from real estate operations has been insufficient to cover the debt service requirements of certain of these projects. Resulting cash shortfalls have been satisfied through cash infusions from Constellation Holdings, Inc., which obtained the funds through a combination of cash flow generated by other Constellation Companies and its corporate borrowings. To the extent the real estate market continues to improve, earnings from real estate activities are expected to improve also. The Constellation Companies continued investment in real estate projects is a function of market demand, interest rates, credit availability, and the strength of the economy in general. The Constellation Companies' Management believes that although the real estate market has improved, until the economy reflects sustained growth and the excess inventory in the market in the Baltimore-Washington corridor goes down, real estate values will not improve significantly. If the Constellation Companies were to sell their real estate projects in the current depressed market, losses would occur in amounts difficult to determine. Depending upon market conditions, future sales could also result in losses. In addition, were the Constellation Companies to change their intent about any project from an intent to hold until market conditions improve to an intent to sell, applicable accounting rules would require a write-down of the project to market value at the time of such change in intent if market value is below book value. Environmental Matters The Company is subject to increasingly stringent federal, state, and local laws and regulations relating to improving or maintaining the quality of the environment. These laws and regulations require the Company to remove or remedy the effect on the environment of the disposal or release of specified substances at ongoing and former operating sites, including Environmental Protection Agency Superfund sites. Details regarding these matters, including financial information, are presented in the Environmental Matters section on pages 6, 7 and 25 of this Report. LIQUIDITY AND CAPITAL RESOURCES Liquidity For the twelve months ended March 31, 1995, the Company's ratio of earnings to fixed charges and ratio of earnings to combined fixed charges and preferred and preference dividend requirements were 3.02 and 2.39, respectively. Capital Requirements The Company's capital requirements reflect the capital- intensive nature of the utility business. Actual capital requirements for the three months ended March 31, 1995, along with estimated annual amounts for the years 1995 through 1997, are reflected below. Three Months Ended March 31 Calendar Year Estimate 1995 1995 1996 1997 (In millions) Utility Business: Construction expenditures (excluding AFC) Electric $51 $233 $219 $206 Gas 12 61 71 84 Common 9 56 50 35 Total construction expenditures 72 350 340 325 AFC 8 26 13 13 Nuclear fuel (uranium purchases and processing charges) 6 48 50 52 Deferred energy conservation expenditures 10 44 43 29 Retirement of long-term debt and redemption of preference stock - 268 98 164 Total utility business 96 736 544 583 Diversified Businesses: Retirement of long-term debt 6 55 67 135 Investment requirements 28 84 70 40 Total diversified businesses 34 139 137 175 Total $130 $875 $681 $758 BGE Utility Capital Requirements BGE's construction program is subject to continuous review and modification, and actual expenditures may vary from the estimates above. Electric construction expenditures include the installation of two 5,000 kilowatt diesel generators at Calvert Cliffs Nuclear Power Plant, one of which is scheduled to be placed in service in June, 1995 and the second in 1996; the construction of a 140-megawatt combustion turbine at Perryman, scheduled to be placed in service in June, 1995; and improvements in BGE's existing generating plants and its transmission and distribution facilities. Future electric construction expenditures do not include additional generating units. During the twelve months ended March 31, 1995, the internal generation of cash from utility operations provided 62% of the funds required for BGE's capital requirements exclusive of retirements and redemptions of debt and preference stock. During the three-year period 1995 through 1997, the Company expects to provide through utility operations approximately 70% of the funds required for BGE's capital requirements, exclusive of retirements and redemptions. Utility capital requirements not met through the internal generation of cash are met through the issuance of debt and equity securities. The amount and timing of issuances and redemptions depends upon market conditions and BGE's actual capital requirements. From January 1, 1995 through the date of this Report, BGE has not issued or redeemed any long-term debt or equity securities. The Constellation Companies' capital requirements are discussed below in the section titled "Diversified Businesses Capital Requirements - Debt and Liquidity." The Constellation Companies are exploring expansion of their energy, real estate service, and senior living facility businesses. Expansion may be achieved in a variety of ways, including without limitation increased investment activity and acquisitions. The Constellation Companies plan to meet their capital requirements with a combination of debt and internal generation of cash from their operations. Additionally, from time to time, BGE may make loans to Constellation Holdings, Inc., or contribute equity to enhance the capital structure of Constellation Holdings, Inc. Diversified Businesses Capital Requirements Debt and Liquidity The Constellation Companies intend to meet capital requirements by refinancing debt as it comes due and through internally generated cash. These internal sources include cash that may be generated from operations, sale of assets, and cash generated by tax benefits earned by the Constellation Companies. In the event the Constellation Companies can obtain reasonable value for real estate properties, additional cash may become available through the sale of projects (for additional information see the discussion of the real estate business and market on pages 19 to 21 under the heading "Diversified Businesses Earnings"). The ability of the Constellation Companies to sell or liquidate assets described above will depend on market conditions, and no assurances can be given that such sales or liquidations can be made. Also, to provide additional liquidity to meet interim financial needs, CHI entered into a $50 million credit agreement and has borrowed $10 million as of the first quarter of 1995. Investment Requirements The investment requirements of the Constellation Companies include its portion of equity funding to committed projects under development, as well as net loans made to project partnerships. Investment requirements for the years 1995 through 1997 reflect the Constellation Companies' estimate of funding for ongoing and anticipated projects and are subject to continuous review and modification. Actual investment requirements may vary significantly from the estimates on page 22 because of the type and number of projects selected for development, the impact of market conditions on those projects, the ability to obtain financing, and the availability of internally generated cash. The Constellation Companies have met their investment requirements in the past through the internal generation of cash and through borrowings from institutional lenders. PART II. OTHER INFORMATION ITEM 1. Legal Proceedings Asbestos During 1993 and 1994, BGE was served in several actions concerning asbestos. The actions are collectively titled In re Baltimore City Personal Injuries Asbestos Cases in the Circuit Court for Baltimore City, Maryland. The actions are based upon the theory of "premises liability," alleging that BGE knew of and exposed individuals to an asbestos hazard. The actions relate to two types of claims. The first type, direct claims by individuals exposed to asbestos, were described in a Report on Form 8-K filed August 20, 1993. BGE and approximately 70 other defendants are involved. Approximately 482 non-employee plaintiffs each claim $6 million in damages ($2 million compensatory and $4 million punitive). BGE does not know the specific facts necessary for BGE to assess its potential liability for these type claims, such as the identity of the BGE facilities at which the plaintiffs allegedly worked as contractors, the names of the plaintiffs' employers, and the date on which the exposure allegedly occurred. The second type are claims by two manufacturers - Owens Corning Fiberglas and Pittsburgh Corning Corp. - against BGE and approximately eight others, as third-party defendants. These relate to approximately 1,500 individual plaintiffs. BGE does not know the specific facts necessary for BGE to assess its potential liability for these type claims, such as the identity of BGE facilities containing asbestos manufactured by the two manufacturers, the relationship (if any) of each of the individual plaintiffs to BGE, the settlement amounts for any individual plaintiffs who are shown to have had a relationship to BGE, and the dates on which/places at which the exposure allegedly occurred. Until the relevant facts for both type claims are determined, BGE is unable to estimate what its liability, if any, might be. Although insurance and hold harmless agreements from contractors who employed the plaintiffs may cover a portion of any ultimate awards in the actions, BGE's potential liability could be material. Environmental Matters The Company's potential environmental liabilities and pending environmental actions are listed in Item 1. Business - Environmental Matters of the Form 10-K. PART II. OTHER INFORMATION (Continued) ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibit No. 3(a) Charter of BGE, restated as of April 25, 1995. Exhibit No. 3(b) By-Laws of BGE, as amended to April 18, 1995. Exhibit No. 10 Baltimore Gas and Electric Company Executive Benefits Plan, as amended and restated. Exhibit No. 12 Computation of Ratio of Earnings to Fixed Charges and Computation of Ratio of Earnings to Combined Fixed Charges and Preferred and Preference Dividend Requirements. Exhibit No. 27 Financial Data Schedule. (b) Form 8-K None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BALTIMORE GAS AND ELECTRIC COMPANY (Registrant) Date May 15, 1995 /s/ C. W. Shivery C. W. Shivery, Vice President on behalf of the Registrant and as Principal Financial Officer EXHIBIT INDEX Exhibit Number 3(a) Charter of BGE, restated as of April 25, 1995. 3(b) By-Laws of BGE, as amended to April 18, 1995. 10 Baltimore Gas and Electric Company Executive Benefits Plan, as amended and restated. 12 Computation of Ratio of Earnings to Fixed Charges and Computation of Ratio of Earnings to Combined Fixed Charges and Preferred and Preference Dividend Requirements. 27 Financial Data Schedule. EX-3 2 EXHIBIT 3(a) ARTICLES OF RESTATEMENT TO THE CHARTER OF BALTIMORE GAS AND ELECTRIC COMPANY Baltimore Gas and Electric Company, a corporation organized and existing under the laws of the State of Maryland, hereby certifies as follows: 1. The corporation desires to restate its Charter as currently in effect. 2. The provisions of the Charter set forth in these Articles of Restatement are all of the provisions of the Charter currently in effect. 3. The restatement of the Charter was approved by a majority of the Board of Directors of the corporation at its April 18, 1995 meeting. 4. The Charter is not amended by these Articles of Restatement. 5. The current address of the principal office of the corporation is Gas and Electric Building, 39 West Lexington Street, Baltimore, Maryland 21201. 6. The names of the corporation's current resident agents are David A. Brune and Stephen J. Rosasco, and the address for both of them is 39 West Lexington St., Baltimore, Maryland 21201. 7. The number of Directors of the corporation is 14 and the names of those currently in office are as follows: Christian H. Poindexter Edward A. Crooke H. Furlong Baldwin Beverly B. Byron J. Owen Cole Dan A. Colussy James R. Curtiss Jerome W. Geckle Martin L. Grass Freeman A. Hrabowski, III Nancy Lampton George V. McGowan George L. Russell, Jr. Michael D. Sullivan - 2 - 8. The restated provisions of the charter are as follows: I The name of the said corporation shall be BALTIMORE GAS AND ELECTRIC COMPANY II Without in any particular limiting or restricting any of the objects and powers of the corporation hereby formed, it is expressly provided that it shall have power to manufacture, buy, deal in or otherwise acquire gas, and to furnish, convey, distribute, sell or otherwise dispose of the same for any and all purposes, public or private; to generate or otherwise acquire electricity or other mechanical power, and to transmit, convey, distribute, furnish, sell or otherwise dispose of the same for light, heat, power, refrigeration, signaling, traction and any and all other purposes, both public and private; to acquire, hold, sell or otherwise dispose of all property, real, personal or mixed, useful in carrying out any lawful purpose whatsoever; and to have, enjoy and exercise all the rights, powers and privileges which are now or may hereafter be conferred upon corporations organized under the laws of Maryland; and, in carrying on its business, or for the purpose of attaining or furthering any of its objects and purposes, to do any and all other things and exercise any and all other powers which now are or hereafter may be permitted by law. It is expressly declared that the corporate purposes and powers of this corporation, the purposes for which it was formed and the business and objects to be carried on and promoted by it, and the powers of its Board of Directors, include, among other things, the making, by this corporation alone or together with one or more persons or corporations of this or any state or jurisdiction, of any and all contracts and arrangements for the purchase or acquisition of electricity in this state or elsewhere from any one or more persons or corporations of this or any state or jurisdiction and/or the acquisition, by purchase, subscription or otherwise, holding, sale and/or other disposition of all or any part, whether more or less than a majority, of the capital stock or any class thereof, bonds, notes and/or other obligations of any such last mentioned persons or corporations and/or the guaranteeing, whether severally by this corporation or jointly and/or severally with one or more persons or corporations of this or any state or jurisdiction, of dividends on any such stock aforesaid and/or principal of and/or interest on any such bonds, notes and/or other obligations aforesaid and/or other terms or provisions of any such stock, bonds, notes and/or other obligations aforesaid and/or mortgages or other instruments securing the same. This express declaration shall not be construed as implying that the purposes, powers, business and objects of this corporation, and the powers of its directors, do not already (without this declaration) include all those herein stated. III The business and operations of said corporation are to be carried on in the City of Baltimore, and in such other place or places within and without the State of Maryland as the directors may determine. The principal offices of said corporation shall be located in the City of Baltimore. IV 1. The total amount of capital stock which this corporation is authorized to issue is one hundred eighty- two million, five hundred thousand (182,500,000) shares, classified as follows: (1) one million (1,000,000) shares of the par value of one hundred dollars ($100) each, with an aggregate par value of one hundred million dollars ($100,000,000), are preferred stock, of which two hundred twenty-two thousand, nine hundred twenty-one (222,921) shares of the aggregate par value of twenty-two million, two hundred ninety-two thousand, one hundred dollars ($22,292,100) are issued and outstanding preferred stock, Series B, sixty-eight thousand, nine hundred twenty-eight (68,928) shares of the aggregate par value of six million, eight hundred ninety-two thousand, eight hundred dollars ($6,892,800) are issued and outstanding preferred stock, Series C, and three hundred thousand (300,000) shares of the aggregate par value of thirty million dollars ($30,000,000) are issued and outstanding preferred stock, Series D, and four hundred eight thousand, one hundred fifty-one (408,151) shares of the aggregate par value of forty million, eight hundred fifteen thousand, one hundred dollars ($40,815,100) are authorized but unissued and unclassified preferred stock; (2) six million, five hundred thousand shares (6,500,000) with an aggregate par value of six hundred fifty million dollars ($650,000,000) are preference stock, of which two hundred thousand shares (200,000) of the aggregate par value of twenty million dollars ($20,000,000) are issued and outstanding 7.78% Cumulative Preference Stock, 1973 Series, four hundred fifty-five thousand shares (455,000) of the aggregate par value of forty-five million, five hundred thousand dollars ($45,500,000) are issued and outstanding 7.50% Cumulative Preference Stock, 1986 Series, four hundred fifty-five thousand shares (455,000) of the aggregate par value of forty-five million, five hundred thousand dollars ($45,500,000) are issued and outstanding 6.75% Cumulative Preference Stock, 1987 Series, five hundred thousand shares (500,000) of the aggregate par value of fifty million dollars ($50,000,000) are issued and outstanding 6.95% Cumulative Preference Stock, 1987 Series, five hundred thousand shares (500,000) of the aggregate par value of fifty million dollars ($50,000,000) are issued and outstanding 7.80% Cumulative Preference Stock, 1989 Series, five hundred thousand shares (500,000) of the aggregate par value of fifty million dollars ($50,000,000) are issued and outstanding 8.25% Cumulative Preference Stock, 1989 Series, six hundred fifty thousand shares (650,000) of the aggregate par value of sixty-five million dollars ($65,000,000) are issued and outstanding 8.625% Cumulative Preference Stock, 1990 Series, three hundred fifty thousand shares (350,000) of the aggregate par value of thirty five million dollars ($35,000,000) are issued and outstanding 7.85% Cumulative Preference Stock, 1991 Series, four hundred thousand shares (400,000) of the aggregate par value of forty million dollars ($40,000,000) are issued and outstanding 7.125% Cumulative Preference Stock, 1993 Series, five hundred thousand shares (500,000) of the aggregate par value of fifty million dollars ($50,000,000) are issued and outstanding 6.97% Cumulative Preference Stock, four hundred thousand shares (400,000) of the aggregate par value of forty million dollars ($40,000,000) are issued and outstanding 6.70% Cumulative Preference Stock, one million, five hundred ninety thousand shares (1,590,000) of the aggregate par value of one hundred fifty nine million dollars ($159,000,000) are authorized, but unissued and unclassified preference stock; and (3) the balance, one hundred seventy-five million (175,000,000) shares without par value, is common stock of which one hundred fifty million, nine hundred seventy-one thousand, six hundred and sixty-two (150,971,662) shares have either been issued and are now outstanding or have been reserved for issuance and twenty- four million, twenty-eight thousand, three hundred thirty- eight (24,028,338) shares are authorized but unissued and unreserved. The aggregate par value of all the authorized shares of all classes of stock having par value, viz., the preference stock and the preferred stock, is seven hundred fifty million dollars ($750,000,000). The issued and outstanding shares of common stock without par value mentioned in this paragraph numbered 1 include both the number of such shares for which stock certificates have been issued and also the number of shares for which new stock certificates are now issuable in lieu and upon cancellation of outstanding certificates for shares of common stock of the par value of one hundred dollars ($100) each formerly authorized. 2. All preferred stock redeemed shall forthwith be cancelled and retired but shall have the status of authorized but unissued preferred stock of the corporation. 3. In the event of any liquidation or dissolution or winding up, whether voluntary or involuntary, of the corporation, the holders of the preferred stock shall be entitled to be paid in full both the par amount of their shares and an amount equal to the unpaid dividends accrued thereon (whether earned or declared or not) adjusted to date of such payment, before any amount shall be paid to either the holders of the preference stock or the holders of the common stock. 4. All payments to the holders of the preferred stock, whether payments of dividends or payments in the event of redemption, liquidation, dissolution or winding up, shall be made without deduction for any tax or taxes (other than income taxes in excess of two per cent of any such dividend payment with respect to preferred stock issued on or prior to November 27, 1961 and then outstanding, and other than any income taxes on any payments with respect to preferred stock issued after November 27, 1961) which the corporation may be required or permitted to pay thereon or to retain therefrom under any present or future law of the United States of America or of any state, county or municipality therein. 5. The right is hereby reserved to make from time to time any amendments of the charter of the corporation which change the terms of the preferred stock by classification or subclassification of all or any of the authorized but unissued preferred stock into one or more series of the preferred stock, which series may differ from each other and other series already outstanding in any or all of the following respects: (a) the rate and/or payment periods of the fixed preferential dividends payable thereon, which rate shall, however, in no case exceed eight per cent. per annum, (b) whether or not, and if so to what extent and on what terms and conditions, such series shall participate in dividends in excess of the fixed preferential dividends thereon, or in distribution of assets, upon liquidation, dissolution or winding up, in excess of the fixed preferential distribution thereof to the holders of the preferred stock, (c) whether or not, and if so on what terms and conditions, such series shall be convertible at the option of the holders into other stock (preferred, preference, or common), bonds or securities of the corporation, and (d) the prices and times, if any, of redemption thereof. Up to the fixed preferential dividends payable on each series of preferred stock, all series of preferred stock shall participate (not before the respective dividend dates of each series of preferred stock) at the same rate per cent. per annum in any payments for, or including any period (whether a dividend period or part of such a period) aggregating less than the full preferential dividends on all series of preferred stock for such period; if for any period (whether a dividend period or part of such a period) full preferential dividends shall not have been paid on any series of preferred stock when payable, the deficiency shall be payable before any dividends for any subsequent dividend period, or part of such a period, shall be paid upon or set apart for any series of the preferred stock. All of the preferred stock having identical characteristics shall be given the same serial designation. Except in the event of a failure to pay full dividends on the preferred stock and/or on the preference stock, and the continuance of such failure for one year as hereinafter, in the paragraph numbered 6 hereof, provided, neither the preferred stock nor the preference stock shall have any voting power and the common stock shall have full sole voting power with respect to any such proposed amendment of the charter of the corporation. The express reservation of the right to make, through the sole voting power of the common stock and without the vote of any of the preferred stock or any of the preference stock, any such amendments of the charter of the corporation as are specified in this paragraph, numbered 5, shall not be construed as in any way limiting the right to make any other amendments of the charter of the corporation in accordance with the laws of Maryland and the provisions of the next succeeding paragraph, numbered 6, hereof. 6. The common stock shall have full voting powers, that is to say, one vote for each share with respect to all matters. Neither the preferred stock nor the preference stock shall have any voting power except that: (a) the preferred stock shall have twenty-four votes for each share of preferred stock, with respect to any proposed amendment of the charter of the corporation (other than any such amendment as is specified in paragraphs numbered 5 and 19 hereof), any proposed consolidation with any other corporation or corporations, any proposed sale, lease or exchange of all its property and assets as an entirety, including its good will and franchises, to or with any other corporation or any proposed dissolution of the corporation, and no such amendment of the charter of the corporation, consolidation, sale, lease, exchange or dissolution shall be authorized, ratified, accepted or effected without the affirmative vote of two-thirds of all the shares of preferred stock outstanding in favor of such amendment, consolidation, sale, lease, exchange or dissolution, as the case may be; (b) whenever the corporation shall fail to pay full dividends on the preferred stock and such failure shall continue for one year, the preferred stock shall then have twenty-four votes for each share of preferred stock with respect to all matters, until and unless all such dividends shall have been paid in full; (c) the preference stock shall have one vote for each share of preference stock with respect to any proposed amendment of the charter of the corporation which would create or authorize any shares of stock ranking prior to or on a parity with the preference stock as to dividends or as to distribution of assets, or which would substantially adversely affect the contract rights, as expressly set forth in the charter, of the preference stock, and no such amendment of the charter of the corporation of the nature described in this subsection (c) of this paragraph 6 shall be authorized, ratified, accepted or effected without the affirmative vote of two- thirds of all the shares of preference stock outstanding in favor of such amendment; and (d) whenever the corporation shall fail to pay full dividends on the preference stock and such failure shall continue for one year, the preference stock shall then have one vote for each share of preference stock with respect to all matters, until and unless such dividends shall have been paid in full; provided, however, that immediately upon the retirement of the preferred stock outstanding as of November 27, 1961, consisting of 222,921 shares of Series B 4 1/2% and 68,928 shares of Series C 4% preferred stock and without further action by the officers, Board of Directors, or stockholders of the corporation, the foregoing provisions of this paragraph 6 shall be deleted and of no further effect and the following paragraph in lieu thereof shall be fully operative (and all preferred stock issued after November 27, 1961, but prior to the retirement of all the outstanding preferred stock shall be subject to such deletion and amendment): 6. The common stock shall have full voting powers, that is to say, one vote for each share with respect to all matters. Neither the preferred stock nor the preference stock shall have any voting power except that: (a) the preferred stock shall have four votes for each share of preferred stock, with respect to any proposed amendment of the charter of the corporation (other than any such amendment as is specified in the paragraphs numbered 5 and 19 hereof), any proposed consolidation with any other corporation or corporations, any proposed sale, lease or exchange of all its property and assets as an entirety, including its good will and franchises, to or with any other corporation or any proposed dissolution of the corporation, and no such amendment of the charter of the corporation, consolidation, sale, lease, exchange or dissolution shall be authorized, ratified, accepted or effected without the affirmative vote of two-thirds of all the shares of preferred stock in favor of such amendment, consolidation, sale, lease, exchange or dissolution, as the case may be; (b) whenever the corporation shall fail to pay full dividends on the preferred stock and such failure shall continue for one year, the preferred stock shall then have four votes for each share of preferred stock with respect to all matters, until and unless all such dividends shall have been paid in full; (c) the preference stock shall have one vote for each share of preference stock with respect to any proposed amendment of the charter of the corporation FPwhich would create or authorize any shares of stock ranking prior to or on a parity with the preference stock as to dividends or as to distribution of assets, or which would substantially adversely affect the contract rights, as expressly set forth in the charter, of the preference stock, and no such amendment of the charter of the corporation of the nature described in this subsection (c) of this paragraph 6 shall be authorized, ratified, accepted or effected without the affirmative vote of two-thirds of all the shares of preference stock outstanding in favor of such amendment; and (d) whenever the corporation shall fail to pay full dividends on the preference stock and such failure shall continue for one year, the preference stock shall then have one vote for each share of preference stock with respect to all matters, until and unless all such dividends shall have been paid in full. 7. At no time shall preferred stock be issued if, after giving effect to such issuance, the aggregate amount of preferred stock, in number of shares, exceeds one twenty- fourth of the total amount, in number of shares, of common stock at the time being issued and outstanding and not held or owned by the corporation, provided, however, that if preferred stock is issued for the purpose of retiring outstanding preferred stock then the preferred stock to be retired shall not be counted as outstanding for purposes of the foregoing limitation; nor shall the total amount, in number of shares, of common stock issued and outstanding and not held or owned by the corporation be at any time reduced, either by purchase of common stock by the corporation or by amendment of the charter of the corporation, below twenty-four times the total amount, in number of shares, of preferred stock at the time being issued and outstanding; provided, however, that immediately upon the retirement of the preferred stock outstanding as of November 27, 1961, consisting of 222,921 shares of Series B 4 1/2% and 68,928 shares of Series C 4% preferred stock, and without further action by the officers, Board of Directors, or stockholders of the corporation, the foregoing provisions of this paragraph 7 shall be deleted and of no further effect and the following paragraph in lieu thereof shall be fully operative (and all preferred stock issued after November 27, 1961, but prior to the retirement of all the outstanding preferred stock shall be subject to such deletion and amendment): 7. While any shares of preferred stock are outstanding, there shall not be issued without the prior affirmative vote or written consent of the holders of two-thirds of the total number of shares of preferred stock then outstanding, any additional preferred stock if, at the time of issuance of such additional preferred stock and after giving effect to such issuance, the aggregate par value of the preferred stock to be outstanding after such issuance, would exceed an amount equal to the aggregate amount in dollars in the common stock account of the corporation plus any capital surplus represented by consideration received for the issuance of common stock, all as shown on the books of account of the corporation, provided, however, that if preferred stock is issued for the purpose of retiring outstanding preferred stock then the preferred stock to be retired shall not be counted as outstanding for purposes of the foregoing limitation; nor, without like affirmative vote or written consent, shall the outstanding common stock not held or owned by the corporation be reduced by purchase or retirement by the corporation or such capital surplus be reduced by distribution, if and to the extent that, after such reduction, the aggregate par value of the outstanding preferred stock would exceed the sum of the dollars in the common stock account of the corporation plus any capital surplus represented by consideration received for the issuance of common stock, all as shown on the books of account of the corporation. For the purpose of determining compliance with the limitations contained in this paragraph, if the corporation purchases common stock, the said common stock and capital surplus accounts shall be deemed to be thereby reduced by that portion of the total dollars in said accounts which is equivalent to the ratio of the number of shares of common stock purchased to the number outstanding and not held or owned by the corporation immediately before such purchase, but in such a case if the common stock so purchased is subsequently sold or retired the said common stock and capital surplus accounts shall be deemed to be reduced thereafter only by the actual charges to said accounts. 8. At no time shall any preferred stock be issued unless at the time of such issuance the net earnings of the corporation, over and above operating expenses (including allowance for depreciation and other reserves), fixed charges and any other deductions from or charges against income ranking prior to dividends on the preferred stock, for a period of twelve successive calendar months ending within the sixty days immediately preceding such issuance of preferred stock, shall have been at least twice a sum equal to full preferential dividends for one year on (a) all preferred stock already outstanding at the time of such issuance, and (b) the preferred stock so to be issued, provided that in the case of preferred stock being issued for the purpose of retiring outstanding preferred stock, the preferred stock to be retired shall not be counted as outstanding for purposes of this limitation. 9. Subject to and upon compliance with all the provisions aforegoing, the capital stock of the corporation, preferred, preference, and common, may be issued and disposed of as and when such issuance may, pursuant to the laws of Maryland, be authorized by the Board of Directors. The Board of Directors is hereby empowered to authorize the issuance from time to time of shares of common stock without par value and securities convertible into shares of common stock without par value and rights to purchase the same for such consideration as said Board of Directors may deem advisable. The Board of Directors is hereby empowered by resolution to authorize the issuance of any number of shares of stock of one or more classes and/or any amount of convertible securities and/or rights to purchase the same from time to time for such considerations as said Board of Directors may deem advisable. The holders of shares of capital stock of the corporation shall have no preferential or preemptive right, as stockholders, to subscribe for, purchase or receive any proportionate or other part of any issue of additional capital stock of any class, now or hereafter authorized, which may be issued by the corporation, except such right, if any, as may be conferred by the Board of Directors in authorizing such issuance. In furtherance and not in limitation of the powers already vested in the corporation or the Board of Directors, the corporation, through the Board of Directors, may authorize from time to time the issuance and disposition, pursuant to the laws of Maryland, of shares of common stock to any or all of its employees, including officers, or to trustees on behalf of such employees for such considerations as said Board of Directors may deem advisable. Notwithstanding any other provision contained in this Charter, the Board of Directors of the corporation may authorize the issue of some or all of the shares of any or all classes or series of stock authorized under this Charter to be issued without certificates. This authorization may not affect shares already represented by certificates outstanding until they are surrendered to the corporation. 10. The Board of Directors is hereby empowered from time to time to classify or reclassify all or any of the authorized but unissued preferred stock into one or more series of the preferred stock, which series may differ from each other and other series already outstanding in any or all of the following respects: (a) the rate and/or payment periods of the fixed preferential dividends payable thereon, which rate shall, however, in no case exceed eight per cent. per annum, (b) whether or not, and if so on what terms and conditions, such series shall be convertible at the option of the holders into other stock (preferred, preference, or common), bonds or securities of the corporation, and (c) the prices and times, if any, of redemption thereof. Up to the fixed preferential dividends payable on each series of preferred stock, all series of preferred stock shall participate (not before the respective dividend dates of each series of preferred stock) at the same rate per cent. per annum in any payments for, or including, any period (whether a dividend period or part of such period) aggregating less than the full preferential dividends on all series of preferred stock for such period; if for any period (whether a dividend period or part of such a period) full preferential dividends shall not have been paid on any series of preferred stock when payable, the deficiency shall be payable before any dividends for any subsequent dividends period, or part of such a period, shall be paid upon or set apart for the preferred stock. All of the preferred stock having identical characteristics shall be given the same serial designation. 11. Subject to the provisions of paragraph 6 hereof, notwithstanding any provision of law requiring any action to be taken or authorized by the affirmative vote of the holders of a majority or other designated proportion of the shares of stock of the corporation or of the shares of each class or to be otherwise taken or authorized by vote of the stockholders of the corporation, such action shall be effective and valid if taken or authorized by such vote of its stockholders as is hereby required for such action, viz., by the affirmative vote of the holders of a majority or other designated proportion of all of the shares of preferred stock outstanding and entitled to vote thereon voting as a class, and the affirmative vote of the holders of a majority or other designated proportion of the shares of common stock outstanding and entitled to vote thereon, voting as a class, the same (in the case of preferred stock and common stock respectively) as the majority or other designated proportion of the shares of each class of stock otherwise required by law; the requisite number of affirmative votes in any case not to be less than a majority in number of the aggregate number of votes to which the holders of all of the shares of preferred stock outstanding and entitled to vote thereon shall be entitled and a majority in number of the aggregate number of votes to which the holders of all of the shares of common stock outstanding and entitled to vote thereon shall be entitled, except in cases in which the law authorizes such action to be taken or authorized by a less vote; the requisite number of affirmative votes in any case not to be less than the affirmative vote, if any, of shares of preferred stock required in such case by the provisions of the paragraph numbered 6 hereof. 12. (a) The preferred stock, series B, shall entitle the holders thereof to receive, when and as declared, from the surplus or net profits of the corporation yearly dividends at the rate of four and one-half per cent. per annum and no more, payable quarterly on the first days of January, April, July and October in each year. The dividends on the preferred stock, Series B, shall be cumulative and shall be payable before any dividend on either the preference stock or on the common stock shall be paid or set apart; so that, if in any year or years dividends amounting to four and one-half per cent. shall not have been paid thereon, the deficiency shall be payable before any dividends shall be paid upon or set apart for either the preference stock or the common stock. (b) The preferred stock, series B, or any portion thereof may, whenever the Board of Directors shall so determine, be redeemed by the payment to the holders thereof of the sum hereinafter specified as the redemption price at the time of redemption, in cash, for each share thereof, together with all accrued dividends. The redemption price shall be one hundred and fifteen dollars ($115) at any time prior to July 1, 1944, one hundred and fourteen dollars ($114) after June 30, 1944, one hundred and thirteen dollars ($113) after June 30, 1947, one hundred and twelve dollars ($112) after June 30, 1950, one hundred and eleven dollars ($111) after June 30, 1953, and one hundred and ten dollars ($110) after June 30, 1956. In case less than all of the preferred stock, Series B, at the time being outstanding is so redeemed, the shares to be redeemed shall be, as nearly as is reasonably practicable without creating fractional shares, a proportionate part of the holdings of each holder of preferred stock, Series B, or shall be selected, in whole or in part, by lot. At least sixty days' written notice of the election of the corporation to redeem the preferred stock, Series B, or any part thereof, and (in case less than all is to be redeemed) of the shares thereof so to be redeemed, shall be given to each holder of preferred erred stock, Series B, so to be redeemed by mailing the same, postage prepaid, and addressed to him at his address as it appears upon the books of the corporation. When such notice shall have been so given and the funds for payment thereof shall have been provided and set apart, the dividends on the preferred stock so called for redemption and all other rights of the holders thereof, except the right to receive the redemption price, shall cease. 13. (a) The preferred stock, Series C, shall entitle the holders thereof to receive, when and as declared, from the surplus or net profits of the corporation yearly dividends at the rate of four per cent. per annum and no more, payable quarterly on the first days of January, April, July and October in each year. The dividends on the preferred stock, Series C, shall be cumulative and shall be payable before any dividend on either the preference stock or the common stock shall be paid or set apart; so that, if in any year or years dividends amounting to four per cent. shall not have been paid thereon, the deficiency shall be payable before any dividends shall be paid upon or set apart for either the preference stock or the common stock. (b) The preferred stock, Series C, or any portion thereof may, whenever the Board of Directors shall so determine, be redeemed by the payment to the holders thereof of the sum hereinafter specified as the redemption price at the time of redemption, in cash, for each share thereof, together with all accrued dividends. The redemption price shall be one hundred and seven dollars ($107) per share at any time prior to July 1, 1945, one hundred and six dollars ($106) per share after June 30, 1945, and one hundred and five dollars ($105) per share after June 30, 1950. In case less than all of the preferred stock, Series C, at the time being outstanding is so redeemed, the shares to be redeemed shall be, as nearly as is reasonably practicable without creating fractional shares, a proportionate part of the holdings of each holder of preferred stock, Series C, or shall be selected, in whole or in part, by lot. At least sixty days' written notice of the election of the corporation to redeem the preferred stock, Series C, or any part thereof, and (in case less than all is to be redeemed) of the shares thereof so to be redeemed, shall be given to each holder of preferred stock, Series C, so to be redeemed by mailing the same, postage prepaid, and addressed to him at his address as it appears upon the books of the corporation. When such notice shall have been so given and the funds for payment thereof shall have been provided and set apart, the dividends on the preferred stock so called for redemption and all other rights of the holders thereof, except the right to receive the redemption price, shall cease. 14. (a) The preferred stock, Series D, shall entitle the holders thereof to receive, when and as declared, from the surplus or net profits of the corporation yearly dividends at the rate of five and forty hundredths per cent. per annum and no more, payable quarterly on the first days of January, April, July, and October in each year. The dividends on the preferred stock, Series D, shall be cumulative and shall be payable before any dividend on either the preference stock or the common stock shall be paid or set apart; so that, if in any year or years dividends amounting to five and forty hundredths per cent. shall not have been paid thereon, the deficiency shall be payable before any dividends shall be paid upon or set apart for either the preference stock or the common stock. Dividends on preferred stock, Series D, will accrue from May 4, 1967 with respect to shares issued prior to July 1, 1967, and from the first day of the quarterly dividend period in which they are issued with respect to shares issued on or after July 1, 1967. (b) The preferred stock, Series D, or any portion thereof, may, whenever the Board of Directors shall so determine, be redeemed by the payment to the holders thereof of the sum hereinafter specified as the redemption price at the time of redemption, in cash, for each share thereof, together with all accrued dividends. The redemption price shall be one hundred and five dollars and fifty cents ($105.50) per share at any time prior to April 1, 1972, then one hundred and four dollars ($104) per share prior to April 1, 1977, then one hundred and two dollars and fifty cents ($102.50) per share prior to April 1, 1982, and one hundred and one dollars ($101) per share thereafter; provided, however, that the Company will not, prior to April 1, 1972, redeem any shares of the preferred stock, Series D, if such redemption is a part of or in anticipation of any refunding operation involving the application, directly or indirectly, of borrowed funds or the proceeds of an issue of any stock ranking prior to or on a parity with the preferred stock, Series D, if such borrowed funds have an interest rate or cost to the Company (calculated in accordance with generally accepted financial practice), or such stock has a dividend rate or cost to the Company (so calculated), less than the dividend rate per annum of the preferred stock, Series D. In case less than all of the preferred stock, Series D, at the time being outstanding is so redeemed, the shares to be redeemed shall be, as nearly as is reasonably practicable without creating fractional shares, a proportionate part of the holdings of each holder of preferred stock, Series D, or shall be selected, in whole or in part, by lot. At least sixty days' written notice of the election of the corporation to redeem the preferred stock, Series D, or any part thereof, and (in case less than all is to be redeemed) of the shares thereof so to be redeemed, shall be given to each holder of preferred stock, Series D, so to be redeemed by mailing the same, postage prepaid, and addressed to him at his address as it appears upon the books of the corporation. When such notice shall have been so given and the funds for payment of the redemption price plus accrued dividends shall have been provided and set apart, the dividends on the preferred stock so called for redemption and all other rights of the holders thereof, except the right to receive the redemption price plus accrued dividends, shall cease. 15. The preference stock shall entitle the holders thereof to receive, when and as declared, from the surplus or net profits of the corporation remaining after the preferential dividend requirements for the outstanding preferred stock have been provided for yearly dividends payable at such times and at such rates as hereinafter provided. The dividends on the preference stock shall be cumulative and shall be payable before any dividend on the common stock shall be paid or set apart. 16. In the event of any liquidation or dissolution or winding up, whether voluntary or involuntary, of the corporation, the holders of the preference stock shall be entitled to be paid in full, from any assets and funds of the corporation remaining after payment to the holders of the preferred stock as provided in paragraph numbered 3 hereof, both the par amount of their shares and an amount equal to the unpaid dividends accrued thereon (whether earned or declared or not) adjusted to date of such payment before any amount shall be paid to the holders of the common stock; and after the payment to the holders of the preference stock of its par value and an amount equal to the unpaid dividends accrued thereon, the remaining assets and funds shall be divided and paid to the holders of the common stock according to their respective shares. 17. All preference stock redeemed shall forthwith be cancelled and retired but shall have the status of authorized but unissued preference stock of the corporation. 18. The Board of Directors is hereby empowered from time to time to classify or reclassify all or any of the authorized, but unissued preference stock into one or more series of preference stock, which series may differ from each other and other series already outstanding in any or all of the following respects: (a) the rate or rates of the preferential dividends payable thereon, and, if applicable, the manner in which such dividends are determined , (b) whether or not, and if so, on what terms and conditions, such series shall be convertible at the option of the holders into other stock, bonds or securities of the corporation, (c) the prices and times, if any, of redemption thereof, (d) the sinking fund provisions, if any, applicable thereto, (e) the date(s), or the method of determining the date(s), on which such dividends are payable thereon, and (f) the par value thereof. Up to the preferential dividends payable on each series, all series of preference stock shall participate at the same rate per cent. per annum, in any payments for, or including, any period (whether a dividend period or part of such a period) aggregating less than the full preferential dividends on all series of preference stock for such period; if for any period (whether a dividend period or part of such a period) full preferential dividends shall not have been paid on any series of preference stock when payable, the deficiency shall be payable before any dividends for any subsequent dividend period, or part of such a period, shall be paid upon or set apart for the preference stock. All of the preference stock having identical characteristics shall be given the same serial designation 19. The right is hereby reserved to make from time to time amendments of the charter of the corporation to provide that one or more series of the authorized but unissued preference stock shall, and to what extent and on what terms and conditions, participate in dividends in excess of the fixed preferential dividends thereon, or in distribution of assets, upon liquidation, dissolution, or winding up, in excess of the fixed preferential distribution thereof to the holders of preference stock. Except in the event of a failure to pay full dividends on the preferred stock and/or on the preference stock, and the continuance of such failure for one year as provided in paragraph numbered 6 hereof, neither the preferred stock nor the preference stock shall have any voting power and the common stock shall have full sole voting power with respect to any such proposed amendment of the charter of the corporation. 20. At no time shall any preference stock be issued unless at the time of such issuance the net earnings of the corporation, over and above operating expenses (including allowance for depreciation and other reserves), fixed charges and any other deductions from or charges against income (including dividend requirements on stock ranking prior to preference stock) which rank prior to dividends on the preference stock, for a period of twelve successive calendar months ending within the three calendar months immediately preceding the month in which such preference stock is issued, shall have been at least twice a sum equal to full preferential dividends for one year on (a) all preference stock already outstanding at the time of such issuance, and (b) the preference stock so to be issued. 21. (a) The 7.78% Cumulative Preference Stock, 1973 Series ($100 par value) , shall entitle the holders thereof to receive, when and as declared, from the surplus or net profits of the corporation remaining after the preferential dividend requirements for the outstanding preferred stock have been provided for, yearly dividends at the rate of seven and seventy-eight hundredths per cent. per annum and no more, payable quarterly on the first days of January, April, July, and October in each year commencing January 1, 1974. The dividends on the 7.78% Cumulative Preference Stock, 1973 Series ($100 par value), shall be cumulative and shall be payable before any dividend on the common stock shall be paid or set apart; so that, if in any year or years dividends amounting to seven and seventy-eight hundredths per cent. shall not have been paid thereon, the deficiency shall be payable before any dividends shall be paid upon or set apart for the common stock. Dividends on 7.78% Cumulative Preference Stock, 1973 Series ($100 par value), will accrue from November 28, 1973. (b) The 7.78% Cumulative Preference Stock, 1973 Series ($100 par value), or any portion thereof, may whenever the Board of Directors shall so determine, be redeemed by the payment to the holders thereof of the sum hereinafter specified as the redemption price at the time of redemption, in cash, for each share thereof, together with all accrued dividends. The redemption price shall be one hundred eight dollars ($108) per share at any time prior to December 1, 1978, then one hundred five dollars and fifty cents ($105.50) per share prior to December 1, 1983, then one hundred three dollars ($103) per share prior to December 1, 1988, and one hundred one dollars ($101) per share thereafter; provided, however, that the corporation will not, prior to December 1, 1978, redeem any shares of the 7.78% Cumulative Preference Stock, 1973 Series ($100 par value), if such redemption is a part of or in anticipation of any refunding operation involving the application, directly or indirectly, of borrowed funds or the proceeds of an issue of any stock ranking prior to or on a parity with 7.78% Cumulative Preference Stock, 1973 Series ($100 par value) if such borrowed funds have an interest rate or cost to the corporation (calculated in accordance with generally accepted financial practice), or such stock has a dividend rate or cost to the corporation (so calculated), less than the dividend rate per annum of the 7.78% Cumulative Preference Stock, 1973 Series ($100 par value). In case less than all of the preference stock of this series at the time being outstanding is so redeemed, the shares to be redeemed shall be, as nearly as is reasonably practicable without creating fractional shares, a proportionate part of the holdings of each holder of preference stock of this series, or shall be selected in whole or in part, by lot. At least thirty days' written notice of the election of the corporation to redeem the preference stock of this series, or any part thereof, and (in case less than all is to be redeemed) of the shares thereof so to be redeemed, shall be given to each holder of preference stock of this series so to be redeemed by mailing the same, postage prepaid, and addressed to him at his address as it appears upon the books of the corporation. When such notice shall have been so given and the funds for payment of the redemption price plus accrued dividends shall have been provided and set apart, the dividends on the shares of preference stock of this series so called for redemption and all other rights of the holders thereof, except the right to receive the redemption price plus accrued dividends, shall cease. 22. (a) The 7.50% Cumulative Preference Stock, 1986 Series ($100 par value), shall entitle the holders thereof to receive, when and as declared, from the surplus or net profits of the corporation remaining after the preferential dividend requirements for the outstanding preferred stock have been provided for, yearly dividends at the rate of 7.50 per cent per annum and no more, payable quarterly on the first days of January, April, July, and October in each year commencing January 1, 1987. The dividends on the 7.50% Cumulative Preference Stock, 1986 Series ($100 par value), shall be cumulative and shall be payable before any dividend on the common stock shall be paid or set apart; so that, if in any year or years dividends amounting to 7.50 per cent shall not have been paid thereon, the deficiency shall be payable before any dividends shall be paid upon or set apart for the common stock. Dividends on 7.50% Cumulative Preference Stock, 1986 Series ($100 par value) will accrue from and including the date of issuance. (b) The 7.50% Cumulative Preference Stock, 1986 Series ($100 par value), or any portion thereof, may whenever the Board of Directors shall so determine, be redeemed by the payment to the holders thereof of the sum hereinafter specified as the redemption price at the time of redemption, in cash, for each share thereof, together with all accrued dividends. The redemption price shall be $107.50 per share at any time prior to October 1, 1991, then $105 per share prior to October 1, 1996, then $102.50 per share prior to October 1, 2001, and $100 per share thereafter; provided, however, that prior to October 1, 1991, the corporation will not redeem any shares of the 7.50% Cumulative Preference Stock, 1986 Series ($100 par value), if such redemption is a part of or in anticipation of any refunding operation involving the application, directly or indirectly, of borrowed funds or the proceeds of an issue of any stock ranking prior to or on a parity with 7.50% Cumulative Preference Stock, 1986 Series ($100 par value), if such borrowed funds have an interest rate or cost to the corporation (calculated in accordance with generally accepted financial practice), or such stock has a dividend rate or cost to the corporation (so calculated), less than the dividend rate per annum of the 7.50% Cumulative Preference Stock, 1986 Series ($100 par value). In case less than all of the preference stock of this series at the time being outstanding is so redeemed, the shares to be redeemed shall be, as nearly as is reasonably practicable without creating fractional shares, a proportionate part of the holdings of each holder of preference stock of this series, or shall be selected, in whole or in part, by lot. At least thirty (30) days written notice of the election of the corporation to redeem the preference stock of this series (or any part thereof, in which case the notice shall specify the particular shares to be redeemed) shall be given to each holder of the preference stock of this series so to be redeemed by mailing the same, postage prepaid, and addressed to him at his address as it appears upon the books of the corporation. When such notice shall have been so given and the funds for payment of the redemption price plus accrued dividends shall have been provided and set apart, the dividends on the shares of preference stock of this series so called for redemption and all other rights of the holders thereof, except the right to receive the redemption price plus accrued dividends, shall cease. (c) On or before October 1 of each year commencing October 1, 1992 and continuing through October 1, 2025, there shall be provided and set apart by the corporation a sum sufficient for the sinking fund redemption of 15,000 shares of 7.50% Cumulative Preference Stock, 1986 Series ($100 par value). On October 1 of each year commencing October 1, 1992 and continuing through October 1, 2025, the corporation shall make sinking fund redemptions of 15,000 shares of the 7.50% Cumulative Preference Stock, 1986 Series ($100 par value) by the payment to the holders thereof, in cash, of the sum of one Hundred Dollars and No Cents ($100.00) for each share thereof, together with all accrued dividends. Shares shall be selected for sinking fund redemption by lot. At least thirty (30) days' written notice of the shares of the 7.50% Cumulative Preference Stock, 1986 Series ($100 par value) so to be redeemed shall be given to the respective holders thereof by mailing the same, postage prepaid, and addressed to such holder at the address as it appears upon the books of the corporation. When such notice shall have been so given and funds for the payment of the sinking fund redemption price, plus accrued dividends, shall have been provided and set apart by the corporation, the dividends on the shares of the 7.50% Cumulative Preference Stock, 1986 Series ($100 par value) so called for sinking fund redemption and all other rights of the holders thereof, except the right to receive the sinking fund redemption price plus accrued dividends, shall cease. The corporation may, at its option, in connection with any sinking fund redemption, increase by not more than 15,000 shares the number of shares of 7.50% Cumulative Preference Stock, 1986 Series ($100 par value) to be redeemed for the sinking fund, at such sinking fund redemption price, on any such sinking fund redemption date, together, in every case, with all accrued dividends; provided, however, that the right to make such optional increases shall not be cumulative. The corporation may, at its option, satisfy its obligation to make sinking fund redemptions provided for in the first paragraph of this Section 22(c) by crediting shares of 7.50% Cumulative Preference Stock, 1986 Series ($100 par value) acquired by purchase in the open market, by redemption (otherwise than by reason of the required sinking fund redemption provided for by the first paragraph of this Section 22(c)) or otherwise. Notwithstanding the foregoing provisions of this Section 22(c), the obligation to redeem shares of 7.50% Cumulative Preference Stock, 1986 Series ($100 par value) by reason of the sinking fund redemption (provided for in the first paragraph of this Section 22(c)) annually commencing on October 1, 1992 shall be cumulative, and unless full cumulative redemptions of shares of 7.50% Cumulative Preference Stock, 1986 Series ($100 par value) for the sinking fund required hereby have been made, no dividends shall be declared nor any distribution made on the Common Stock, except dividends paid in stock of the corporation ranking junior to the 7.50% Cumulative Preference Stock, 1986 Series ($100 par value), nor shall any purchase or other acquisition for value of such Common Stock be made. The provisions of this Section 22(c) shall apply so long as any shares of 7.50% Cumulative Preference Stock, 1986 Series ($100 par value) are outstanding. 23. (a) The 6.75% Cumulative Preference Stock, 1987 Series ($100 par value), shall entitle the holders thereof to receive, when and as declared, from the surplus or net profits of the corporation remaining after the preferential dividend requirements for the outstanding preferred stock have been provided for, yearly dividends at the rate of six and seventy five hundredths per cent per annum and no more, payable quarterly on the first days of January, April, July, and October in each year commencing April 1, 1987. The dividends on the 6.75% Cumulative Preference Stock, 1987 Series ($100 par value), shall be cumulative and shall be payable before any dividend on the common stock shall be paid or set apart; so that, if in any year or years dividends amounting to six and seventy five hundredths per cent shall not have been paid thereon, the deficiency shall be payable before any dividends shall be paid upon or set apart for the common stock. Dividends on 6.75% Cumulative Preference Stock, 1987 Series ($100 par value), will accrue from and include January 22, 1987. (b) The 6.75% Cumulative Preference Stock, 1987 Series ($100 par value), or any portion thereof, may whenever the Board of Directors shall so determine, be redeemed by the payment to the holders thereof of the sun hereinafter specified as the redemption price at the time of redemption, in cash, for each share thereof, together with all accrued dividends. The redemption price shall be $106.75 per share at any time prior to April 1, 1992, then $104.50 per share prior to April 1, 1997, then $102.25 per share prior to April 1, 2002, and $100 per share thereafter; provided, however, that prior to April 1, 1992, the corporation will not redeem any shares of the 6.75% Cumulative Preference Stock, 1987 Series ($100 par value), if such redemption is a part of or in anticipation of any refunding operation involving the application, directly or indirectly, of borrowed funds or the proceeds of an issue of any stock ranking prior to or on a parity with 6.75% Cumulative Preference Stock, 1987 Series ($100 par value), if such borrowed funds have an interest rate or cost to the corporation (calculated in accordance with generally accepted financial practice), or such stock has a dividend rate or cost to the corporation (so calculated), less than the dividend rate per annum of the 6.75% Cumulative Preference Stock, 1987 Series ($100 par value) . In case less than all of the preference stock of this series at the time being outstanding is so redeemed, the shares to be redeemed shall be, as nearly as is reasonably practicable without creating fractional shares, a proportionate part of the holdings of each holder of preference stock of this series, or shall be selected, in whole or in part, by lot. At least thirty (30) days written notice of the election of the corporation to redeem the preference stock of this series (or any part thereof, in which case the notice shall specify the particular shares to be redeemed) shall be given to each holder of the preference stock of this series so to be redeemed by mailing the same, postage prepaid, and addressed to him at his address as it appears upon the books of the corporation. When such notice shall have been so given and the funds for payment of the redemption price plus accrued dividends shall have been provided and set apart, the dividends on the shares of preference stock of this series so called for redemption and all other rights of the holders thereof, except the right to receive the redemption price plus accrued dividends, shall cease. (c) On or before April 1 of each year commencing April 1, 1993 and continuing through April 1, 2026, there shall be provided and set apart by the corporation a sum sufficient for the sinking fund redemption of 15,000 shares of 6.75% Cumulative Preference Stock, 1987 Series ($100 par value). Thereafter, on April 1 of each year commencing April 1, 1993 and continuing through April 1, 2026, the corporation shall make sinking fund redemptions of 15,000 shares of the 6.75% Cumulative Preference Stock, 1987 Series ($100 par value) by the payment to the holders thereof, in cash, of the sum of One Hundred Dollars and No Cents ($100.00) for each share thereof, together with all accrued dividends. Shares shall be selected for sinking fund redemption by lot. At least thirty (30) days' written notice of the shares of the 6.75% Cumulative Preference Stock, 1987 Series ($100 par value) so to be redeemed shall be given to the respective holders thereof by mailing the same, postage prepaid, and addressed to such holder at the address as it appears upon the books of the corporation. When such notice shall have been so given and funds for the payment of the sinking fund redemption price, plus accrued dividends, shall have been provided and set apart by the corporation, the dividends on the shares of the 6.75% Cumulative Preference Stock, 1987 Series ($100 par value) so called for sinking fund redemption and all other rights of the holders thereof, except the right to receive the sinking fund redemption price Plus accrued dividends, shall cease. The corporation may, at its option, in connection with any sinking fund redemption, increase by not more than 15,000 shares the number of shares of 6.75% Cumulative Preference Stock, 1987 Series ($100 par value) to be redeemed for the sinking fund, at such sinking fund redemption price, on any such sinking fund redemption date, together, in every case, with all accrued dividends; provided, however, that the right to make such optional increases shall not be cumulative. The corporation may, at its option, satisfy its obligation to make sinking fund redemptions provided for in the first paragraph of this Section 23(c) by crediting shares of 6.75% Cumulative Preference Stock, 1987 Series ($100 par value) acquired by purchase in the open market, by redemption (otherwise than by reason of the required sinking fund redemption provided for by the first paragraph of this Section 23(c)) or otherwise. Notwithstanding the foregoing provisions of this Section 23(c), the obligation to redeem shares of 6.75% Cumulative Preference Stock, 1987 Series ($100 par value) by reason of the sinking fund redemption provided for in the first paragraph of this Section 23 (c) , annually commencing on April 1, 1993 shall be cumulative, and unless full cumulative redemptions of shares of 6.75% Cumulative Preference Stock, 1987 Series ($100 par value) for the sinking fund required hereby have been made, no dividends shall be declared nor any distribution made on the common stock, except dividends paid in stock of the corporation ranking junior to the 6.75% Cumulative Preference Stock, 1987 Series ($100 par value), nor shall any purchase or other acquisition for value of such common stock be made. The provisions of this section 23(c) shall apply so long as any shares of 6.75% Cumulative Preference Stock, 1987 Series ($100 par value) are outstanding. 24. (a) The 6.95% Cumulative Preference Stock, 1987 Series ($100 par value), shall entitle the holders thereof to receive, when and as declared, from the surplus or net profits of the corporation remaining after the preferential dividend requirements for the outstanding preferred stock have been provided for, yearly dividends at the rate of six and ninety five hundredths per cent. per annum and no more, payable quarterly on the first days of January, April, July, and October in each year commencing October 1, 1987 and continuing each such first day of January, April, July and October thereafter through and including October 1, 1995. The dividends on the 6.95% Cumulative Preference Stock, 1987 Series ($100 par value), shall be cumulative and shall be payable before any dividend on the common stock shall be paid or set apart; so that, if in any year or years dividends amounting to six and ninety five hundredths per cent. shall not have been paid thereon, the deficiency shall be payable before any dividends shall be paid upon or set apart for the common stock. Dividends on 6.95% cumulative Preference Stock, 1987 Series ($100 par value), will accrue from and include the date of issuance. (b) The 6.95% Cumulative Preference Stock, 1987 Series ($100 par value), shall be redeemed in whole on October 1, 1995, by the payment, to the holders thereof, in cash, of the sum of One Hundred Dollars and No Cents ($100.00) for each share thereof, together with all accrued dividends. At least thirty (30) days' written notice shall be given to each holder of the preference stock of this series so to be redeemed by mailing the same, postage prepaid, and addressed to him at his address as it appears upon the books of the corporation. When such notice shall have been so given and the funds for payment of the redemption price plus accrued dividends shall have been provided and set apart, the dividends on the shares of preference stock of this series so called for redemption and all other rights of the holders thereof, except the right to receive the redemption price plus accrued dividends, shall cease. 25. (a) The 7.80% Cumulative Preference Stock, 1989 Series ($100 par value), shall entitle the holders thereof to receive, when and as declared, from the surplus or net profits of the corporation remaining after the preferential dividend requirements for the outstanding preferred stock have been provided for, yearly dividends at the rate of seven and eighty hundredths per cent per annum and no more, payable quarterly on the first days of January, April, July, and October in each year commencing October 1, 1989. The dividends on the 7.80% Cumulative Preference Stock, 1989 Series ($100 par value), shall be cumulative and shall be payable before any dividend on the common stock shall be paid or set apart; so that, if in any year or years dividends amounting to seven and eighty hundredths per cent. shall not have been paid thereon, the deficiency shall be payable before any dividends shall be paid upon or set apart for the common stock. Dividends on 7.80% Cumulative Preference Stock, 1989 Series ($100 par value) will accrue from and include June 22, 1989. (b) The 7.80% Cumulative Preference Stock, 1989 Series ($100 par value) shall be redeemed in whole on July 1, 1997 by the payment to the holders thereof, in cash, of the sum of One Hundred Dollars and No Cents ($100.00) for each share thereof, together with all accrued dividends. At least thirty (30) days' written notice shall be given to each holder of the preference stock of this series so to be redeemed by mailing the same, postage prepaid, and addressed to him at his address as it appears upon the books of the corporation. When such notice shall have been so given and the funds for payment of the redemption price plus accrued dividends shall have been provided and set apart, the dividends on the shares of preference stock of this series so called for redemption and all other rights of the holders thereof, except the right to receive the redemption price plus accrued dividends, shall cease. 26. (a) The 8.25% Cumulative Preference Stock, 1989 Series ($100 par value), shall entitle the holders thereof to receive, when and as declared, from the surplus or net profits of the corporation remaining after the preferential dividend requirements for the outstanding preferred stock have been provided for, yearly dividends at the rate of eight and twenty-five hundredths per cent. per annum and no more, payable quarterly on the first days of January, April, July, and October in each year commencing January 1, 1990. The dividends on the 8.25% Cumulative Preference Stock, 1989 Series ($100 par value), shall be cumulative and shall be payable before any dividend on the common stock shall be paid or set apart; so that, if in any year or years dividends amounting to eight and twenty-five hundredths per cent. shall not have been paid thereon, the deficiency shall be payable before any dividends shall be paid upon or set apart for the common stock. Dividends on the 8.25% Cumulative Preference Stock, 1989 Series ($100 par value) will accrue from and include November 21, 1989. (b) On or before October 1 of each year commencing October 1, 1995 and continuing through October 1, 1999 (or such earlier October 1 on which there remain any shares of 8.25% Cumulative Preference Stock, 1989 Series ($100 par value) outstanding), there shall be provided and set apart by the corporation a sum sufficient for the sinking fund redemption of 100,000 shares of 8.25% Cumulative Preference Stock, 1989 Series ($100 par value). Thereafter, on October I of each year commencing October 1, 1995 and continuing through October 1, 1999 (or such earlier October 1 on which there remain any shares of 8.25% Cumulative Preference Stock, 1989 Series ($100 par value) outstanding), the corporation shall make sinking fund redemptions of 100,000 shares of the 8.25% Cumulative Preference Stock, 1989 Series ($100 par value) by the payment to the holders thereof, in cash, of the sum of One Hundred Dollars and No Cents ($100.00) for each share thereof, together with all accrued dividends. Shares shall be selected for sinking fund redemption by lot. At least thirty (30) days written notice of the shares of the 8.25% Cumulative Preference Stock, 1989 Series ($100 par value) so to be redeemed shall be given to the respective holders thereof by mailing the same, postage prepaid, and addressed to such holder at the address as it appears upon the books of the corporation. When such notice shall have been so given and funds for the payment of the sinking fund redemption price, plus accrued dividends, shall have been provided and set apart by the corporation, the dividends on the shares of the 8.25% Cumulative Preference Stock, 1989 Series ($100 par value) so called for sinking fund redemption and all other rights of the holders thereof, except the right to receive the sinking fund redemption price plus accrued dividends, shall cease. The corporation may, at its option, in connection with any sinking fund redemption, increase by not more than 100,000 shares the number of shares of 8.25% Cumulative Preference Stock, 1989 Series ($100 par value) to be redeemed for the sinking fund, at the sinking fund redemption price of one Hundred Dollars and No Cents ($100.00) for each share thereof, on any such sinking fund redemption date, together, in every case, with all accrued dividends; provided, however, that the right to make such optional increases shall not be cumulative. The corporation may, at its option, satisfy its obligation to make sinking fund redemptions provided for in the first paragraph of this Section 26(b) by crediting shares of 8.25% Cumulative Preference Stock, 1989 Series ($100 par value) acquired by purchase in the open market or otherwise. Notwithstanding the foregoing provisions of this section 26(b), the obligation to redeem shares of 8.25% Cumulative Preference Stock, 1989 Series ($100 par value) by reason of the sinking fund redemption (provided for in the first paragraph of this Section 26(b)), annually commencing on October 1, 1995 shall be cumulative, and unless full cumulative redemptions of shares of 8.25% Cumulative Preference Stock, 1989 Series ($100 par value) for the sinking fund required hereby have been made, no dividends shall be declared nor any distribution made on the common stock, except dividends paid in stock of the corporation ranking junior to the 8.25% Cumulative Preference Stock, 1989 Series ($100 par value), nor shall any purchase or other acquisition for value of such common stock be made. The provisions of this section 26(b) shall apply so long as any shares of 8.25% Cumulative Preference Stock, 1989 Series ($100 par value) are outstanding. 27. (a) The 8.625% Cumulative Preference Stock, 1990 Series ($100 par value) shall entitle the holders thereof to receive, when and as declared, from the surplus or net profits of the corporation remaining after the preferential dividend requirements for the outstanding preferred stock have been provided for, yearly dividends at the rate of eight and six hundred and twenty-five thousandths per cent per annum and no more, payable quarterly on the first days of January, April, July, and October in each year commencing July 1, 1990. The dividends on the 8.625% Cumulative Preference Stock, 1990 Series ($100 par value) shall be cumulative and shall be payable before any dividend on the common stock shall be paid or set apart; so that, if in any year or years dividends amounting to eight and six hundred and twenty- five thousandths per cent shall not have been paid thereon, the deficiency shall be payable before any dividends shall be paid upon or set apart for the common stock. Dividends on the 8.625% Cumulative Preference Stock, 1990 Series ($100 par value) will accrue from and include June 7, 1990. (b) On or before July 1 of each year commencing on July 1, 1996 and continuing through July 1, 2000, there shall be provided and set apart by the corporation a sum sufficient for the sinking fund redemption of 130,000 shares of 8.625% Cumulative Preference Stock, 1990 Series ($100 par value). Thereafter, on July 1 of each year commencing July 1, 1996 and continuing through July 1, 2000, the corporation shall make sinking fund redemptions of 130,000 shares of the 8.625% Cumulative Preference Stock, 1990 Series ($100 par value) by the payment to the holders thereof, in cash, of the sum of one Hundred Dollars and No Cents ($100.00) for each share thereof, together with all accrued dividends. Shares shall be selected for sinking fund redemption by lot. At least thirty (30) days' written notice of the shares of the 8.625% Cumulative Preference Stock, 1990 Series ($100 par value) so to be redeemed shall be given to the respective holders thereof by mailing the same, postage prepaid, and addressed to such holder at the address as it appears upon the books of the corporation. When such notice shall have been so given and funds for payment of the sinking fund redemption price, plus accrued dividends, shall have been provided and set apart by the corporation, the dividends on the shares of the 8.625% Cumulative Preference Stock, 1990 Series ($100 par value) so called for sinking fund redemption and all other rights of the holders thereof, except the right to receive the sinking fund redemption price plus accrued dividends, shall cease. The corporation may, at its option, in connection with any sinking fund redemption, increase by not more than 130,000 shares the number of shares of 8.625% cumulative Preference stock, 1990 Series ($100 par value) to be redeemed for the sinking fund, at the sinking fund redemption price of One Hundred Dollars and No Cents ($100.00) for each share thereof, on any such sinking fund redemption date, together, in every case, with all accrued dividends; provided, however, that the right to make such optional increases shall not be cumulative. The corporation may, at its option, satisfy its obligation to make sinking fund redemptions provided for in the first paragraph of this Section 27(b) by crediting shares of 8.625% Cumulative Preference Stock, 1990 Series ($100 par value) acquired by purchase in the open market or otherwise. Notwithstanding the foregoing provisions of this Section 27(b), the obligation to redeem shares of 8.625% cumulative Preference Stock, 1990 Series ($100 par value) by reason of the sinking fund redemption provided for in the first paragraph of this Section 27(b), annually commencing on July 1, 1996 shall be cumulative, and unless full cumulative redemptions of shares of 8.625% Cumulative Preference Stock, 1990 Series ($100 par value) for the sinking fund required hereby have been made, no dividends shall be declared nor any distribution made on the common stock, except dividends paid in stock of the corporation ranking junior to the 8.625% Cumulative Preference Stock, 1990 Series ($100 par value), nor shall any purchase or other acquisition for value of such common stock be made. The provisions of this Section 27(b) shall apply so long as any shares of 8.625% Cumulative Preference Stock, 1990 Series ($100 par value) are outstanding. 28. (a) The 7.85% Cumulative Preference Stock, 1991 Series ($100 par value) shall entitle the holders thereof to receive, when and as declared, from the surplus or net profits of the corporation remaining after the preferential dividend requirements for the outstanding preferred stock have been provided for, yearly dividends at the rate of seven and eighty-five hundredths per cent per annum and no more, payable quarterly on the first days of January, April, July, and October in each year commencing July 1, 1991. The dividends on the 7.85% Cumulative Preference Stock, 1991 Series ($100 par value) shall be cumulative and shall be payable before any dividend on the common stock shall be paid or set apart; so that, if in any year or years dividends amounting to seven and eighty-five hundredths per cent shall not have been paid thereon, the deficiency shall be payable before any dividends shall be paid upon or set apart for the common stock. Dividends on the 7.85% Cumulative Preference Stock, 1991 Series ($100 par value) will accrue from and include May 1, 1991. (b) On or before July 1 of each year commencing on July 1, 1997 and continuing through July 1, 2001, there shall be provided and set apart by the corporation a sum sufficient for the sinking fund redemption of 70,000 shares of 7.85% Cumulative Preference Stock, 1991 Series ($100 par value). Thereafter, on July I of each year commencing July 1, 1997 and continuing through July 1, 2001, the corporation shall make sinking fund redemptions of 70,000 shares of the 7.85% Cumulative Preference Stock, 1991 Series ($100 par value) by the payment to the holders thereof, in cash, of the sum of One Hundred Dollars and No Cents ($100.00) for each share thereof, together with all accrued dividends. Shares shall be selected for sinking fund redemption by lot. At least thirty (30) days' written notice of the shares of the 7.85% Cumulative Preference Stock, 1991 Series ($100 par value) so to be redeemed shall be given to the respective holders thereof by mailing the same, postage prepaid, and addressed to such holder at the address as it appears upon the books of the corporation. When such notice shall have been so given and funds for payment of the sinking fund redemption price, plus accrued dividends, shall have been provided and set apart by the corporation, the dividends on the shares of the 7.85% Cumulative Preference Stock, 1991 Series ($100 par value) so called for sinking fund redemption and all other rights of the holders thereof, except the right to receive the sinking fund redemption price plus accrued dividends, shall cease. The corporation may, at its option, in connection with any sinking fund redemption, increase by not more than 70,000 shares the number of shares of 7.85% Cumulative Preference Stock, 1991 Series ($100 par value) to be redeemed for the sinking fund, at the sinking fund redemption price of One Hundred Dollars and No Cents ($100.00) for each share thereof, on any such sinking fund redemption date, together, in every case, with all accrued dividends; provided, however, that the right to make such optional increases shall not be cumulative. The corporation may, at its option, satisfy its obligation to make sinking fund redemptions provided for in the first paragraph of this Section 28(b) by crediting shares of 7.85% Cumulative Preference Stock, 1991 Series ($100 par value) acquired by purchase in the open market or otherwise. Notwithstanding the foregoing provisions of this Section 28(b), the obligation to redeem shares of 7.85% Cumulative Preference Stock, 1991 Series ($100 par value) by reason of the sinking fund redemption provided for in the first paragraph of this Section 28(b), annually commencing on July 1, 1997 shall be cumulative, and unless full cumulative redemptions of shares of 7.85% Cumulative Preference Stock, 1991 Series ($100 par value) for the sinking fund required hereby have been made, no dividends shall be declared nor any distribution made on the common stock, except dividends paid in stock of the corporation ranking junior to the 7.85% Cumulative Preference Stock, 1991 Series ($100 par value), nor shall any purchase or other acquisition for value of such common stock be made. The provisions of this Section 28(b) shall apply so long as any shares of 7.85% Cumulative Preference Stock, 1991 Series ($100 par value) are outstanding. 29. (a) The 7.125% Cumulative Preference Stock, 1993 Series ($100 par value), shall entitle the holders thereof to receive, when and as declared, from the surplus or net profits of the corporation remaining after the preferential dividend requirements for the outstanding preferred stock have been provided for, yearly dividends at the rate of seven and one hundred twenty-five thousandths per cent per annum and no more, payable quarterly on the first days of January, April, July, and October in each year commencing October 1, 1993. The dividends on the 7.125% Cumulative Preference Stock, 1993 Series ($100 par value), shall be cumulative and shall be payable before any dividend on the common stock shall be paid or set apart; so that, if in any year or years dividends amounting to seven and one hundred twenty-five thousandths per cent shall not have been paid thereon, the deficiency shall be payable before any dividends shall be paid upon or set apart for the common stock. Dividends on the 7.125% Cumulative Preference Stock, 1993 Series ($100 par value), will accrue from and include June 24, 1993. (b) The 7.125% Cumulative Preference Stock, 1993 Series ($100 par value), or any portion thereof, may whenever the Board of Directors shall so determine, be redeemed by the payment to the holders thereof of the sum hereinafter specified as the redemption price at the time of redemption, in cash, for each share thereof, together with all accrued dividends. The applicable redemption prices shall be: Redemption Price Twelve Month Period Per Share Beginning July 1, $103.56 2003 103.21 2004 102.85 2005 102.49 2006 102.14 2007 101.78 2008 101.42 2009 101.07 2010 100.71 2011 100.36 2012 100.00 2013 and thereafter provided, however, that prior to July 1, 2003, the corporation will not redeem any shares of the 7.125% Cumulative Preference Stock, 1993 Series ($100 par value). In case less than all of the preference stock of this series at the time being outstanding is so redeemed, the shares to be redeemed shall be, as nearly as is reasonably practicable without creating fractional shares, a proportionate part of the holdings of each holder of preference stock of this series, or shall be selected, in whole or in part, by lot. At least thirty (30) days written notice of the election of the corporation to redeem the preference stock of this series (or any part thereof, in which case the notice shall specify the particular shares to be redeemed) shall be given to each holder of the preference stock of this series so to be redeemed by mailing the same, postage prepaid, and addressed to him at his address as it appears upon the books of the corporation. When such notice shall have been so given and the funds for payment of the redemption price plus accrued dividends shall have been provided and set apart, the dividends on the shares of preference stock of this series so called for redemption and all other rights of the holders thereof, except the right to receive the redemption price plus accrued dividends, shall cease. 30. (a) The 6.97% Cumulative Preference Stock, 1993 Series ($100 par value), shall entitle the holders thereof to receive, when and as declared, from the surplus or net profits of the corporation remaining after the preferential dividend requirements for the outstanding preferred stock have been provided for, yearly dividends at the rate of six and ninety-seven hundredths per cent per annum and no more, payable quarterly on the first days of January, April, July, and October in each year commencing October 1, 1993. The dividends on the 6.97% Cumulative Preference Stock, 1993 Series ($100 par value), shall be cumulative and shall be payable before any dividend on the common stock shall be paid or set apart; so that, if in any year or years dividends amounting to six and ninety-seven hundredths per cent shall not have been paid thereon, the deficiency shall be payable before any dividends shall be paid upon or set apart for the common stock. Dividends on the 6.97% Cumulative Preference Stock, 1993 Series ($100 par value), will accrue from and include August 5, 1993. (b) The 6.97% Cumulative Preference Stock, 1993 Series ($100 par value), or any portion thereof, may whenever the Board of Directors shall so determine, be redeemed by the payment to the holders thereof of the sum hereinafter specified as the redemption price at the time of redemption, in cash, for each share thereof, together with all accrued dividends. The applicable redemption prices shall be: Redemption Price Twelve Month Period Per Share Beginning October 1, $103.49 2003 103.14 2004 102.79 2005 102.44 2006 102.09 2007 101.74 2008 101.39 2009 101.05 2010 100.70 2011 100.35 2012 100.00 2013 and thereafter provided, however, that prior to October 1, 2003, the corporation will not redeem any shares of the 6.97% Cumulative Preference Stock, 1993 Series ($100 par value). In case less than all of the preference stock of this series at the time being outstanding is so redeemed, the shares to be redeemed shall be, as nearly as is reasonably practicable without creating fractional shares, a proportionate part of the holdings of each holder of preference stock of this series, or shall be selected, in whole or in part, by lot. At least thirty (30) days' written notice of the election of the corporation to redeem the preference stock of this series (or any part thereof, in which case the notice shall specify the particular shares to be redeemed) shall be given to each holder of the preference stock of this series so to be redeemed by mailing the same, postage prepaid, and addressed to him at his address as it appears upon the books of the corporation. When such notice shall have been so given and the funds for payment of the redemption price plus accrued dividends shall have been provided and set apart, the dividends on the shares of preference stock of this series so called for redemption and all other rights of the holders thereof, except the right to receive the redemption price plus accrued dividends, shall cease. 31. (a) The 6.70% Cumulative Preference Stock, 1993 Series ($100 par value), shall entitle the holders thereof to receive, when and as declared, from the surplus or net profits of the corporation remaining after the preferential dividend requirements for the outstanding preferred stock have been provided for, yearly dividends at the rate of six and seventy hundredths per cent per annum and no more, payable quarterly on the first days of January, April, July, and October in each year commencing January 1, 1994. The dividends on the 6.70% Cumulative Preference Stock, 1993 Series ($100 par value), shall be cumulative and shall be payable before any dividend on the common stock shall be paid or set apart; so that, if in any year or years dividends amounting to six and seventy hundredths per cent shall not have been paid thereon, the deficiency shall be payable before any dividends shall be paid upon or set apart for the common stock. Dividends on the 6.70% Cumulative Preference Stock, 1993 Series ($100 par value), will accrue from and include October 14, 1993. (b) The 6.70% Cumulative Preference Stock, 1993 Series ($100 par value), or any portion thereof, may whenever the Board of Directors shall so determine, be redeemed by the payment to the holders thereof of the sum hereinafter specified as the redemption price at the time of redemption, in cash, for each share thereof, together with all accrued dividends. The applicable redemption prices shall be: Twelve Month Period Redemption Price Beginning January 1, Per Share 2004 $103.35 2005 103.02 2006 102.68 2007 102.35 2008 102.01 2009 101.68 2010 101.34 2011 101.01 2012 100.67 2013 100.34 2014 and thereafter 100.00 provided, however, that prior to January 1, 2004, the corporation will not redeem any shares of the 6.70% Cumulative Preference Stock, 1993 Series ($100 par value). In case less than all of the preference stock of this series at the time being outstanding is so redeemed, the shares to be redeemed shall be, as nearly as is reasonably practicable without creating fractional shares, a proportionate part of the holdings of each holder of preference stock of this series, or shall be selected, in whole or in part, by lot. At least thirty (30) days' written notice of the election of the corporation to redeem the preference stock of this series (or any part thereof, in which case the notice shall specify the particular shares to be redeemed) shall be given to each holder of the preference stock of this series so to be redeemed by mailing the same, postage prepaid, and addressed to him at his address as it appears upon the books of the corporation. When such notice shall have been so given and the funds for payment of the redemption price plus accrued dividends shall have been provided and set apart, the dividends on the shares of preference stock of this series so called for redemption and all other rights of the holders thereof, except the right to receive the redemption price plus accrued dividends, shall cease. V A director or officer of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages except (i) to the extent that it is proved that the person actually received an improper benefit or profit in money, property, or services for the amount of the benefit or profit in money, property or services actually received or (ii) to the extent that a judgment or other final adjudication adverse to the person is entered in a proceeding based on a finding in the proceeding that the person's action or failure to act was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding. It is the intent of this Article that the liability of directors and officers shall be limited to the fullest extent permitted by the Maryland General Corporation Law, as amended from time to time. Any repeal or modification of the foregoing paragraph by the stockholders of the corporation shall not adversely affect any right or protection of a director or officer of the corporation existing at the time of such repeal or modification. IN WITNESS WHEREOF, Baltimore Gas and Electric Company has caused these Articles of Restatement to its Charter to be signed in its corporate name and on its behalf by a Vice President, and its corporate seal to be hereto affixed, duly attested by its Assistant Secretary on May 5, 1995 who each hereby (1) acknowledge that the execution of these Articles of Restatement is the act of Baltimore Gas and Electric Company, and (2) state that to the best of their respective knowledge, information and belief, the matters and facts set forth herein are true in all material respects, such statement being made under the penalties for perjury. BALTIMORE GAS AND ELECTRIC COMPANY By: Vice President SEAL: BALTIMORE GAS AND ELECTRIC COMPANY, INCORPORATED JUNE 20, 1906 Attest: Assistant Secretary CHARTER.DOC/04/21/95 EX-3 3 EXHIBIT 3(b) BY-LAWS OF Baltimore Gas and Electric Company Amended to April 18, 1995 Baltimore Gas and Electric Company ARTICLE I MEETINGS OF STOCKHOLDERS Section 1. - Annual Meeting. The annual meeting of the stockholders for the election of Directors and for the transaction of general business shall be held on any date during the period of April 6, through May 6, as determined year to year by the Board of Directors. The time and location of the meeting shall be determined by the Board of Directors. The Chief Executive Officer of the Company shall prepare, or cause to be prepared, an annual report containing a full and correct statement of the affairs of the Company, including a balance sheet and a financial statement of operations for the preceding fiscal year, which shall be submitted to the stockholders at the annual meeting. Section 2. - Special Meeting. Special meetings of the stockholders may be held in the City of Baltimore or in any county in which the Company provides service or owns property upon call by the Chairman of the Board, the President, or a majority of the Board of Directors whenever they deem expedient, or upon the written request of the holders of shares entitled to not less than twenty-five percent of all the votes entitled to be cast at such a meeting. Such request of the stockholders shall state the purpose or purposes of the meeting and the matters proposed to be acted on the threat and shall be delivered to the Secretary, who shall inform such stockholders of the reasonably estimated cost of preparing and mailing such notice of the meeting, and upon payment to the company of such costs the Secretary shall give notice stating the purpose or purposes of the meeting to all stockholders entitled to vote at such meeting. No special meeting eneed be called upon the request of the holders of the shares entitled to cast less than a majority of all votes entitled to be cast to such meeting, to consider any matter which is substantially the same as a matter voted upon at any special meeting of the stockholders held during the preceding twelve months. The business at all special meetings shall be confined to that specially named in the notice thereof. Section 3. - Notice of Meetings. Written or printed notice of every meeting of the stockholders, whether annual or special, stating the place, day, and hour of such meeting and (in case of special meetings) the business proposed to be transacted shall be given by the Secretary to each stockholder entitled to vote at such meeting not less that ten days but no more than ninety days before the date fixed for such meeting, by depositing such notice in the United States mail addressed to him at his post office address as it appears on the records of the Company, with postage thereon prepaid. Section 4. - Organization of Meeting. All meetings of the stockholders shall be called to order by the Chairman of the Board, or in his absence by the President, or in his absence by a Vice President; or in the case of the absence of such officers, then by any stockholder, whereupon the meeting shall organize by electing a chairman. The Secretary of the Company, if present, shall act as Secretary of the meeting, unless some other person shall be elected by the meeting to act. An accurate record of the meeting shall be kept by the secretary thereof, and placed in the record books of the Company. Section 5. - Quorum. At any meeting of the stockholders the presence in person or by proxy of stockholders entitled to cast a majority of the votes thereat shall constitute a quorum for the transaction of business. If a quorum be not present at any meeting, holders of a majority of the shares of stock so present or represented may adjourn the meeting either sine die or to a date certain. Section 6. - Voting. At all meetings of the stockholders each stockholder shall be entitled to one vote for each share of common stock standing in his name and, when the preferred or preference stock is entitled to vote, such number of votes as shall be provided in the Charter of the Company for each share of preferred and preference stock standing in his name, and the votes shall be cast by stockholders in person or by lawful proxy. Section 7. - Judge of Election and Tellers. The Director shall, at a regular or special meeting, appoint a Judge of Election and two Tellers to serve at each meeting of stockholders. If the Directors fail to make such appointments, of if the Judge of Election and/or Tellers, or any of them, fail to appear at the meeting, the Chairman of the meeting shall appoint a Judge of Election and/or a Teller or Tellers to serve at that meeting. It shall be the duty of the Tellers to receive the ballots of all the holders of stock entitled to vote and present at a meeting either in person or by proxy, and to count and tally said ballots by the official record of stockholders of the Company, or by a summary prepared therefrom and certified by the Stock Transfer Agent or the Secretary of the Company showing the number of shares of common and, if entitled to vote, preferred and preference stock owned of record by each stockholder, who may be designated therein by name, code number, or otherwise, and certify them to the Judge of Election, and the said Judge shall communicate in writing the result of the balloting so certified by the Tellers to the Chairman who shall at once announce the same to the meeting. This certificate, signed by the Tellers and countersigned by the Judge, shall be duly recorded as part of the minutes of the meeting and filed among the records of the Company. Section 8. - Record Date for Stockholders and Closing of Transfer Books. The Board of Directors may fix, in advance, a date as the record for the determination of the stockholders entitled to notice of, or to vote at, any meeting of stockholders, or entitled to receive payment of any dividend, or entitled to the allotment of any rights, or for any other proper purpose. Such date in any case shall not be more than ninety days (and in the case of a meeting of stockholders not less than ten days) prior to the date on which the particular action requiring such determination of stockholders is to be taken. Only stockholders of record on such date shall be entitled to notice of or to vote at such meeting or to receive such dividends or rights, as the case may be. In lieu of fixing a record date the Board of Directors may close the stock transfer books of the Company for a period not exceeding twenty nor less than ten days preceding the date of any meeting of stockholders or not exceeding twenty days preceding any other of the above mentioned events. ARTICLE II BOARD OF DIRECTORS AND COMMITTEES Section 1. - Powers of Directors The business and affairs of the Company shall be managed by a Board of Directors which shall have and may exercise all the powers of the Company, except such as are expressly conferred upon or reserved by the stockholders by law, by Charter, or by these by-laws. Except as otherwise provided herein, the Board of Directors shall appoint the officers for the conduct of the business of the Company, determine their duties and responsibilities and fix their compensation. The Board of Directors may remove any officer. Section 2. - Number and Election of Directors. The number of Directors shall be fourteen (14), all of whom shall own at least 300 shares of the Company's common stock. The Directors shall be elected at each Annual Meeting of the Stockholders except as otherwise provided in these by-laws. They shall hold their offices for one year and until their successors are elected and qualified. Section 3. - Removals and Vacancies. The stockholders, at any meeting duly called and at which a quorum is present, may remove any Director or Directors from Office by the affirmative vote of the holders of a majority of the outstanding shares entitled to the vote thereon, and may elect a successor or successors to fill any resulting vacancies for the unexpired terms of the removed Directors. Any vacancy occurring in the Board of Directors from any cause other than by reason of a removal or an increase in the number of Directors, may be filled by a majority of the remaining Directors although such majority is less than a quorum. Any vacancy occurring by reason of an increase in the number of Directors may be filled by action of a majority of Directors. A Director elected to fill a vacancy shall hold office until the next annual meeting of stockholders or until his successor is elected and qualified. Section 4. - Meetings of the Board. A regular meeting of the Board of Directors shall beheld immediately after the annual meeting of stockholders or any special meeting of the stockholders at which the Board of Directors is elected, and thereafter regular meetings of the Board of Directors shall be held on such dates during the year as may be designated from time to time by the Board. All meetings of the Board of Directors shall be held at the general offices of the Company in the City of Baltimore or elsewhere, as ordered by the Board. Of all such meetings (except the regular meeting held immediately after the election of Directors) the Secretary shall give notice to each Director personally or by telephone, by telegram directed to, or by written notice deposited in the mails addressed to, his residence or business address at lease 48 hours before such meeting. Special meetings may be held at any time or place upon the call of the Chairman of the Board, or, the Chief Executive Officer, or in their absence, on order of the Executive Committee by notices as above, unless the meetings be called during the months of July and August, in which case five days' notice shall be given. In the event three- fourths of the Directors in office waive notice of any meeting in writing at or before the meeting, the meeting may be held without the aforesaid advance notices. The Chairman shall preside at all meetings of the Board, or, in his absence, the President, or one of the Vice Presidents (if a member of the Board) shall preside. If at any meeting none of the foregoing persons is present, the Directors present shall designate one of their number to preside at such meeting. Section 5. - Quorum. A majority of the Directors in office, but in no event less than five, shall constitute a quorum of the Board for the transaction of business. If a quorum be not present at any meeting, a majority of the Directors present may adjourn to any time and place they may see fit. Section 6. - Executive Committee. The Directors shall annually, at their first meeting succeeding the stockholders' meeting at which they are elected, elect from among their number an Executive Committee of five or more (but no more than nine), as the Board may determine. The Executive Committee may exercise, in the intervals between meetings of the Board of Directors, all of the powers of the Board of Directors in the management of the business and affairs of the Company, except the power to declare dividends, to issue stock other than as hereinafter stated, to recommend to stockholders any action requiring stockholder approval, amend the by-laws, or approve any merger or share exchange which does not require stockholder approval. If the Board of Directors has given general authorization for the issuance of stock, the Executive Committee, in accordance with a general formula or method specified by the Board by resolution or by adoption of a stock option or other plan, may fix the terms of stock subject to classification or reclassification and the terms on which any stock may be issued, including all terms and conditions required or permitted to be established or authorized by the Board of Directors. The members of the Executive Committee shall hold their offices as such for one year or until their successors are elected and qualified; all vacancies in said Committee shall be filled by the Board of Directors, but in the absence of a member or members of the Executive Committee, the members thereof present at any meeting (whether or not they constitute a quorum) may appoint a member of the Board of Directors to act in the place of such absent member. They shall designate one of their number as Chairman of the Committee, and shall keep a separate book of minutes of their proceedings and actions. They shall elect a Secretary to the Committee who shall give notice personally or by mail, telephone, or telegraph to each member of the Committee of all meetings, not later than 12 noon of the day before the meeting, unless a majority of the members of the Executive Committee in office waive notice thereof in writing at or before the meeting in which case the meeting may be held without the aforesaid advance notice. Meetings may be called by the Chairman of the Committee or by the Chief Executive Officer, or, in the event of their death, absence, or disability, by one of the other officers among the Chairman of the Board, the President, or the Vice Presidents. A majority of the members of the Executive Committee in office, but in no event less than three, shall constitute a quorum for the transaction of business. Section 7. - Audit Committee. The Directors shall annually, at their first meeting succeeding the stockholders' meeting at which they are elected, elect from among their number an Audit Committee which shall consist of at least three Directors who shall be independent of Management and free from any relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment as a Committee member, and provided further that no Director who was formerly an Officer of the Company shall be a member of the said Audit Committee. One such member of the Committee shall be designated by the Board of Directors to be Chairman of the Audit Committee. The tenure of the office of the members of the Audit Committee shall; be one year or until their successors shall have been duly appointed or elected. Any vacancy shall be filled by the Board of Directors. Two members of the Audit Committee shall constitute a quorum. In order to provide for direct communication between representatives of the Board and the Independent Auditors for this corporation, the Audit Committee, in furtherance of this charge, shall have the following duties and responsibilities: (1) To recommend to the Board of Directors the public accounting firm to be engaged to conduct the annual financial audit of the corporation. (2) To discuss with such Auditors the scope of their examination which shall be in accordance with generally accepted auditing standards with appropriate reports thereon to be submitted to the Board of Directors. (3) To review with the Auditors and appropriate financial Officers and Management of the corporation the annual financial statements and the Auditors' report thereon. (4) To invite comments and recommendations from the Auditors regarding the need for and/or results of the reviews of those financial statements and other documents and data reviewed or certified by the public accounting firm thus engaged. (5) To invite comments and recommendations from the Auditors regarding the system of internal controls, accounting policies and practices, and any other related matters employed by the corporation. (6) To meet with the corporation's Internal Auditor in order to ensure, as a part of the system of internal controls, that an adequate program of internal auditing is being continuously carried out, to determine that the corporation's Internal Audit Staff is adequate and to review the findings of such Staff's investigations. (7) To report periodically regarding its activities to the Board of Directors of the corporation and to make such recommendations and findings concerning any audit or audit-related matter as the Audit Committee deems appropriate. Section 8. - Committee on Management. The Directors shall annually, at their first meeting succeeding the stockholders' meeting at which they are elected, elect from among their number a Committee on Management consisting of four members. One such member shall be designated by the Board of Directors to be the Chairman of the Committee on Management. The tenure of office of the members of the Committee on Management shall be one year or until their successors shall have been duly appointed or elected. Any vacancy shall be filled by the Board of Directors. Two members shall constitute a quorum. The Committee on Management shall recommend to the Board of Directors nominees for election as Directors and shall consider the performance of incumbent Directors in determining whether to nominate them to stand for reelection; the Committee shall, among other things, consider any major changes in the organization of the corporation; it shall recommend to the Board of Directors the remuneration arrangements for Officers and Directors of the corporation. The Committee shall recommend to the full Board of Directors nominees for Officers of the corporation. The Committee on Management shall have such additional powers to perform such duties as shall be prescribed by resolution of the Board of Directors. Section 9. - Other Committees. The Board of Directors is authorized to appoint from among its members such other committees as it may, from time to time, deem advisable and to delegate to such committee or committees any of the powers of the Board of Directors which it may lawfully delegate. Each such committee shall consist of at least two Directors. Section 10. - Fees and Expenses. Each member of the Board of Directors, other than salaried Officers and employees, shall be paid an annual retainer fee, payable in quarterly installments, in such amount as shall be specified from time to time by the Board. Each member of the Board of Directors, other than salaried Officers and employees, shall be paid such fee as shall be specified from time to time by the Board for attending each regular or special meeting of the Board and for attending, as a committee member, each meeting of the Executive Committee, Audit Committee, Committee on Management and any other committee appointed by the Board. Each member shall be paid reasonable traveling expenses incident to attendance at meetings. ARTICLE III OFFICERS Section 1. - Officers. The Company shall have a Chairman of the Board, a President, one or more Vice Presidents, a Treasurer, and a Secretary who shall be elected by, and hold office at the will of, the Board of Directors. The Chairman of the Board and the President shall be chosen from among the Directors, and the Board of Directors shall designate either the Chairman of the Board or the President to be the Chief Executive Officer of the Company. The Board of Directors shall also elect such other officers as they may deem necessary for the conduct of the business and affairs of the Company. Any two offices, except those of President and Vice President, may be held by the same person, but no person shall sign checks, drafts and promissory notes, or execute, acknowledge or verify any other instrument in more than one capacity, if such instrument is required by law, the charter, these by-laws, a resolution of the Board of Directors or order of the Chief Executive Officer to be signed, executed, acknowledged or verified by two or more officers. The Chairman of the Board, President and Vice Presidents shall receive such compensation as shall be fixed by the Board of Directors. Compensation for officers other than the Chairman of the Board, President and Vice Presidents shall be fixed by the Chief Executive Officer. The Board of Directors shall require a fidelity bond to be given by each officer, or, in its discretion, the Board may substitute a general blanket fidelity bond or insurance contract to cover all officers and employees. Section 2. - Duties of the Officers. (a) Chairman of the Board The Chairman of the Board shall preside at all meetings of the Board of Directors and of stockholders. He shall also have such other powers and duties as from time to time may be assigned to him by the Board of Directors. (b) President The President shall have general executive powers, as well as specific powers conferred by these by-laws. He, any Vice President, or such other persons as may be designated by the Board of Directors, shall sign all special contracts of the Company, countersign checks, drafts and promissory notes, and such other papers as may be directed by the Board of Directors. He, or any Vice President, together with the Treasurer or an Assistant Treasurer, shall have authority to sell, assign or transfer and deliver any bonds, stocks or other securities owned by the Company. He shall also have such other powers and duties as from time to time may be assigned to him by the Board of Directors. In the absence of the Chairman of the Board, the President shall perform all the duties of the Chairman of the Board. (c) Vice Presidents Each Vice President shall have such powers and duties as may be assigned to him by the Board of Directors, or the Chief Executive Officer, as well as the specific powers assigned by these by-laws. A Vice President may be designated by the Board of Directors or the Chief Executive Officer to perform, in the absence of the President, all the duties of the President. (d) Treasurer The Treasurer shall have the care and the custody of the funds and valuable papers of the Company, and shall receive and disburse all moneys in such a manner as may be prescribed by the Board of Directors or the Chief Executive Officer. He shall have such other powers and duties as may be assigned to him by the Board of Directors, or the Chief Executive Officer, as well as specific powers assigned by these by-laws. (e) Secretary The Secretary shall attend all meetings of the stockholders and Directors and shall notify the stockholders and Directors of such meetings in the manner provided in these by-laws. He shall record the proceedings of all such meetings in books kept for that purpose. He shall have such other powers and duties as may be assigned to him by the Board of Directors or the Chief Executive Officer, as well as the specific powers assigned by these by- laws. Section 3. - Removals and Vacancies. Any officer may be removed by the Board of Directors whenever, in its judgment, the best interest of the Company will be served thereby. In case of removal, the salary of such officer shall cease. Removal shall be without prejudice to the contractual rights, if any, of the person so removed, but election of an officer shall not of itself create contractual rights. Any vacancy occurring in any office of the Company shall be filled by the Board of Directors and the officer so elected shall hold office for the unexpired term in respect of which the vacancy occurred or until its successor shall be duly elected and qualified. In any event of absence or temporary disability of any officer of the Company, the Board of Directors may authorize some other person to perform the duties of that office. ARTICLE IV INDEMNIFICATION OF DIRECTORS AND OFFICERS Each person made or threatened to be made party to an action, suit or proceeding, whether, civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director or officer of the Company, or, at its request, is or was a director or officer of another corporation, shall be indemnified by the Company (to the extent indemnification is not otherwise provided by insurance) against the liabilities, costs and expenses of every kind actually and reasonable incurred by him as a result of such action, suit or proceeding, or any threat thereof or any appeal thereon, but in each case only if and to the extent permissible under applicable common or statutory law, state or federal. The foregoing indemnity shall not be inclusive of other rights to which such person may be entitled. ARTICLE V CAPITAL STOCK Section 1. - Evidence of Stock Ownership. Evidence of ownership of stock in the Company may be either pursuant to a certificate(s) or a statement in compliance with Maryland law, each of which shall represent the number of shares of stock owned by a stockholder in the Company. Stockholders may request that their stock ownership be represented by a certificate(s). Each certificate shall be signed on behalf of the Company by the President or a Vice President and countersigned by the Secretary, and shall be sealed with the corporate seal. The signatures may be either manual or facsimile. In case any officer who signed any certificate, in facsimile or otherwise, ceases to be such officer of the Company before the certificate is issued, the certificate may nevertheless be issued by the Company with the same effect as if the officer had not ceased to be such officer as of the date of its issue. For stock ownership evidenced by a statement, such statement shall be in such form, and executed, as required from time to time by Maryland law. Section 2. - Transfer of Shares. Stock shall be transferable only on the books of the Company by assignment in writing by the registered holder thereof, his legally constituted attorney, or his legal representative, either upon surrender and cancellation of the certificate(s) therefor, if such stock is represented by a certificate, or upon receipt of such other documentation for stock not represented by a certificate as the Board of Directors and Maryland law may, from time to time, require. Section 3. - Lost, Stolen or Destroyed Certificates. No certificate for shares of stock of the Company shall be issued in place of any other certificate alleged to have been lost, stolen, or destroyed, except upon production of such evidence of the loss, theft or destruction and upon indemnification of the Company to such extent and in such manner as the Board of Directors may prescribe. Section 4. - Transfer Agents and Registrars. The Board of Directors shall appoint a person or persons, or any incorporated trust company or companies or both, as transfer agents and registrars and, if stock is represented by a certificate, may require that such certificate bear the signatures or the counter-signatures of such transfer agents and registrars, or either of them. Section 5. - Stock Ledger. The Company shall maintain at its principal office in Baltimore, Maryland, a stock record containing the names and addresses of all stockholders and the numbers of shares of each class held by each stockholder. ARTICLE VI SEAL The Board of Directors shall provide, subject to change, a suitable corporate seal which may be used by causing it, or facsimile thereof, to be impressed or affixed or reproduced one the Company's stock certificates, bonds, or any other documents on which the seal may be appropriate. ARTICLE VII AMENDMENTS These by-laws, or any of them, may be amended or repealed, and new by-laws may be made or adopted at any meeting of the Board of Directors, by vote of a majority of the Directors, or by the stockholders at any annual meeting, or at any special meeting called for that purpose. I HEREBY CERTIFY that the foregoing is a true copy of the by-laws of Baltimore Gas and Electric Company in effect at the date hereof. IN WITNESS WHEREOF I have hereunto set my hand as Assistant Secretary of said Company and affixed its corporate seal this 5th day of May, 1995. Assistant Secretary. EX-10 4 EXHIBIT 10 BALTIMORE GAS AND ELECTRIC COMPANY EXECUTIVE BENEFITS PLAN 1. Objective. The objective of this Plan is to enhance the benefits provided to senior management employees of BGE and its subsidiaries in order to attract and retain talented executive personnel. 2. Definitions. All words beginning with an initial capital letter and not otherwise defined herein shall have the meaning set forth in the Pension Plan. All singular terms defined in this Plan will include the plural and vice versa. As used herein, the following terms will have the meaning specified below: "Annual Base Salary" means an amount determined by adding the monthly salary amounts earned over the twelve calendar months immediately preceding the month that includes the date of the computation. "Average Incentive Award" (or "Average Award") means generally the product of the percentage equal to an average of the two highest of the participant's five immediately prior year award percentages under BGE's Executive Annual Incentive Plan and/or BGE's Manager Annual Incentive Plan multiplied by the participant's annualized base salary in effect at the end of the prior year, and is calculated in accordance with procedures approved by the Committee, that are attached hereto. "BGE" means Baltimore Gas and Electric Company, a Maryland corporation, or its successor. "BGE's Executive Annual Incentive Plan" means such plan or other incentive plan or arrangement designated in writing by the Plan Administrator. "BGE's Manager Annual Incentive Plan" means such plan or other incentive plan or arrangement designated in writing by the Plan Administrator. "Cause" means the participant's (a) failure to comply with BGE policy, (b) deliberate and continual refusal to satisfactorily perform employment duties on substantially a full- time basis, (c) deliberate and continual refusal to act in accordance with any specific instructions of a majority of BGE's Board of Directors, (d) disclosure, without the consent of a majority of BGE's Board of Directors, of confidential information or trade secrets concerning BGE which could be materially damaging to BGE, or (e) deliberate misconduct which could be materially damaging to BGE without reasonable good faith belief by the participant that such conduct was in the best interest of BGE. "Committee" means the Committee on Management of the Board of Directors of BGE. "Demotion" means a transfer to a position with BGE or a subsidiary of BGE that either (a) is below the substantial equivalent position in which the participant was employed on the date of transfer, or (b) results in a substantial reduction in pay when compared to the participant's pay on the date of the transfer. Whether a position is a substantial equivalent position shall be determined in the reasonable discretion of the Committee, with reference to factors including whether the participant retains principal responsibility for a department or division, and whether the participant remains eligible for the perquisites enjoyed by the participant before the position change. "Interest Rate" means the rate equal to 3.5% plus 65% of yield on the Lehman Brothers Government/Corporate Bond Index. "LTD Plan" means the Baltimore Gas and Electric Company Long Term Disability Plan as may be amended from time to time, or any successor plan. "Mortality Table" means the mortality table used to value liabilities for Pension Plan funding purposes. "Pension Plan" means the Pension Plan of Baltimore Gas and Electric Company as may be amended from time to time. "Plan Administrator" means, as set forth in Section 3, the Committee. "Rabbi Trust" means the trust established by BGE pursuant to the Grantor Trust Agreement Dated as of July 31, 1994, between BGE and Citibank, N.A. "Termination From Employment With BGE" means a participant's separation from service with BGE or a subsidiary of BGE; however, a participant's retirement, disability, or transfer of employment to a subsidiary of BGE shall not constitute a Termination From Employment With BGE. 3. Plan Administration. The Committee is the Plan Administrator and has sole authority (except as specified otherwise herein) to interpret the Plan and, in general, to make all other determinations advisable for the administration of the Plan to achieve its stated objective. Appeals of written decisions by the Plan Administrator may be made to the Board of Directors of BGE. Decisions by the Board shall be final and not subject to further appeal. The Plan Administrator shall have the power to delegate all or any part of its duties to one or more designees, and to withdraw such authority, by written designation. 4. Eligibility. Each member of full-time senior management or key employee of BGE or its subsidiaries may be designated by the Plan Administrator as a participant with respect to one or more benefits under the Plan. Once designated, participation shall continue until such designation is withdrawn at the discretion and by written order of the Committee, provided, however, that such withdrawal may not be made for benefits provided pursuant to Sections 5 and 7 with respect to a participant who has satisfied the eligibility requirements to retire (as set forth in Section 5(a)(i)). Notwithstanding the foregoing, any participant who is disabled under the LTD Plan shall continue to participate in this Plan while classified as disabled and, for purposes of the supplemental pension benefit provided by this Plan, while classified as disabled, shall be deemed to continue to accrue Credited Service until no later than his/her Normal Retirement Date. 5. Supplemental Pension Benefit (a) Retirement benefits. (i) Eligibility for retirement benefits. A participant shall be eligible to retire under this Plan on or after the participant's Normal Retirement Date, or on the first day of any month preceding his/her Normal Retirement Date, if the participant has attained (1) age 55 and has accumulated at least 20 years of Credited Service; or (2) age 60 and has accumulated at least one year of Credited Service. (ii) Computation of retirement benefits. A participant who is eligible to retire under this Plan will be entitled to supplemental pension retirement benefits under this Plan, which will be calculated as set forth below on the participant's Retirement Date: (1) add the Annual Base Salary and the Average Incentive Award, (2) divide the sum by 12, (3) multiply this dollar amount by the appropriate percentage, determined as follows: Chairman of the Board and President of BGE - 60%; all other participants (by completed years of Credited Service) 1 through 9 - 3% per year; 10 through 19 - 40%; 20 through 24 - 45%; 25 through 29 - 50%; and 30 or more - 55%, (4) multiply this dollar amount by the Early Retirement Adjustment Factor set forth under the Pension Plan provided, however, if the participant is age 62 or older and is a member of full-time senior management or key employee of BGE, other than the Chairman of the Board or the President of BGE, such factor shall be one (1), (5) subtract from this dollar amount the charges relating to coverage for a preretirement survivor annuity in excess of 50%, and for a post-retirement survivor annuity in excess of 50%, and (6) subtract from the remainder the net amount payable to the participant under the Pension Plan. (iii) Form of payout of retirement benefits. Each participant entitled to supplemental pension retirement benefits will receive his/her supplemental pension retirement benefits payout in the form of a monthly payment, unless the participant makes a valid election to receive his/her supplemental pension retirement benefits payout in the form of a lump sum. A participant may elect to receive his/her supplemental pension retirement benefits payout in the form of a lump sum by submitting to the Committee a signed Lump Sum Election Form. The Form must be received by the Committee before the beginning of the calendar year during which the participant's Retirement Date occurs. The election may be revoked at any time before the beginning of the calendar year during which the participant's Retirement Date occurs, by submitting to the Committee a signed Lump Sum Revocation Form. (iv) Amount, timing, and source of monthly retirement benefit payout. A participant entitled to monthly supplemental pension retirement benefits will receive monthly payments equal to the amount determined under paragraph (a)(ii). Such payments shall commence effective with the participant's Retirement Date. If such participant receives (or would have received but for the Internal Revenue Code limitations) cost of living adjustment(s) under the Pension Plan, the monthly payments hereunder will be automatically increased based on the percentage of, and at the same time as, such adjustment(s). Monthly payments hereunder shall permanently cease upon the death of the participant, effective with the monthly payment for the month following the month of the participant's death. Monthly payments hereunder shall be made in accordance with the provisions of the Rabbi Trust and, to the extent not paid under the terms of the Rabbi Trust, from general corporate assets. (v) Amount, timing, and source of lump sum retirement benefit payout. A participant entitled to a lump sum supplemental pension retirement benefit will receive a lump sum payment. This lump sum payment will be calculated by a certified actuary and will be equal to the present value of an immediate annuity including the estimated present value of post-retirement supplemental survivor annuity benefits described in Section 7, using (1) the supplemental pension retirement benefit amount calculated under paragraph (a)(ii), which is expressed as a monthly amount, (2) the Interest Rate computed on the participant's Retirement Date, and (3) the Mortality Table. Such lump sum payment shall be made within 60 days after the participant's Retirement Date. The lump sum payment shall be made in accordance with the provisions of the Rabbi Trust and, to the extent not paid under the terms of the Rabbi Trust, from general corporate assets. A participant who receives a lump sum payment shall not be entitled to any cost of living adjustments or to post-retirement survivor annuity coverage under the Plan. (vi) Death of participant entitled to lump sum payout. In the event of the death of a participant after his/her Retirement Date and before the participant receives the lump sum payment under paragraph (a)(v), such lump sum payment shall be made to the participant's surviving spouse (as defined in Section 7(i)). The lump sum payment shall be the same amount and made at the same and from the same sources as set forth in paragraph (a)(v). If there is no surviving spouse at the date of the participant's death, no payments shall be made pursuant to Sections 5 or 7. A surviving spouse who receives a lump sum benefit under this paragraph (a)(vi) shall not be entitled to any cost of living adjustments or to post-retirement survivor annuity coverage. (b) Accrued Benefit. (i) Computation of gross accrued benefit. The computation of the gross accrued supplemental pension benefit for a participant as of the date of the computation will be made as follows: (1) add the Annual Base Salary and the Average Incentive Award, (2) divide the sum by 12, and (3) multiply this dollar amount by the appropriate percentage, determined as follows: Chairman of the Board and President of BGE - 60%; all other participants (by completed years of Credited Service as of the date of the computation) 1 through 9 - 3% per year; 10 through 19 - 40%; 20 through 24 - 45%; 25 through 29 - 50%; and 30 or more - 55%. (ii) Computation of net accrued benefit. The computation of the net accrued supplemental pension benefit for a participant as of the date of the computation will be made by subtracting from the gross accrued benefit determined under paragraph (b)(i) the amount, computed on the date a benefit is payable under paragraph (c)(iii), of (1) the participant's Accrued Gross Pension under the Pension Plan, expressed as a monthly amount if the participant is not eligible for Normal Retirement, Early Retirement or Disability Retirement benefits under the Pension Plan, otherwise (2) the gross amount payable to the participant under the Pension Plan. (c) Entitlement to benefit upon happening of certain events. (i) Satisfaction of requirements. A participant who has satisfied the age and Credited Service requirements set forth in Section 5(a)(i) while eligible as set forth in Section 4, but who does not retire under the Plan due to Demotion, Termination From Employment With BGE, or the withdrawal of a participant's eligibility to participate under Section 5, shall be entitled to his/her net accrued supplemental pension benefit. The effective date of the Demotion, Termination From Employment With BGE, or eligibility withdrawal event shall be the date of such Demotion, Termination From Employment With BGE, or eligibility withdrawal. (ii) Other events. A participant, regardless of his/her age and years of Credited Service, shall be entitled to his/her net accrued supplemental pension benefit upon the happening of any of the following entitlement events, but only if such entitlement event occurs before a participant retires under this Plan: (1) Change in control. A change in control, followed within two years by the participant's Demotion, a participant's Termination From Employment With BGE, or the withdrawal of the participant's eligibility to participate under the Plan, is an entitlement event. The effective date of the entitlement event shall be the date of the Demotion, Termination From Employment With BGE, or eligibility withdrawal. A change in control for purposes of this paragraph (c)(i)(1) shall mean (w) the purchase or acquisition by any person, entity or group of persons, (within the meaning of section 13(d) or 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), or any comparable successor provisions), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20 percent or more of either the outstanding shares of common stock of BGE or the combined voting power of BGE's then outstanding shares of voting securities entitled to a vote generally, or (x) the approval by the stockholders of BGE of a reorganization, merger, or consolidation, in each case, with respect to which persons who were stockholders of BGE immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50 percent of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated entity's then outstanding securities, or (y) a liquidation or dissolution of BGE or the sale of substantially all of its assets, or (z) a change of more than one-half of the members of the Board of Directors of BGE within a 90-day period for reasons other than the death, disability, or retirement of such members. (2) Plan amendment. A Plan amendment that has the effect of reducing a participant's gross accrued supplemental pension benefit is an entitlement event. In determining whether such a reduction has occurred, the participant's gross accrued supplemental pension benefit calculated on the day immediately preceding the effective date of the amendment shall be compared to the participant's gross accrued supplemental pension benefit calculated on the effective date of the amendment. An amendment that has the effect of reducing future benefit accruals is not an entitlement event. It is intended that an entitlement event under this paragraph (c)(i)(2) will occur only with respect to those amendments that are substantially similar to amendments that are prohibited by Internal Revenue Code section 411(d)(6) with respect to qualified pension plans. The effective date of the entitlement event shall be the effective date of the Plan amendment. (3) Involuntary Demotion, Termination From Employment With BGE, or eligibility withdrawal without Cause. A participant's involuntary Demotion or involuntary Termination From Employment With BGE without Cause, or the withdrawal of a participant's eligibility to participate under Sections 5 or 7 of the Plan without Cause, is an entitlement event. The effective date of the entitlement event shall be the effective date of the participant's involuntary Demotion or involuntary Termination From Employment With BGE without Cause, or the eligibility withdrawal without Cause. (iii) Form of benefit payout. Each participant entitled to a payout under this paragraph (c) will receive such payout in the form of a lump sum payment. (iv) Amount, timing, and source of benefit payout. A participant entitled to a payout of his/her net accrued benefit, as a result of the occurrence of an event described in paragraphs (c)(i), (c)(ii)(1), (2), or (3) will be entitled to a lump sum benefit. This lump sum benefit will be calculated by a certified actuary as the present value of an annuity beginning at age 65 (or the participant's actual age, if the participant is older than age 65 on the date the lump sum benefit is payable), including the estimated present value of post-retirement survivor annuity benefits described in Section 7, using (1) the net accrued benefit amount calculated under paragraph (b)(ii) on the effective date of the event, which is expressed as a monthly amount, (2) the Early Retirement Adjustment Factor computed by substituting the date the lump sum benefit is payable for the Retirement Date, (3) the Interest Rate computed on the date the lump sum benefit is payable, and (4) the Mortality Table. The lump sum benefit shall be payable on the date that is the later of the date of the participant's Termination From Employment With BGE or the date the participant reaches age 55. The lump sum payment shall be made within 60 days after such date and shall be made in accordance with the provisions of the Rabbi Trust and, to the extent not paid under the terms of the Rabbi Trust, from general corporate assets. A participant who receives a lump sum benefit under this paragraph (c)(iv) shall not be entitled to any cost of living adjustments or to preretirement or post-retirement survivor annuity coverage. (v) Death of participant entitled to lump sum payout. In the event of the death of a participant after the occurrence of an event described in paragraphs (c)(i), (c)(ii)(1), (2), or (3) and before the participant receives the lump sum payment under paragraph (c)(iv), such lump sum payment shall be made to the participant's surviving spouse (as defined in Section 7(i)). The lump sum payment will be calculated by a certified actuary and will be equal to 50% of the present value of an immediate annuity using (1) the monthly amount under paragraph (c)(iv), (2) the Early Retirement Adjustment Factor computed using the participant's age at the date of the participant's death, or if the participant was younger than age 60 on the date of death, using age 60, (3) the Interest Rate computed on the date the lump sum benefit is payable, and (4) the Mortality Table. However, if the participant's death occurred during the 60 day period described in paragraph (c)(iv), 100% shall be used instead of 50% in the preceding sentence. The lump sum benefit shall be payable on the date that is the later of the date that the participant would have reached age 55 or the date of the participant's death. The lump sum payment shall be made within 60 days after such date, and shall be made in accordance with the provisions of the Rabbi Trust and, to the extent not paid under the terms of the Rabbi Trust, from general corporate assets. If there is no surviving spouse at the date of the participant's death, no payments shall be made pursuant to Sections 5 or 7. A surviving spouse who receives a lump sum benefit under this paragraph (c) (v) shall not be entitled to any cost of living adjustments or to preretirement or post-retirement survivor annuity coverage. 6. Supplemental Long Term Disability Benefit. (i) Eligibility for disability benefits. Any participant with at least one year of Credited Service who is Disabled (as that term is defined in the LTD Plan) will be entitled to supplemental disability benefits under this Plan. (ii) Computation of disability benefits. The amount of such supplemental disability benefits shall be determined as follows: (1) multiply the monthly base salary in effect immediately prior to becoming entitled to benefits under the LTD Plan by twelve, (2) add the Average Incentive Award to the product, (3) divide the sum by 12, (4) multiply this monthly dollar amount by the income replacement percentage applicable under the LTD Plan, and (5) subtract from the product the gross monthly amount provided for the participant under the LTD Plan before such amount is reduced for Offset for Other Income (as that term is defined in the LTD Plan). (iii) Form of payment of disability benefits. Each participant entitled to supplemental disability benefits will receive his/her supplemental disability benefit payout in the form of a monthly payment. (iv) Amount, timing, and source of monthly disability benefit payout. A participant entitled to supplemental disability benefits will receive a monthly payment equal to the amount determined under (ii) above. Such payments shall commence effective with the expiration of the participant's BGE-provided sickness benefits. Monthly payments shall permanently cease when benefits under the LTD Plan cease. If a participant receiving payments pursuant to this Section 6 receives cost of living adjustment(s) under the LTD Plan, the payments hereunder will be automatically increased based on the same percentage of, and at the same time as, such adjustment(s). Monthly payments shall be made from BGE's general corporate assets. 7. Supplemental 50% Survivor Annuity Benefit. (i) Eligibility for survivor annuity benefit. Following the death of a participant, a supplemental survivor annuity will be paid to the participant's surviving spouse until the death of that spouse. For purposes of this Section 7, a participant's surviving spouse is the individual married to the participant on the date of the participant's death. If there is no surviving spouse, or if the participant or the participant's spouse previously received or is entitled to receive a lump sum payment under Section 5, no supplemental survivor annuity will be payable. (ii) Computation of survivor annuity benefit. The amount of the supplemental survivor annuity will be determined as follows: (1) if the participant had retired prior to the date of death, begin with the monthly pension benefit (under both the Pension Plan and Section 5 of this Plan) that the participant was receiving prior to the date of death. Otherwise, begin with the larger of the Early Retirement pension benefit (under both the Pension Plan and Section 5 of this Plan) to which the participant would have been entitled to receive if the (A) participant had been retired at age 60 on the date of death for purposes of computing the Early Retirement Adjustment Factor, or B) participant had retired on the date of death for purposes of computing the Early Retirement Adjustment Factor, (2) multiply this dollar amount by .5, and (3) subtract from the product the net amount, if any, of the survivor annuity provided on behalf of the participant under the Pension Plan. (iii) Form of payout of survivor annuity benefits. Each surviving spouse entitled to a supplemental survivor annuity benefit will receive his/her survivor annuity benefit payout in the form of a monthly payment. (iv) Amount, timing, and source of monthly survivor annuity benefit payout. A surviving spouse entitled to monthly supplemental survivor annuity benefits will receive a monthly payment equal to the amount determined under (ii) above. Such payments shall commence effective with the first day of the month following the month of the participant's death. If such surviving spouse receives (or would have received but for the Internal Revenue Code limitations) cost of living adjustment(s) under the Pension Plan, the monthly payments hereunder will be automatically increased based on the percentage of, and at the same time as, such adjustment(s). Monthly payments shall permanently cease upon the death of the surviving spouse, effective with the monthly payment for the month following the month of the surviving spouse's death. Monthly payments shall be made in accordance with the provisions of the Rabbi Trust and, to the extent not paid under the terms of the Rabbi Trust, from general corporate assets. 8. Death Benefit. BGE shall make arrangements, through its split-dollar life insurance program or otherwise, for life insurance coverage for each participant providing that the participant's beneficiary shall receive, as a pre-rollout death benefit, an amount which is approximately equal to three times the participant's compensation, and as a post-rollout benefit, an amount which is approximately equal to two times the participant's compensation, as set forth in a separate agreement between BGE and the participant. As determined in the sole discretion of the Plan Administrator, in the event that either (i) a participant is ineligible to receive the type of life insurance coverage provided to other participants under this Plan, or (ii) such coverage is not available on reasonably cost-effective terms as a result of any penalty for smoking or other factors that are reflected in the insurance carrier's rates, then BGE shall provide a benefit that, in the discretion of the Plan Administrator, is substantially equivalent to the cost of the benefit provided to other participants under this Plan. 9. Dependent Death Benefit. In the event of the death of a participant's qualified dependent while the participant is an active employee of BGE, BGE shall make a death benefit payment to the participant, from general corporate assets. For purposes of this Section 9, qualified dependent shall have the same meaning as set forth in the Family Life Insurance Plan. For purposes of this Section 9, the amount of the death benefit payment shall be the highest amount of insurance that would have been payable with respect to such qualified dependent if coverage had been provided under the Family Life Insurance Plan. The dependent death benefit payment under this Plan shall be grossed-up to provide for income taxes. 10. Sickness Benefit. Each participant, without regard to length of service, shall be entitled to the greater of the benefits stipulated under the BGE sick benefit policy for employees or twenty-six (26) weeks of sick benefits. 11. Vacation Benefit. Each participant, without regard to length of service, shall be entitled to the greater of the benefits stipulated under the BGE vacation benefit policy for employees or five weeks of paid vacation. 12. Planning Benefit. Each participant shall be entitled to certain personal financial, tax, and estate planning services paid for by BGE but provided through designated professional firms. This entitlement shall be subject to any dollar limitation established by the Committee with respect to all such fees. The services shall be provided to each participant by the chosen firm(s) on a personalized and confidential basis; and each firm shall have sole responsibility for quality of the services which it may render. The services to be provided shall be on an on-going and continuous basis, but shall be limited to (i) the development and legal documentation of both career-oriented financial plans and personal estate plans, and (ii) tax counseling regarding personal tax-return preparation and the most advantageous structuring, tax-wise, of proposed personal transactions. Such planning benefit shall continue during the year of retirement plus the next two calendar years and include the completion of the federal and state personal tax returns for the second calendar year following retirement. However, if a retired member of senior management continues to serve as a member of the Board of Directors of BGE, his/her planning benefit period shall be extended until he/she no longer serves as a member of the Board of Directors. Upon the death of a participant entitled to the planning benefit provided hereunder, his/her surviving spouse shall be entitled to receive the following planning benefit: (i) if the deceased was not retired at the time of death, the surviving spouse shall be entitled to the planning benefit for the year in which the death occurred plus the next two calendar years, including completion of the federal and state personal tax returns for the second calendar year after the year in which the death occurred; or (ii) if the deceased was retired at the time of death, then the surviving spouse shall receive a planning benefit equal to that the deceased would have received if he/she had not died prior to expiration of the planning benefit. The surviving spouse of a retired member of senior management whose death occurs while serving as a member of the Board of Directors of BGE, shall be entitled to a planning benefit as set forth in (i) above. The planning benefit provided under this Plan shall be grossed-up to provide for income taxes. 13. Miscellaneous. None of the benefits provided under this Plan shall be subject to alienation or assignment by any participant or beneficiary nor shall any of them be subject to attachment or garnishment or other legal process except (i) to the extent specially mandated and directed by applicable State or Federal statute; (ii) as requested by the participant or beneficiary to satisfy income tax withholding or liability; and (iii) any policy of insurance written by a commercial carrier on a split-dollar basis shall be assignable. This Plan may be amended from time to time, or suspended or terminated at any time, provided, however, that no amendment or termination shall reduce any previously accrued supplemental pension benefit under this Plan or prejudice the rights of any participant or beneficiary entitled to receive payment hereunder at the time of such action. All amendments to this Plan which would increase or decrease the compensation of any Officer of BGE, either directly or indirectly, must be approved by the Board of Directors. All other permissible amendments may be made at the written direction of the Committee. Participation in this Plan shall not constitute a contract of employment between BGE and any person and shall not be deemed to be consideration for, or a condition of, continued employment of any person. The Plan, notwithstanding the creation of the Rabbi Trust, is intended to be unfunded for purposes of Title I of the Employee Retirement Security Act of 1974. BGE shall make contributions to the Rabbi Trust in accordance with the terms of the Rabbi Trust. Any funds which may be invested and any assets which may be held to provide benefits under this Plan shall continue for all purposes to be a part of the general funds and assets of BGE and no person other than BGE shall by virtue of the provisions of this Plan have any interest in such funds and assets. To the extent that any person acquires a right to receive payments from BGE under this Plan, such rights shall be no greater than the right of any unsecured general creditor of BGE. This Plan shall be governed in all respects by Maryland law. Executive Benefits Plan Procedures Computation of Average Incentive Award Average Incentive Award is the product of the annualized prior year, year end base salary multiplied by the greater of the following: (i) a fraction, the numerator of which is expressed as a percentage and is equal to the sum of the two highest of the percentages of the applicable annualized year end base salary awarded to the participant under BGE's Executive Annual Incentive Plan during the participant's most recent five calendar years of participation thereunder (or such shorter period, if applicable, as set forth below), and the denominator of which is 2 (reduced, if applicable, as set forth below), or (ii) a fraction, the numerator of which is expressed as a percentage and is equal to the sum of the two highest of the percentages of the applicable annualized base salary awarded to the participant under either BGE's Executive Annual Incentive Plan or BGE's Manager Annual Incentive Plan (collectively referred to as Incentive Plans) during the participant's most recent five calendar years of participation thereunder (or such shorter period, if applicable, as set forth below), and the denominator of which is 2 (reduced, if applicable, as set forth below), provided that - - for purposes of (i) and (ii), the year that the participant separates from service due to retirement, disability, or other termination of employment with BGE shall be completely disregarded, therefore, the computation of the Average Award shall generally be made, except as otherwise provided herein, by taking into consideration the five years preceding the year of such separation from service, and - - for purposes of (i) and (ii), no consideration shall be given, in the numerator and the denominator, to any year (or for purposes of (ii), part of a year) for which awards were not made under the applicable Incentive Plans, and - - for purposes of (i) and (ii), consideration shall be given, in both the numerator and the denominator, to any year (or for purposes of (ii), part of a year) for which awards were made to one or more participants under the applicable Incentive Plans, even though the participant did not receive an award, and - - for purposes of (i), and for purposes of (ii) except as provided below, no consideration shall be given, in the numerator and in the denominator, to any year during which the participant is deemed to have participated under the applicable Incentive Plans for less than the full year, notwithstanding the fact that the participant may have received a reduced award based upon participation for some portion of that year, and - - for purposes of (ii), consideration shall be given to a year during which a participant had participated in both Incentive Plans, however, the numerator with respect to such year shall equal the sum of the actual percentage award under BGE's Executive Annual Incentive Plan (expressed as a percentage of the applicable annualized year end base salary as a member of senior management) plus the actual percentage award under BGE's Manager Annual Incentive Plan (expressed as a percentage of annualized final base salary as a manager). Date: March 17, 1995 EX-12 5 EXHIBIT 12 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED AND PREFERENCE DIVIDEND REQUIREMENTS
12 Months Ended March December December December December December 1995 1994 1993 1992 1991 1990 (In Thousands of Dollars) Net Income $312,326 $323,617 $309,866 $264,347 $233,681 $175,446 Taxes on Income 148,777 156,702 140,833 105,994 88,041 22,818 Adjusted Net Income $461,103 $480,319 $450,699 $370,341 $321,722 $198,264 Fixed Charges: Interest and Amortization of Debt Discount and Expense and Premium on all Indebtedness $206,243 $204,205 $199,415 $200,848 $213,616 $194,656 Capitalized Interest 13,110 12,427 16,167 13,800 20,953 25,748 Interest Factor in Rentals 2,079 2,011 2,144 2,033 1,801 1,840 Total Fixed Charges $221,432 $218,643 $217,726 $216,681 $236,370 $222,244 Preferred and Preference Dividend Requirements: (1) Preferred and Preference Dividends $ 39,843 $ 39,922 $ 41,839 $ 42,247 $ 42,746 $ 40,261 Income Tax Required 18,722 19,075 18,763 16,729 15,916 5,166 Total Preferred and Preference Dividend Requirements $ 58,565 $ 58,997 $ 60,602 $ 58,976 $ 58,662 $ 45,427 Total Fixed Charges and Preferred and Preference Dividend Requirements $279,997 $277,640 $278,328 $275,657 $295,032 $267,671 Earnings (2) $669,425 $686,535 $652,258 $573,222 $537,139 $394,760 Ratio of Earnings to Fixed Charges 3.02 3.14 3.00 2.65 2.27 1.78 Ratio of Earnings to Combined Fixed Charges and Preferred and Preference Dividend Requirements 2.39 2.47 2.34 2.08 1.82 1.47 (1) Preferred and preference dividend requirements consist of an amount equal to the pre-tax earnings that would be required to meet dividend requirements on preferred stock and preference stock. (2) Earnings are deemed to consist of net income that includes earnings of BGE's consolidated subsidiaries, equity in the net income of BGE's unconsolidated subsidiary, income taxes (including deferred income taxes and investment tax credit adjustments), and fixed charges other than capitalized interest.
EX-27 6
UT 1,000 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 PER-BOOK 5,418,646 1,189,014 639,389 857,702 0 8,104,751 1,425,391 0 1,317,497 2,725,440 279,500 209,185 2,579,841 0 0 27,800 272,646 61,500 0 0 1,948,839 8,104,751 715,251 32,616 567,092 599,708 115,543 3,898 119,441 48,588 70,853 9,951 60,902 56,060 54,977 197,788 .41 .41
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