AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 21, 2003
REGISTRATION NO. 333-110348
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
CENTERPOINT ENERGY, INC.
(Exact name of registrant as specified in its charter)
TEXAS 1111 LOUISIANA 74-0694415
(State or other jurisdiction of HOUSTON, TEXAS 77002 (I.R.S. Employer
incorporation or organization) (713) 207-1111 Identification No.)
(Address, including zip code, and telephone
number, including area code, of
registrant's principal executive offices)
--------------------------
RUFUS S. SCOTT
VICE PRESIDENT, DEPUTY GENERAL COUNSEL AND ASSISTANT CORPORATE SECRETARY
1111 LOUISIANA
HOUSTON, TEXAS 77002
(713) 207-1111
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
COPY TO:
GERALD M. SPEDALE
BAKER BOTTS L.L.P.
910 LOUISIANA, ONE SHELL PLAZA
HOUSTON, TEXAS 77002-4995
(713) 229-1234
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended (the "Securities Act"), other than securities offered only
in connection with dividend or interest reinvestment plans, check the following
box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
The information in this prospectus is not complete and may be changed. The
selling security holders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION DATED NOVEMBER 21, 2003
PROSPECTUS
[CENTERPOINT ENERGY LOGO]
$575,000,000
3.75% Convertible Senior Notes due 2023
and
Common Stock Issuable Upon Conversion of the Notes
This prospectus relates to $575,000,000 aggregate principal amount of
our 3.75% Convertible Senior Notes Due 2023. We originally issued and sold the
notes to Citigroup Global Markets Inc., Banc of America Securities LLC, J.P.
Morgan Securities Inc., Deutsche Bank Securities Inc., Credit Suisse First
Boston LLC, Wachovia Securities, Inc., ABN AMRO Rothschild LLC, Barclays Capital
Inc., Commerzbank Capital Markets Corp. and RBC Dain Rauscher Inc. in a private
placement in May 2003. This prospectus will be used by selling security holders
to resell their notes and the common stock issuable upon conversion of the
notes.
The notes will bear interest at the rate of 3.75% per year. Interest on
the notes will be payable on May 15 and November 15 of each year, beginning on
November 15, 2003. Beginning with the six-month interest period commencing on
May 15, 2008, we will pay contingent interest during a six-month interest period
if the average trading price of a note is above a specified level during a
specified period prior to such six-month interest period as described in this
prospectus.
The notes are convertible by holders into shares of our common stock at
an initial conversion rate of 86.3558 shares of our common stock per $1,000
principal amount of notes (subject to adjustment in certain events), which is
equal to an initial conversion price of $11.58 per share, under the following
circumstances: (1) if the price of our common stock issuable upon conversion
reaches specified thresholds described in this prospectus, (2) if we call the
notes for redemption, (3) upon the occurrence of specified corporate
transactions described in this prospectus or (4) if the credit ratings assigned
to the notes decline below the levels described in this prospectus.
The notes will mature on May 15, 2023. We may redeem some or all of the
notes at any time on or after May 15, 2008. The redemption prices are described
under the caption "Description of the Notes -- Optional Redemption."
The notes will be unsecured and will rank equally with all of our other
unsecured and unsubordinated indebtedness from time to time outstanding. Holders
will have the right to require us to purchase the notes at a purchase price
equal to 100% of the principal amount of the notes plus accrued and unpaid
interest, including contingent interest and additional amounts, if any, on May
15, 2008, May 15, 2013 and May 15, 2018 or upon a fundamental change as
described in this prospectus.
The notes will be treated as contingent payment debt instruments that
will be subject to special United States federal income tax rules. For
discussion of the special tax rules governing contingent payment debt
instruments, see "Material United States Federal Income Tax Considerations."
Our common stock is listed on the New York Stock Exchange under the
symbol "CNP." The last reported sales price of our common stock on the New York
Stock Exchange on November 20, 2003 was $9.59 per share.
The notes trade in the Private Offerings, Resales and Trading through
Automatic Linkages Market commonly referred to as the Portal Market; however,
the notes resold pursuant to this prospectus will no longer trade in the Portal
Market.
INVESTING IN THE NOTES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 10.
We will not receive any of the proceeds from the sale of the notes or
shares of common stock by any of the selling security holders. The notes and the
shares of common stock may be offered and sold from time to time directly from
the selling security holders or alternatively through underwriters of
broker-dealers or agents. The notes and the shares of common stock may be sold
in one or more transactions at fixed prices, at the prevailing market prices at
the time of sale, at varying prices determined at the time of sale, or at
negotiated prices. See "Plan of Distribution."
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED WHETHER
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is , 2003.
1
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING
AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU
SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE
FRONT OF THAT DOCUMENT. ANY INFORMATION WE HAVE INCORPORATED BY REFERENCE IS
ACCURATE ONLY AS OF THE DATE OF THE DOCUMENT INCORPORATED BY REFERENCE.
TABLE OF CONTENTS
Page
----
WHERE YOU CAN FIND MORE INFORMATION.............................................................................. 2
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION....................................................... 4
PROSPECTUS SUMMARY............................................................................................... 6
RISK FACTORS..................................................................................................... 10
RATIOS OF EARNINGS TO FIXED CHARGES.............................................................................. 13
USE OF PROCEEDS.................................................................................................. 13
DESCRIPTION OF THE NOTES......................................................................................... 14
DESCRIPTION OF OUR CAPITAL STOCK................................................................................. 37
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS......................................................... 44
SELLING SECURITY HOLDERS......................................................................................... 51
PLAN OF DISTRIBUTION............................................................................................. 56
VALIDITY OF SECURITIES........................................................................................... 59
EXPERTS.......................................................................................................... 59
WHERE YOU CAN FIND MORE INFORMATION
We file reports and other information with the SEC. You may read and
copy any document we file with the SEC at the SEC's public reference room
located at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
further information regarding the operation of the SEC's public reference room
by calling the SEC at 1-800-SEC-0330. Our filings are also available to the
public on the SEC's Internet site located at http://www.sec.gov.
This prospectus is part of a registration statement we have filed with
the SEC relating to the notes and the common stock issuable upon conversion
thereof. As permitted by SEC rules, this prospectus does not contain all of the
information we have included in the registration statement and the accompanying
exhibits and schedules we file with the SEC. You may refer to the registration
statement, the exhibits and the schedules for more information about us and our
securities. The registration statement, exhibits and schedules are available at
the SEC's public reference room or through its Web site.
We have obtained a no-action letter from the SEC which provides that we
will be treated as the successor of Reliant Energy, Incorporated for financial
reporting purposes under the Securities Exchange Act of 1934. We are
"incorporating by reference" into this prospectus information we file with the
SEC. This means we are disclosing important information to you by referring you
to the documents containing the information. The information we incorporate by
reference is considered to be part of this prospectus. Information that we file
later with the SEC that is deemed incorporated by reference into this prospectus
(but not information deemed to be furnished to and not filed with the SEC) will
automatically update and supersede information previously included.
We are incorporating by reference into this prospectus the documents
listed below and any subsequent filings we make with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (excluding
information deemed to be furnished and not filed with the SEC) until all the
securities are sold:
- our Annual Report on Form 10-K for the year ended December 31,
2002 (our "2002 Form 10-K"),
- our Current Report on Form 8-K filed January 7, 2003,
2
- Item 5 of our Current Report on Form 8-K filed February 13,
2003,
- our Current Report on Form 8-K filed March 3, 2003,
- our Current Reports on Form 8-K filed March 27, 2003,
- our Quarterly Report on Form 10-Q for the period ended March
31, 2003,
- our Current Report on Form 8-K filed April 23, 2003,
- Item 5 of our Current Report on Form 8-K filed April 24, 2003,
- Item 5 of our Current Report on Form 8-K filed May 1, 2003,
- our Current Report on Form 8-K filed May 12, 2003,
- our Current Report on Form 8-K filed May 16, 2003,
- our Current Report on Form 8-K filed May 30, 2003,
- our Current Report on Form 8-K filed June 3, 2003,
- our Current Reports on Form 8-K filed June 20, 2003,
- our Quarterly Report on Form 10-Q for the period ended June
30, 2003,
- Item 5 of our Current Report on Form 8-K filed July 29, 2003,
- Item 5 of our Current Report on Form 8-K filed September 3,
2003,
- our Current Reports on Form 8-K filed September 10, 2003,
- Item 5 of our Current Report on Form 8-K filed September 18,
2003,
- our Current Report on Form 8-K filed September 25, 2003,
- our Quarterly Report on Form 10-Q for the period ended
September 30, 2003 (the "Third Quarter 2003 Form 10-Q"),
- Item 5 of our Current Report on Form 8-K filed October 21,
2003,
- our Current Report on Form 8-K filed November 5, 2003,
- our Current Report on Form 8-K filed November 7, 2003 (the
"November 7, 2003 Form 8-K"), and
- the description of our common stock (including the related
preferred share purchase rights) contained in our Current
Report on Form 8-K filed September 6, 2002, as we may update
that description from time to time.
Our November 7, 2003 Form 8-K contains the Selected Financial Data,
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Financial Statements and Supplementary Data of CenterPoint Energy
from our 2002 Form 10-K with revisions for certain reclassifications and other
items.
3
You may also obtain a copy of our filings with the SEC at no cost by
writing to or telephoning us at the following address:
CenterPoint Energy, Inc.
Attn: Investor Services
P.O. Box 4567
Houston, Texas 77210-4567
(713) 207-1111
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
From time to time we make statements concerning our expectations,
beliefs, plans, objectives, goals, strategies, future events or performance and
underlying assumptions and other statements that are not historical facts. These
statements are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Actual results may differ materially
from those expressed or implied by these statements. In some cases, you can
identify our forward-looking statements by the words "anticipate," "believe,"
"continue," "could," "estimate," "expect," "forecast," "goal," "intend," "may,"
"objective," "plan," "potential," "predict," "projection," "should," "will" or
other similar words.
We have based our forward-looking statements on our management's
beliefs and assumptions based on information available to our management at the
time the statements are made. We caution you that assumptions, beliefs,
expectations, intentions and projections about future events may and often do
vary materially from actual results. Therefore, we cannot assure you that actual
results will not differ materially from those expressed or implied by our
forward-looking statements.
The following are some of the factors that could cause actual results
to differ materially from those expressed or implied in forward-looking
statements:
- state and federal legislative and regulatory actions or
developments, including deregulation, re-regulation and
restructuring of the electric utility industry, constraints
placed on our activities or business by the Public Utility
Holding Company Act of 1935, as amended ("1935 Act"), changes
in or application of laws or regulations applicable to other
aspects of our business and actions with respect to:
- recovery of stranded costs,
- allowed rates of return,
- rate structures,
- recovery of investments, and
- operation and construction of facilities,
- non-payment for our services due to financial distress of our
customers, including Reliant Resources, Inc. ("Reliant
Resources"),
- the successful and timely completion of the monetization of
our interest in Texas Genco Holdings, Inc.,
- industrial, commercial and residential growth in our service
territory and changes in market demand and demographic
patterns,
- the timing and extent of changes in commodity prices,
particularly natural gas,
- changes in interest rates,
- weather variations and other natural phenomena,
4
- commercial bank and financial market conditions, our access to
capital, the cost of such capital, receipt of certain
approvals under the 1935 Act, and the results of our financing
and refinancing efforts, including availability of funds in
the debt capital markets,
- actions by rating agencies,
- inability of various counterparts to meet their obligations to
us,
- changes in technology
- acts of terrorism or war, including any direct or indirect
effect on our business resulting from terrorist attacks such
as occurred on September 11, 2001 or any similar incidents or
responses to those incidents,
- the availability and price of insurance,
- the outcome of the pending lawsuits against us, Reliant
Energy, Incorporated and Reliant Resources,
- the ability of Reliant Resources to satisfy its indemnity
obligations to us,
- the reliability of the systems, procedures and other
infrastructure necessary to operate the retail electric
business in our service territory, including the systems owned
and operated by the independent system operator in the market
served by the Electric Reliability Council of Texas, Inc.,
- political, legal, regulatory and economic conditions and
developments in the United States, and
- other factors we discuss in "Risk Factors" beginning on page
62 of our Third Quarter 2003 Form 10-Q.
Other risk factors are described in other documents we file with the
SEC and incorporate by reference in this prospectus.
You should not place undue reliance on forward-looking statements. Each
forward-looking statement speaks only as of the date of the particular
statement.
5
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. This summary is not complete and does not contain all the
information that you should consider regarding CenterPoint Energy, Inc. and your
investment in the notes. You should read carefully the entire prospectus,
including the risk factors, financial data and financial statements included or
incorporated by reference herein and the other documents incorporated by
reference in this prospectus.
Unless the context requires otherwise, the terms "CenterPoint Energy,"
"our company," "we," "our," "ours" and "us" refer to CenterPoint Energy, Inc.;
the term "CenterPoint Houston" refers to CenterPoint Energy Houston Electric,
LLC, our electric utility subsidiary; the term "CERC" refers to CenterPoint
Energy Resources Corp., our gas distribution and pipelines and gathering
subsidiary. We refer to our 3.75% Convertible Senior Notes due 2023 offered by
this prospectus as the "notes."
OUR COMPANY
GENERAL
We are a public utility holding company. Our indirect wholly owned
subsidiaries include (i) CenterPoint Houston, which engages in electric
transmission and distribution in a 5,000-square mile area of the Texas Gulf
Coast that includes Houston, and (ii) CERC, which owns gas distribution systems
that together form one of the United States' largest natural gas distribution
operations in terms of the number of customers served. Through wholly owned
subsidiaries, CERC also owns two interstate natural gas pipelines and gas
gathering systems and provides various ancillary services. We also have an
approximately 81% ownership interest in Texas Genco Holdings, Inc. ("Texas
Genco"), which owns and operates electric generating plants in Texas. We
distributed approximately 19% of the outstanding common stock of Texas Genco to
our shareholders on January 6, 2003.
We are a registered public utility holding company under the Public
Utility Holding Company Act of 1935 ("1935 Act"). The 1935 Act and related rules
and regulations impose a number of restrictions on our activities and those of
our subsidiaries. The 1935 Act, among other things, limits our ability and the
ability of our subsidiaries to issue debt and equity securities without prior
authorization, restricts the source of dividend payments to current and retained
earnings without prior authorization, regulates sales and acquisitions of
certain assets and businesses and governs affiliate transactions.
Our executive offices are located at 1111 Louisiana, Houston, Texas
77002 (telephone number 713-207-1111).
6
THE OFFERING
For a more complete description of the terms of the notes, see
"Description of the Notes" beginning on page 14.
Issuer.............................. CenterPoint Energy, Inc.
Securities Offered.................. $575,000,000 aggregate principal amount of
3.75% Convertible Senior Notes due 2023.
Maturity............................ May 15, 2023.
Interest............................ 3.75% per annum on the principal amount,
payable semiannually in arrears on each
May 15 and November 15, beginning November
15, 2003. We will also pay contingent
interest and additional amounts on the
notes under the circumstances described in
this prospectus.
Ranking............................. The notes will be unsecured and will rank
equally in right of payment with all of
CenterPoint Energy's other existing and
future unsecured and unsubordinated
indebtedness. The notes will not have the
benefit of collateral granted to all
CenterPoint Energy's existing secured debt
and are effectively subordinated to
existing and future indebtedness and other
liabilities of CenterPoint Energy's
subsidiaries. As discussed in the
"Description of the Notes" section
beginning on page 14, as of October 31,
2003, CenterPoint Energy, on an
unconsolidated basis, had $5.3 billion
aggregate principal amount of outstanding
indebtedness, including $1.8 billion
secured by the stock of Texas Genco and
$924 million secured by mortgage bonds of
CenterPoint Houston.
Contingent Interest................. We will make additional payments of
interest, referred to in this prospectus
as "contingent interest," during any
six-month period from May 15 to November
14 or from November 15 to May 14
commencing on or after May 15, 2008 for
which the average trading price of the
notes for the applicable five trading day
reference period equals or exceeds 120% of
the principal amount of the notes as of
the day immediately preceding the first
day of the applicable six-month interest
period. The amount of contingent interest
payable per note in respect of any
six-month period will be equal to 0.25% of
the average trading price of a note for
the applicable five trading day reference
period. The five trading day reference
period means the five trading days ending
on the second trading day immediately
preceding the relevant six-month interest
period. For more information about
contingent interest, see "Description of
the Notes -- Contingent Interest"
beginning on page 15.
Conversion Rights................... Holders may convert their notes into
shares of our common stock under any of
the following circumstances:
(1) during any calendar quarter (and
only during such calendar quarter)
if the last reported sale price of
our common stock for at least 20
trading days during the period of
30 consecutive trading days ending
on the last trading day of the
previous calendar quarter, is
greater than or equal to 120% or,
following May 15, 2008, 110% of the
conversion price per share of our
common stock on such last trading
day, or
(2) if the notes have been called for
redemption, or
7
(3) upon the occurrence of specified
corporate transactions described
under "Description of the Notes --
Conversion Rights -- Conversion
Upon Specified Corporate
Transactions" on page 18, or
(4) during any period in which the
credit ratings assigned to the
notes by both Moody's and S&P are
lower than Ba2 and BB,
respectively, or the notes are no
longer rated by at least one of
these rating services or their
successors.
For each $1,000 principal amount of notes
surrendered for conversion, you will
receive 86.3558 shares of our common
stock. This represents an initial
conversion price of $11.58 per share of
common stock. As described in this
prospectus, the conversion rate may be
adjusted for certain reasons, but it will
not be adjusted for accrued and unpaid
interest. Except as otherwise described in
this prospectus, you will not receive any
payment representing accrued and unpaid
interest upon conversion of a note;
however, we will continue to pay
additional amounts, if any, on the notes
and the common stock issuable upon
conversion thereof to the holder in
accordance with the registration rights
agreement. Notes called for redemption may
be surrendered for conversion prior to the
close of business on the second business
day immediately preceding the redemption
date.
Optional Redemption................. Prior to May 15, 2008, the notes will not
be redeemable. On or after May 15, 2008,
we may redeem for cash all or part of the
notes at any time, upon not less than 30
nor more than 60 days' notice before the
redemption date by mail to the trustee
under the indenture under which the notes
have been issued, the paying agent and
each holder of notes, for a price equal to
100% of the principal amount of the notes
to be redeemed plus any accrued and unpaid
interest, including contingent interest,
if any, and additional amounts owed, if
any, to the redemption date. See
"Description of the Notes -- Optional
Redemption" on page 16.
Purchase of Notes by Us at the
Option of the Holder................ Holders have the right to require us to
purchase all or any portion of the notes
for cash on May 15, 2008, May 15, 2013 and
May 15, 2018. In each case, we will pay a
purchase price equal to 100% of the
principal amount of the notes to be
purchased plus any accrued and unpaid
interest, including contingent interest,
if any, and additional amounts owed, if
any, to such purchase date. See
"Description of the Notes -- Purchase of
Notes by Us at the Option of the Holder"
beginning on page 20.
Fundamental Change.................. If we undergo a Fundamental Change (as
defined under "Description of the Notes --
Fundamental Change Requires Purchase of
Notes by Us at the Option of the Holder"
beginning on page 21) prior to May 15,
2008, holders will have the right, at
their option, to require us to purchase
any or all of their notes for cash, or any
portion of the principal amount thereof
that is equal to $1,000 or an integral
multiple of $1,000. The cash price we are
required to pay is equal to 100% of the
principal amount of the notes to be
purchased plus accrued and unpaid
interest, including contingent interest,
if any, and additional amounts owed, if
any, to the Fundamental Change purchase
date. See "Description of the Notes --
Fundamental Change Requires Purchase of
Notes by Us at the Option of the Holder"
beginning on page 21.
Significant Covenants............... The notes have been issued under an
indenture containing certain restrictive
covenants for your benefit. These
covenants, which are described under
"Description of the Notes" beginning on
page 14, restrict our ability, with
certain exceptions, to:
8
- incur certain debt secured by
liens, and
- merge, consolidate or transfer
substantially all of our assets.
Use of Proceeds..................... We will not receive any proceeds from the
sale by the selling security holders of
the notes or the common stock issuable
upon conversion thereof. See "Use of
Proceeds" on page 13.
Trustee, Paying Agent
and Conversion Agent................ JPMorgan Chase Bank.
Risk Factors........................ You should consider carefully all of the
information set forth and incorporated by
reference in this prospectus and, in
particular, you should evaluate the
specific factors set forth under "Risk
Factors" beginning on page 10 before
deciding whether to invest in the notes.
U.S. Federal Income Tax
Considerations...................... We and each holder agree in the indenture
to treat the notes as contingent payment
debt instruments for U.S. federal income
tax purposes. As a holder of notes, you
will agree to accrue original issue
discount on a constant yield to maturity
basis at a rate comparable to the rate at
which we would borrow in a noncontingent,
nonconvertible borrowing, 5.81%,
compounded semi-annually, even though the
notes will have a significantly lower
stated yield to maturity. You may
recognize taxable income in each year
significantly in excess of interest
payments (whether fixed or contingent)
actually received that year. Additionally,
you will generally be required to
recognize ordinary income on the gain, if
any, realized on a sale, exchange,
conversion or redemption of the notes. In
the case of a conversion, this gain will
be measured by the fair market value of
the stock received. A summary of the
United States federal income tax
consequences of ownership of the notes and
our common stock is described in this
prospectus under the heading "Material
United States Federal Income Tax
Considerations" beginning on page 44.
Owners of the notes should consult their
tax advisors as to the United States
federal, state, local or other tax
consequences of acquiring, owning and
disposing of the notes and our common
stock.
Governing Law....................... The indenture and the notes will be
governed by, and construed in accordance
with, the laws of the State of New York.
Book-Entry Form..................... The notes were issued in book-entry form
and are represented by permanent global
certificates deposited with, or on behalf
of, The Depository Trust Company ("DTC")
and registered in the name of a nominee of
DTC. Beneficial interests in any of the
notes are shown on, and transfers will be
effected only through, records maintained
by DTC or its nominee and any such
interest may not be exchanged for
certificated securities, except in limited
circumstances.
Listing............................. The notes sold in the initial placement to
qualified institutional buyers are
eligible for trading on the Private
Offerings, Resales and Trading through
Automatic Linkages Market commonly
referred to as the Portal Market; however,
the notes resold pursuant to this
prospectus will no longer be eligible for
trading on the Portal Market. We do not
intend to apply for listing of the notes
on any securities exchange or for
inclusion of the notes in any automated
quotation system. Our common stock is
traded on the New York Stock Exchange
under the symbol "CNP."
9
RISK FACTORS
In addition to the information contained elsewhere in this prospectus
and the risk factors associated with our business set forth in our Third Quarter
2003 Form 10-Q and the other documents incorporated by reference herein, the
following risk factors should be considered carefully by each prospective
investor before making an investment decision.
RISKS RELATED TO THE NOTES
THE MARKET PRICE OF THE NOTES COULD BE SIGNIFICANTLY AFFECTED BY THE
MARKET PRICE OF OUR COMMON STOCK.
We expect that the market price of our notes will be significantly
affected by the market price of our common stock. This may result in greater
volatility in the market price of the notes than would be expected for
nonconvertible debt securities. The market price of our common stock will likely
continue to fluctuate in response to factors including the following, many of
which are beyond our control:
- quarterly fluctuations in our operating and financial results,
- changes in financial estimates and recommendations by
financial analysts,
- changes in the ratings of our notes or other securities,
- developments related to litigation or regulatory proceedings
involving us,
- fluctuations in the stock price and operating results of our
competitors,
- dispositions, acquisitions and financings, and
- general conditions in the industries in which we operate.
In addition, the stock markets in general, including the New York Stock
Exchange, recently have experienced significant price and trading fluctuations.
These fluctuations have resulted in volatility in the market prices of
securities that often has been unrelated or disproportionate to changes in
operating performance. These broad market fluctuations may affect adversely the
market prices of our notes and our common stock.
WE CANNOT ASSURE YOU THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE
NOTES.
There is currently no public market for the notes. Although the notes
sold to qualified institutional buyers under Rule 144A are eligible for trading
on the Portal Market, the notes resold pursuant to this prospectus will no
longer be eligible for trading on the Portal Market. As a result, there may be a
limited market for the notes. We do not intend to apply for listing of the notes
on any securities exchange or for the inclusion of the notes in any automated
quotation system. Accordingly, we cannot predict whether an active trading
market for the notes will develop or be sustained. If an active market for the
notes fails to develop or be sustained, the trading price of the notes could
fall. If an active trading market were to develop, the notes could trade at
prices that may be lower than the initial offering price of the notes. In
addition, the market price for the notes may be adversely affected by changes in
our financial performance, changes in the overall market for similar securities
and performance or prospects for companies in our industry.
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO PURCHASE
THE NOTES UPON A FUNDAMENTAL CHANGE OR OTHER PURCHASE DATE, AS REQUIRED
BY THE INDENTURE GOVERNING THE NOTES.
On May 15, 2008, May 15, 2013 and May 15, 2018, holders of the notes
may require us to purchase their notes for cash. In addition, holders of the
notes also may require us to purchase their notes upon a Fundamental Change as
described under "Description of the Notes -- Fundamental Change Requires
Purchase of Notes by Us at the Option of the Holder." A Fundamental Change also
may constitute an event of default, and result in the acceleration of the
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maturity of our then existing indebtedness, under another indenture or other
agreement. We cannot assure you that we would have sufficient financial
resources, or would be able to arrange financing, to pay the purchase price for
the notes tendered by holders. Failure by us to purchase the notes when required
will result in an event of default with respect to the notes.
YOU SHOULD CONSIDER THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
OF OWNING THE NOTES.
We intend to treat the notes as indebtedness for United States federal
income tax purposes and intend to take the position that the notes will be
subject to the special regulations governing contingent payment debt instruments
(which we refer to as the "CPDI regulations"). Notwithstanding the issuance of a
recent revenue ruling, the application of the CPDI regulations to instruments
such as the notes is uncertain in several respects, and, as a result, no
assurance can be given that the Internal Revenue Service or a court will agree
with the treatment described herein, and no ruling will be obtained from the
Internal Revenue Service concerning the application of the CPDI regulations to
the notes. Any differing treatment could affect the amount, timing and character
of income, gain or loss in respect of an investment in the notes. In particular,
a holder might be required to accrue interest income at a higher or lower rate,
might not recognize income, gain or loss upon conversion of the notes into
shares of our common stock, and might recognize capital gain or loss upon a
taxable disposition of the notes. Please read "Material United States Federal
Income Tax Considerations" in this prospectus.
THE NOTES WILL BE EFFECTIVELY SUBORDINATED TO EXISTING AND FUTURE
INDEBTEDNESS AND OTHER LIABILITIES OF OUR SUBSIDIARIES.
We derive substantially all our operating income from, and hold
substantially all our assets through, our subsidiaries. As a result, we will
depend on distributions from our subsidiaries in order to meet our payment
obligations under any debt securities, including the notes and our other
obligations. In general, these subsidiaries are separate and distinct legal
entities and will have no obligation to pay any amounts due on our debt
securities or to provide us with funds for our payment obligations, whether by
dividends, distributions, loans or otherwise. In addition, provisions of
applicable law, such as those limiting the legal sources of dividends and those
under the 1935 Act, limit their ability to make payments or other distributions
to us, and they could agree to contractual restrictions on their ability to make
distributions. For a discussion of restrictions under the 1935 Act, please read
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of CenterPoint Energy and Subsidiaries -- Liquidity and Capital
Resources -- Future Sources and Uses of Cash Flows -- Certain Contractual and
Regulatory Limits on Ability to Issue Securities" in Item 2 of Part I of our
Third Quarter 2003 Form 10-Q.
Our right to receive any assets of any subsidiary, and therefore the
right of our creditors to participate in those assets, will be effectively
subordinated to the claims of that subsidiary's creditors, including trade
creditors. In addition, even if we were a creditor of any subsidiary, our rights
as a creditor would be subordinated to any security interest in the assets of
that subsidiary and any indebtedness of the subsidiary senior to that held by
us. Excluding subsidiaries issuing trust preferred securities and transition
bonds, as of October 31, 2003, our subsidiaries had approximately $5.1 billion
aggregate principal amount of external indebtedness, of which approximately $2.7
billion is secured, as well as other liabilities.
IF YOU HOLD NOTES, YOU WILL NOT BE ENTITLED TO ANY RIGHTS WITH RESPECT
TO OUR COMMON STOCK, BUT YOU WILL BE SUBJECT TO ALL CHANGES MADE WITH
RESPECT TO OUR COMMON STOCK.
If you hold notes, you will not be entitled to any rights with respect
to our common stock (including, without limitation, voting rights and rights to
receive any dividends or other distributions on our common stock), but you will
be subject to all changes affecting the common stock. You will only be entitled
to rights on the common stock if and when we deliver shares of common stock to
you upon conversion of your notes and in limited cases under the conversion rate
adjustments of the notes. For example, in the event that an amendment is
proposed to our articles of incorporation or by-laws requiring shareholder
approval and the record date for determining the shareholders of record entitled
to vote on the amendment occurs prior to delivery of the common stock, you will
not be entitled to vote on the amendment, although you will nevertheless be
subject to any changes in the powers, preferences or special rights of our
common stock.
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WE MAY ISSUE ADDITIONAL SHARES OF COMMON STOCK AND THEREBY MATERIALLY
AND ADVERSELY AFFECT THE PRICE OF OUR COMMON STOCK.
We are not restricted from issuing additional common stock during the
life of the notes and have no obligation to consider your interests for any
reason. If we issue additional shares of common stock, it may materially and
adversely affect the price of our common stock and, in turn, the price of the
notes.
OUR ARTICLES OF INCORPORATION AND BYLAW PROVISIONS, AND SEVERAL OTHER
FACTORS, COULD LIMIT ANOTHER PARTY'S ABILITY TO ACQUIRE US AND COULD
DEPRIVE YOU OF THE OPPORTUNITY TO OBTAIN A TAKEOVER PREMIUM FOR YOUR
SHARES OF COMMON STOCK.
A number of provisions that are in our articles of incorporation and
bylaws will make it difficult for another company to acquire us and for you to
receive any related takeover premium for our common stock. See "Description of
Our Capital Stock -- Anti-Takeover Effects of Texas Laws and Our Charter and
Bylaw Provisions" and "Description of Our Capital Stock -- Shareholder Rights
Plan."
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RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth ratios of earnings to fixed charges for
each of the periods indicated, calculated pursuant to SEC rules. Earnings from
continuing operations in 2002 and the nine months ended September 30, 2003
include $697 million and $455 million, respectively, of non-cash ECOM true-up.
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------- -------------
1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
Ratio of earnings from continuing
operations to fixed charges........... (1) 5.38 1.80 2.18 1.70 1.75
-------------
(1) In 1998, earnings were inadequate to cover fixed charges by approximately
$232 million. This deficiency results from the $1.2 billion non-cash,
unrealized loss recorded for our 7% Automatic Common Exchange Securities.
Excluding the effect of the non-cash, unrealized loss, the ratio of
earnings from continuing operations to fixed charges would have been 3.29.
USE OF PROCEEDS
We will not receive any proceeds from the sale by the selling security
holders of the notes or the common stock issuable upon their conversion.
We issued $575,000,000 aggregate principal amount of the notes on May
19, 2003. We issued the notes to the initial purchasers in a private placement.
We used the proceeds from this financing to repay a portion of the borrowings
under our credit facility.
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DESCRIPTION OF THE NOTES
We issued the notes under an indenture dated as of May 19, 2003 between
us and JPMorgan Chase Bank, as trustee, as supplemented. The descriptions under
this heading are summaries of the material provisions of the notes and the
indenture. Such summaries do not purport to be complete and are qualified in
their entirety by reference to the indenture and the notes. For a complete
description of the notes, you should refer to the indenture and the supplemental
indenture establishing the terms of the notes, which we have filed with the SEC.
References to article and section numbers in this prospectus, unless otherwise
indicated, are references to article and section numbers of the indenture. For
purposes of this summary, the terms "we," "our," "ours" and "us" refer only to
CenterPoint Energy, Inc. and not to any of our subsidiaries.
We may issue debt securities from time to time in one or more series
under the indenture. There is no limitation on the amount of debt securities we
may issue under the indenture. In addition to the notes, our 5.875% Senior Notes
due 2008 ($200,000,000 outstanding), our 6.85% Senior Notes due 2015
($200,000,000 outstanding) and our 7.25% Senior Notes due 2010 ($200,000,000
outstanding) are currently outstanding under the indenture.
GENERAL
The notes will mature on May 15, 2023. The notes are issued only in
denominations of $1,000 principal amount and integral multiples of $1,000
principal amount. The notes are limited to $575,000,000 in aggregate principal
amount.
The notes:
- are general unsecured obligations,
- rank equally in right of payment with all of our other
existing and future unsecured and unsubordinated indebtedness,
and
- with respect to the assets and earnings of our subsidiaries,
effectively rank below all of the liabilities of our
subsidiaries.
As of October 31, 2003, CenterPoint Energy, on an unconsolidated basis,
had approximately $5.3 billion aggregate principal amount of outstanding
indebtedness. Of this indebtedness, approximately $1.8 billion is secured by the
stock of Texas Genco and approximately $924 million of obligations relating to
pollution control bonds issued on CenterPoint Energy's behalf are secured by
general mortgage bonds and first mortgage bonds of CenterPoint Houston.
Excluding subsidiaries issuing trust preferred securities and transition bonds,
as of October 31, 2003, our subsidiaries had approximately $5.1 billion
aggregate principal amount of external indebtedness, of which approximately $2.7
billion is secured, as well as other liabilities.
STRUCTURAL SUBORDINATION
We are a holding company that conducts substantially all of our
operations through our subsidiaries. Our only significant assets are the capital
stock of our subsidiaries, and our subsidiaries generate substantially all of
our operating income and cash flow. As a result, dividends or advances from our
subsidiaries are the principal source of funds necessary to meet our debt
service obligations. Contractual provisions or laws, including the 1935 Act, as
well as our subsidiaries' financial condition and operating requirements, may
limit our ability to obtain cash from our subsidiaries that we may require to
pay our debt service obligations, including payments on the notes. In addition,
the notes will be effectively subordinated to all of the liabilities of our
subsidiaries with regard to the assets and earnings of our subsidiaries.
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INTEREST
Interest on the notes will:
- accrue at the rate of 3.75% per year from May 19, 2003,
- be payable semi-annually in arrears on each May 15 and
November 15, beginning November 15, 2003,
- be payable to the person in whose name the notes are
registered at the close of business on the May 1 and November
1 immediately preceding the applicable interest payment date,
which we refer to with respect to the notes as "regular record
dates,"
- be computed on the basis of a 360-day year comprised of twelve
30-day months, and
- be payable on overdue interest to the extent permitted by law
at the same rate as interest is payable on principal.
If any interest payment date, the maturity date, or any redemption date
or purchase date (including upon the occurrence of a Fundamental Change, as
described below) falls on a day that is not a business day, the required payment
will be made on the next succeeding business day with the same force and effect
as if made on the relevant interest payment date, maturity date, redemption date
or purchase date and no additional amounts will accrue on that payment for the
period from and after the interest payment date, maturity date, redemption date
or purchase date (including upon the occurrence of a Fundamental Change), as the
case may be, to the date of that payment on the next succeeding business day.
The term "business day" means, with respect to any note, any day other than a
Saturday, a Sunday or a day on which banking institutions in The City of New
York are authorized or required by law, regulation or executive order to close.
In addition, we will pay contingent interest and additional amounts on
the notes under the circumstances described below under " -- Contingent
Interest" and " -- Registration Rights."
CONTINGENT INTEREST
We will pay contingent interest to the holders of notes during any
six-month period from May 15 to November 14 or from November 15 to May 14
commencing on or after May 15, 2008 for which the average trading price of a
note for the applicable five trading day reference period equals or exceeds 120%
of the principal amount of the note as of the day immediately preceding the
first day of the applicable six-month interest period. The five trading day
reference period means the five trading days ending on the second trading day
immediately preceding the relevant six-month interest period.
During any period when contingent interest shall be payable, the
contingent interest payable per note in respect of any six-month period will
equal 0.25% of the average trading price of the note for the applicable five
trading day reference period.
The record date and payment date for contingent interest, if any, will
be the same as the regular record date and payment date for the semi-annual
interest payments on the notes.
The "trading price" of the notes on any date of determination means the
average of the secondary market bid quotations per $1,000 principal amount of
notes obtained by the bid solicitation agent for $10 million principal amount of
notes at approximately 4:00 p.m., New York City time, on such determination date
from three unaffiliated, nationally recognized securities dealers we select,
provided that if:
- at least three such bids are not obtained by the bid
solicitation agent, or
- in our reasonable judgment, the bid quotations are not
indicative of the secondary market value of the notes,
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then the trading price of the notes will equal (a) the then applicable
conversion rate of the notes multiplied by (b) the average last reported sale
price of our common stock for the five trading days ending on such determination
date.
The "last reported sale price" of our common stock on any date means
the closing sale price per share (or, if no closing sale price is reported, the
average of the bid and ask prices or, if more than one in either case, the
average of the average bid and the average asked prices) on that date as
reported in composite transactions for the principal U.S. securities exchange on
which our common stock is traded or, if our common stock is not listed on a U.S.
national or regional securities exchange, as reported by the Nasdaq National
Market.
If our common stock is not listed for trading on a U.S. national or
regional securities exchange and not reported by the Nasdaq National Market on
the relevant date, the "last reported sale price" will be the last quoted bid
price for our common stock in the over-the-counter market on the relevant date
as reported by the National Quotation Bureau or similar organization.
If our common stock is not so quoted, the "last reported sale price"
will be the average of the mid-point of the last bid and ask prices for our
common stock on the relevant date from each of at least three nationally
recognized independent investment banking firms selected by us for this purpose.
The bid solicitation agent will initially be the trustee. We may change
the bid solicitation agent, but the bid solicitation agent will not be our
affiliate. The bid solicitation agent will solicit bids from nationally
recognized securities dealers that are believed by us to be willing to bid for
the notes.
We will notify the holders of the notes upon a determination that they
will be entitled to receive contingent interest during a six-month interest
period. In connection with providing such notice, we will issue a press release
and publish a notice containing information regarding the contingent interest
determination in a newspaper of general circulation in The City of New York or
publish the information on our web site or through such other public medium as
we may use at that time.
OPTIONAL REDEMPTION
No sinking fund is provided for the notes. Prior to May 15, 2008, the
notes will not be redeemable. On or after May 15, 2008, we may redeem for cash
all or part of the notes at any time, upon not less than 30 nor more than 60
days' notice before the redemption date by mail to the trustee, the paying agent
and each holder of notes, for a price equal to 100% of the principal amount of
the notes to be redeemed plus any accrued and unpaid interest, including
contingent interest and additional amounts, if any, to the redemption date.
If we decide to redeem fewer than all of the outstanding notes, the
trustee will select the notes to be redeemed (in principal amounts of $1,000 or
integral multiples thereof) by lot, on a pro rata basis or by another method the
trustee considers fair and appropriate.
If the trustee selects a portion of your note for partial redemption
and you convert a portion of the same note, the converted portion will be deemed
to be from the portion selected for redemption.
In the event of any redemption in part, we will not be required to:
- issue, register the transfer of or exchange any note during a
period of 15 days before the mailing of the redemption notice,
or
- register the transfer of or exchange any note so selected for
redemption, in whole or in part, except the unredeemed portion
of any note being redeemed in part.
CONVERSION RIGHTS
Subject to the conditions and during the periods and under the
circumstances described below, holders may convert each of their notes into
shares of our common stock initially at a conversion rate of 86.3558 shares of
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common stock per $1,000 principal amount of notes (equivalent to an initial
conversion price of $11.58 per share of common stock) at any time prior to the
close of business on May 15, 2023. The conversion rate and the equivalent
conversion price in effect at any given time are referred to as the "applicable
conversion rate" and the "applicable conversion price," respectively, and will
be subject to adjustment as described below. A holder may convert fewer than all
of such holder's notes so long as the notes converted are an integral multiple
of $1,000 principal amount.
Except as otherwise described below, you will not receive any cash
payment representing accrued and unpaid interest (including contingent interest,
if any) upon conversion of a note and we will not adjust the conversion rate to
account for the accrued and unpaid interest. Upon conversion we will deliver to
you a fixed number of shares of our common stock and any cash payment to account
for fractional shares. The cash payment for fractional shares will be based on
the last reported sale price of our common stock on the trading day immediately
prior to the conversion date. Delivery of shares of common stock will be deemed
to satisfy our obligation to pay the principal amount of the notes, including
accrued and unpaid interest (including contingent interest, if any). Accrued and
unpaid interest (including contingent interest, if any) will be deemed paid in
full rather than canceled, extinguished or forfeited. The trustee will initially
act as the conversion agent. Notwithstanding conversion of any notes, the
holders of the notes and any common stock issuable upon conversion thereof will
continue to be entitled to receive additional amounts in accordance with the
registration rights agreement. See " -- Registration Rights" below.
If a holder converts notes, we will pay any documentary, stamp or
similar issue or transfer tax due on the issue of shares of our common stock
upon the conversion, unless the tax is due because the holder requests the
shares to be issued or delivered to a person other than the holder, in which
case the holder will pay that tax.
If a holder wishes to exercise its conversion right, such holder must
deliver an irrevocable conversion notice, together, if the notes are in
certificated form, with the certificated security, to the conversion agent along
with appropriate endorsements and transfer documents, if required, and pay any
transfer or similar tax, if required. The conversion agent will, on the holder's
behalf, convert the notes into shares of our common stock. Holders may obtain
copies of the required form of the conversion notice from the conversion agent.
A certificate for the number of full shares of our common stock into which any
notes are converted, together with any cash payment for fractional shares, will
be delivered through the conversion agent as soon as practicable, but no later
than the fifth business day, following the conversion date.
If a holder has already delivered a purchase notice as described under
either " -- Purchase of Notes by Us at the Option of the Holder" or " --
Fundamental Change Requires Purchase of Notes by Us at the Option of the Holder"
with respect to a note, however, the holder may not surrender that note for
conversion until the holder has withdrawn the purchase notice in accordance with
the indenture.
Holders of notes at the close of business on a regular record date will
receive payment of interest, including contingent interest, if any, payable on
the corresponding interest payment date notwithstanding the conversion of such
notes at any time after the close of business on such regular record date. Notes
surrendered for conversion by a holder during the period from the close of
business on any regular record date to the opening of business on the
immediately following interest payment date must be accompanied by payment of an
amount equal to the interest, including contingent interest, if any, that the
holder is to receive on the notes; provided, however, that no such payment need
be made if (1) we have specified a redemption date that is after a record date
and on or prior to the immediately following interest payment date, (2) we have
specified a purchase date following a Fundamental Change that is during such
period or (3) any overdue interest (including overdue contingent interest, if
any) exists at the time of conversion with respect to such notes to the extent
of such overdue interest. The holders of the notes and any common stock issuable
upon conversion thereof will continue to be entitled to receive additional
amounts in accordance with the registration rights agreement.
Holders may surrender their notes for conversion into shares of our
common stock prior to stated maturity in only the circumstances described below.
For a discussion of the federal income tax consequences of a conversion of the
notes into our common stock, see "Material United States Federal Income Tax
Considerations."
CONVERSION UPON SATISFACTION OF SALE PRICE CONDITION. A holder may
surrender any of its notes for conversion into shares of our common stock in any
calendar quarter (and only during such calendar quarter) if the last reported
sale price of our common stock for at least 20 trading days during the period of
30 consecutive trading
17
days ending on the last trading day of the previous calendar quarter is greater
than or equal to 120% or, following May 15, 2008, 110% of the conversion price
per share of our common stock on such last trading day.
CONVERSION UPON REDEMPTION. If we redeem the notes, holders may convert
notes into our common stock at any time prior to the close of business on the
second business day immediately preceding the redemption date, even if the notes
are not otherwise convertible at such time.
CONVERSION UPON SPECIFIED CORPORATE TRANSACTIONS. If we elect to:
- distribute to all holders of our common stock certain rights
entitling them to purchase, for a period expiring within 60
days after the date of the distribution, shares of our common
stock at less than the last reported sale price of a share of
our common stock on the trading day immediately preceding the
declaration date of the distribution, or
- distribute to all holders of our common stock our assets, debt
securities or certain rights to purchase our securities, which
distribution has a per share value as determined by our board
of directors exceeding 15% of the last reported sale price of
a share of our common stock on the trading day immediately
preceding the declaration date for such distribution,
we must notify the holders of the notes at least 20 business days prior to the
ex-dividend date for such distribution. Once we have given such notice, holders
may surrender their notes for conversion at any time until the earlier of the
close of business on the business day immediately prior to the ex-dividend date
or our announcement that such distribution will not take place, even if the
notes are not otherwise convertible at such time; provided, however, that a
holder may not exercise this right to convert if the holder may participate in
the distribution without conversion. The "ex-dividend date" is the first date
upon which a sale of the common stock does not automatically transfer the right
to receive the relevant dividend from the seller of the common stock to its
buyer.
In addition, if we are party to a consolidation, merger or binding
share exchange pursuant to which our common stock would be converted into cash
or property other than securities, a holder may surrender notes for conversion
at any time from and after the date which is 15 days prior to the anticipated
effective date of the transaction until 15 days after the actual effective date
of such transaction. If we engage in certain reclassifications of our common
stock or are a party to a consolidation, merger, binding share exchange or
transfer of all or substantially all of our assets pursuant to which our common
stock is converted into cash, securities or other property, then at the
effective time of the transaction, the right to convert a note into our common
stock will be changed into a right to convert a note into the kind and amount of
cash, securities or other property which the holder would have received if the
holder had converted its notes immediately prior to the transaction. If we
engage in any transaction described in the preceding sentence, the conversion
rate will not be adjusted. If the transaction also constitutes a Fundamental
Change, as defined below, a holder can require us to purchase all or a portion
of its notes as described below under " -- Fundamental Change Requires Purchase
of Notes by Us at the Option of the Holder."
CONVERSION UPON CREDIT RATINGS EVENT. A holder may convert notes into
our common stock during any period in which the credit ratings assigned to the
notes by both Moody's Investors Service, Inc. and S&P's Ratings Services are
lower than Ba2 and BB, respectively, or the notes are no longer rated by at
least one of these ratings services or their successors.
CONVERSION RATE ADJUSTMENTS. The conversion rate will be subject to
adjustment, without duplication, upon the occurrence of any of the following
events:
(1) the payment of dividends and other distributions on our
common stock payable exclusively in shares of our common stock or our
other capital stock,
(2) the issuance to all holders of our common stock of rights
or warrants that allow the holders to purchase shares of our common
stock for a period expiring within 60 days from the date of issuance of
the rights or warrants at less than the market price on the record date
for the determination of shareholders entitled to receive the rights or
warrants,
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(3) subdivisions, combinations, or certain reclassifications
of our common stock,
(4) distributions to all holders of our common stock of our
assets, debt securities or rights or warrants to purchase our
securities (excluding (A) any dividend, distribution or issuance
covered by clauses (1) or (2) above, (B) any dividend or distribution
paid exclusively in cash, and (C) our prior distributions of shares of
common stock of Reliant Resources and of Texas Genco), if these
distributions, aggregated on a rolling twelve-month basis, have a per
share value exceeding 15% of the market price of our common stock on
the trading day immediately preceding the declaration of the
distribution. In cases where (a) the fair market value per share of
common stock of the assets, debt securities or rights or warrants to
purchase our securities distributed to shareholders equals or exceeds
the market price of our common stock on the record date for the
determination of shareholders entitled to receive such distribution, or
(b) the market price of our common stock on the record date for
determining the shareholders entitled to receive the distribution
exceeds the fair market value per share of common stock of the assets,
debt securities or rights or warrants so distributed by less than
$1.00, rather than being entitled to an adjustment in the conversion
rate, the holder will be entitled to receive upon conversion, in
addition to the shares of our common stock, the kind and amount of
assets, debt securities or rights or warrants comprising the
distribution that the holder would have received if the holder had
converted the holder's notes immediately prior to the record date for
determining the shareholders entitled to receive the distribution, and
(5) distributions made during any of our quarterly fiscal
periods consisting exclusively of cash to all holders of outstanding
shares of common stock in an aggregate amount that, together with (A)
other all-cash distributions made during such quarterly fiscal period,
and (B) any cash and the fair market value, as of the expiration of the
tender or exchange offer (other than consideration payable in respect
of any odd-lot tender offer) by us or any of our subsidiaries for
shares of common stock concluded during such quarterly fiscal period,
exceed the product of $0.10 (appropriately adjusted from time to time
for any stock dividends on or subdivisions or combinations of our
common stock) multiplied by the number of shares of common stock
outstanding on the record date for such distribution.
With respect to paragraph (4) above, in the event that we make a
distribution to all holders of our common stock consisting of capital stock of,
or similar equity interests in, a subsidiary or other business unit of ours, the
conversion rate will be adjusted based on the market value of the securities so
distributed relative to the market value of our common stock, in each case based
on the average closing sales prices of those securities for the 10 trading days
commencing on and including the fifth trading day after the date on which
"ex-dividend trading" commences for such dividend or distribution on the New
York Stock Exchange or such other national or regional exchange or market on
which the securities are then listed or quoted.
Notwithstanding the foregoing, in no event will the conversion rate
exceed 129.5337, which we refer to as the "maximum conversion rate," as a result
of an adjustment pursuant to paragraphs (4) and (5) above.
In addition to these adjustments, we may increase the conversion rate
as our board of directors considers advisable to avoid or diminish any income
tax to holders of our common stock or rights to purchase our common stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes. We may also,
from time to time, to the extent permitted by applicable law, increase the
conversion rate by any amount for any period of at least 20 days if our board of
directors has determined that such increase would be in our best interests. If
our board of directors makes such a determination, it will be conclusive. We
will give holders of notes at least 15 days' notice of such an increase in the
conversion rate.
As used in this prospectus, "market price" means the average of the
last reported sale prices per share of our common stock for the 20 trading day
period ending on the applicable date of determination (if the applicable date of
determination is a trading day or, if not, then on the last trading day prior to
the applicable date of determination), appropriately adjusted to take into
account the occurrence, during the period commencing on the first of the trading
days during the 20 trading day period and ending on the applicable date of
determination, of any event that would result in an adjustment of the conversion
rate under the indenture.
No adjustment to the conversion rate or the ability of a holder of a
note to convert will be made if the holder will otherwise participate in the
distribution without conversion or in certain other cases.
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The applicable conversion rate will not be adjusted:
- upon the issuance of any shares of our common stock pursuant
to any present or future plan providing for the reinvestment
of dividends or interest payable on our securities and the
investment of additional optional amounts in shares of our
common stock under any plan,
- upon the issuance of any shares of our common stock or options
or rights to purchase those shares pursuant to any present or
future employee, director or consultant benefit plan or
program of or assumed by us or any of our subsidiaries,
- upon the issuance of any shares of our common stock pursuant
to any option, warrant, right or exercisable, exchangeable or
convertible security not described in the preceding bullet and
outstanding as of the date the notes were first issued,
- for a change in the par value of the common stock, or
- for accrued and unpaid interest, including contingent interest
or additional amounts, if any.
The holders will receive, upon conversion of the notes, in addition to
common stock, the rights under our shareholder rights plan or under any future
rights plan we may adopt, whether or not the rights have separated from the
common stock at the time of conversion unless, prior to conversion, the rights
have expired, terminated or been redeemed or exchanged. See "Description of Our
Capital Stock -- Shareholder Rights Plan."
No adjustment in the applicable conversion price will be required
unless the adjustment would require an increase or decrease of at least 1% of
the applicable conversion price. If the adjustment is not made because the
adjustment does not change the applicable conversion price by more than 1%, then
the adjustment that is not made will be carried forward and taken into account
in any future adjustment.
PURCHASE OF NOTES BY US AT THE OPTION OF THE HOLDER
Holders have the right to require us to purchase the notes on May 15,
2008, May 15, 2013 and May 15, 2018 (each, a "purchase date"). Any note
purchased by us on a purchase date will be paid for in cash. We will be required
to purchase any outstanding notes for which a holder delivers a written purchase
notice to the paying agent. This notice must be delivered during the period
beginning at any time from the opening of business on the date that is 20
business days prior to the relevant purchase date until the close of business on
the fifth business day prior to the purchase date. If the purchase notice is
given and withdrawn during such period, we will not be obligated to purchase the
related notes. Our purchase obligation will be subject to some additional
conditions as described in the indenture. Also, as described in the "Risk
Factors" section of this prospectus under the caption "Risks Related to the
Notes -- We may not have the ability to raise the funds necessary to purchase
the notes upon a Fundamental Change or other purchase date, as required by the
indenture governing the notes," we may not have funds sufficient to purchase the
notes when we are required to do so. Our failure to purchase the notes when we
are required to do so will constitute an event of default under the indenture
with respect to the notes.
The purchase price payable will be equal to 100% of the principal
amount of the notes to be purchased plus any accrued and unpaid interest,
including contingent interest and additional amounts, if any, to such purchase
date. For a discussion of the United States federal income tax treatment of a
holder receiving cash, see "Material United States Federal Income Tax
Considerations."
On or before the 20th business day prior to each purchase date, we will
provide to the trustee, the paying agent and to all holders of the notes at
their addresses shown in the register of the registrar, and to beneficial owners
as required by applicable law, a notice stating, among other things:
- the purchase price,
- the name and address of the paying agent and the conversion
agent, and
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- the procedures that holders must follow to require us to
purchase their notes.
In connection with providing such notice, we will issue a press release
and publish a notice containing this information in a newspaper of general
circulation in The City of New York or publish the information on our web site
or through such other public medium as we may use at that time.
A notice electing to require us to purchase your notes must state:
- if certificated notes have been issued, the certificate
numbers of the notes,
- the portion of the principal amount of notes to be purchased,
in integral multiples of $1,000, and
- that the notes are to be purchased by us pursuant to the
applicable provisions of the notes and the indenture.
If the notes are not in certificated form, your notice must comply with
appropriate DTC procedures.
No notes may be purchased at the option of holders if there has
occurred and is continuing an event of default other than an event of default
that is cured by the payment of the purchase price of the notes.
You may withdraw any purchase notice in whole or in part by a written
notice of withdrawal delivered to the paying agent prior to the close of
business on the business day prior to the purchase date. The notice of
withdrawal must state:
- the principal amount of the withdrawn notes,
- if certificated notes have been issued, the certificate
numbers of the withdrawn notes, and
- the principal amount, if any, which remains subject to the
purchase notice.
If the notes are not in certificated form, your notice must comply with
appropriate DTC procedures.
You must either effect book-entry transfer or deliver the notes,
together with necessary endorsements, to the office of the paying agent after
delivery of the purchase notice to receive payment of the purchase price. You
will receive payment promptly following the later of the purchase date or the
time of book-entry transfer or the delivery of the notes. If the paying agent
holds money or securities sufficient to pay the purchase price of the notes on
the business day following the purchase date, then:
- the notes will cease to be outstanding and interest, including
contingent interest, will cease to accrue (whether or not
book-entry transfer of the notes is made or whether or not the
note is delivered to the paying agent), and
- all other rights of the holder will terminate (other than the
right to receive the purchase price upon delivery or transfer
of the notes).
FUNDAMENTAL CHANGE REQUIRES PURCHASE OF NOTES BY US AT THE OPTION OF THE HOLDER
If a Fundamental Change (as defined below in this section) occurs at
any time prior to May 15, 2008, holders will have the right, at their option, to
require us to purchase any or all of their notes for cash, or any portion of the
principal amount thereof, that is equal to $1,000 or an integral multiple of
$1,000. The cash price we are required to pay is equal to 100% of the principal
amount of the notes to be purchased plus accrued and unpaid interest, including
contingent interest and additional amounts, if any, to the Fundamental Change
purchase date. If a Fundamental Change occurs on or after May 15, 2008 no holder
will have a right to require us to purchase any notes, except as described above
under " -- Purchase of Notes by Us at the Option of the Holder." For a
discussion of the United States federal income tax treatment of a holder
receiving cash, see "Material United States Federal Income Tax Considerations."
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A "Fundamental Change" will be deemed to have occurred at the time
after the notes are originally issued that any of the following occurs:
(1) our common stock or other common stock into which the
notes are convertible is neither listed for trading on a United States
national securities exchange nor approved for trading on the Nasdaq
National Market or another established automated over-the-counter
trading market in the United States,
(2) a "person" or "group" within the meaning of Section 13(d)
of the Securities Exchange Act of 1934 other than us, our subsidiaries
or our or their employee benefit plans, files a Schedule TO or any
schedule, form or report under the Securities Exchange Act of 1934
disclosing that such person or group has become the direct or indirect
ultimate "beneficial owner," as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, of our common equity representing more
than 50% of the voting power of our common equity entitled to vote
generally in the election of directors,
(3) consummation of any share exchange, consolidation or
merger of us pursuant to which our common stock will be converted into
cash, securities or other property or any sale, lease or other transfer
in one transaction or a series of transactions of all or substantially
all of the consolidated assets of us and our subsidiaries, taken as a
whole, to any person other than us or one or more of our subsidiaries;
provided, however, that a transaction where the holders of our common
equity immediately prior to such transaction have directly or
indirectly, more than 50% of the aggregate voting power of all classes
of common equity of the continuing or surviving corporation or
transferee entitled to vote generally in the election of directors
immediately after such event shall not be a Fundamental Change, or
(4) continuing directors (as defined below in this section)
cease to constitute at least a majority of our board of directors.
A Fundamental Change will not be deemed to have occurred in respect of
any of the foregoing, however, if either:
(1) the last reported sale price of our common stock for any
five trading days within the 10 consecutive trading days ending
immediately before the later of the Fundamental Change or the public
announcement thereof, equals or exceeds 105% of the conversion price of
the notes in effect immediately before the Fundamental Change or the
public announcement thereof, or
(2) at least 90% of the consideration, excluding cash payments
for fractional shares, in the transaction or transactions constituting
the Fundamental Change consists of shares of capital stock traded on a
national securities exchange or quoted on the Nasdaq National Market or
which will be so traded or quoted when issued or exchanged in
connection with a Fundamental Change (these securities being referred
to as "publicly traded securities") and as a result of this transaction
or transactions the notes become convertible into such publicly traded
securities, excluding cash payments for fractional shares.
For purposes of the above paragraph the term capital stock of any
person means any and all shares (including ordinary shares or American
Depositary Shares), interests, participations or other equivalents however
designated of corporate stock or other equity participations, including
partnership interests, whether general or limited, of such person and any rights
(other than debt securities convertible or exchangeable into an equity
interest), warrants or options to acquire an equity interest in such person.
"Continuing director" means a director who either was a member of our
board of directors on the date of this prospectus who becomes a member of our
board of directors subsequent to that date and whose appointment, election or
nomination for election by our shareholders is duly approved by a majority of
the continuing directors on our board of directors at the time of such approval,
either by a specific vote or by approval of the proxy statement issued by us on
behalf of the board of directors in which such individual is named as nominee
for director.
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On or before the 30th day after the occurrence of a Fundamental Change,
we will provide to all holders of the notes and the trustee and paying agent a
notice of the occurrence of the Fundamental Change and of the resulting purchase
right. Such notice shall state, among other things:
- the events causing a Fundamental Change,
- the date of the Fundamental Change,
- the last date on which a holder may exercise the purchase
right,
- the Fundamental Change purchase price,
- the Fundamental Change purchase date,
- the name and address of the paying agent and the conversion
agent,
- the conversion rate and any adjustments to the conversion
rate,
- the notes with respect to which a Fundamental Change purchase
notice has been given by the holder may be converted only if
the holder withdraws the Fundamental Change purchase notice in
accordance with the terms of the indenture, and
- the procedures that holders must follow to require us to
purchase their notes.
Simultaneously with providing such notice, we will issue a press
release and publish a notice containing this information in a newspaper of
general circulation in The City of New York or publish the information on our
web site or through such other public medium as we may use at that time.
To exercise the purchase right, holders must deliver, on or before the
35th day after the date of our notice of a Fundamental Change, subject to
extension to comply with applicable law, the notes to be purchased, duly
endorsed for transfer, together with a written purchase notice and the form
entitled "Form of Fundamental Change Purchase Notice" duly completed, to the
paying agent. Their purchase notice must state:
- if certificated, the certificate numbers of their notes to be
delivered for purchase,
- the portion of the principal amount of notes to be purchased,
which must be $1,000 or an integral multiple thereof, and
- that the notes are to be purchased by us pursuant to the
applicable provisions of the notes and the indenture.
If the notes are not in certificated form, their notice must comply with
appropriate DTC procedures.
Holders may withdraw any purchase notice (in whole or in part) by a
written notice of withdrawal delivered to the paying agent prior to the close of
business on the business day prior to the Fundamental Change purchase date. The
notice of withdrawal shall state:
- the principal amount of the withdrawn notes,
- if certificated notes have been issued, the certificate
numbers of the withdrawn notes, and
- the principal amount, if any, which remains subject to the
purchase notice.
If the notes are not in certificated form, their notice must comply with
appropriate DTC procedures.
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We will be required to purchase the notes no later than 35 business
days after the date of our notice of the occurrence of the relevant Fundamental
Change subject to extension to comply with applicable law. Holders will receive
payment of the Fundamental Change purchase price promptly following the later of
the Fundamental Change purchase date or the time of book-entry transfer or the
delivery of the notes. If the paying agent holds money or securities sufficient
to pay the Fundamental Change purchase price of the notes on the business day
following the Fundamental Change purchase date, then:
- the notes will cease to be outstanding and interest,
including contingent interest and additional amounts, if any,
will cease to accrue (whether or not book-entry transfer of
the notes is made or whether or not the note is delivered to
the paying agent), and
- all other rights of the holder will terminate (other
than the right to receive the Fundamental Change purchase
price upon delivery or transfer of the notes).
The rights of the holders to require us to purchase their notes upon a
Fundamental Change could discourage a potential acquirer of us. The Fundamental
Change purchase feature, however, is not the result of management's knowledge of
any specific effort to accumulate shares of our common stock, to obtain control
of us by any means or part of a plan by management to adopt a series of
anti-takeover provisions.
The term Fundamental Change is limited to specified transactions and
may not include other events that might adversely affect our financial
condition. In addition, the requirement that we offer to purchase the notes upon
a Fundamental Change may not protect holders in the event of a highly leveraged
transaction, reorganization, merger or similar transaction involving us.
No notes may be purchased at the option of holders upon a Fundamental
Change if there has occurred and is continuing an event of default other than an
event of default that is cured by the payment of the Fundamental Change purchase
price of the notes.
The definition of Fundamental Change includes a phrase relating to the
conveyance, transfer, sale, lease or disposition of "all or substantially all"
of our consolidated assets. There is no precise, established definition of the
phrase "substantially all" under applicable law. Accordingly, the ability of a
holder of the notes to require us to purchase its notes as a result of the
conveyance, transfer, sale, lease or other disposition of less than all of our
assets may be uncertain.
If a Fundamental Change were to occur, we may not have enough funds to
pay the Fundamental Change purchase price. See "Risk Factors" under the caption
"Risks Related to the Notes -- We may not have the ability to raise the funds
necessary to purchase the notes upon a Fundamental Change or other purchase
date, as required by the indenture governing the notes." Our failure to purchase
the notes when required following a Fundamental Change will constitute an event
of default under the indenture with respect to the notes. In addition, we have,
and may in the future incur, other indebtedness with similar change in control
provisions permitting holders to accelerate or to require us to purchase our
indebtedness upon the occurrence of similar events or on some specific dates.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Under the indenture, we may not consolidate with or merge into, or
convey, transfer or lease our properties and assets substantially as an entirety
to, any person, referred to as a "successor person" unless:
- the successor person is a corporation, partnership, trust or
other entity organized and validly existing under the laws of
the United States of America or any state thereof or the
District of Columbia,
- the successor person expressly assumes our obligations with
respect to the notes and the indenture,
- immediately after giving effect to the transaction, no event
of default, and no event which, after notice or lapse of time
or both, would become an event of default, would occur and be
continuing, and
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- we have delivered to the trustee the certificates and opinions
required under the indenture. (Section 801)
However, certain of these transactions occurring prior to May 15, 2008
could constitute a Fundamental Change (as defined above) permitting each holder
to require us to purchase the notes of such holder as described above.
EVENTS OF DEFAULT
Each of the following will be an event of default under the indenture
with respect to the notes:
- our failure to pay the principal of or premium, if any, on the
notes when due,
- our failure to pay any interest, including contingent interest
and additional amounts, if any, on the notes for 30 days after
the interest becomes due,
- our failure to perform, or our breach, in any material
respect, of any other covenant or warranty in the indenture,
other than a covenant or warranty included in the indenture
solely for the benefit of another series of debt securities
issued under the indenture, for 90 days after either the
trustee or holders of at least 25% in principal amount of the
outstanding notes have given us written notice of the breach
in the manner required by the indenture,
- the default by us, CERC or CenterPoint Houston in a scheduled
payment at maturity, upon redemption or otherwise in the
aggregate principal amount of $50 million or more, after the
expiration of any applicable grace period, of any
Indebtedness, or the acceleration of any Indebtedness of us,
CERC or CenterPoint Houston in such aggregate principal
amount, so that it becomes due and payable prior to the date
on which it would otherwise have become due and payable and
such payment default is not cured or such acceleration is not
rescinded within 30 days after notice to us in accordance with
the terms of the Indebtedness; provided that such payment
default or acceleration of CERC or CenterPoint Houston shall
not be an event of default if, at the time such event occurs,
CERC or CenterPoint Houston, as the case may be, shall not be
affiliated with us,
- specified events involving bankruptcy, insolvency or
reorganization of us, CERC or CenterPoint Houston; provided
that any specified event involving CERC or CenterPoint Houston
shall not be an event of default if, at the time such event
occurs, CERC or CenterPoint Houston, as the case may be, shall
not be affiliated with us,
- default in our obligation to redeem notes after we have
exercised our redemption option,
- default in our obligation to satisfy our conversion obligation
upon exercise of a holder's conversion right, and
- default in our obligation to purchase notes upon the
occurrence of a Fundamental Change or exercise by a holder of
its option to require us to purchase such holder's notes,
provided, however, that no event described in the third bullet point above will
be an event of default until an officer of the trustee, assigned to and working
in the trustee's corporate trust department, has actual knowledge of the event
or until the trustee receives written notice of the event at its corporate trust
office, and the notice refers to the notes generally, us and the indenture.
(Section 501)
If an event of default occurs and is continuing, either the trustee or
the holders of at least 25% in principal amount of the outstanding notes may
declare the principal amount of the notes due and immediately payable. In order
to declare the principal amount of the notes due and immediately payable, the
trustee or the holders must deliver a notice that satisfies the requirements of
the indenture. Upon a declaration by the trustee or the holders, we will be
obligated to pay the principal amount of the notes plus accrued and unpaid
interest, including contingent interest and additional amounts, if any which
have then been accrued.
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This right does not apply if an event of default described in the fifth
bullet point above occurs. If one of the events of default described in the
fifth bullet point above occurs and is continuing, the notes then outstanding
under the indenture shall be due and payable immediately.
At any time after any declaration of acceleration of the notes, but
before a judgment or decree for payment of the money due has been obtained by
the trustee, the event of default giving rise to the declaration of acceleration
will, without further act, be deemed to have been waived, and such declaration
and its consequences will, without further act, be deemed to have been rescinded
and annulled if:
- we have paid or deposited with the trustee a sum sufficient to
pay:
- all overdue installments of interest on the notes,
including contingent interest and additional amounts,
if any,
- the principal of (and premium, if any, on) the notes
which have become due otherwise than by such
declaration of acceleration and any interest thereon
at the rate or rates prescribed therefore,
- to the extent lawfully permitted, interest upon
overdue interest, and
- all sums owed to the trustee under the indenture, and
- all events of default, other than the non-payment of the
principal amount of the notes which became due solely by such
declaration of acceleration, have been cured or waived as
provided in the indenture. (Section 502) See "-- Modification
and Waiver" below.
If an event of default occurs and is continuing, the trustee will
generally have no obligation to exercise any of its rights or powers under the
indenture at the request or direction of any of the holders, unless the holders
offer reasonable indemnity to the trustee. (Section 603) The holders of a
majority in principal amount of the outstanding notes will generally have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the trustee or exercising any trust or power conferred on
the trustee for the notes, provided that:
- the direction is not in conflict with any law or the
indenture,
- the trustee may take any other action it deems proper which is
not inconsistent with the direction, and
- the trustee will generally have the right to decline to follow
the direction if an officer of the trustee determines, in good
faith, that the proceeding would involve the trustee in
personal liability or would otherwise be contrary to
applicable law. (Section 512)
A holder of a note may only pursue a remedy under the indenture if:
- the holder has previously given the trustee written notice of
a continuing event of default for the notes,
- holders of at least 25% in principal amount of the outstanding
notes have made a written request to the trustee to pursue
that remedy,
- the holders have offered reasonable indemnity to the trustee,
- the trustee fails to pursue that remedy within 60 days after
receipt of the request, and
- during that 60-day period, the holders of a majority in
principal amount of the notes do not give the trustee a
direction inconsistent with the request. (Section 507)
However, these limitations do not apply to a suit by a holder of a note
demanding payment of the principal, premium, if any, or interest on a note on or
after the date the payment is due. (Section 508)
26
We will be required to furnish to the trustee annually a statement by
some of our officers regarding our performance or observance of any of the terms
of the indenture and specifying all of our known defaults, if any. (Section
1004)
MODIFICATION AND WAIVER
We may enter into one or more supplemental indentures with the trustee
without the consent of the holders of the notes in order to:
- evidence the succession of another person to us, or successive
successions and the assumption of our covenants, agreements
and obligations by a successor,
- add to our covenants for the benefit of the holders or any
series of debt securities issued under the indenture or to
surrender any of our rights or powers,
- add events of default for any series of debt securities issued
under the indenture,
- add or change any provision of the indenture to the extent
necessary to issue notes in bearer form,
- add to, change or eliminate any provision of the indenture
applying to one or more series of debt securities issued under
the indenture, provided that if such action adversely affects
the interests of any holder of debt securities of any series,
the addition, change or elimination will become effective with
respect to that series only when no security of that series
remains outstanding,
- convey, transfer, assign, mortgage or pledge any property to
or with the trustee or to surrender any right or power
conferred upon us by the indenture,
- establish the form or terms of any series of debt securities
issued under the indenture,
- provide for uncertificated securities in addition to
certificated securities,
- evidence and provide for successor trustees or to add or
change any provisions to the extent necessary to appoint a
separate trustee or trustees for a specific series of debt
securities,
- correct any ambiguity, defect or inconsistency under the
indenture, provided that such action does not adversely affect
the interests of the holders of debt securities of any series,
- supplement any provisions of the indenture necessary to
defease and discharge any series of debt securities, provided
that such action does not adversely affect the interests of
the holders of any series of debt securities,
- comply with the rules or regulations of any securities
exchange or automated quotation system on which any debt
securities are listed or traded, or
- add, change or eliminate any provisions of the indenture in
accordance with any amendments to the Trust Indenture Act of
1939, provided that the action does not adversely affect the
rights or interests of any holder of debt securities. (Section
901)
We may enter into one or more supplemental indentures with the trustee
in order to add to, change or eliminate provisions of the indenture or to modify
the rights of the holders of one or more series of debt securities, including
the notes, if we obtain the consent of the holders of a majority in principal
amount of the outstanding debt securities of each series affected by the
supplemental indenture, treated as one class. However, without the consent of
the holders of each outstanding debt security affected by the supplemental
indenture, we may not enter into a supplemental indenture that:
27
- changes the stated maturity of the principal of, or any
installment of principal of or interest on, any debt security,
except to the extent permitted by the indenture,
- reduces the principal amount of, or any premium or interest
on, any debt security,
- reduces the redemption price, purchase price or Fundamental
Change purchase price of the notes or changes the terms
applicable to redemption or purchase in a manner adverse to
the holder,
- reduces the amount of principal of an original issue discount
security or any other debt security payable upon acceleration
of the maturity thereof,
- changes the place or currency of payment of principal,
premium, if any, or interest,
- impairs the right to institute suit for the enforcement of any
payment on any note,
- reduces the percentage in principal amount of outstanding debt
securities of any series, the consent of whose holders is
required for modification or amendment of the indenture,
- reduces the percentage in principal amount of outstanding debt
securities of any series necessary for waiver of compliance
with certain provisions of the indenture or for waiver of
certain defaults,
- makes certain modifications to such provisions with respect to
modification and waiver,
- makes any change that adversely affects the right to convert
or exchange any debt security, including the notes, or
decreases the conversion or exchange rate or increases the
conversion price of any convertible or exchangeable debt
security,
- in the case of the notes, alters the manner of calculation or
rate of contingent interest or additional amounts payable on
any note or extends the time for payment of any such amount,
or
- changes the terms and conditions pursuant to which any series
of debt securities that is secured in a manner adverse to the
holders of the debt securities. (Section 902)
Holders of a majority in principal amount of the outstanding notes may
waive past defaults or noncompliance with restrictive provisions of the
indenture. However, the consent of holders of each outstanding note is required
to:
- waive any default in the payment of principal, premium, if
any, or interest,
- waive any covenants and provisions of the indenture that may
not be amended without the consent of the holder of each
outstanding note,
- waive any default in any payment of redemption price, purchase
price or Fundamental Change purchase price with respect to any
notes, or
- waive any default which constitutes a failure to convert any
note in accordance with its terms and the terms of the
indenture. (Sections 513 and 1006)
In order to determine whether the holders of the requisite principal
amount of the outstanding debt securities have taken an action under the
indenture as of a specified date:
- the principal amount of an "original issue discount security"
that will be deemed to be outstanding will be the amount of
the principal that would be due and payable as of such date
upon acceleration of the maturity to such date,
28
- if, as of such date, the principal amount payable at the
stated maturity of a debt security is not determinable, for
example, because it is based on an index, the principal amount
of such debt security deemed to be outstanding as of such date
will be an amount determined in the manner prescribed for such
debt security,
- the principal amount of a debt security denominated in one or
more foreign currencies or currency units that will be deemed
to be outstanding will be the $U.S. equivalent, determined as
of such date in the manner prescribed for such debt security,
of the principal amount of such debt security or, in the case
of a debt security described in the two preceding bullet
points, of the amount described above, and
- debt securities owned by us or any other obligor upon the debt
securities or any of our or their affiliates will be
disregarded and deemed not to be outstanding.
An "original issue discount security" means a debt security issued
under the indenture which provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration of maturity.
Some debt securities, including those for whose payment or redemption money has
been deposited or set aside in trust for the holders and those that have been
fully defeased pursuant to Section 1402 of the indenture, will not be deemed to
be outstanding. (Section 101)
We will generally be entitled to set any day as a record date for
determining the holders of outstanding notes entitled to give or take any
direction, notice, consent, waiver or other action under the indenture. In
limited circumstances, the trustee will be entitled to set a record date for
action by holders of outstanding notes. If a record date is set for any action
to be taken by holders, the action may be taken only by persons who are holders
of outstanding notes on the record date. To be effective, the action must be
taken by holders of the requisite principal amount of notes within a specified
period following the record date. For any particular record date, this period
will be 180 days or such shorter period as we may specify, or the trustee may
specify, if it set the record date. This period may be shortened or lengthened
by not more than 180 days. (Section 104)
DEFEASANCE
The notes will be subject to both legal defeasance and discharge and
covenant defeasance at our option. However, our obligations with respect to the
convertibility of the notes will survive any such action by us. (Section 1401)
DEFEASANCE AND DISCHARGE. We will be discharged from all of our
obligations with respect to the notes, except for certain obligations to
convert, exchange or register the transfer of notes, to replace stolen, lost or
mutilated notes, to maintain paying agencies and to hold moneys for payment in
trust, upon the deposit in trust for the benefit of the holders of the notes of
money or U.S. government obligations, or both, which, through the payment of
principal and interest in respect thereof in accordance with their terms, will
provide money in an amount sufficient to pay the principal, premium, if any, and
interest on the notes to the stated maturity of the notes in accordance with the
terms of the indenture and the notes. Such defeasance or discharge may occur
only if, among other things, we have delivered to the trustee an opinion of
counsel to the effect that we have received from, or there has been published
by, the United States Internal Revenue Service a ruling, or there has been a
change in tax law, in either case to the effect that holders of the notes will
not recognize gain or loss for federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to federal income tax on
the same amount, in the same manner and at the same times as would have been the
case if such deposit, defeasance and discharge were not to occur. (Sections 1402
and 1404)
DEFEASANCE OF CERTAIN COVENANTS. In certain circumstances, we may omit
to comply with specified restrictive covenants, and that in those circumstances
the occurrence of certain events of default, which are described in the third
bullet point under "-- Events of Default" above, with respect to such
restrictive covenants, and those described in the fourth bullet point under "--
Events of Default" above, will be deemed not to be or result in an event of
default, in each case with respect to the notes. We, in order to exercise such
option, will be required to deposit, in trust for the benefit of the holders of
the notes, money or U.S. government obligations, or both, which, through the
payment of principal and interest in respect thereof in accordance with their
terms, will provide money in an amount sufficient to pay the principal, premium,
if any, and interest on the notes to the stated maturity in accordance with
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the terms of the indenture and the notes. However, our obligations with respect
to the convertibility of the notes will survive any such action by us. We will
also be required, among other things, to deliver to the trustee an opinion of
counsel to the effect that holders of the notes will not recognize gain or loss
for federal income tax purposes as a result of such deposit and defeasance of
certain obligations and will be subject to federal income tax on the same
amount, in the same manner and at the same times as would have been the case if
such deposit and defeasance were not to occur. In the event we exercise this
option with respect to any notes and the notes were declared due and payable
because of the occurrence of any event of default, the amount of money and U.S.
government obligations so deposited in trust would be sufficient to pay amounts
due on the notes at the time of their stated maturity, but might not be
sufficient to pay amounts due on such notes upon any acceleration resulting from
the event of default. In such case, we would remain liable for those payments.
(Sections 1403 and 1404)
SATISFACTION AND DISCHARGE
We may discharge our obligations under the indenture while notes remain
outstanding, other than our obligations in respect of conversion, if (1) all
outstanding debt securities issued under the indenture have become due and
payable, whether at stated maturity, or any redemption date or any purchase
date, (2) all outstanding debt securities issued under the indenture have or
will become due and payable at their scheduled maturity within one year, or (3)
all outstanding debt securities issued under the indenture are scheduled for
redemption in one year, and in each case, we have deposited with the trustee an
amount sufficient to pay and discharge all outstanding debt securities issued
under the indenture on the date of their scheduled maturity or the scheduled
date of redemption or purchase.
CALCULATIONS IN RESPECT OF NOTES
We will be responsible for making all calculations called for under the
notes. These calculations include, but are not limited to, determinations of the
market prices of our common stock, accrued interest payable on the notes and the
conversion price of the notes. We will make all these calculations in good faith
and, absent manifest error, our calculations will be final and binding on
holders of notes. We will provide a schedule of our calculations to each of the
trustee and the conversion agent, and each of the trustee and conversion agent
is entitled to rely upon the accuracy of our calculations without independent
verification. The trustee will forward our calculations to any holder of notes
upon the request of that holder.
SINKING FUND
We are not obligated to make mandatory redemption or sinking fund
payments with respect to the notes.
RESTRICTIVE COVENANT
Other than the covenant described below, the indenture does not contain
financial covenants and does not restrict us from paying dividends, incurring
additional indebtedness or issuing or repurchasing any of our other securities.
The indenture also does not protect holders in the event of a highly leveraged
transaction, except to the extent described under "-- Fundamental Change
Requires Purchase of Notes by Us at the Option of the Holder," "--
Consolidation, Merger and Sale of Assets" and "-- Conversion Rights --
Conversion Upon Specified Corporate Transactions."
LIMITATIONS ON LIENS. So long as any of the notes are outstanding, we
will not pledge, mortgage, hypothecate or grant a security interest in, or
permit any such mortgage, pledge, security interest or other lien upon, any
capital stock or other equity interests now or hereafter owned by us of any
Significant Subsidiary to secure any Indebtedness, without making effective
provision whereby the outstanding notes shall be equally and ratably secured.
This restriction shall not apply to:
- any mortgage, pledge, security interest, lien or encumbrance
upon the capital stock of Texas Genco Holdings, Inc. to secure
obligations under our current credit facility or any
extension, renewal, refunding, amendment or replacement
thereof,
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- any mortgage, pledge, security interest, lien or encumbrance
upon the capital stock or other equity interests of
CenterPoint Energy Transition Bond Company, LLC or any other
special purpose subsidiary hereafter created by us in
connection with the issuance of securitization bonds for the
economic value of generation-related regulatory assets and
stranded costs,
- any mortgage, pledge, security interest, lien or encumbrance
upon any capital stock or other equity interests in an entity
which was not affiliated with us prior to one year before the
grant of such mortgage, pledge, security interest, lien or
encumbrance (or the capital stock or other equity interests of
a holding company formed to acquire or hold such capital stock
or other equity interests) created at the time of our
acquisition of the capital stock or other equity interests or
within one year after such time to secure all or a portion of
the purchase price for such capital stock or other equity
interests; provided that the principal amount of any
Indebtedness secured by such mortgage, pledge, security
interest, lien or encumbrance does not exceed 100% of such
purchase price and the fees, expenses and costs incurred in
connection with such acquisition and acquisition financing,
- any mortgage, pledge, security interest, lien or encumbrance
existing upon capital stock or other equity interests in an
entity which was not affiliated with us prior to one year
before the grant of such mortgage, pledge, security interest,
lien or encumbrance at the time of our acquisition of such
capital stock or other equity interests (whether or not the
obligations secured thereby are assumed by us or such
subsidiary becomes a Significant Subsidiary); provided that
(i) such mortgage, pledge, security interest, lien or
encumbrance existed at the time such entity became a
Significant Subsidiary and was not created in anticipation of
the acquisition and (ii) any such mortgage, pledge, security
interest, lien or encumbrance does not by its terms secure any
Indebtedness other than Indebtedness existing or committed
immediately prior to the time such entity becomes a
Significant Subsidiary,
- liens for taxes, assessments or governmental charges or levies
to the extent not past due or which are being contested in
good faith by appropriate proceedings diligently conducted and
for which we have provided adequate reserves for the payment
thereof in accordance with generally accepted accounting
principles,
- pledges or deposits in the ordinary course of business to
secure obligations under workers' compensation laws or similar
legislation,
- materialmen's, mechanics', carriers', workers' and repairmen's
liens imposed by law and other similar liens arising in the
ordinary course of business for sums not yet due or currently
being contested in good faith by appropriate proceedings
diligently conducted,
- attachment, judgment or other similar liens, which have not
been effectively stayed, arising in connection with court
proceedings; provided that such liens, in the aggregate, shall
not secure judgments which exceed $50,000,000 aggregate
principal amount at any one time outstanding; provided further
that the execution or enforcement of each such lien is
effectively stayed within 30 days after entry of the
corresponding judgment (or the corresponding judgment has been
discharged within such 30 day period) and the claims secured
thereby are being contested in good faith by appropriate
proceedings timely commenced and diligently prosecuted,
- other liens not otherwise referred to in the above bullets,
provided that the Indebtedness secured by such liens in the
aggregate, shall not exceed 1% of consolidated gross assets
appearing in our most recent audited consolidated financial
statements at any one time outstanding,
- any mortgage, pledge, security interest, lien or encumbrance
on the capital stock or other equity interests of any
subsidiary that was otherwise permitted hereunder if such
subsidiary subsequently becomes a Significant Subsidiary, or
- any extension, renewal or refunding of Indebtedness secured by
any mortgage, pledge, security interest, lien or encumbrance
described in the above bullets; provided that the principal
amount of any such
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Indebtedness is not increased by an amount greater than the
fees, expenses and costs incurred in connection with such
extension, renewal or refunding.
DEFINED TERMS
An "affiliate" of, or a person "affiliated" with, a specific person is
a person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the person
specified.
The term "control" (including the terms "controlled by" and "under
common control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a person,
whether through the ownership of voting shares, by contract, or otherwise.
"Indebtedness," as applied to any person, means bonds, debentures,
notes and other instruments or arrangements representing obligations created or
assumed by such person, in respect of:
- obligations for money borrowed, other than unamortized debt
discount or premium,
- obligations evidenced by a note or similar instrument given in
connection with the acquisition of any business, properties or
assets of any kind,
- obligations as lessee under a capital lease, and
- amendments, renewals, extensions, modifications and refundings
of any such indebtedness or obligations listed in the three
immediately preceding bullet points.
All indebtedness of such type secured by a lien upon property owned by such
person, although such person has not assumed or become liable for the payment of
such indebtedness, is also deemed to be indebtedness of such person. All
indebtedness for borrowed money incurred by any other persons which is directly
guaranteed as to payment of principal by such person will for all purposes of
the indenture be deemed to be indebtedness of such person, but no other
contingent obligation of such person in respect of indebtedness incurred by any
other persons shall be deemed indebtedness of such person.
"Significant Subsidiary" means CERC, CenterPoint Houston and Texas
Genco, and any other subsidiary which, at the time of the creation of such
pledge, mortgage, security interest or other lien, has consolidated gross assets
(having regard to our beneficial interest in the shares, or the like, of that
subsidiary) that represent at least 25% of our consolidated gross assets
appearing in our most recent audited consolidated financial statements.
A "subsidiary" of any entity means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which) more
than 50% of (i) the issued and outstanding capital stock or comparable interest
having ordinary voting power to elect a majority of the board of directors or
comparable governing body of such corporation or entity (irrespective of whether
at the time capital stock of any other class or classes of such corporation
shall or might have voting power upon the occurrence of any contingency), (ii)
the interest in the capital or profits of such limited liability company,
partnership, joint venture or other entity or (iii) the beneficial interest in
such trust or estate, is at the time directly or indirectly owned or controlled
by such entity, by such entity and one or more of its other subsidiaries or by
one or more of such entity's other subsidiaries.
PAYMENT AND PAYING AGENT
We will pay interest on the notes to the persons in whose names the
notes are registered at the close of business on the applicable record date for
each interest payment. However, we will pay the interest payable on the notes at
their stated maturity to the persons to whom we pay the principal amount of the
notes. (Section 307)
We will pay principal, premium, if any, and interest on the notes at
the offices of the paying agents we designate. However, except in the case of a
global security, we may pay interest by:
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- check mailed to the address of the person entitled to the
payment as it appears in the security register, or
- by wire transfer in immediately available funds to the place
and account designated in writing by the person entitled to
the payment as specified in the security register.
We have designated the trustee as the sole paying agent for the notes. At any
time, we may designate additional paying agents or rescind the designation of
any paying agents. However, we are required to maintain a paying agent in each
place of payment for the notes at all times. (Sections 307 and 1002)
Any money deposited with the trustee or any paying agent or then held
by us for the payment of principal, premium, if any, and interest on the notes
that remains unclaimed for two years after the date the payments became due, may
be repaid to us upon our request. After we have been repaid, holders entitled to
those payments may only look to us for payment as our unsecured general
creditors. The trustee and any paying agents will not be liable for those
payments after we have been repaid. (Section 1003)
EXCHANGE AND TRANSFER OF THE NOTES
We will issue the notes in registered form, without coupons. We will
only issue notes in denominations of integral multiples of $1,000.
Holders may present notes for exchange or for registration of transfer
at the office of the security registrar or at the office of any transfer agent
we designate for that purpose. The security registrar or designated transfer
agent will exchange or transfer the notes if it is satisfied with the documents
of title and identity of the person making the request. We will not charge a
service charge for any exchange or registration of transfer of notes. However,
we may require payment of a sum sufficient to cover any tax or other
governmental charge payable for the registration of transfer or exchange. The
trustee will serve as the security registrar for the notes. (Section 305) At any
time we may:
- designate additional transfer agents,
- rescind the designation of any transfer agent, or
- approve a change in the office of any transfer agent.
However, we are required to maintain a transfer agent in each place of payment
for the notes at all times. (Sections 305 and 1002)
In the event we elect to redeem the notes, neither we nor the trustee
will be required to register the transfer or exchange of notes:
- during the period beginning at the opening of business 15 days
before the day we mail the notice of redemption for the notes
and ending at the close of business on the day the notice is
mailed, or
- if we have selected the notes for redemption, in whole or in
part, except for the unredeemed portion of the notes. (Section
305)
BOOK-ENTRY SYSTEM
We originally issued the notes in the form of global securities. The
global securities were deposited with, or on behalf of, DTC and registered in
the name of a nominee of DTC. The notes sold pursuant to this prospectus will be
represented by a new unrestricted global security. Except under circumstances
described below, the notes will not be issued in definitive form.
Investors who purchased notes in offshore transactions in reliance on
Regulation S under the Securities Act of 1933 may hold their interest in a
global security directly through Euroclear Bank S.A./N.V., as operator of the
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Euroclear System ("Euroclear"), and Clearstream Banking, societe anonyme
("Clearstream"), if they are participants in such systems, or indirectly through
organizations that are participants in such systems. Euroclear and Clearstream
will hold interests in the global securities on behalf of their participants
through their respective depositaries, which in turn will hold such interests in
the global securities in customers' securities accounts in the depositaries'
names on the books of DTC.
Ownership of beneficial interests in a global security will be limited
to persons that have accounts with DTC or its nominee ("participants") or
persons that may hold interests through participants. Ownership of beneficial
interests in a global security will be shown on, and the transfer of that
ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of persons other than participants). The laws
of some states require that some purchasers of securities take physical delivery
of the securities in definitive form. Such limits and such laws may impair the
ability to transfer beneficial interests in a global security.
So long as DTC or its nominee is the registered owner of a global
security, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the notes represented by that global security for all
purposes under the indenture. Except as provided below, owners of beneficial
interests in a global security will not be entitled to have notes represented by
that global security registered in their names, will not receive or be entitled
to receive physical delivery of notes in definitive form and will not be
considered the owners or holders thereof under the indenture. Principal and
interest payments, if any, on notes registered in the name of DTC or its nominee
will be made to DTC or its nominee, as the case may be, as the registered owner
of the relevant global security. Neither we, the trustee, any paying agent or
the security registrar for the notes will have any responsibility or liability
for any aspect of the records relating to nor payments made on account of
beneficial interests in a global security or for maintaining, supervising or
reviewing any records relating to such beneficial interests.
We expect that DTC or its nominee, upon receipt of any payment of
principal or interest will credit immediately participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of the relevant global security as shown on the records of
DTC or its nominee. We also expect that payments by participants to owners of
beneficial interests in a global security held through these participants will
be governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of the participants.
Beneficial owners of interests in global securities who desire to
convert their interests into common stock should contact their brokers or other
participants or indirect participants through whom they hold such beneficial
interests to obtain information on procedures, including proper forms and
cut-off times, for submitting requests for conversion.
Unless and until they are exchanged in whole or in part for notes in
definitive form, the global securities may not be transferred except as a whole
by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of
DTC. Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. Transfers
between participants in Euroclear and Clearstream will be effected in the
ordinary way in accordance with their respective rules and operating procedures.
Cross-market transfers between DTC, on the one hand, and directly or
indirectly through Euroclear or Clearstream participants, on the other, will be
effected in DTC in accordance with DTC rules on behalf of Euroclear or
Clearstream, as the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions to Euroclear or
Clearstream, as the case may be, by the counterparty in such system in
accordance with its rules and procedures and within its established deadlines
(Brussels time). Euroclear or Clearstream, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the global securities in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Clearstream
participants may not deliver instructions directly to the depositaries for
Euroclear or Clearstream.
Because of time zone differences, the securities account of a Euroclear
or Clearstream participant purchasing an interest in the global securities from
a DTC participant will be credited during the securities settlement processing
day (which must be a business day for Euroclear or Clearstream, as the case may
be) immediately following the
34
DTC settlement date, and such credit of any transactions interests in the global
securities settled during such processing day will be reported to the relevant
Euroclear or Clearstream participant on such day. Cash received by Euroclear or
Clearstream as a result of sales of interests in the global securities by or
through a Euroclear or Clearstream participant to a DTC participant will be
received with value on the DTC settlement date, but will be available in the
relevant Euroclear or Clearstream cash account only as of the business day
following settlement in DTC.
If DTC at any time is unwilling or unable to continue as a depositary,
defaults in the performance of its duties as depositary or ceases to be a
clearing agency registered under the Securities Exchange Act of 1934 or other
applicable statute or regulation, and a successor depositary is not appointed by
us within 90 days, we will issue notes in definitive form in exchange for the
global securities relating to the notes. In addition, we may at any time and in
our sole discretion determine not to have the notes or portions of the notes
represented by one or more global securities and, in that event, will issue
individual notes in exchange for the global security or securities representing
the notes. Further, if we so specify with respect to any notes, an owner of a
beneficial interest in a global security representing the notes may, on terms
acceptable to us and the depositary for the global security, receive individual
notes in exchange for the beneficial interest. In any such instance, an owner of
a beneficial interest in a global security will be entitled to physical delivery
in definitive form of notes represented by the global security equal in
principal amount to the beneficial interest, and to have the notes registered in
its name. Notes so issued in definitive form will be issued as registered notes
in denominations of $1,000 and integral multiples thereof, unless otherwise
specified by us.
GOVERNING LAW
New York law will govern the indenture and the notes. (Section 112)
THE TRUSTEE
JPMorgan Chase Bank is the trustee, security registrar, paying agent
and conversion agent under the indenture for the notes. We maintain banking
relationships in the ordinary course of business with the trustee and its
affiliates. As of October 31, 2003, the trustee served as trustee for $2.0
billion aggregate principal amount of our outstanding debt securities and $1.0
billion aggregate principal amount of outstanding pollution control bonds issued
on our behalf. In addition, the trustee serves as trustee for debt securities of
some of our subsidiaries. The trustee and its affiliates are also parties to
credit agreements under which we and our affiliates have bank lines of credit.
We and our affiliates also maintain depository and other banking, investment
banking and investment management relationships with the trustee and its
affiliates. The trustee also serves as rights agent under our shareholder rights
plan.
NOTICES
Except as otherwise described herein, notice to holders of the notes
will be given by mail to the addresses as they appear in the security register.
LISTING
The notes sold to qualified institutional buyers are eligible for
trading on the Portal Market; however, the notes resold pursuant to this
prospectus will no longer be eligible for trading on the Portal Market.
REGISTRATION RIGHTS
We have entered into a registration rights agreement with the initial
purchasers of the notes for the benefit of the holders of the notes and the
common stock issuable upon conversion thereof. We have filed the registration
statement of which this prospectus is a part to satisfy our obligations under
the registration rights agreement. Under this agreement, we will, at our cost,
use reasonable commercial efforts to keep the shelf registration statement
effective after its effective date until the earliest to occur of the following:
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- all securities covered by the registration statement have been
sold pursuant to an effective registration statement,
- the date on which all registrable securities have been sold
pursuant to Rule 144 under the Securities Act of 1933,
- such time as there are no longer any registrable securities
outstanding, and
- the second anniversary of the last date of original issuance
of the notes.
We refer to the notes and the common stock issuable upon conversion
thereof as registrable securities. We will be permitted to suspend the
effectiveness of the shelf registration statement or the use of the prospectus
that is part of the shelf registration statement during specified periods (not
to exceed 45 consecutive days or an aggregate of 90 days in any consecutive
12-month period) in specified circumstances, including circumstances relating to
pending corporate developments, without being required to pay additional
amounts. We need not specify the nature of the event giving rise to a suspension
in any notice to the holders of the notes of the existence of a suspension.
If:
- after the effectiveness of the shelf registration statement,
we fail to file a post-effective amendment, prospectus
supplement or report with the SEC within five business days
after a holder provides us with the questionnaire referred to
below, if such filing is necessary to enable the holder to
deliver the prospectus to purchasers of such holder's
registrable securities,
- the registration statement ceases to be effective or fails to
be usable without being succeeded within 30 days by a
post-effective amendment, prospectus supplement or report
filed with the SEC pursuant to the Securities Exchange Act of
1934 that cures the failure of the registration statement to
be effective or usable, or
- the aggregate duration of any suspension periods in any period
exceeds the limits described above,
then, in each case, we will pay additional amounts, until such failure is cured,
to all holders of notes equal to 0.25% of the aggregate principal amount of
notes per annum for the first 90 days following such failure, increasing by
0.25% per annum at the beginning of each subsequent 90-day period. With respect
to shares of common stock issued upon conversion of the notes, we will pay
additional amounts equal to 0.25% per annum of the then applicable conversion
price for the first 90 days, increasing by 0.25% per annum at the beginning of
each subsequent 90-day period. Additional amounts on the registrable securities
will not, however, exceed 0.50% per annum at any time. Any additional amounts
due will be payable in cash semi-annually in arrears on the same dates as the
interest payment dates for the notes.
The term "applicable conversion price" means, as of any date of
determination, $1,000 principal amount of notes as of such date of determination
divided by the conversion rate in effect as of such date of determination or, if
no notes are then outstanding, the conversion rate that would be in effect were
notes then outstanding.
A holder who elects to sell any securities pursuant to the shelf
registration statement:
- will be required to be named as a selling security holder,
- will be required to deliver a prospectus to purchasers,
- will be subject to the civil liability provisions under the
Securities Act of 1933 in connection with any sales, and
- will be bound by the provisions of the registration rights
agreement, which are applicable to the holder, including
certain indemnification obligations.
To be named as a selling security holder in the shelf registration
statement when it first becomes effective, holders must complete and deliver a
questionnaire, the form of which can be obtained from us upon request, at least
36
five business days prior to the effectiveness of the shelf registration
statement. If we receive from a holder of registrable securities a completed
questionnaire, together with such other information as may be reasonably
requested by us, after the effectiveness of the shelf registration statement, we
will file an amendment to the shelf registration statement or supplement to the
related prospectus within five business days to permit the holder to deliver a
prospectus to purchasers of registrable securities. Any holder that does not
complete and deliver a questionnaire or provide such other information will not
be named as a selling security holder in this prospectus and therefore will not
be permitted to sell any registrable securities under the shelf registration
statement.
DESCRIPTION OF OUR CAPITAL STOCK
The following descriptions are summaries of material terms of our
common stock, preferred stock, articles of incorporation and bylaws. This
summary is qualified by reference to our amended and restated articles of
incorporation and amended and restated bylaws, each as amended to date, copies
of which we have previously filed with the SEC, and by the provisions of
applicable law. Our authorized capital stock consists of:
- 1,000,000,000 shares of common stock, par value $0.01 per
share, of which 306,077,942 shares are outstanding as of
November 3, 2003 and
- 20,000,000 shares of preferred stock, par value $0.01 per
share, of which no shares are outstanding as of November 3,
2003.
A series of our preferred stock, designated Series A Preferred Stock,
has been reserved for issuance upon exercise of the preferred stock purchase
rights attached to each share of our common stock pursuant to the shareholder's
rights plan discussed below.
COMMON STOCK
VOTING RIGHTS. Holders of our common stock are entitled to one vote for
each share on all matters submitted to a vote of shareholders, including the
election of directors. There are no cumulative voting rights. Subject to the
voting rights expressly conferred under prescribed conditions to the holders of
our preferred stock, the holders of our common stock possess exclusive full
voting power for the election of directors and for all other purposes.
DIVIDENDS. Subject to preferences that may be applicable to any of our
outstanding preferred stock, the holders of our common stock are entitled to
dividends when, as and if declared by the board of directors out of funds
legally available for that purpose.
LIQUIDATION RIGHTS. If we are liquidated, dissolved or wound up, the
holders of our common stock will be entitled to a pro rata share in any
distribution to shareholders, but only after satisfaction of all of our
liabilities and of the prior rights of any outstanding class of our preferred
stock, which may include the right to participate further with the holders of
our common stock in the distribution of any of our remaining assets.
PREEMPTIVE RIGHTS. Holders of our common stock are not entitled to any
preemptive or conversion rights or other subscription rights.
TRANSFER AGENT AND REGISTRAR. Our shareholder services division serves
as transfer agent and registrar for our common stock.
OTHER PROVISIONS. There are no redemption or sinking fund provisions
applicable to our common stock. No personal liability will attach to holders of
such shares under the laws of the State of Texas. Subject to the provisions of
our articles of incorporation and bylaws imposing certain supermajority voting
provisions, the rights of the holders of shares of our common stock may not be
modified except by a vote of at least a majority of the shares outstanding,
voting together as a single class.
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PREFERRED STOCK
Our board of directors may cause us to issue preferred stock from time
to time in one or more series and may fix the number of shares and the terms of
each series without the approval of our shareholders. Our board of directors may
determine the terms of each series, including:
- the designation of the series,
- dividend rates and payment dates,
- redemption rights,
- liquidation rights,
- sinking fund provisions,
- conversion rights,
- voting rights, and
- any other terms.
The issuance of preferred stock, while providing desired flexibility in
connection with possible acquisitions and other corporate purposes, could
adversely affect the voting power of holders of our common stock. It could also
affect the likelihood that holders of our common stock will receive dividend
payments and payments upon liquidation. The issuance of shares of preferred
stock, or the issuance of rights to purchase shares of preferred stock, could be
used to discourage an attempt to obtain control of us. For example, if, in the
exercise of its fiduciary obligations, our board were to determine that a
takeover proposal was not in our best interest, the board could authorize the
issuance of a series of preferred stock containing class voting rights that
would enable the holder or holders of the series to prevent or make the change
of control transaction more difficult. Alternatively, a change of control
transaction deemed by the board to be in our best interest could be facilitated
by issuing a series of preferred stock having sufficient voting rights to
provide a required percentage vote of the shareholders.
For purposes of the rights plan described below, our board of directors
has designated a series of preferred stock to constitute the Series A Preferred
Stock. For a description of the rights plan, see "-- Anti-Takeover Effects of
Texas Laws and Our Charter and Bylaw Provisions" and "-- Shareholder Rights
Plan."
ANTI-TAKEOVER EFFECTS OF TEXAS LAWS AND OUR CHARTER AND BYLAW PROVISIONS
Some provisions of Texas law and our articles of incorporation and
bylaws could make the following more difficult:
- acquisition of us by means of a tender offer,
- acquisition of control of us by means of a proxy contest or
otherwise, or
- removal of our incumbent officers and directors.
These provisions, as well as our shareholder rights plan, are designed
to discourage coercive takeover practices and inadequate takeover bids. These
provisions are also designed to encourage persons seeking to acquire control of
us to first negotiate with our board of directors. We believe that the benefits
of this increased protection gives us the potential ability to negotiate with
the proponent of an unfriendly or unsolicited proposal to acquire or restructure
us, and that the benefits of this increased protection outweigh the
disadvantages of discouraging those proposals, because negotiation of those
proposals could result in an improvement of their terms.
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CHARTER AND BYLAW PROVISIONS
ELECTION AND REMOVAL OF DIRECTORS. The exact number of members of our
board of directors will be fixed from time to time by resolution of the board of
directors. Our board of directors is divided into three classes, Class I, Class
II and Class III. Each class is as nearly equal in number of directors as
possible. The terms of office of the directors of Class I expire at the annual
meeting of shareholders in 2006, of Class II expire at the annual meeting of
shareholders in 2004 and of Class III expire at the annual meeting of
shareholders in 2005. At each annual meeting, the shareholders elect the number
of directors equal to the number in the class whose term expires at the meeting
to hold office until the third succeeding annual meeting. This system of
electing and removing directors may discourage a third party from making a
tender offer for or otherwise attempting to obtain control of us, because it
generally makes it more difficult for shareholders to replace a majority of the
directors. In addition, no director may be removed except for cause, and,
subject to the voting rights expressly conferred under prescribed conditions to
the holders of our preferred stock, directors may be removed for cause only by
the holders of a majority of the shares of capital stock entitled to vote at an
election of directors. Subject to the voting rights expressly conferred under
prescribed conditions to the holders of our preferred stock, any vacancy
occurring on the board of directors and any newly created directorship may be
filled by a majority of the remaining directors in office or by election by the
shareholders.
SHAREHOLDER MEETINGS. Our articles of incorporation and bylaws provide
that special meetings of holders of common stock may be called only by the
chairman of our board of directors, our chief executive officer, the president,
the secretary, a majority of our board of directors or the holders of at least
50% of the shares outstanding and entitled to vote.
MODIFICATION OF ARTICLES OF INCORPORATION. In general, amendments to
our articles of incorporation which are recommended by the board of directors
require the affirmative vote of holders of at least a majority of the voting
power of all outstanding shares of capital stock entitled to vote in the
election of directors. The provisions described above under "-- Election and
Removal of Directors" and "-- Shareholder Meetings" may be amended only by the
affirmative vote of holders of at least 66 2/3% of the voting power of all
outstanding shares of capital stock entitled to vote in the election of
directors. The provisions described below under "-- Modification of Bylaws" may
be amended only by the affirmative vote of holders of at least 80% of the voting
power of all outstanding shares of capital stock entitled to vote in the
election of directors.
MODIFICATION OF BYLAWS. Our board of directors has the power to alter,
amend or repeal the bylaws or adopt new bylaws by the affirmative vote of at
least 80% of all directors then in office at any regular or special meeting of
the board of directors called for that purpose. The shareholders also have the
power to alter, amend or repeal the bylaws or adopt new bylaws by the
affirmative vote of holders of at least 80% of the voting power of all
outstanding shares of capital stock entitled to vote in the election of
directors, voting together as a single class.
OTHER LIMITATIONS ON SHAREHOLDER ACTIONS. Our bylaws also impose some
procedural requirements on shareholders who wish to:
- make nominations in the election of directors,
- propose that a director be removed,
- propose any repeal or change in the bylaws, or
- propose any other business to be brought before an annual or
special meeting of shareholders.
Under these procedural requirements, a shareholder must deliver timely
notice to the corporate secretary of the nomination or proposal along with
evidence of:
- the shareholder's status as a shareholder,
- the number of shares beneficially owned by the shareholder,
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- a list of the persons with whom the shareholder is acting in
concert, and
- the number of shares such persons beneficially own.
To be timely, a shareholder must deliver notice:
- in connection with an annual meeting of shareholders, not less
than 90 nor more than 180 days prior to the date on which the
immediately preceding year's annual meeting of shareholders
was held; provided that if the date of the annual meeting is
advanced by more than 30 days prior to or delayed by more than
60 days after the date on which the immediately preceding
year's annual meeting of shareholders was held, not less than
180 days prior to such annual meeting and not later than the
last to occur of (i) the 90th day prior to such annual meeting
or (ii) the 10th day following the day on which we first make
public announcement of the date of such meeting, or
- in connection with a special meeting of shareholders, not less
than 40 nor more than 60 days prior to the date of the special
meeting.
In order to submit a nomination for the board of directors, a
shareholder must also submit information with respect to the nominee that we
would be required to include in a proxy statement, as well as some other
information. If a shareholder fails to follow the required procedures, the
shareholder's nominee or proposal will be ineligible and will not be voted on by
our shareholders.
LIMITATION ON LIABILITY OF DIRECTORS. Our articles of incorporation
provide that no director will be personally liable to us or our shareholders for
monetary damages for breach of fiduciary duty as a director, except as required
by law as in effect from time to time. Currently, Texas law requires that
liability be imposed for the following:
- any breach of the director's duty of loyalty to us or our
shareholders,
- any act or omission not in good faith that constitutes a
breach of duty of the director to the corporation or an act or
omission that involves intentional misconduct or a knowing
violation of law,
- a transaction from which the director received an improper
benefit, whether or not the benefit resulted from an action
taken within the scope of a director's office, and
- an act or omission for which the liability of a director is
expressly provided for by statute.
Our bylaws provide that we will indemnify our officers and directors and advance
expenses to them in connection with proceedings and claims, to the fullest
extent permitted by the Texas Business Corporation Act ("TBCA"). The bylaws
authorize our board of directors to indemnify and advance expenses to people
other than our officers and directors in certain circumstances.
TEXAS ANTI-TAKEOVER LAW
We are subject to Article 13.03 of the TBCA. That section prohibits
Texas corporations from engaging in a wide range of specified transactions with
any affiliated shareholder during the three-year period immediately following
the affiliated shareholder's acquisition of shares in the absence of certain
board of director or shareholder approvals. An affiliated shareholder is any
person, other than the corporation and any of its wholly owned subsidiaries,
that is or was within the preceding three-year period the beneficial owner of
20% or more of any class or series of stock entitled to vote generally in the
election of directors. Article 13.03 may deter any potential unfriendly offers
or other efforts to obtain control of us that are not approved by our board.
This may deprive the shareholders of opportunities to sell shares of our common
stock at a premium to the prevailing market price.
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SHAREHOLDER RIGHTS PLAN
Each share of our common stock includes one right to purchase from us a
unit consisting of one one-thousandth of a share of our Series A Preferred Stock
at a purchase price of $42.50 per unit, subject to adjustment. The rights are
issued pursuant the Rights Agreement dated as of January 1, 2002 between us and
JPMorgan Chase Bank (the "Rights Agreement"). We have summarized selected
portions of the Rights Agreement and the rights below. This summary is qualified
by reference to the Rights Agreement, a copy of which we have previously filed
with the SEC.
DETACHMENT OF RIGHTS; EXERCISABILITY. The rights will attach to all
certificates representing our common stock issued prior to the "release date."
That date will occur, except in some cases, on the earlier of:
- ten days following a public announcement that a person or
group of affiliated or associated persons, whom we refer to
collectively as an "acquiring person," has acquired, or
obtained the right to acquire, beneficial ownership of 20% or
more of the outstanding shares of our common stock, or
- ten business days following the start of a tender offer or
exchange offer that would result in a person becoming an
acquiring person.
Our board of directors may defer the release date in some circumstances. Also,
some inadvertent acquisitions of our common stock will not result in a person
becoming an acquiring person if the person promptly divests itself of sufficient
common stock.
Until the release date:
- common stock certificates will evidence the rights,
- the rights will be transferable only with those certificates,
- new common stock certificates will contain a notation
incorporating the Rights Agreement by reference, and
- the surrender for transfer of any common stock certificate
will also constitute the transfer of the rights associated
with the common stock represented by the certificate.
The rights are not exercisable until the release date and will expire
at the close of business on December 31, 2011, unless we redeem or exchange them
at an earlier date as described below.
As soon as practicable after the release date, the rights agent will
mail certificates representing the rights to holders of record of common stock
as of the close of business on the release date. From that date on, only
separate rights certificates will represent the rights. We will also issue
rights with all shares of common stock issued prior to the release date. We will
also issue rights with shares of common stock issued after the release date in
connection with some employee benefit plans or upon conversion of some
securities, including the notes offered by this prospectus. Except as otherwise
determined by our board of directors, we will not issue rights with any other
shares of common stock issued after the release date.
FLIP-IN EVENT. A flip-in event will occur under the Rights Agreement
when a person becomes an acquiring person other than pursuant to a "permitted
offer." The Rights Agreement defines "permitted offer" as a tender or exchange
offer for all outstanding shares of our common stock at a price and on terms
that a majority of the independent directors of our board of directors
determines to be fair to and otherwise in the best interests of us and the best
interest of our shareholders.
If a flip-in event occurs, each right, other than any right that has
become null and void as described below, will become exercisable to receive (in
lieu of the shares of Series A Preferred Stock otherwise purchasable) the number
of shares of common stock, or in certain circumstances, cash, property or other
securities, which has a "current
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market price" equal to two times the exercise price of the right. Please refer
to the Rights Agreement for the definition of "current market price."
FLIP-OVER EVENT. A "flip-over event" will occur under the Rights
Agreement when, at any time from and after the time a person becomes an
acquiring person:
- we are acquired or we acquire any person in a merger or other
business combination transaction, other than specified mergers
that follow a permitted offer, or
- 50% or more of our assets, cash flow or earning power is sold
or transferred.
If a flip-over event occurs, each holder of a right, except rights that are
voided as described below, will thereafter have the right to receive, on
exercise of the right, a number of shares of common stock of the acquiring
company that has a current market price equal to two times the exercise price of
the right.
When a flip-in event or a flip-over event occurs, all rights that then
are, or under the circumstances the Rights Agreement specifies previously were,
beneficially owned by an acquiring person or specified related parties will
become null and void in the circumstances the Rights Agreement specifies.
SERIES A PREFERRED STOCK. After the release date, each right will
entitle the holder to purchase a one one-thousandth share of our Series A
Preferred Stock, which fraction will be essentially the economic equivalent of
one share of common stock.
ANTI-DILUTION. The number of outstanding rights associated with a share
of common stock, the number of fractional shares of Series A Preferred Stock
issuable upon exercise of a right and the exercise price of the right are
subject to adjustment in the event of certain stock dividends on, or a
subdivision, combination or reclassification of, our common stock occurring
prior to the release date. The exercise price of the rights and the number of
fractional shares of Series A Preferred Stock or other securities or property
issuable on exercise of the rights are subject to adjustment from time to time
to prevent dilution in the event of certain transactions affecting the Series A
Preferred Stock.
With some exceptions, we will not be required to adjust the exercise
price of the rights until cumulative adjustments amount to at least 1% of the
exercise price. The Rights Agreement also will not require us to issue
fractional shares of Series A Preferred Stock that are not integral multiples of
the specified fractional share and, in lieu thereof, we will make a cash
adjustment based on the market price of the Series A Preferred Stock on the last
trading date prior to the date of exercise. Pursuant to the Rights Agreement, we
reserve the right to require prior to the occurrence of any flip-in event or
flip-over event that, on any exercise of rights, a number of rights must be
exercised so that it will issue only whole shares of Series A Preferred Stock.
REDEMPTION OF RIGHTS. At any time until the time a person becomes an
acquiring person, we may redeem the rights in whole, but not in part at a price
of $.005 per right, payable, at our option, in cash, shares of common stock or
such other consideration as our board of directors may determine. Upon such
redemption, the rights will terminate and the only right of the holders of
rights will be to receive the $.005 redemption price.
EXCHANGE OF RIGHTS. At any time after the occurrence of a flip-in
event, and prior to a person's becoming the beneficial owner of 50% or more of
our outstanding common stock or the occurrence of a flip-over event, we may
exchange the rights (other than rights owned by an acquiring person or an
affiliate or an associate of an acquiring person, which will have become void,
in whole or in part), at an exchange ratio of one share of common stock, and/or
other equity securities deemed to have the same value as one share of common
stock, per right, subject to adjustment.
SUBSTITUTION. If we have an insufficient number of authorized but
unissued shares of common stock available to permit an exercise or exchange of
rights upon the occurrence of a flip-in event, we may substitute certain other
types of property for common stock so long as the total value received by the
holder of the rights is equivalent to the
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value of the common stock that the shareholder would otherwise have received. We
may substitute cash, property, equity securities or debt, reduce the exercise
price of the rights or use any combination of the foregoing.
NO RIGHTS AS A SHAREHOLDER. Until a right is exercised, a holder of
rights will have no rights to vote or receive dividends or any other rights as a
holder of our preferred or common stock.
AMENDMENT OF TERMS OF RIGHTS. Our board of directors may amend any of
the provisions of the Rights Agreement, other than the redemption price, at any
time prior to the time a person becomes an acquiring person. Thereafter, the
board of directors may only amend the Rights Agreement in order to cure any
ambiguity, defect or inconsistency or to make changes that do not materially and
adversely affect the interests of holders of the rights, excluding the interests
of any acquiring person.
RIGHTS AGENT. JPMorgan Chase Bank will serve as rights agent with
regard to the rights.
ANTI-TAKEOVER EFFECTS. The rights will have anti-takeover effects. They
will cause substantial dilution to any person or group that attempts to acquire
us without the approval of our board of directors. As a result, the overall
effect of the rights may be to make more difficult or discourage any attempt to
acquire us even if such acquisition may be favorable to the interests of our
shareholders. Because our board of directors can redeem the rights or approve a
permitted offer, the rights should not interfere with a merger or other business
combination approved by the board of directors.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
This is a summary of material United States federal income tax
consequences relevant to holders of the notes. This summary is based upon laws,
regulations, rulings and decisions now in effect, all of which are subject to
change (including retroactive changes) or possible differing interpretations.
The discussion below deals only with holders who hold the notes (and the shares
of our common stock acquired upon conversion of the notes) as capital assets and
who acquire the notes from a selling security holder as described under "Selling
Security Holders" pursuant to an offering of such notes under this prospectus in
the first sale of such notes by such selling security holder after the notes are
first registered with the SEC. The discussion does not purport to deal with
persons in special tax situations, such as financial institutions, insurance
companies, regulated investment companies, dealers in securities or currencies,
certain former citizens or former long-term residents of the United States,
tax-exempt entities, persons holding the notes (or our common stock acquired
upon conversion of a note) in a tax-deferred or tax-advantaged account or
persons holding the notes or shares of common stock as a hedge against currency
risks, as a position in a "straddle" or as part of a "hedging" or "conversion"
transaction for tax purposes.
We do not address all of the tax consequences that may be relevant to
an investor in the notes. In particular, we do not address:
- the United States federal income tax consequences to
shareholders in, or partners or beneficiaries of, an entity
that is a holder of the notes (or our common stock acquired
upon conversion of a note),
- the United States federal estate, gift or alternative minimum
tax consequences of the purchase, ownership or disposition of
the notes (or our common stock acquired upon conversion of a
note),
- the United States federal income tax consequences to holders
whose functional currency is not the United States dollar, or
- any state, local or foreign tax consequences of the purchase,
ownership or disposition of the notes (or our common stock
acquired upon conversion of a note).
Persons considering the purchase of the notes should consult their own
tax advisors concerning the application of the United States federal income tax
laws to their particular situations as well as any consequences of the purchase,
ownership and disposition of the notes (or our common stock acquired upon
conversion of a note) arising under other United States federal tax laws and the
laws of any other taxing jurisdiction.
For purposes of the discussion that follows, a U.S. holder is a
beneficial owner of the notes (or our common stock acquired upon conversion of a
note) that for U.S. federal income tax purposes is:
- an individual citizen or resident of the United States,
- a corporation, including any entity treated as a corporation
for United States federal income tax purposes, created or
organized in or under the laws of the United States, or any
political subdivision thereof,
- an estate if its income is subject to United States federal
income taxation regardless of its source, or
- a trust (1) that is subject to the primary supervision of a
United States court and the control of one or more United
States persons or (2) that has a valid election in effect
under applicable Treasury regulations to be treated as a
United States person.
A Non-U.S. holder is a beneficial owner of the notes (or our common
stock acquired upon conversion of a note) that is neither a U.S. holder nor a
partnership. If a partnership (including for this purpose any entity treated as
a partnership for United States federal income tax purposes) is a beneficial
owner of the notes (or our common stock acquired upon conversion of a note), the
United States federal income tax treatment of a partner in the partnership
44
will generally depend on the status of the partner and the activities of the
partnership. A holder of the notes (or our common stock acquired upon conversion
of a note) that is a partnership and partners in such partnership should consult
their individual tax advisors about the United States federal income tax
consequences of holding and disposing of the notes (or our common stock acquired
upon conversion of a note).
No statutory or judicial authority directly addresses the treatment of
the notes or instruments similar to the notes for United States federal income
tax purposes. The Internal Revenue Service (the "IRS") has issued a revenue
ruling with respect to instruments similar to the notes. To the extent it
addresses the issues, this ruling supports certain aspects of the treatment
described below. No ruling has been or is expected to be sought from the IRS
with respect to the United States federal income tax consequences to the holders
of the notes. The IRS would not be precluded from taking contrary positions to
those set forth herein. As a result, no assurance can be given that the IRS will
agree with all of the tax characterizations and the tax consequences described
below.
WE URGE PROSPECTIVE INVESTORS TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE NOTES AND OUR COMMON STOCK IN LIGHT OF THEIR OWN PARTICULAR
CIRCUMSTANCES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR
OTHER TAX LAWS.
CLASSIFICATION OF THE NOTES
We intend to treat the notes as indebtedness for United States federal
income tax purposes and take the position that the notes will be subject to the
special regulations governing contingent payment debt instruments (which we
refer to as the "CPDI regulations"). Pursuant to the terms of the indenture, we
and each holder of the notes agree, for United States federal income tax
purposes, to treat the notes as debt instruments that are subject to the CPDI
regulations, and the remainder of this discussion assumes that the notes will be
so treated.
In addition, under the indenture, each holder will be deemed to have
agreed to treat the fair market value of our common stock received by such
holder upon conversion as a contingent payment and to accrue interest with
respect to the notes as original issue discount for United States federal income
tax purposes according to the "noncontingent bond method," set forth in section
1.1275-4(b) of the CPDI regulations, using the comparable yield (as defined
below) compounded semiannually and the projected payment schedule (as defined
below) determined by us. Notwithstanding the issuance of the revenue ruling
referred to above, the application of the CPDI regulations to instruments such
as the notes is uncertain in several respects, and, as a result, no assurance
can be given that the IRS or a court will agree with the treatment described
herein. Any differing treatment could affect the amount, timing and character of
income, gain or loss in respect of an investment in the notes. In particular, a
holder might be required to accrue interest income at a higher or lower rate,
might not recognize income, gain or loss upon conversion of the notes into
shares of our common stock, might recognize capital gain or loss upon a taxable
disposition of the notes and might have an adjusted tax basis in the notes or
our common stock acquired upon conversion of a note materially different than
discussed herein. Holders should consult their tax advisors concerning the tax
treatment of holding and disposing of the notes.
TREATMENT OF U.S. HOLDERS
ACCRUAL OF INTEREST ON THE NOTES
Pursuant to the CPDI regulations, a U.S. holder will be required to
accrue interest income on the notes, which we sometimes refer to as original
issue discount, in the amounts described below, regardless of whether the U.S.
holder uses the cash or accrual method of tax accounting. Accordingly, U.S.
holders will likely be required to include interest in taxable income in each
year in excess of the accruals on the notes for non-tax purposes (i.e., in
excess of the stated semi-annual cash interest payable on the notes and any
contingent interest payments actually received in that year).
The CPDI regulations provide that a U.S. holder must accrue an amount
of ordinary interest income, as original issue discount for United States
federal income tax purposes, for each accrual period prior to and including the
maturity date of the notes that equals:
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(1) the product of (i) the adjusted issue price (as defined below) of
the notes as of the beginning of the accrual period and (ii) the
comparable yield (as defined below) of the notes, adjusted for the
length of the accrual period,
(2)divided by the number of days in the accrual period, and
(3) multiplied by the number of days during the accrual period that the
U.S. holder held the notes.
The notes' issue price is the first price at which a substantial amount
of the notes was sold, excluding sales to bond houses, brokers or similar
persons or organizations acting in the capacity of underwriters, placement
agents or wholesalers. The adjusted issue price of a note is its issue price
increased by any interest income previously accrued, determined without regard
to any adjustments to interest accruals described below, and decreased by the
amount of any projected payments, as defined below (including payments of stated
cash interest) with respect to the notes.
Unless certain conditions are met, the term "comparable yield" means
the annual yield we would pay, as of the initial issue date, on a noncontingent,
nonconvertible, fixed-rate debt instrument with terms and conditions otherwise
comparable to those of the notes. We intend to take the position that the
comparable yield for the notes is 5.81%, compounded semiannually. The precise
manner of calculating the comparable yield, however, is not entirely clear. If
the comparable yield were successfully challenged by the IRS, the redetermined
yield could differ materially from the comparable yield provided by us.
Moreover, the projected payment schedule could differ materially from the
projected payment schedule provided by us.
The CPDI regulations require that we provide to U.S. holders, solely
for United States federal income tax purposes, a schedule of the projected
amounts of payments, which we refer to as projected payments, on the notes. This
schedule must produce the comparable yield. The projected payment schedule
includes the semiannual stated cash interest payable on the notes at the rate of
3.75% per annum, estimates for certain contingent interest payments and an
estimate for a payment at maturity taking into account the conversion feature.
In this connection, the fair market value of any common stock (and cash, if any)
received by a holder upon conversion will be treated as a contingent payment.
The comparable yield and the schedule of projected payments is set
forth in the indenture. U.S. holders may also obtain the projected payment
schedule by submitting a written request for such information to: CenterPoint
Energy, Inc., 1111 Louisiana, Houston, Texas 77002, Attention: Treasury
Department.
THE COMPARABLE YIELD AND THE SCHEDULE OF PROJECTED PAYMENTS ARE NOT
DETERMINED FOR ANY PURPOSE OTHER THAN FOR THE DETERMINATION OF A U.S. HOLDER'S
INTEREST ACCRUALS AND ADJUSTMENTS THEREOF IN RESPECT OF THE NOTES FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES AND DO NOT CONSTITUTE A PROJECTION OR
REPRESENTATION REGARDING THE ACTUAL AMOUNTS PAYABLE ON THE NOTES.
Amounts treated as interest under the CPDI regulations are treated as
original issue discount for all purposes of the Internal Revenue Code of 1986,
as amended (which we refer to as the "Code").
ADJUSTMENTS TO INTEREST ACCRUALS ON THE NOTES
As noted above, the projected payment schedule includes amounts
attributable to the stated semi-annual cash interest payable on the notes.
Accordingly, the receipt of the stated semi-annual cash interest payments will
not be separately taxable to U.S. holders. If, during any taxable year, a U.S.
holder receives actual payments with respect to the notes for that taxable year
that in the aggregate exceed the total amount of projected payments for that
taxable year, the U.S. holder will incur a "net positive adjustment" under the
CPDI regulations equal to the amount of such excess. The U.S. holder will treat
a "net positive adjustment" as additional interest income. For this purpose, the
payments in a taxable year include the fair market value of property received in
that year, including the fair market value of our common stock received upon
conversion.
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If a U.S. holder receives in a taxable year actual payments with
respect to the notes for that taxable year that in the aggregate are less than
the amount of projected payments for that taxable year, the U.S. holder will
incur a "net negative adjustment" under the CPDI regulations equal to the amount
of such deficit. This adjustment will (a) first reduce the U.S. holder's
interest income on the notes for that taxable year and (b) to the extent of any
excess after the application of (a), give rise to an ordinary loss to the extent
of the U.S. holder's interest income on the notes during prior taxable years,
reduced to the extent such interest was offset by prior net negative
adjustments. A negative adjustment is not subject to the two percent floor
limitation imposed on miscellaneous itemized deductions under section 67 of the
Code. Any negative adjustment in excess of the amounts described in (a) and (b)
will be carried forward and treated as a negative adjustment in the succeeding
taxable year and will offset future interest income accruals in respect of the
notes or will reduce the amount realized on the sale, exchange, purchase by us
at the holder's option, conversion, redemption or retirement of the notes.
If a U.S. holder purchases notes at a discount or premium to the
adjusted issue price, the discount will be treated as a positive adjustment, and
will increase the U.S. holder's adjusted tax basis, and the premium will be
treated as a negative adjustment, and will reduce the U.S. holder's adjusted tax
basis. The U.S. holder must reasonably allocate the adjustment over the
remaining term of the notes by reference to the accruals of original issue
discount at the comparable yield or to the projected payments. It may be
reasonable to allocate the adjustment over the remaining term of the notes pro
rata with the accruals of original issue discount at the comparable yield. U.S.
holders should consult their tax advisors regarding these allocations.
SALE, EXCHANGE, CONVERSION OR REDEMPTION OF THE NOTES
Generally, the sale or exchange of a note, the purchase of a note by us
at the holder's option or the redemption or retirement of a note for cash will
result in taxable gain or loss to a U.S. holder. As described above, our
calculation of the comparable yield and the schedule of projected payments for
the notes includes the receipt of common stock upon conversion as a contingent
payment with respect to the notes. Accordingly, we intend to treat the receipt
of our common stock by a U.S. holder upon the conversion of a note as a
contingent payment under the CPDI regulations. Under this treatment, conversion
also would result in taxable gain or loss to the U.S. holder. As described
above, holders will be deemed to have agreed to be bound by our determination of
the comparable yield and the schedule of projected payments.
The amount of gain or loss on a taxable sale, exchange, purchase by us
at the holder's option, conversion, redemption or retirement would be equal to
the difference between (a) the amount of cash plus the fair market value of any
other property received by the U.S. holder, including the fair market value of
any of our common stock received and (b) the U.S. holder's adjusted tax basis in
the note. A U.S. holder's adjusted tax basis in a note will generally be equal
to the U.S. holder's original purchase price for the note, increased by any
interest income previously accrued by the U.S. holder (determined without regard
to any adjustments to interest accruals described above, other than adjustments
to reflect a discount or premium to the adjusted issue price, if any), and
decreased by the amount of any projected payments, as defined above, projected
to have been made through such date in respect of the notes to the U.S. holder
(without regard to the actual amount paid). Gain recognized upon a sale,
exchange, purchase by us at the holder's option, conversion, redemption or
retirement of a note will generally be treated as ordinary interest income; any
loss will be ordinary loss to the extent of interest previously included in
income, and thereafter, capital loss (which will be long-term if the note is
held for more than one year). The deductibility of net capital losses by
individuals and corporations is subject to limitations.
A U.S. holder's tax basis in our common stock received upon a
conversion of a note will equal the then current fair market value of such
common stock. The U.S. holder's holding period for the common stock received
will commence on the day immediately following the date of conversion.
CONSTRUCTIVE DIVIDENDS
If at any time we were to make a distribution of property to our
shareholders that would be taxable to the shareholders as a dividend for United
States federal income tax purposes and, in accordance with the anti-dilution
provisions of the notes, the conversion rate of the notes were increased, such
increase might be deemed to be the payment of a taxable dividend to holders of
the notes.
47
For example, an increase in the conversion rate in the event of
distributions of our evidences of indebtedness, or assets, or an increase in the
event of an extraordinary cash dividend may result in deemed dividend treatment
to holders of the notes, but, generally, an increase in the event of stock
dividends or the distribution of rights to subscribe for common stock would not
be so treated.
ADDITIONAL AMOUNTS
We may be required to make payments of additional amounts if the
prospectus is unavailable for periods in excess of those permitted by the
registration rights agreement, as described under "Description of the Notes -
Registration Rights." We intend to take the position for United States federal
income tax purposes that any such additional payments should be taxable to U.S.
holders as additional ordinary income when received or accrued, in accordance
with their method of tax accounting. Our determination is binding on holders of
the notes, unless they explicitly disclose that they are taking a different
position to the IRS on their tax returns for the year during which they acquire
the note. The IRS could take a contrary position from that described above,
which could affect the timing and character of U.S. holders' income from the
notes with respect to the payments of additional amounts.
U.S. holders should consult their tax advisors concerning the
appropriate tax treatment of the payment of any additional amounts with respect
to the notes.
DIVIDENDS ON COMMON STOCK
If, after a U.S. holder converts a note into our common stock, we make
distributions on our common stock, the distributions will constitute dividends
taxable to the holder as ordinary income for United States federal income tax
purposes to the extent of our current or accumulated earnings and profits as
determined under United States federal income tax principles. If a U.S. holder
is an individual and receives a distribution that is treated as a dividend,
recently enacted legislation generally reduces the maximum tax rate to 15%.
However, there are several exceptions and restrictions regarding the
availability of the reduced tax rates, such as restrictions relating to (i) the
U.S. holder's holding period of stock on which the dividends are received, (ii)
such holder's obligation, if any, to make related payments with respect to
positions in substantially similar or related property, and (iii) amounts the
U.S. holder takes into account as investment income under section 163(d)(4)(B)
of the Code. The reduced rates apply only to dividends received on or before
December 31, 2008. Individuals should consult their tax advisors regarding the
extent, if any, to which any exceptions and restrictions may apply to their
particular factual situation.
To the extent that a U.S. holder receives distributions on shares of
common stock that would otherwise constitute dividends for United States federal
income tax purposes but that exceed our current and accumulated earnings and
profits, such distributions will be treated first as a non-taxable return of
capital reducing the holder's tax basis in the shares of common stock. Any such
distributions in excess of the U.S. holder's tax basis in the shares of common
stock will generally be treated as capital gain. Subject to applicable
limitations, distributions on our common stock constituting dividends paid to
holders that are United States corporations will qualify for the dividends
received deduction.
SALE OF COMMON STOCK
A U.S. holder generally will recognize capital gain or loss on a sale
or exchange of our common stock. The U.S. holder's gain or loss will equal the
difference between the proceeds received by the holder and the holder's tax
basis in the common stock, which will generally be the fair market value of the
common stock at the time of the conversion. The proceeds received by a U.S.
holder will include the amount of any cash and the fair market value of any
other property received for the common stock. The gain or loss recognized by a
U.S. holder on a sale or exchange of common stock will be long-term capital gain
or loss if the holder's holding period for the common stock is more than one
year. Long-term capital gains of noncorporate taxpayers are generally taxed at a
lower maximum marginal tax rate than the maximum marginal tax rate applicable to
ordinary income. The deductibility of net capital losses by individuals and
corporations is subject to limitations.
If a U.S. holder is an individual, recently enacted legislation
generally reduces the maximum tax rate on such long-term capital gain to 15%.
However, there are exceptions to the reduced rates, including an exception for
48
amounts the U.S. holder takes into account as investment income under section
163(d)(4)(B) of the Code. The reduced rates apply only to tax years beginning on
or before December 31, 2008. Individuals should consult their tax advisors
regarding the extent, if any, to which any exceptions may apply to their
particular factual situation. Moreover, if such holder previously received, with
respect to such stock, one or more dividends that were taxed at the reduced rate
described above under " -- Dividends on Common Stock" any capital loss on a
subsequent disposition of the stock will, regardless of such holder's holding
period, be treated as long-term capital loss to the extent that the previous
dividends were extraordinary dividends within the meaning of section 1059(c) of
the Code.
TREATMENT OF NON-U.S. HOLDERS
OWNERSHIP AND DISPOSITION OF THE NOTES
All payments on the notes made to a Non-U.S. holder, including interest
payments, a payment in common stock pursuant to a conversion, and any gain
realized on a sale or exchange of the notes will be exempt from United States
income and withholding tax provided that: (i) such Non-U.S. holder does not own,
actually, indirectly or constructively, 10% or more of the total combined voting
power of all classes of our stock entitled to vote and is not a controlled
foreign corporation related, directly or indirectly, to us through stock
ownership, (ii) the statement requirement described below has been fulfilled
with respect to the beneficial owner, as discussed below, and (iii) such
payments and gain are not effectively connected with the conduct by such
Non-U.S. holder of a trade or business in the United States. However, if a
Non-U.S. holder were deemed to have received a constructive dividend (see " --
Treatment of U.S. Holders -- Constructive Dividends" above), the Non-U.S. holder
will generally be subject to United States federal withholding tax at a 30%
rate, subject to a reduction by an applicable treaty, on the taxable amount of
such dividend (see " -- Ownership and Disposition of Common Stock" below).
The statement requirement referred to in the preceding paragraph will
be fulfilled if the beneficial owner of a note certifies on IRS Form W-8BEN (or
successor form), under penalties of perjury, that it is not a United States
person and provides its name and address or otherwise satisfies applicable
documentation requirements. If a Non-U.S. holder of the notes is engaged in a
trade or business in the United States, and if interest on the notes is
effectively connected with the conduct of such trade or business (and, if
required by a tax treaty, the dividends are attributable to a permanent
establishment maintained in the United States), the Non-U.S. holder, although
exempt from the withholding tax discussed in the preceding paragraph, will
generally be subject to regular United States federal income tax on interest and
on any gain realized on the sale, exchange, purchase by us at the holder's
option, conversion, redemption or retirement of the notes in the same manner as
if it were a U.S. holder. In lieu of the certificate described above, such a
Non-U.S. holder would be required to provide to the withholding agent a properly
executed IRS Form W-8ECI (or successor form) in order to claim an exemption from
withholding tax. In addition, if such a Non-U.S. holder is a foreign
corporation, such holder may be subject to a branch profits tax equal to 30% (or
such lower rate provided by an applicable treaty) of its effectively connected
earnings and profits for the taxable year, subject to certain adjustments.
OWNERSHIP AND DISPOSITION OF COMMON STOCK
If, after a Non-U.S. holder converts a note into common stock, we make
distributions on our common stock, the distributions will constitute a dividend
for United States federal income tax purposes to the extent of our current or
accumulated earnings and profits as determined under United States federal
income tax principles. Except as described below, dividends paid on common stock
held by a Non-U.S. holder will be subject to United States federal withholding
tax at a rate of 30% or lower treaty rate, if applicable. A Non-U.S. holder
generally will be required to satisfy certain IRS certification requirements in
order to claim a reduction of or exemption from withholding under a tax treaty
by filing IRS Form W-8BEN (or successor form) upon which the Non-U.S. holder
certifies, under penalties of perjury, its status as a non-U.S. person and its
entitlement to the lower treaty rate with respect to such payments.
If dividends paid to a Non-U.S. holder are effectively connected with
the conduct of a United States trade or business by the Non-U.S. holder (and, if
required by a tax treaty, the dividends are attributable to a permanent
establishment maintained in the United States), we and other payors generally
are not required to withhold tax from the dividends, provided that the Non-U.S.
holder furnishes to us a valid IRS Form W-8ECI (or successor form) certifying,
under penalties of perjury, that the holder is a Non-U.S. person, and the
dividends are effectively
49
connected with the holder's conduct of a United States trade or business and are
includible in the holder's gross income. Effectively connected dividends will be
subject to United States federal income tax on net income that applies to U.S.
persons generally (and, with respect to a Non-U.S. holder that is a foreign
corporation, under certain circumstances, the 30% branch profits tax).
A Non-U.S. holder generally will not be subject to United States
federal income or withholding tax on gain realized on the sale or other taxable
disposition of our common stock received upon conversion of a note unless (1)
such Non-U.S. holder is an individual who is present in the United States for
183 days or more in the taxable year of sale, exchange or other disposition, and
certain conditions are met, or (2) such gain is effectively connected with the
conduct by the Non-U.S. holder of a trade or business in the United States (and,
if certain tax treaties apply, is attributable to a permanent establishment
maintained by the Non-U.S. holder in the United States).
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
A U.S. holder may be subject to United States federal backup
withholding tax at the applicable statutory rate with respect to payments of
principal, premium, if any, and interest (including original issue discount and
a payment in common stock pursuant to a conversion of the notes) on the notes,
the payments of dividends on our common stock, and the proceeds of dispositions
of the notes or our common stock, if the U.S. holder fails to supply an accurate
taxpayer identification number or otherwise fails to comply with applicable
United States backup withholding certification requirements. A Non-U.S. holder
may be subject to United States backup withholding tax on payments on the notes
or our common stock and the proceeds from a sale or other disposition of the
notes or our common stock unless the Non-U.S. holder complies with certification
procedures to establish that it is not a United States person. Any amounts so
withheld will be allowed as a credit against a holder's United States federal
income tax liability and may entitle a holder to a refund, provided the required
information is timely furnished to the IRS. Payments on the notes and our common
stock, as well as the proceeds from a sale or other disposition, may be subject
to information reporting. Holders of the notes should consult their tax advisors
concerning the application of the backup withholding and information reporting
rules in their particular circumstances.
50
SELLING SECURITY HOLDERS
The notes were originally issued by us and sold to Citigroup Global
Markets, Inc., Banc of America Securities LLC and J.P. Morgan Securities as
joint book-runners of the offering and as representatives of the initial
purchasers in the offering (the "initial purchasers") and resold by the initial
purchasers in transactions exempt from the registration requirements of the
Securities Act of 1933 to persons reasonably believed by the initial purchasers
to be "qualified institutional buyers," as defined by Rule 144A under the
Securities Act of 1933, and outside the United States to non-U.S. persons in
accordance with Regulation S under the Securities Act of 1933. The selling
security holders, including their transferees, pledgees, donees, assignees or
successors, may from time to time offer and sell pursuant to this prospectus any
or all of the notes listed below and the shares of common stock issued upon
conversion of the notes.
The following table sets forth recent information about the principal
amount of notes beneficially owned by each selling security holder and the
number of shares of common stock issuable upon conversion of those notes that
may be offered from time to time pursuant to this prospectus. Selling security
holders may be deemed to be "underwriters" as defined in the Securities Act of
1933. Any profits realized by the selling security holders may be deemed to be
underwriting commissions.
The number of shares of common stock shown in the table below assumes
conversion of the full amount of notes held by such holder at the initial
conversion rate of 86.3558 shares per $1,000 principal amount of notes. This
conversion rate is subject to adjustment as described under "Description of the
Notes - Conversion Rights." Accordingly, the number of shares of common stock
issuable upon conversion of the notes may increase or decrease from time to
time. Under the terms of the indenture, fractional shares will not be issued
upon conversion of the notes. Cash will be paid instead of fractional shares, if
any.
The table below has been prepared based upon the information furnished
to us by the selling security holders as of November 20, 2003. The selling
security holders identified above may have sold, transferred or otherwise
disposed of some or all of their notes since the date on which the information
in the preceding table is presented in transactions exempt from or not subject
to the registration requirements of the Securities Act of 1933. Information
concerning the selling security holders may change from time to time and, if
necessary, we will supplement this prospectus accordingly. We cannot give an
estimate as to the amount of the notes or common stock issuable upon conversion
thereof that will be held by the selling security holders upon the termination
of this offering because the selling security holders may offer some or all of
their notes or common stock pursuant to the offering contemplated by this
prospectus. See "Plan of Distribution."
To our knowledge, other than their ownership of the securities
described below, none of the selling holders has, or has had within the past
three years, any position, office or other material relationship with us or any
of our predecessors or affiliates.
PRINCIPAL AMOUNT OF NUMBER OF SHARES
NOTES BENEFICIALLY PERCENTAGE OF OF COMMON STOCK PERCENTAGE OF
OWNED THAT MAY NOTES THAT COMMON STOCK
NAME BE SOLD OUTSTANDING MAY BE SOLD OUTSTANDING (1)
---- ------- ----------- ----------- ---------------
Advent Convertible Master Cayman L.P............. $ 11,851,000 2.06% 1,023,403 *
Advisory Convertible Arbitrage Fund (I) L.P...... $ 1,000,000 * 86,356 *
AIG DKR SoundShore Strategic Holding Fund Ltd.... $ 3,000,000 * 259,067 *
Allstate Insurance Company....................... $ 1,000,000 * 86,356 *
Alpha US Sub Fund 4, LLC......................... $ 652,000 * 56,304 *
American Fidelity Assurance Company.............. $ 310,000 * 26,770 *
American AAdvantage Funds........................ $ 390,000 * 33,679 *
Arbitex Master Fund, L.P. ....................... $ 23,000,000 4.00% 1,986,183 *
Argent Classic Convertible Arbitrage Fund L.P.... $ 1,900,000 * 164,076 *
Argent Classic Convertible Arbitrage Fund II,
L.P.............................................. $ 300,000 * 25,907 *
51
Argent Classic Convertible Arbitrage (Bermuda)
Fund Ltd............................................. $ 4,000,000 * 345,423 *
Argent LowLev Convertible Arbitrage Fund LLC......... $ 1,900,000 * 164,076 *
Argent LowLev Convertible Arbitrage Fund Ltd......... $ 5,300,000 * 457,686
Aventis Pension Master Trust......................... $ 50,000 * 4,318 *
Banc of America Securities LLC (2)................... $ 5,970,000 1.04% 515,544 *
BNP Paribas Equity Strategies SNC.................... $ 4,660,000 * 402,418 *
Boilermaker - Blacksmith Pension Trust............... $ 225,000 * 19,430 *
CALAMOS Convertible Fund - CALAMOS Investment
Trust................................................ $ 2,000,000 * 172,712 *
CALAMOS Convertible Growth and Income Fund -
CALAMOS Investment Trust............................. $ 2,190,000 * 189,119 *
CALAMOS Convertible Portfolio - CALAMOS Advisors
Trust................................................ $ 50,000 * 4,318 *
CGNU Life Fund....................................... $ 800,000 * 69,085 *
Citigroup Global Markets Inc. (3).................... $ 4,144,000 * 357,858 *
Citigroup Pension Fund CAP Arbitrage................. $ 776,000 * 67,012 *
City of Birmingham Retirement and Relief System...... $ 665,000 * 57,427 *
City of Knoxville Pension System..................... $ 50,000 * 4,318 *
Clinton Multistrategy Master Fund, Ltd............... $ 17,270,000 3.00% 1,491,365 *
Clinton Riverside Convertible Portfolio Limited...... $ 21,371,000 3.72% 1,845,510 *
Commercial Union Life Fund........................... $ 1,000,000 * 86,356 *
Convertible Securities Fund.......................... $ 75,000 * 6,477 *
CooperNeff Convertible Strategies (Cayman)
Master Fund L.P...................................... $ 4,142,000 * 357,686 *
CQS Convertible & Quantitative Strategies Master
Fund Limited......................................... $ 3,675,000 * 317,358 *
Credit Industriel D'Alsace Lorraine.................. $ 12,500,000 2.17% 1,079,448 *
DBAG London.......................................... $ 31,000,000 5.39% 2,677,030 *
DB Equity Opportunities Master Portfolio Ltd......... $ 4,000,000 * 345,423 *
DEAM Convertible Arbitrage........................... $ 5,000,000 * 431,779 *
Delaware Investments Dividend and Income Fund,
Inc. (4)............................................. $ 800,000 * 69,085 *
Delaware Investments Global Dividend and Income
Fund, Inc. (4)....................................... $ 200,000 * 17,271 *
D.E. Shaw Investment Group, L.P...................... $ 5,800,000 1.01% 500,864 *
D.E. Shaw Valence Portfolios, L.P.................... $ 23,200,000 4.03% 2,003,455 *
Delta Airlines Master Trust.......................... $ 225,000 * 19,430 *
Delta Pilots Disability and Survivorship Trust....... $ 75,000 * 6,477 *
Deutsche Bank Securities, Inc........................ $ 6,700,000 1.17% 578,584 *
Dodeca Fund, L.P..................................... $ 1,950,000 * 168,394 *
Dorinco Reinsurance Company.......................... $ 125,000 * 10,794 *
General Motors Investment Corp....................... $ 2,000,000 * 172,712 *
Genesee County Employees' Retirement System.......... $ 340,000 * 29,361 *
GM Pension........................................... $ 411,000 * 35,492 *
GM Veba.............................................. $ 1,194,000 * 103,109 *
Goodville Mutual Casualty Company.................... $ 110,000 * 9,499 *
HealthNow New York, Inc. ............................ $ 140,000 * 12,090 *
HFR CA Select Fund................................... $ 900,000 * 77,720 *
HFR Convertible Arbitrage Account.................... $ 695,000 * 60,017 *
52
Inflective Convertible Opportunity Fund I,
L.P.(5)............................................ $ 50,000 * 4,318 *
Jackson County Employees' Retirement System........ $ 185,000 * 15,976 *
JMG Capital Partners, LP........................... $ 16,125,000 2.80% 1,392,487 *
JMG Triton Offshore Fund, Ltd...................... $ 23,875,000 4.15% 2,061,745 *
KBC Financial Products USA Inc..................... $ 625,000 * 53,972 *
Kemper Fund........................................ $ 75,000 * 6,477 *
Knoxville Utilities Board Retirement System........ $ 50,000 * 4,318 *
Lincoln National Convertible Securities
Fund............................................... $ 1,930,000 * 166,667 *
Lyxor.............................................. $ 1,665,000 * 143,782 *
Lyxor Convertible Arbitrage Fund, Ltd.............. $ 258,000 * 22,280 *
Lyxor Master Fund.................................. $ 300,000 * 25,907 *
Lyxor Master Fund c/o Arbitex Capital Limited...... $ 500,000 * 43,178 *
Macomb County Employees' Retirement System......... $ 50,000 * 4,318 *
Maystone Continuum Master Fund, Ltd................ $ 2,000,000 * 172,712 *
Merrill Lynch, Pierce, Fenner & Smith, Inc......... $ 10,050,000 1.75% 867,876 *
Nations Convertible Securities Fund................ $ 8,925,000 1.55% 770,726 *
NMS Services (Cayman), Inc......................... $ 19,000,000 3.30% 1,640,760 *
Nomura Securities International Inc. (6)........... $ 21,000,000 3.65% 1,813,472 *
NORCAL Mutual Insurance Company.................... $ 250,000 * 21,589 *
Norwich Union Life and Pensions.................... $ 1,500,000 * 129,534 *
Onyx Fund Holdings, LDC............................ $ 2,000,000 * 172,712 *
Oppenheimer Convertible Securities Fund............ $ 5,000,000 * 431,779 *
Pennington Biomedical Research Foundation.......... $ 65,000 * 5,613 *
Performance Capital Group LLC...................... $ 2,000,000 * 172,712 *
Physicians' Reciprocal Insurers Account # 7........ $ 775,000 * 66,926 *
Port Authority of Allegheny County Retirement
and Disability Allowance Plan for the Employees
Represented by Local 85 of the Amalgamated
Transit Union...................................... $ 100,000 * 8,636 *
Prisma Foundation.................................. $ 25,000 * 2,159 *
Privelege Portfolio SICAV.......................... $ 4,000,000 * 345,423 *
Putnam Convertible Income- Growth Trust (7)........ $ 4,800,000 * 414,508 *
Putnam Variable Trust- Putnam VT High Yield Fund... $ 444,500 * 38,428 *
Putnam Variable Trust- Putnam VT Diversified
Income Fund........................................ $ 200,000 * 17,271 *
Putnam High Yield Trust............................ $ 2,190,000 * 189,119 *
Putnam High Yield Advantage Fund................... $ 900,000 * 77,720 *
Putnam Master Income Trust......................... $ 125,000 * 10,794 *
Putnam Premier Income Trust........................ $ 325,000 * 28,066 *
Putnam Diversified Income Trust $ 1,515,000 * 130,829 *
Putnam Managed High Yield Trust $ 40,000 * 3,454 *
Pyramid Equity Strategies Fund $ 1,000,000 * 86,356 *
Quattro Fund Ltd................................... $ 2,400,000 * 207,254 *
RBC Alternative Assets Convertible Fund
LP................................................. $ 175,000 * 15,112 *
SAM Investments LDC................................ $ 75,000,000 13.04% 6,476,685 2.12%
San Diego County Employee Retirement Association... $ 1,800,000 * 155,440 *
San Francisco Employees Retirement System.......... $ 825,000 * 71,244 *
SB Diversified Arbitrage Strategies................ $ 3,434,000 * 296,546 *
SB Enhanced Arbitrage Strategies................... $ 799,000 * 68,998 *
53
SB Market Neutral Arbitrage........................... $ 1,060,000 * 91,537 *
SB Multi Strategy Arbitrage........................... $ 13,826,000 2.40% 1,193,955 *
SCI Endowment Care Common Trust Fund - First
Union................................................. $ 35,000 * 3,022 *
SCI Endowment Care Common Trust Fund - National
Fiduciary Services.................................... $ 50,000 * 4,318 *
SCI Endowment Care Common Trust Fund - Suntrust....... $ 25,000 * 2,159 *
Silver Convertible Arbitrage Fund, LDC................ $ 700,000 * 60,449 *
Singlehedge US Convertible Arbitrage Fund............. $ 780,000 * 67,358 *
Smith Barney Convertible Fund......................... $ 750,000 * 64,767 *
South Dakota Retirement System........................ $ 4,000,000 * 345,423 *
Southern Farm Bureau Life Insurance Company........... $ 725,000 * 62,608 *
SPT................................................... $ 250,000 * 21,589 *
Sterling Invest Co.................................... $ 2,000,000 * 172,712 *
Sturgeon Limited...................................... $ 660,000 * 56,995 *
Tag Associates........................................ $ 137,000 * 11,831 *
Teachers Insurance and Annuity Association of
America............................................... $ 9,700,000 1.69% 837,651 *
The California Wellness Foundation.................... $ 75,000 * 6,477 *
The Cockrell Foundation............................... $ 70,000 * 6,045 *
The Dow Chemical Company Employees' Retirement
Plan.................................................. $ 425,000 * 36,701 *
The Fondren Foundation................................ $ 50,000 * 4,318 *
Thrivent Financial for Lutherans (8).................. $ 3,000,000 * 259,067 *
UBS O'Connor F/B/O O'Connor Global Convertible
Arbitrage Master Ltd.................................. $ 37,750,000 6.57% 3,259,931 *
UBS O'Connor LLC F/B/O O'Connor Global
Convertible Portfolio................................. $ 500,000 * 43,178 *
Union Carbide Retirement Account...................... $ 200,000 * 17,271 *
United Food and Commercial Workers Local 1262
and Employers Pension Fund............................ $ 100,000 * 8,636 *
Univar USA Inc. Retirement Plan....................... $ 50,000 * 4,318 *
Univest Multi-Strategy Convertible Fund............... $ 275,000 * 23,748 *
WPG Convertible Arbitrage Overseas Master Fund........ $ 1,425,000 * 123,057 *
WPG MSA Convertible Arbitrage Fund.................... $ 125,000 * 10,794 *
Xavex Convertible Arbitrage 2 Fund.................... $ 2,000,000 * 172,712 *
Xavex Convertible Arbitrage 10 Fund................... $ 500,000 * 43,178 *
Zazove Convertible Arbitrage Fund, L.P................ $ 2,550,000 * 220,207 *
Zazove Hedged Convertible Fund, L.P................... $ 2,950,000 * 254,750 *
Zazove Income Fund, L.P............................... $ 1,600,000 * 138,169 *
Zurich Institutional Benchmark Management c/o
Quattro Fund.......................................... $ 600,000 * 51,813 *
Zurich Institutional Benchmarks Master Fund, Ltd...... $ 1,800,000 * 155,440 *
All other holders of notes or future
transferees, pledgees, donees or successors
of any such holder (9)................................ $ 44,825,000 7.80% 3,870,899 1.26%
Total................................................. $575,000,000 100% 49,654,585 16.22%
--------------
* Less than 1%
54
(1) Calculated using 306,077,942 shares of common stock outstanding as of
November 3, 2003. In calculating this amount for each holder, we
treated as outstanding the number of shares of common stock issuable
upon conversion of all of that holder's notes, but we did not assume
conversion of any other holder's notes.
(2) Banc of America Securities LLC was one of the initial purchasers in
connection with the private placement of the notes in May 2003.
(3) Citigroup Global Markets Inc. was one of the initial purchasers in
connection with the private placement of the notes in May 2003.
(4) Thomas F. Madison, a member of our Board of Directors, also serves on
the board of directors of the selling security holder.
(5) Inflective Convertible Opportunity Fund I, L.P. also beneficially owns
2,375 shares of common stock.
(6) Nomura Securities International Inc. also beneficially owns 242,743
shares of common stock.
(7) Putnam Convertible Income - Growth Trust also beneficially owns 362,400
shares of common stock and 327,500 shares of convertible preferred
stock.
(8) Thrivent Financial for Lutherans also beneficially owns (i) $2,500,000
principal amount of CERC's 7.875% Senior Notes due 2013, (ii)
$3,000,000 principal amount of CenterPoint Houston's 5.70% General
Mortgage Bonds, Series J, due 2013, (iii) $2,000,000 principal amount
of CenterPoint Houston's 5.60% General Mortgage Bonds, Series L, due
2023 and (iv) $6,000,000 principal amount of CenterPoint Houston's
6.95% General Mortgage Bonds, Series K, due 2033.
(9) Information concerning other selling security holders of notes or
common stock issuable upon conversion thereof will be set forth in
prospectus supplements or post-effective amendments from time to time,
if required.
55
PLAN OF DISTRIBUTION
We are registering the notes and the common stock covered by this
prospectus to permit holders to conduct public secondary trading of these
securities from time to time after the date of this prospectus. We have agreed,
among other things, to bear all expenses, other than underwriting discounts,
selling commissions and transfer taxes, in connection with the registration and
sale of the notes and the common stock covered by this prospectus. We will not
receive any of the proceeds of the sale of the notes and the common stock
offered by this prospectus. The aggregate proceeds to the selling security
holders from the sale of the notes or common stock will be the purchase price of
the notes or common stock less any discounts and commissions. A selling security
holder reserves the right to accept and, together with their agents, to reject,
any proposed purchases of notes or common stock to be made directly or through
agents.
The notes and the common stock offered by this prospectus may be sold
from time to time to purchasers:
- directly by the selling security holders and their successors,
which includes their donees, pledgees or transferees or their
successors-in-interest, or
- through underwriters, broker-dealers or agents, who may receive
compensation in the form of discounts, commissions or agent's
commissions from the selling security holders or the purchasers of
the notes and the common stock. These discounts, concessions or
commissions may be in excess of those customary in the types of
transactions involved.
The selling security holders and any underwriters, broker-dealers or
agents who participate in the distribution of the notes and the common stock may
be deemed to be "underwriters" within the meaning of the Securities Act of 1933.
As a result, any profits on the sale of the notes and the common stock by
selling security holders and any discounts, commissions or agent's commissions
received by any such broker-dealers or agents may be deemed to be underwriting
discounts and commissions under the Securities Act of 1933. Selling security
holders who are "underwriters" within the meaning of the Securities Act of 1933
will be subject to prospectus delivery requirements of the Securities Act of
1933. If the selling security holders were deemed to be underwriters, the
selling security holders may be subject to certain statutory liabilities of the
Securities Act of 1933 and the Securities Exchange Act of 1934. If the notes and
the common stock are sold through underwriters, broker-dealers or agents, the
selling security holders will be responsible for underwriting discounts or
commissions or agent's commissions.
The notes and the common stock may be sold in one or more transactions
at:
- fixed prices,
- prevailing market prices at the time of sale,
- prices related to such prevailing market prices,
- varying prices determined at the time of sale, or
- negotiated prices.
These sales may be effected in one or more transactions:
- on any national securities exchange or quotation service on which
the notes and common stock may be listed or quoted at the time of
the sale,
- in the over-the-counter market,
- in transactions otherwise than on such exchanges or services or in
the over-the-counter market,
56
- through the writing of options (including the issuance by the
selling security holders of derivative securities), whether the
options or such other derivative securities are listed on an
options exchange or otherwise,
- through the settlement of short sales, or
- through any combination of the foregoing.
These transactions may include block transactions or crosses. Crosses
are transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with the sales of the notes and the common stock issuable
upon conversion thereof or otherwise, the selling security holders may enter
into hedging transactions with broker-dealers or other financial institutions
which in turn may:
- engage in short sales of the notes or the common stock in the
course of hedging their positions,
- sell the notes and common stock short and deliver the notes and
common stock to close out short positions,
- loan or pledge notes or the common stock to broker-dealers or other
financial institutions that in turn may sell the notes and the
common stock,
- enter into option or other transactions with broker-dealers or
other financial institutions that require the delivery to the
broker-dealer or other financial institution of the notes or the
common stock, which the broker-dealer or other financial
institution may resell pursuant to the prospectus, or
- enter into transactions in which a broker-dealer makes purchases as
a principal for resale for its own account or through other types
of transactions.
To our knowledge, there are currently no plans, arrangements or
understandings between any selling security holders and any underwriter,
broker-dealer or agent regarding the sale of the notes and the common stock by
the selling security holders.
Our common stock trades on the New York Stock Exchange under the symbol
"CNP." We do not intend to apply for listing of the notes on any securities
exchange or for inclusion of the notes in any automated quotation system.
Accordingly, no assurances can be given as to the development of liquidity or
any trading market for the notes. See "Risk Factors - Risks Related to the Notes
- We cannot assure you that an active trading market will develop for the
notes."
There can be no assurance that any selling security holder will sell
any or all of the notes or the common stock pursuant to this prospectus.
Further, we cannot assure you that any such selling security holder will not
transfer, devise or gift the notes and the common stock by other means not
described in this prospectus. In addition, any notes or common stock covered by
this prospectus that qualify for sale pursuant to Rule 144 or Rule 144A of the
Securities Act of 1933 may be sold under Rule 144 or Rule 144A rather than under
this prospectus. The notes or common stock covered by this prospectus may also
be sold to non-U.S. persons outside the United States in accordance with
Regulation S under the Securities Act of 1933 rather than pursuant to this
prospectus. The notes and the common stock may be sold in some states only
through registered or licensed brokers or dealers. In addition, in some states
the notes and common stock may not be sold unless they have been registered or
qualified for sale or an exemption from registration or qualification is
available and complied with.
The selling security holders and any other person participating in the
sale of notes or the common stock will be subject to the Securities Exchange Act
of 1934. The Securities Exchange Act of 1934 rules include, without limitation,
Regulation M, which may limit the timing of purchases and sales of any of the
notes and the common stock by the selling security holders and any other such
person. In addition, Regulation M may restrict the ability of any person engaged
in the distribution of the notes and the common stock to engage in market-making
activities with respect to the particular notes and the common stock being
distributed. This may affect the marketability of the
57
notes and the common stock and the ability of any person or entity to engage in
market-making activities with respect to the notes and the common stock.
We have agreed to indemnify the selling security holders against
certain liabilities, including liabilities under the Securities Act of 1933.
The notes were issued and sold in May 2003 in transactions exempt from
the registration requirements of the Securities Act of 1933 to persons
reasonably believed by the initial purchasers to be "qualified institutional
buyers," as defined by Rule 144A under the Securities Act of 1933, and outside
the United States to non-U.S. persons in accordance with Regulation S under the
Securities Act of 1933.
Prior to the private placement, there was no trading market for the
notes. Although the broker-dealers that acted as initial purchasers when the
notes were originally issued have advised us that they currently intend to make
a market in the notes, they are not obligated to do so and may discontinue
market-making activities at any time without notice. In addition, their
market-making activities will be subject to limits imposed by the Securities Act
of 1933 and the Securities Exchange Act of 1934 and may be limited during the
pendency of this shelf registration statement. Although the notes issued in the
private placement are eligible for trading on the Portal Market, notes resold
using this prospectus will no longer be eligible for trading on the Portal
Market. We have not listed, and do not intend to list, the notes on any
securities exchange or automated quotation system. We cannot assure you that any
active market for the notes will develop or be sustained. If an active market is
not developed or sustained, the market price and liquidity of the notes may be
adversely affected.
We have agreed to pay substantially all of the expenses incidental to
the registration, offering and sale of the notes and common stock to the public
other than commissions, fees and discounts of underwriters, brokers, dealers and
agents.
A person may only communicate or cause to be communicated an invitation
or inducement to engage in investment activity (within the meaning of Section 21
of the Financial Services and Markets Act 2000 (the "FSMA")) received by it in
connection with the issue and sale of any notes in circumstances in which
Section 21(1) of the FSMA does not apply to us.
This prospectus is being distributed to and is directed only at persons
who (1) are outside the United Kingdom, (2) are investment professionals falling
within Article 19(5) of the FSMA (Financial Promotion) Order 2001 (the "Order")
or (3) are persons falling within Article 49(2) (a) to (d) ("high net worth
companies, unincorporated associates, etc.") of the Order (all these persons
together being referred to as "relevant persons"). This prospectus must not be
acted on or relied on by persons who are not relevant persons. Any investment or
investment activity to which this prospectus relates is available only to
relevant persons and will be engaged in only with relevant persons.
58
VALIDITY OF SECURITIES
The validity of the notes and the common stock issuable upon conversion
thereof will be passed upon for us by Baker Botts L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of CenterPoint Energy and its
subsidiaries as of December 31, 2001 and 2002, and for each of the three years
in the period ended December 31, 2002, incorporated by reference in this
prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports (which reports express an unqualified opinion and
include explanatory paragraphs referring to the distribution of Reliant
Resources, Inc. and the change in method of accounting for goodwill and certain
intangible assets), which are included in CenterPoint Energy's Current Report on
Form 8-K filed November 7, 2003 that is incorporated herein by reference, and
has been so incorporated in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
59
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses payable by
CenterPoint Energy, Inc., a Texas corporation ("CenterPoint"), in connection
with the offering described in this Registration Statement.
SEC registration fee................................. $ 46,518
Printing expenses.................................... 50,000
Accounting fees and expenses......................... 20,000
Legal fees and expenses.............................. 60,000
Miscellaneous........................................ 3,482
--------
Total................................... 180,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 2.02.A.(16) and Article 2.02-1 of the Texas Business
Corporation Act and Article V of CenterPoint's Amended and Restated Bylaws
provide CenterPoint with broad powers and authority to indemnify its directors
and officers and to purchase and maintain insurance for such purposes. Pursuant
to such statutory and Bylaw provisions, CenterPoint has purchased insurance
against certain costs of indemnification that may be incurred by it and by its
officers and directors.
Additionally, Article IX of CenterPoint's Amended and Restated Articles
of Incorporation provides that a director of CenterPoint is not liable to
CenterPoint or its shareholders for monetary damages for any act or omission in
the director's capacity as director, except that Article IX does not eliminate
or limit the liability of a director for (i) any breach of such director's duty
of loyalty to CenterPoint or its shareholders, (ii) any act or omission not in
good faith that constitutes a breach of duty of such director to CenterPoint or
an act or omission that involves intentional misconduct or a knowing violation
of law, (iii) a transaction from which such director received an improper
benefit, whether or not the benefit resulted from an action taken within the
scope of the director's office or (iv) an act or omission for which the
liability of a director is expressly provided for by statute.
Article IX also provides that any subsequent amendments to Texas
statutes that further limit the liability of directors will inure to the benefit
of the directors, without any further action by shareholders. Any repeal or
modification of Article IX shall not adversely affect any right of protection of
a director of CenterPoint existing at the time of the repeal or modification.
See "Item 17. Undertakings" for a description of the Commission's
position regarding such indemnification provisions.
ITEM 16. EXHIBITS.
The following documents are filed as part of this Registration
Statement or incorporated by reference herein:
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DOCUMENT DESCRIPTION STATEMENT NUMBER REFERENCE
------- -------------------- --------- ------ ---------
3.1 Amended and Restated Articles of Registration Statement on Form 333-69502 3.1
Incorporation of CenterPoint Energy, S-4 of CenterPoint Energy, Inc.
Inc.
II-1
3.1.1 Articles of Amendment to the Amended Form 10-K of CenterPoint 1-31447 3.1.1
and Restated Articles of Incorporation Energy, Inc. for the year ended
of CenterPoint Energy, Inc. December 31, 2001
3.2 Amended and Restated Bylaws of Form 10-K of CenterPoint 1-31447 3.2
CenterPoint Energy, Inc. Energy, Inc. for the year ended
December 31, 2001
3.3 Statement of Resolution Establishing Form 10-K of CenterPoint 1-31447 3.3
Series of Shares Designated Series A Energy, Inc. for the year ended
Preferred Stock and Form of Rights December 31, 2001
Certificate
4.1 Rights Agreement dated as of January Form 10-K of CenterPoint 1-31447 4.2
1, 2003 between CenterPoint Energy, Energy, Inc. for the year ended
Inc. and JPMorgan Chase Bank, as December 31, 2001
Rights Agent
4.2 Form of CenterPoint Energy, Inc. Registration Statement on Form 333-69502 4.1
Stock Certificate S-4 of CenterPoint Energy, Inc.
4.3 Indenture, dated as of May 19, 2003, Current Report on Form 8-K of 1-31447 4.1
between CenterPoint Energy, Inc. and CenterPoint Energy, Inc. filed
JPMorgan Chase Bank as trustee (the June 3, 2003
"Trustee")
4.4 Supplemental Indenture No. 1, dated Current Report on Form 8-K of 1-31447 4.2
as of May 19, 2003, between CenterPoint Energy, Inc. filed
CenterPoint Energy, Inc. and the June 3, 2003
Trustee, with respect to $575,000,000
aggregate principal amount of 3.75%
Convertible Senior Notes due 2023
(including the form of Note)
4.5 Registration Rights Agreement, dated Form 10-Q of CenterPoint 1-31447 4.5.4
as of May 19, 2003, among CenterPoint Energy, Inc. for the quarterly
Energy, Inc., Citigroup Global period ending June 30, 2003
Markets Inc., Banc of America
Securities LLC and J.P. Morgan
Securities Inc., as representatives
of the initial purchasers
*5.1 Opinion of Baker Botts L.L.P. as to
the legality of the securities
*8.1 Opinion of Baker Botts L.L.P. as to
certain U.S. federal income tax
matters
* 12.1 Statement of computation of ratio of
earnings to fixed charges for the
twelve month periods ended December
31, 2002, 2001, 2000, 1999 and 1998
12.2 Statement of computation of ratio of Form 10-Q of CenterPoint 1-31447 12.1
earnings to fixed charges for the nine Energy, Inc. for the quarterly
month periods ended September 30, 2003 period ending September 30,
and 2002 2003
II-2
23.1 Consent of Deloitte & Touche LLP
*23.2 Consent of Baker Botts LLP (included
in Exhibit 5.1)
*24.1 Powers of Attorney
*25.1 Statement of Eligibility and
Qualification under the Trust
Indenture Act of 1939 of the Trustee
on Form T-1
--------------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
(a)The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i)To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) of the
Securities Act of 1933 if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8 and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to section 13
or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b)The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration
II-3
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c)Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Houston, the State of Texas, on November 20,
2003.
CENTERPOINT ENERGY, INC.
By: /s/ David M. McClanahan
-------------------------------------
David M. McClanahan
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities indicated on November 20, 2003.
SIGNATURE TITLE
/s/ David. M. McClanahan President,
-------------------------------- Chief Executive Officer and Director
David M. McClanahan (Principal Executive Officer)
/s/ Gary L. Whitlock Executive Vice President
-------------------------------- and Chief Financial Officer
Gary L. Whitlock (Principal Financial Officer)
/s/ James S. Brian Senior Vice President and
-------------------------------- Chief Accounting Officer
James S. Brian (Principal Accounting Officer)
* Director
--------------------------------
Milton Carroll
* Director
--------------------------------
Derrill Cody
* Director
--------------------------------
John T. Cater
* Director
--------------------------------
O. Holcombe Crosswell
II-5
* Director
--------------------------------
Thomas F. Madison
* Director
--------------------------------
Michael E. Shannon
* By: /s/ David. M. McClanahan
------------------------
David M. McClanahan
Attorney-in-Fact
II-6
INDEX TO EXHIBITS
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DOCUMENT DESCRIPTION STATEMENT NUMBER REFERENCE
------- -------------------- --------- ------ ---------
3.1 Amended and Restated Articles of Registration Statement on Form 333-69502 3.1
Incorporation of CenterPoint Energy, S-4 of CenterPoint Energy, Inc.
Inc.
3.1.1 Articles of Amendment to the Form 10-K of CenterPoint 1-31447 3.1.1
Amended and Restated Articles of Energy, Inc. for the year ended
Incorporation of CenterPoint Energy, December 31, 2001
Inc.
3.2 Amended and Restated Bylaws of Form 10-K of CenterPoint 1-31447 3.2
CenterPoint Energy, Inc. Energy, Inc. for the year ended
December 31, 2001
3.3 Statement of Resolution Establishing Form 10-K of CenterPoint 1-31447 3.3
Series of Shares Designated Series A Energy, Inc. for the year ended
Preferred Stock and Form of Rights December 31, 2001
Certificate
4.1 Rights Agreement dated as of January Form 10-K of CenterPoint 1-31447 4.2
1, 2003 between CenterPoint Energy, Energy, Inc. for the year ended
Inc. and JPMorgan Chase Bank, as December 31, 2001
Rights Agent
4.2 Form of CenterPoint Energy, Inc. Registration Statement on Form 333-69502 4.1
Stock Certificate S-4 of CenterPoint Energy, Inc.
4.3 Indenture, dated as of May 19, 2003, Current Report on Form 8-K of 1-31447 4.1
between CenterPoint Energy, Inc. and CenterPoint Energy, Inc. filed
JPMorgan Chase Bank as trustee (the June 3, 2003
"Trustee")
4.4 Supplemental Indenture No. 1, dated Current Report on Form 8-K of 1-31447 4.2
as of May 19, 2003, between CenterPoint Energy, Inc. filed
CenterPoint Energy, Inc. and the June 3, 2003
Trustee, with respect to $575,000,000
aggregate principal amount of 3.75%
Convertible Senior Notes due 2023
(including the form of Note)
4.5 Registration Rights Agreement, dated Form 10-Q of CenterPoint 1-31447 4.5.4
as of May 19, 2003, among Energy, Inc. for the quarterly
CenterPoint Energy, Inc., Citigroup period ending June 30, 2003
Global Markets Inc., Banc of America
Securities LLC and J.P. Morgan
Securities Inc., as representatives
of the initial purchasers
*5.1 Opinion of Baker Botts L.L.P. as to
the legality of the securities
*8.1 Opinion of Baker Botts L.L.P. as to
certain U.S. federal income tax
matters
* 12.1 Statement of computation of ratio of
earnings to fixed charges for the
twelve month periods ended December
31, 2002, 2001, 2000, 1999 and 1998
12.2 Statement of computation of ratio of Form 10-Q of CenterPoint 1-31447 12.1
earnings to fixed charges for the nine Energy, Inc. for the quarterly
month periods ended September 30, 2003 period ending September 30,
and 2002 2003
23.1 Consent of Deloitte & Touche LLP
*23.2 Consent of Baker Botts LLP (included
in Exhibit 5.1)
*24.1 Powers of Attorney
*25.1 Statement of Eligibility and
Qualification under the Trust
Indenture Act of 1939 of the Trustee
on Form T-1
-----------------
* Previously filed.