<PAGE>
FILED PURSUANT
TO RULE 424(b)(2)
FILE NO. 333-36380
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 15, 2000)
<TABLE>
<S> <C>
CONSTELLATION ENERGY GROUP, INC.
[LOGO] 250 W. PRATT STREET
BALTIMORE, MARYLAND 21201
(410) 234-5000
</TABLE>
$300,000,000
EXTENDIBLE NOTES DUE JUNE 21, 2010
We are offering the notes with the following principal terms:
- During the period from and including the date of original issuance to but
excluding June 21, 2001, the interest rate on the notes will be reset and
payable quarterly based on three-month LIBOR plus 0.08%. During this initial
period, we will pay interest on the notes quarterly on March 21, June 21,
September 21, and December 21, commencing September 21, 2000. The initial
interest rate will be determined on June 19, 2000.
- During each subsequent period, interest shall be payable either at a floating
or fixed rate.
- On June 21, 2001 and on each successive remarketing date, unless you
affirmatively elect otherwise, your notes will be automatically tendered for a
purchase price equal to 100% of their principal amount, plus accrued interest.
- If we cannot agree with the Remarketing Agents on the spread for any
subsequent period, we must repurchase and retire all of the notes on the
remarketing date at a price equal to 100% of their principal amount, plus
accrued interest.
- If the Remarketing Agents are unable to remarket some or all of the notes
tendered, we must purchase and retire any remaining unsold tendered notes at a
price equal to 100% of their principal amount, plus accrued interest.
- The notes will not be listed on any national securities exchange.
------------------------
WE URGE YOU TO CAREFULLY READ THIS PROSPECTUS SUPPLEMENT AND ACCOMPANYING
PROSPECTUS WHICH WILL DESCRIBE THE SPECIFIC TERMS OF THE OFFERING BEFORE YOU
MAKE YOUR INVESTMENT DECISION.
<TABLE>
<CAPTION>
PER NOTE TOTAL
-------- ------------
<S> <C> <C>
Price to public (1)......................................... 100% $300,000,000
Underwriting commission..................................... .15% $450,000
Proceeds to Company......................................... 99.85% $299,550,000
</TABLE>
(1) Plus accrued interest, from June 21, 2000, if settlement occurs after that
date
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE
------------------------
<TABLE>
<S> <C>
LEHMAN BROTHERS MERRILL LYNCH & CO.
BANC OF AMERICA SECURITIES LLC BNY CAPITAL MARKETS, INC.
FIRST UNION SECURITIES, INC. GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY SCOTIA CAPITAL
SUNTRUST EQUITABLE SECURITIES
</TABLE>
------------------------
The notes will be ready for delivery on or about June 21, 2000.
The date of this prospectus supplement is June 16, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
PROSPECTUS SUPPLEMENT
Certain Terms of the Notes.................................. S-3
Certain United States Federal Income Tax Considerations..... S-10
Underwriting................................................ S-14
PROSPECTUS
Forward Looking Statements.................................. 2
Constellation Energy........................................ 3
Current Events.............................................. 3
Pricing Supplement.......................................... 5
Use of Proceeds............................................. 5
Ratio of Earnings of Fixed Charges.......................... 5
Description of the Notes.................................... 5
Plan of Distribution........................................ 17
Legal Opinions.............................................. 18
Experts..................................................... 19
Where You Can Find More Information......................... 19
</TABLE>
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. Neither
we nor the underwriters have authorized any other person to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We are not, and the underwriters are
not, making an offer to sell these securities in any jurisdiction where the
offer or sale is not permitted.
You should assume that the information appearing in this prospectus
supplement, the accompanying prospectus and the documents incorporated by
reference is accurate only as of the respective dates of these documents. Our
business, financial condition, results of operations and prospects may have
changed since those dates.
S-2
<PAGE>
CERTAIN TERMS OF THE NOTES
This prospectus supplement is the pricing supplement referred to throughout the
accompanying prospectus.
This description of the particular terms of the notes supplements, and, to the
extent inconsistent therewith, replaces, the description of the general terms
and provisions of the notes set forth in the accompanying prospectus under the
heading "Description of the Notes."
The notes will be issued only in fully registered, book-entry form. See "Book
Entry Notes--Registration, Transfer, and Payment of Interest and Principal" and
"--Method of Repurchase" on page 6 of the accompanying prospectus.
If the maturity for the notes falls on a day that is not a Business Day (as
defined on page 9 of the accompanying prospectus), the principal and interest
payment will be made on the next Business Day and no additional interest will
accrue.
INITIAL SPREAD PERIOD
The "INITIAL SPREAD PERIOD" will be the period from and including June 21, 2000
to but excluding June 21, 2001. June 21, 2001 is the initial "REMARKETING RESET
DATE."
During the Initial Spread Period, we will pay interest quarterly, on the 21(st)
day of each March, June, September and December, commencing September 21, 2000
(each date an "INTEREST PAYMENT DATE" for the Initial Spread Period). The
interest rate on the notes will be reset quarterly on the 21(st) day of each
March, June, September and December, commencing September 21, 2000 (each an
"INTEREST RESET DATE" for the Initial Spread Period). The notes will bear
interest at a floating rate (computed on the basis of the actual number of days
elapsed over a 360-day year) equal to three-month LIBOR for the applicable
Interest Reset Period (as defined below), plus 0.08%.
The initial "INTEREST RESET PERIOD" will be the period from and including
June 21, 2000 to but excluding September 21, 2000. Thereafter, each Interest
Reset Period during the Initial Spread Period will be the quarterly period from
and including the most recent Interest Reset Date to but excluding the next
succeeding Interest Reset Date or Remarketing Reset Date, as the case may be.
The interest rate per annum for the notes during the initial Interest Reset
Period and each succeeding Interest Reset Period during the Initial Spread
Period will be calculated as described below under "Subsequent Spread
Periods-Floating Rate Mode."
If any Interest Payment Date, redemption date, Interest Reset Date or
Remarketing Reset Date is not a Business Day, then such date will be postponed
to the next Business Day, unless the next Business Day is in the next calendar
month, then such date shall be the prior Business Day.
SUBSEQUENT SPREAD PERIODS
GENERAL
The Spread (as defined below) will be determined in the manner described below
for each period from and including each Remarketing Reset Date (as defined
below) to but excluding the next Remarketing Reset Date or, as the case may be,
maturity of the notes (a "SUBSEQUENT SPREAD PERIOD"). A Subsequent Spread Period
will be one or more periods of at least three months (or any integral multiple
of three months), but not more than the period remaining to the maturity of the
notes, as designated by us. The commencement of each Subsequent Spread Period is
a "REMARKETING RESET DATE."
S-3
<PAGE>
Interest on the notes during each Subsequent Spread Period shall accrue and be
payable either:
- at a floating interest rate (the notes being in the "Floating Rate Mode" and
the interest rate being a "Floating Rate"), or
- at a fixed interest rate (the notes being in the "Fixed Rate Mode" and the
interest rate being a "Fixed Rate"),
in each case as determined by us and the Remarketing Agents in accordance with
the Remarketing Agreement and the applicable Remarketing Agency Agreement (each
as defined below).
The "SPREAD" that will be applicable to the notes during each Subsequent Spread
Period will be the percentage
(a) recommended by the Remarketing Agents so as to result in a rate that, in
their reasonable opinion, is expected to enable tendered notes to be
remarketed at 100% of the principal amount thereof, as described under
"Tender of Notes; Remarketing Agency Agreement" on page S-6, and
(b) agreed to by us.
Unless we give notice to redeem the notes in whole, the following terms will be
established by 3:00 p.m. on the eighth Business Day prior to the Remarketing
Reset Date which commences the Subsequent Spread Period (the "DURATION/ MODE
DETERMINATION DATE"):
- duration,
- redemption dates,
- redemption type (I.E., par, premium or make-whole),
- redemption prices (if applicable),
- Remarketing Reset Date,
- Interest Reset Dates,
- Interest Payment Dates,
- interest rate mode (I.E., fixed or floating),
- optional repayment terms, if any, and
- any other relevant terms.
In addition, the Spread for each Subsequent Spread Period will be established by
3:00 p.m., on the fourth Business Day prior to the Remarketing Reset Date
commencing the Subsequent Spread Period (the "SPREAD DETERMINATION DATE").
We will, not less than ten nor more than twenty calendar days prior to any
Duration/Mode Determination Date:
- Inform DTC that the notes are subject to mandatory, automatic tender on the
Remarketing Reset Date (subject to the right to elect not to tender), and
- Request that DTC notify its participants of such Duration/Mode Determination
Date and of the procedures that must be followed if any beneficial owner of a
note wishes to retain it as described under "Tender of Notes; Remarketing
Agency Agreement" on page S-6.
In the event that DTC or its nominee is no longer the holder of record of the
notes, we will notify the holders of the notes directly. This will be the only
notice given by us or the Remarketing Agents with respect to such Duration/Mode
Determination Date and procedures for electing not to tender notes.
If we cannot agree with the Remarketing Agents on the Spread for any Subsequent
Spread Period, then we will unconditionally repurchase and retire all of the
notes on the Remarketing Reset Date at a price equal to 100% of the principal
amount of the notes, together with accrued and unpaid interest, if any, thereon
to but excluding the Remarketing Reset Date.
S-4
<PAGE>
FLOATING RATE MODE
If the notes are to be reset to the Floating Rate Mode, as agreed to by the
Remarketing Agents and us on a Duration/ Mode Determination Date, then during
the corresponding subsequent Spread Period:
- The interest rate on the notes will be reset monthly, quarterly or
semiannually (each, an "INTEREST RESET PERIOD") and interest on the notes will
be payable either monthly, quarterly or semiannually on such dates (each such
date, an "INTEREST PAYMENT DATE" in respect of such Subsequent Spread Period),
in each case as specified by the Remarketing Agents and us on the applicable
Duration/Mode Determination Date, and
- The notes will bear interest at a per annum rate (computed on the basis of the
actual number of days elapsed over a 360-day year) equal to LIBOR for the
applicable Interest Reset Period, plus the applicable Spread, as determined on
the relevant Spread Determination Date.
Unless otherwise specified on the applicable Duration/Mode Determination Date
for notes in the Floating Rate Mode, interest will be payable, in the case of
notes which reset:
- Monthly, on the 21(st) day of each month,
- Quarterly, on the 21(st) day of each March, June, September and December, or
- Semiannually, on the 21(st) day of each June and December.
The Interest Reset Date, unless otherwise specified on the applicable
Duration/Mode Determination Date, will be, in the case of notes which reset:
- Monthly, on the 21(st) day of each month,
- Quarterly, on the 21(st) day of each March, June, September and December, or
- Semiannually, on the 21(st) day of each June and September.
The interest rate in effect on each day will be:
- If such day is an Interest Reset Date, the interest rate determined as of the
Floating Rate Determination Date (as defined below) immediately preceding such
Interest Reset Date, or
- If such day is not an Interest Reset Date, the interest rate determined as of
the Floating Rate Determination Date immediately preceding the most recent
Interest Reset Date.
If any Interest Payment Date, redemption date, repayment date, Interest Reset
Date or Remarketing Reset Date in the Floating Rate Mode is not a Business Day,
such date will be postponed to the next Business Day, except that if the next
Business Day is in the next calendar month, such date shall be the prior
Business Day.
The interest rate applicable to each Interest Reset Period commencing on the
related Interest Reset Date will be the rate determined as of the applicable
Floating Rate Determination Date. The "FLOATING RATE DETERMINATION DATE" will be
the second London Business Day immediately preceding the applicable Interest
Reset Date.
For the Initial Spread Period and if the notes are reset to the Floating Rate
Mode for a Subsequent Spread Period, LIBOR will be determined by The Bank of New
York, acting as Calculation Agent, as described in LIBOR Notes on page 13 of the
accompanying prospectus.
FIXED RATE MODE
If the notes are to be reset to the Fixed Rate Mode, as agreed to by us and
the Remarketing Agents on a Duration/ Mode Determination Date, then the
applicable Fixed Rate for the
S-5
<PAGE>
corresponding Subsequent Spread Period will be determined by 4:00 p.m. on the
third Business Day prior to the Remarketing Reset Date for such Subsequent
Spread Period (the "FIXED RATE DETERMINATION DATE"), by adding:
- the applicable Spread (as determined by the Remarketing Agents and agreed to
by us on the immediately preceding Spread Determination Date) plus
- the yield to maturity determined by 4:00 p.m. on the Fixed Rate Determination
Date (expressed as a bond equivalent, on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) of the applicable
United States Treasury security selected by the Remarketing Agents as having a
maturity comparable to the duration selected for the following Subsequent
Spread Period, which would be used in accordance with customary financial
practice in pricing new issues of corporate debt securities of comparable
maturity to the duration selected for the following Subsequent Spread Period.
Interest in the Fixed Rate Mode will be computed on the basis of a 360-day year
of twelve 30-day months. Such interest will be payable semiannually in arrears
on June 21 and December 21, unless otherwise specified by us and the Remarketing
Agents on the applicable Duration/Mode Determination Date) at the applicable
Fixed Rate, as determined on the Fixed Rate Determination Date, beginning on the
applicable Remarketing Reset Date and continuing for the duration of the
relevant Subsequent Spread Period.
If any Interest Payment Date, redemption date or repayment date in the Fixed
Rate Mode is a day that is not a Business Day (except if such date falls on a
Remarketing Reset Date, in which case each such date will be postponed to the
next Business Day), the related payment of principal and interest will be made
on the next Business Day, and no additional interest will accrue.
TENDER OF NOTES; REMARKETING AGENCY AGREEMENT
We will enter into a Remarketing Agreement with respect to remarketing of the
notes by the Remarketing Agents. If we agree with the Remarketing Agents on the
Spread on the Spread Determination Date with respect to any Subsequent Spread
Period, we will enter into a Remarketing Agency Agreement with the Remarketing
Agents on such Spread Determination Date.
On the Remarketing Reset Date which commences a Subsequent Spread Period, each
note will be automatically tendered to the Remarketing Agents for remarketing on
the Remarketing Reset Date at 100% of the principal amount thereof (the
"PURCHASE PRICE") unless the beneficial owner of the note, at the owner's
option, upon giving notice as provided below (the "HOLD NOTICE"), elects not to
tender his note. We currently anticipate that notes so purchased by the
Remarketing Agents will be remarketed by them.
If the notes are held in book-entry form, subject to the fifth and sixth
succeeding paragraphs below, the Purchase Price will be paid by the Remarketing
Agents in accordance with the standard procedures of DTC. Beneficial owners that
tender notes through a broker, dealer, commercial bank, trust company or other
institution, other than the Remarketing Agents, may be required to pay fees or
commissions to such institution. If a beneficial owner has an account at the
Remarketing Agents and tenders notes through that account, the beneficial owner
will not be required to pay any fee or commission to the Remarketing Agents.
The Hold Notice must be received by the Remarketing Agents (through DTC if held
S-6
<PAGE>
in book-entry form) during the period commencing at 3:00 p.m. on the Duration/
Mode Determination Date and ending at 12:00 noon on the third Business Day prior
to the Remarketing Reset Date for such Subsequent Spread Period (the "NOTICE
DATE"); provided, however, that if we are unable to agree with the Remarketing
Agents on the Spread for such Subsequent Spread Period, any Hold Notices
received will be null and void.
In order to ensure that a Hold Notice is received on a particular day, the
beneficial owner of notes must direct his broker or other designated direct or
indirect participant to give such Hold Notice before the broker's cut-off time
for accepting instructions for that day. Different firms may have different
cut-off times for accepting instructions from their customers. Accordingly,
beneficial owners should consult the brokers or other direct or indirect
participants through which they own their interests in the notes for the cut-off
times for such brokers or participants.
Except as otherwise provided below, a Hold Notice shall be irrevocable. If a
Hold Notice is not received for any reason by the Remarketing Agents with
respect to any note by 12:00 noon on the Notice Date, the beneficial owner of
such note shall be deemed to have elected to tender such note for purchase by
the Remarketing Agents. All of the notes, whether or not tendered, shall bear
interest upon the same terms.
The Remarketing Agents will attempt, on a reasonable efforts basis, to remarket
the tendered notes at a price equal to 100% of the aggregate principal amount so
tendered. There is no assurance that the Remarketing Agents will be able to
remarket the entire principal amount of notes tendered in a remarketing. The
obligations, if any, of the Remarketing Agents will be subject to certain
conditions and termination events customary in our offerings of debt securities,
including a condition that no material adverse change in our consolidated
financial condition, taken as a whole, shall have occurred since the Spread
Determination Date.
If the Remarketing Agents are unable to remarket some or all of the tendered
notes and, in their sole discretion, elect not to purchase them, we are
obligated unconditionally to purchase and retire on the Remarketing Reset Date
the remaining unsold tendered notes at a price equal to 100% of the principal
amount thereof plus accrued and unpaid interest, if any, thereon to the
applicable Remarketing Reset Date. No beneficial owner of any note shall have
any rights or claims against the Remarketing Agents as a result of the
Remarketing Agents not purchasing such notes.
The Remarketing Agents shall have the option, but not the obligation, to
purchase any notes tendered to them that they are not able to remarket. If the
Remarketing Agents are unable to remarket the entire principal amount of all
notes tendered on any Remarketing Reset Date and, in their sole discretion, the
Remarketing Agents elect not to purchase such tendered notes, they will promptly
notify us and the trustee. We may offer to purchase notes in a remarketing,
provided that the Spread and related interest rate established with respect to
the notes in connection with such remarketing are not different than they would
otherwise be if we had not purchased such notes.
The term "Remarketing Agents" means the nationally recognized broker-dealers
selected by us to act as Remarketing Agents. Pursuant to the Remarketing
Agreement, Lehman Brothers Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated have agreed to act as
S-7
<PAGE>
Remarketing Agents. The Remarking Agents will also act as our agent to determine
the yield to maturity on the applicable United States Treasury security that is
used in connection with the determination of the applicable Fixed Rate, and the
ensuing applicable Fixed Rate.
In our sole discretion, we may change the Remarketing Agents for any Subsequent
Spread Period at any time on or prior to 3:00 p.m. on the Duration/Mode
Determination Date relating thereto.
Each of the Calculation Agent and the Remarketing Agents, in its individual or
any other capacity, may buy, sell, hold and deal in any of the notes. Any of
them may exercise any vote or join in any action which any beneficial owner of
notes may be entitled to exercise or take with like effect as if they did not
act in any capacity under the Remarketing Agency Agreement or Calculation Agency
Agreement. Any of them, in their individual capacity, either as principal or
agent, may also engage in or have any interest in any financial or other
transaction with us as freely as if they did not act in any capacity as a
Remarketing or Calculation Agent.
REDEMPTION OF THE NOTES
The notes may not be redeemed prior to June 21, 2001. On each Remarketing Reset
Date (including the initial Remarketing Reset Date) and on those Interest
Payment Dates or other dates specified as redemption dates by us on the
Duration/ Mode Determination Date in connection with any Subsequent Spread
Period, the notes may be redeemed, at our option, in whole or in part, upon
notice given at any time during the 30 calendar day period ending on the eighth
Business Day prior to the redemption date (or fifteen Business Days prior to the
redemption date in the case of a partial redemption), in accordance with the
redemption type selected on the Duration/Mode Determination Date. The notes are
also subject to redemption in whole or in part as provided above under
"Subsequent Spread Periods" and "Tender of Notes; Remarketing Agency Agreement."
If less than all of the outstanding notes are to be redeemed, the notes to be
redeemed shall be selected by a method we deem fair and appropriate. If DTC or
its nominee is the record holder of the notes, however, we will give notice to
DTC, and DTC will determine the principal amount to be redeemed from the account
of each direct participant in accordance with its rules and procedures. A direct
or indirect participant may determine to redeem from some beneficial owners
(which may include a participant holding notes for its own account) without
redeeming from the accounts of other beneficial owners.
The redemption type to be chosen by us and the Remarketing Agents on the
Duration/Mode Determination Date with respect to any Subsequent Spread Period
may be one of the following:
- "PAR REDEMPTION," meaning redemption at a redemption price equal to 100% of
the principal amount thereof, plus unpaid interest thereon, if any, accrued to
the redemption date,
- "PREMIUM REDEMPTION," meaning redemption at a redemption price or prices
greater than 100% of the principal amount thereof, plus unpaid interest
thereon, if any, accrued to the redemption date, as determined on the
Duration/Mode Determination Date, or
- "MAKE-WHOLE REDEMPTION," meaning redemption at a redemption price equal to the
Make-Whole Amount with respect to such notes.
In connection with any optional redemption of any note, "Make-Whole
S-8
<PAGE>
Amount" means an amount equal to the greater of:
- 100% of its principal amount plus accrued interest, if any, thereon to the
date of redemption, or
- the sum of the present values of the remaining scheduled payments of principal
and interest thereon discounted to the date of redemption on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
applicable Treasury Yield plus the Reinvestment Spread.
Unless otherwise specified by the Remarketing Agents and us on any Duration/Mode
Determination Date, the redemption type will be Par Redemption. Furthermore, the
redemption in part of any notes must be in increments of $1,000 or integral
multiples thereof.
"TREASURY YIELD" means, with respect to any redemption date applicable to any of
the notes, the rate per annum equal to the semiannual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to the
applicable Comparable Treasury Price for such redemption date.
"COMPARABLE TREASURY ISSUE" means, with respect to the notes subject to
redemption, the United States Treasury security selected by the Remarketing
Agents as having a maturity comparable to the remaining term of the notes that
would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of the notes.
"COMPARABLE TREASURY PRICE" means, with respect to any redemption date
applicable to the notes subject to redemption:
- the average of the applicable Reference Treasury Dealer Quotations for such
redemption date, after excluding the highest and lowest of such applicable
Reference Treasury Dealer Quotations, or
- if the Remarketing Agents obtain fewer than four such Reference Treasury
Dealer Quotations, the average of all such Quotations, or
- if only one Reference Treasury Dealer Quotation is received, such Quotation.
"REFERENCE TREASURY DEALER" means, with respect to the notes subject to
redemption, at least four primary U.S. Government securities dealers in New York
City as selected by us, which may include the Remarketing Agents or an affiliate
thereof.
"REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to each Reference
Treasury Dealer and any redemption date for the notes subject to redemption, the
average, as determined by the Remarketing Agents of the bid and asked prices for
the Comparable Treasury Issue for the notes (expressed in each case as a
percentage of its principal amount) quoted in writing to the trustee by such
Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such
redemption date.
"REINVESTMENT SPREAD" means, with respect to the notes subject to redemption, a
number, expressed as a number of basis points or as a percentage, selected by us
and agreed to by the Remarketing Agents on the Duration/Mode Determination Date.
REPAYMENT AT THE OPTION OF THE HOLDERS
The notes will not be subject to repayment at the option of the holders thereof
prior to the initial Remarketing Reset Date.
S-9
<PAGE>
Thereafter, if we elect on the Duration/ Mode Determination Date preceding a
Subsequent Spread Period, the notes will be subject to repayment at the option
of the holders thereof during such Subsequent Spread Period on such date(s) as
we may select, in whole or in part in increments of $1,000 or integral multiples
thereof, at a repayment price equal to 100% of the unpaid principal amount to be
repaid, together with unpaid interest accrued thereon to but excluding the date
of repayment.
So long as DTC or its nominee is the record holder of the notes, beneficial
owners that desire to have all or any portion of their notes repaid must
instruct their broker or other designated direct or indirect participant to
direct DTC or its nominee to exercise the repayment option on their behalf by
forwarding the instructions to the trustee, not more than 60 nor less than 30
calendar days prior to the date scheduled for repayment or within such other
notice period as may be specified on the applicable Duration/Mode Determination
Date.
In order to ensure that such instructions are received by the trustee on a
particular day, the applicable beneficial owner must so direct his broker or
other designated direct or indirect participant through which it owns its
interest before the deadline set by such broker or direct or indirect
participant for accepting instructions for that day. Different firms may have
different deadlines for accepting instructions from their customers.
Accordingly, beneficial owners should consult the broker or direct or indirect
participant through which they own their interests for the respective deadlines
for such broker or direct or indirect participant.
All instructions given to participants from beneficial owners of global notes
relating to the option to elect repayment are irrevocable. In addition, at the
time such instructions are given, each beneficial owner shall cause the broker
or direct or indirect participant through which it owns its interest to transfer
such beneficial owner's interest in the global note or notes representing the
related book entry notes, on DTC's records, to the trustee.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following summary of certain United States Federal income tax consequences
of the purchase, ownership and disposition of the notes is based upon the
Internal Revenue Code of 1986, as amended (the "CODE"), regulations promulgated
thereunder ("TREASURY REGULATIONS"), and rulings and decisions now in effect,
all of which are subject to change (prospectively or retroactively). The
following discussion deals only with notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, banks, insurance companies, regulated investment companies,
dealers in securities or currencies, persons holding notes as a hedge against
currency risks or as a position in a "straddle" for tax purposes, or persons
whose functional currency is not the United States dollar. It also does not deal
with holders other than original purchasers (except where otherwise specifically
noted).
Persons considering the purchase of the notes should consult their own tax
advisors concerning the application of United States Federal income tax laws to
their particular situations as well as any consequences of the purchase,
ownership and disposition of the notes arising under the laws of any other
taxing jurisdiction.
S-10
<PAGE>
As used herein, the term "U.S. Holder" means a beneficial owner of a note that
is for United States Federal income tax purposes:
- a citizen or resident of the United States,
- a corporation (including an 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 State thereof or the District of Columbia,
- an estate the income of which is subject to United States Federal income
taxation regardless of its source, or
- a trust whose administration is subject to the primary supervision of a United
States court and which has one or more United States persons who have the
authority to control all substantial decisions of such trust.
As used herein, the term "non-U.S. Holder" means a beneficial owner of a note
that is not a U.S. Holder. If a partnership holds notes, the tax treatment of a
partner will generally depend on the status of the partner and the activities of
the partnership. Partners of partnerships holding notes should consult their tax
advisors.
U.S. HOLDERS
PAYMENTS OF INTEREST
The notes should constitute variable rate debt instruments ("VRDIS") and the
interest payments received should be considered "qualified stated interest"
under section 1.1275-5 of the Treasury Regulations. Based on this treatment, the
interest received will be taxable to a U.S. Holder as ordinary interest income
at the time such payments are accrued or received in accordance with the U.S.
Holder's regular method of tax accounting.
DISPOSITION OF A NOTE
Based on the foregoing treatment, upon the sale, exchange or retirement of a
note, a U.S. Holder generally will recognize taxable gain or loss in an amount
equal to the difference, if any, between the amount realized upon the sale,
exchange or retirement (other than amounts representing accrued and unpaid
interest which will be taxable as interest income) and such U.S. Holder's
adjusted tax basis in the note. A U.S. Holder's adjusted tax basis in a note is
generally equal to such U.S. Holder's initial investment in such note.
CONSEQUENCES TO NON-TENDERING HOLDERS
A U.S. Holder who does not tender his notes to the Remarketing Agents on the
Remarketing Reset Date will continue to be subject to tax on the interest
payable with respect to such notes as described above. It is unclear whether,
for United States Federal income tax purposes, a. U.S. Holder who does not
tender his notes to the Remarketing Agents on the Remarketing Reset Date will be
deemed to have exchanged his notes for "new" or modified notes on the
Remarketing Reset Date. Even if there was a deemed exchange, however, a U.S.
Holder who had acquired the notes at original issuance at the initial issue
price should not recognize any gain or loss because his adjusted tax basis in
the notes would equal the purchase price. A U.S. Holder would, however, start a
new holding period with respect to "new" or modified notes received in such a
deemed exchange.
OTHER POSSIBLE TREATMENT OF THE NOTES
While we intend to treat the notes as VRDIs issued without original issue
discount ("OID"), it is possible that the Internal Revenue Service ("IRS") will
take the position that the notes are either
S-11
<PAGE>
(i) VRDIs issued with OID, or (ii) contingent payment debt instruments. In the
event the IRS was successful in either assertion, holders of the notes could
experience U.S. federal income tax consequences significantly different from
those discussed herein.
Prospective purchasers of notes are urged to consult their tax advisors as to
the potential application of, and the consequences of applying, the Treasury
Regulations governing VRDIs issued with OID and contingent payment debt
instruments.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain payments of
principal and interest and to the proceeds of sales of notes made to U.S.
Holders other than certain exempt recipients (such as corporations). A 31%
backup withholding tax will apply to such payments if the U.S. Holder:
- fails to provide a taxpayer identification number ("TIN"),
- furnishes an incorrect TIN,
- is notified by the IRS that it has failed to properly report payments of
interest and dividends, or
- under certain circumstances, fails to certify, under penalty of perjury, that
it has furnished a correct TIN and has not been notified by the IRS that it is
subject to backup withholding.
Any amounts withheld under the backup withholding rules generally will be
allowed as a refund or a credit against a U.S. Holder's United States Federal
income tax liability provided required information is furnished to the IRS.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal withholding taxes
on payment of principal, premium (if any) or interest on a note, provided that
such non-U.S. Holder is not:
- a direct or indirect 10% or greater shareholder of ours,
- a controlled foreign corporation related to us, or
- a bank receiving interest described in section 881(c)(3)(A) of the Code.
To qualify for the exemption, the last United States payor in the chain of
payment prior to payment to the non-U.S. Holder (THE "WITHHOLDING AGENT") must
have received in the year in which a payment of interest or principal occurs, or
in either of the two preceding calendar years, a statement that:
- is signed by the beneficial owner of the note under penalties of perjury,
- certifies that such owner is not a U.S. Holder, and
- provides the name and address of the beneficial owner.
The statement may be made on an IRS Form W-8 or a substantially similar form,
and the beneficial owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a note is held
through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement to
the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by the
beneficial owner to the organization or institution.
S-12
<PAGE>
Generally, a non-U.S. Holder will not be subject to United States Federal income
taxes on any amount which constitutes gain upon retirement or disposition of a
note, provided that:
- the gain is not effectively connected with the conduct of a trade or business
in the United States by the non-U.S. Holder, and
- in the CASE of an individual non-U.S. Holder, such HOLDER is present in the
United States for fewer than 183 days in the taxable year of the retirement or
disposition and is not subject to certain provisions of the Code that apply to
United States expatriates.
The notes will not be includible in the estate of a non-U.S. Holder provided
that the individual is not a direct or indirect 10% or greater owner of ours,
and that at the time of such individual's death, payments in respect of the
notes would not have been effectively connected with the conduct by such
individual of a trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Compliance with the identification procedures described in the preceding
section would establish an exemption from backup withholding for those non-U.S.
Holders who are not exempt recipients.
In addition, upon the sale of a note to (or through) a broker, the broker must
withhold 31% of the entire purchase price, unless either:
- the broker determines that the seller is a corporation or other exempt
recipient, or
- the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a
non-U.S. Holder (and certain other conditions are met).
Such a sale must also be reported by the broker to the IRS, unless either:
- the broker determines that the seller is an exempt recipient, or
- the seller certifies its non-U.S. status (and certain other conditions are
met).
Certification of the registered owner's non-U.S. status would normally be made
on an IRS Form W-8 under penalties of perjury, although in certain cases it may
be possible to submit other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner generally would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax liability provided the
required information is furnished to the IRS.
NEW WITHHOLDING REGULATIONS
The Treasury Department has issued regulations, which make certain modifications
to the withholding, backup withholding, and information reporting rules
described above. These regulations attempt to unify certification requirements
and modify reliance standards. The IRS has announced that these regulations will
generally be effective for payments made after December 31, 2000, subject to
certain transition rules. Prospective investors are urged to consult their own
tax advisors regarding these regulations.
S-13
<PAGE>
UNDERWRITING
We are selling the notes to the underwriters named in the table below pursuant
to a Purchase Agreement, and each of the underwriters has severally agreed to
purchase from us the respective amount of notes set forth opposite its name:
<TABLE>
<CAPTION>
UNDERWRITER PRINCIPAL AMOUNT OF NOTES
----------- -------------------------
<S> <C>
Lehman Brothers Inc. .................. $108,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................ 108,000,000
Banc of America Securities LLC......... 12,000,000
BNY Capital Markets, Inc............... 12,000,000
First Union Securities, Inc............ 12,000,000
Goldman, Sachs & Co.................... 12,000,000
Salomon Smith Barney Inc............... 12,000,000
Scotia Capital (USA) Inc............... 12,000,000
SunTrust Equitable Securities
Corporation.......................... 12,000,000
------------
Total....................... $300,000,000
============
</TABLE>
The obligations of the underwriters to purchase the notes are subject to certain
limitations as set forth in the purchase agreement. The underwriters are
obligated to purchase all of the notes if any of the notes are purchased.
We will pay all expenses, excluding underwriting commissions, of approximately
$250,000 associated with the offer and sale of the notes.
The underwriters may also offer the notes to certain securities dealers at the
offering price on the cover of this prospectus less a concession of .10%. The
underwriters may allow, and such dealers may reallow, a discount not in excess
of .05% for all of the notes to certain brokers and dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.
There is no established trading market for the notes, and the underwriters are
not obligated to make a market in the notes. We cannot predict the amount of
trading or liquidity of the notes.
In connection with the offering, SEC rules permit the underwriters to engage in
transactions that stabilize the price of the notes. These transactions may
include purchases for the purpose of fixing or maintaining the price of the
notes.
The underwriters may create a short position in the notes in connection with the
offering. That means they sell a larger principal amount of the notes than is
shown on the cover page of this prospectus supplement. If they create a short
position, the underwriters may purchase notes in the open market to reduce the
short position.
If the underwriters purchase the notes to stabilize the price or to reduce their
short position, the price of the notes could be higher than it might be if they
had not made such purchases. The underwriters make no representation or
prediction about any effect that the purchases may have on the price of the
notes.
We will have agreements with the underwriters to indemnify them against certain
civil liabilities, including liabilities under the Securities Act of 1933, or to
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<PAGE>
contribute with respect to payments which the underwriters may be required to
make.
One of our subsidiaries, Constellation Power Source, has an exclusive
arrangement with a subsidiary of Goldman, Sachs & Co. to serve as an advisor for
power marketing and related risk management services. In addition, our
subsidiary, Constellation Enterprises, Inc., has an ownership interest in Orion
Power Holdings, Inc. with an affiliate of Goldman, Sachs & Co. to acquire
electric generating plants in the United States and Canada. An underwriter may
engage in transactions with, or perform services for, us or our subsidiaries in
the ordinary course of its businesses.
S-15
<PAGE>
[LOGO]
<TABLE>
<S> <C>
$500,000,000
MEDIUM TERM NOTES Constellation Energy Group, Inc.
SERIES B 250 W. Pratt Street
Baltimore, Maryland 21201
(410) 234-5000
</TABLE>
-----------------------------------------------------------------
P R O S P E C T U S
--------------------------------------------------------------------------------
This prospectus is part of a registration statement that we filed with the
SEC utilizing a "shelf" registration process. Under this shelf process, we may,
from time to time, sell the notes described in this prospectus in one or more
offerings up to a total dollar amount of $500,000,000. We will receive between
$496,250,000 and $499,375,000 of the proceeds from the sale of the notes, after
paying the agents' commissions of between $625,000 and $3,750,000.
This prospectus provides you with a general description of the notes we may
offer. Each time we sell notes, we will provide a pricing supplement (which may
also be referred to as a prospectus supplement) that will contain specific
information about the terms of that offering. The supplement may also add,
update or change information contained in this prospectus.
---------------------
WE URGE YOU TO CAREFULLY READ THIS PROSPECTUS AND THE PRICING SUPPLEMENT
WHICH WILL DESCRIBE THE SPECIFIC TERMS OF THE OFFERING TOGETHER WITH ADDITIONAL
INFORMATION DESCRIBED UNDER THE HEADING WHERE YOU CAN FIND MORE INFORMATION
BEFORE YOU MAKE YOUR INVESTMENT DECISION.
--------------------------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------------------------------------------------------------
LEHMAN BROTHERS
GOLDMAN, SACHS & CO. MERRILL LYNCH & CO.
Agents
May 15, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Forward Looking Statements.................................. 2
Constellation Energy........................................ 3
Current Events.............................................. 3
Pricing Supplement.......................................... 5
Use of Proceeds............................................. 5
Ratio of Earnings to Fixed Charges.......................... 5
Description of the Notes.................................... 5
Plan of Distribution........................................ 17
Legal Opinions.............................................. 18
Experts..................................................... 19
Where You Can Find More Information......................... 19
</TABLE>
FORWARD-LOOKING STATEMENTS
We make statements in this prospectus and the documents we incorporate by
reference that are considered forward-looking statements within the meaning of
the Securities Act of 1933 and the Securities Exchange Act of 1934. Sometimes
these statements will contain words such as "believes," "expects," "intends,"
"plans" and other similar words. These statements are not guarantees of our
future performance and are subject to risks, uncertainties and other important
factors that could cause our actual performance or achievements to be materially
different from those we project. These risks, uncertainties and factors include,
but are not limited to:
- general economic, business and regulatory conditions;
- energy supply and demand;
- competition;
- federal and state regulations;
- availability, terms and use of capital;
- nuclear and environmental issues;
- weather;
- implications of the restructuring order by the Maryland Public Service
Commission;
- commodity price risk;
- operating our currently regulated generation assets in a deregulated market
beginning July 1, 2000 without the benefit of a fuel rate adjustment clause;
- loss of revenues due to customers choosing alternative suppliers;
- higher volatility of earnings and cash flows;
- increased financial requirements of our non-regulated subsidiaries;
- inability to pass on to electric retail customers costs associated with
providing them service during the electric rate freeze period; and
- implications from the transfer of Baltimore Gas and Electric Company's
generation assets to nonregulated subsidiaries of Constellation Energy.
Given these uncertainties, you should not place undue reliance on these
forward-looking statements. Please see the documents we incorporate by reference
for more information on these factors. These forward-looking statements
represent our estimates and assumptions only as of the date of this prospectus.
2
<PAGE>
CONSTELLATION ENERGY
Constellation Energy became the holding company for Baltimore Gas and Electric
Company ("BGE") on April 30, 1999. Constellation Energy owns all the outstanding
shares of common stock of BGE and the subsidiaries formerly owned by BGE.
BGE is a public utility that has served Central Maryland for over 180 years. BGE
produces, purchases and sells electricity and purchases, transports and sells
natural gas. BGE also jointly owns and operates two electric generating plants
and one hydroelectric plant in Pennsylvania.
Constellation Energy owns the stock of several other companies primarily engaged
in diversified energy-services businesses. They are:
- Constellation Power Source, Inc. -- wholesale power marketing;
- Constellation Power, Inc. and Subsidiaries -- power projects;
- Constellation Energy Source, Inc. -- energy products and services;
- Constellation Nuclear Group, LLC -- nuclear generation and consulting
services;
- BGE Home Products & Services, Inc. and Subsidiaries -- home products,
commercial building systems, and residential and small commercial gas retail
marketing; and
- District Chilled Water General Partnership (ComfortLink) -- a general
partnership, in which BGE is a partner, that provides cooling services for
commercial customers in Baltimore.
Constellation Energy also has two other subsidiaries:
- Constellation Investments, Inc. -- financial investments; and
- Constellation Real Estate Group, Inc. -- real estate and senior living.
CURRENT EVENTS
ELECTRIC RESTRUCTURING
On April 8, 1999, Maryland enacted legislation authorizing customer choice and
competition among electric suppliers. In addition, on November 10, 1999, the
Maryland Public Service Commission issued a restructuring order that resolved
the major issues surrounding electric restructuring. These matters are discussed
further in our 1999 Annual Report on Form 10-K. See WHERE YOU CAN FIND MORE
INFORMATION.
As a result of the deregulation of the electric generation owned by BGE, no
earlier than July 1, 2000, and upon receipt of all regulatory approvals, we
expect that BGE will transfer, at book value, its 1) nuclear generating assets,
2) nuclear decommissioning trust fund, 3) fossil generating assets and
4) partial ownership interest in two coal plants and a hydroelectric plant
located in Pennsylvania, to our nonregulated subsidiaries. In total, these
generating assets represent about 6,240 megawatts of generation capacity with a
total projected net book value at June 30, 2000 of approximately $2.4 billion.
We expect BGE to transfer approximately $278 million of tax exempt debt to our
nonregulated subsidiaries related to the transferred assets and that BGE will
receive approximately $426 million in unsecured promissory notes. Repayments of
the notes by our nonregulated subsidiaries will be used exclusively to service
certain long-term debt of BGE. BGE will also transfer equity
3
<PAGE>
associated with the generating assets to our nonregulated subsidiaries.
The fossil fuel and nuclear fuel inventories, materials and supplies, and
certain purchase power contracts of BGE will also be assumed by these entities.
Under the Restructuring Order, BGE will provide standard offer service to
customers at fixed rates over various time periods during the transition period
for those customers that do not choose an alternate supplier once customer
choice begins July 1, 2000. In addition, the electric fuel rate will be
discontinued effective July 1, 2000. Our nonregulated subsidiaries will provide
BGE with the energy and capacity required to meet its standard offer service
obligations for the first three years of the transition period. Standard offer
service will be competitively bid thereafter.
Our nonregulated subsidiaries will obtain the energy and capacity to supply
BGE's standard offer service obligations from our Calvert Cliffs Nuclear Power
Plant (Calvert Cliffs) and BGE's former fossil plants, supplemented with energy
purchased from the wholesale energy market as necessary. Our earnings will be
exposed to the risks of the competitive wholesale electricity market to the
extent that our nonregulated subsidiaries have to purchase energy and/or
capacity or generate energy to meet obligations to supply power to BGE at market
prices or costs, respectively, which may approach or exceed BGE's standard offer
service rates. We will also be affected by operational risk, that is, the risk
that a generating plant is not available to produce energy when the energy is
required.
Until July 1, 2000, we will continue to recover our cost of electric fuel as
long as the Maryland PSC finds that, among other things, we have kept the
productive capacity of our generating plants at a reasonable level. After
July 1, 2000, any energy purchased to meet BGE's load commitments will become a
cost of doing business in the newly competitive marketplace. Therefore, if BGE
provides standard offer service at fixed rates to its customers that do not
select an alternative provider as required under the terms of the Restructuring
Order, and the load demand exceeds our capacity to supply energy due to a plant
outage, we would be required to purchase additional power in the wholesale
energy market. If the price of obtaining energy in the wholesale market exceeds
the fixed standard offer service price, our earnings would be adversely
affected. Imbalances in demand and supply can occur not only because of plant
outages, but also because of transmission constraints or due to extreme
temperatures (hot or cold) causing demand to exceed available supply.
We cannot estimate the impact of the increased financial risks associated with
this transition. However, these financial risks could have a material impact on
our, and BGE's, financial results.
CORPORATE REORGANIZATION
In anticipation of the deregulation of Maryland's electric industry on July 1,
2000, we are realigning our organization. We are combining the existing power
marketing and trading functions of Constellation Power Source with the domestic
plant operations, development and generation functions of Constellation Power
and, on or about July 1, 2000, the electric generation portion of BGE's
business. Together these functions will form an integrated domestic merchant
energy organization that will strategically develop, own and operate power
plants, market and trade power, and manage risk in the wholesale energy market.
4
<PAGE>
PRICING SUPPLEMENT
The pricing supplement, which may also be called a prospectus supplement, for
each offering of notes will contain the specific information and terms for that
offering. The pricing supplement may also add, update or change information
contained in this prospectus. It is important for you to consider the
information contained in this prospectus and the pricing supplement in making
your investment decision.
USE OF PROCEEDS
Based on our current plans and estimates the net proceeds from the sale of the
notes will be used for general corporate purposes relating to our nonregulated
businesses, including repayment of commercial paper borrowings used to finance
capital expenditures and operations. We may, however, use the net proceeds for
other purposes if we find it necessary. If we do not use the net proceeds
immediately, we temporarily invest them in short-term, interest-bearing
obligations.
For current information on our commercial paper balances and average interest
rate, see our most recent Form 10-K and 10-Q. See WHERE YOU CAN FIND MORE
INFORMATION.
RATIO OF EARNINGS TO FIXED CHARGES
The Ratio of Earnings to Fixed Charges for each of the periods indicated is
as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
---------------------------------
----------------------------------------------------
MARCH 31, DECEMBER 31,
--------------------- ----------------------------------------------------
2000 1999 1998 1997 1996 1995
---- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
2.82 2.87 2.60 2.35 2.44 2.52
</TABLE>
For current information on the Ratio of Earnings to Fixed Charges, please see
our most recent Form 10-K and 10-Q. See WHERE YOU CAN FIND MORE INFORMATION.
DESCRIPTION OF THE NOTES
GENERAL
We will issue the notes under an indenture between us and the trustee, The Bank
of New York, dated as of March 24, 1999. This prospectus briefly outlines some
of the indenture provisions. The indenture is a contract between us and The Bank
of New York acting as trustee. The trustee has two main roles. First, the
trustee can enforce your rights against us if an "Event of Default" described
below occurs. Second, the trustee performs certain administrative duties for us.
The indenture is summarized below. Because it is a summary, it does not contain
all of the information that may be important to you. We have filed the indenture
with the SEC, and we suggest that you read those parts of the indenture that are
important to you. You especially need to read the indenture to get a complete
understanding of your rights and our obligations under the provisions described
in EVENT OF DEFAULT; CONSOLIDATION, MERGER OR SALE; AND MODIFICATION OF
INDENTURE. See WHERE YOU CAN FIND MORE INFORMATION to find out how to locate the
indenture. You may also review the indenture at the trustee's offices at 101
Barclay Street, New York, New York.
The specific terms of each offering of notes will be described in the particular
pricing supplement relating to that offering. The
5
<PAGE>
pricing supplement may or may not modify the general terms found in this
prospectus and will be filed with the SEC. For a complete description of the
terms of a particular offering of notes, you should read both this prospectus
and the pricing supplement relating to that particular offering.
The indenture does not limit the amount of notes that may be issued. Each series
of notes may differ as to their terms. For current information on our debt
outstanding see our most recent Form 10-K and 10-Q. See WHERE YOU CAN FIND MORE
INFORMATION.
The notes are unsecured and will rank equally with all our unsecured
indebtedness. The notes will be denominated in U.S. dollars and we will pay
principal and interest in U.S. dollars. The notes will not be subject to any
conversion, amortization, or sinking fund. It is anticipated that the notes will
be "book-entry," represented by a permanent global note registered in the name
of The Depository Trust Company, or its nominee. However, we reserve the right
to issue notes in certificate form registered in the name of the noteholders.
In the discussion that follows, whenever we talk about paying principal on the
notes, we mean at maturity, redemption or repurchase. Also, in discussing the
time for notices and how the different interest rates are calculated, all times
are New York City time, unless otherwise noted.
The following terms may apply to each note as specified in the applicable
pricing supplement and the note. The applicable pricing supplement will describe
the terms for the notes including: interest rate, remarketing provisions, our
right to redeem notes, the holders' right to tender notes, and any other
provisions.
REDEMPTIONS
We may redeem notes at our option. Notes may be redeemable in whole or in part
in increments of $1,000 upon no more than 60, and not less than 30 days prior
notice. If we do not redeem all the notes of a series at one time, the trustee
selects the notes to be redeemed in a manner it determines to be fair.
REPURCHASES
The noteholder may have the right to cause us to repurchase the notes. We will
repurchase the notes in whole or in part in increments of $1,000. The method for
repurchases differs for book-entry and certificate notes, and is discussed later
in this section, DESCRIPTION OF THE NOTES.
REMARKETED NOTES
We may issue notes with remarketing features that allow holders the option to
sell their notes back to us. In turn, we have the option to retire these notes
or remarket and sell them to new holders.
BOOK-ENTRY NOTES -- REGISTRATION, TRANSFER, AND PAYMENT OF INTEREST AND
PRINCIPAL
Book-entry notes of a series will be issued in the form of a global note that
will be deposited with The Depository Trust Company, New York, New York ("DTC").
This means that we will not issue certificates to each holder. One global note
will be issued to DTC who will keep a computerized record of its participants
(for example, your broker) whose clients have purchased the notes. The
participant will then keep a record of its clients who purchased the notes.
Unless it is exchanged in whole or in part for a certificate note, a global note
may not be transferred; except that DTC, its nominees, and their successors may
transfer a global note as a whole to one another.
Beneficial interests in global notes will be shown on, and transfers of global
notes will be made only through, records maintained by DTC and its participants.
6
<PAGE>
DTC has provided us the following information: DTC is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the United States
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered under the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds
securities that its participants ("Direct Participants") deposit with DTC. DTC
also records the settlement among Direct Participants of securities
transactions, such as transfers and pledges, in deposited securities through
computerized records for Direct Participant's accounts. This eliminates the need
to exchange certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations.
DTC's book-entry system is also used by other organizations such as securities
brokers and dealers, banks and trust companies that work through a Direct
Participant. The rules that apply to DTC and its participants are on file with
the SEC.
DTC is owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., The American Stock Exchange, LLC and the National Association of
Securities Dealers, Inc.
We will wire principal and interest payments to DTC's nominee. We and the
trustee will treat DTC's nominee as the owner of the global notes for all
purposes. Accordingly, we, the trustee and any paying agent will have no direct
responsibility or liability to pay amounts due on the global notes to owners of
beneficial interests in the global notes.
It is DTC's current practice, upon receipt of any payment of principal or
interest, to credit Direct Participants' accounts on the payment date according
to their respective holdings of beneficial interests in the global notes as
shown on DTC's records. In addition, it is DTC's current practice to assign any
consenting or voting rights to Direct Participants whose accounts are credited
with notes on a record date, by using an omnibus proxy. Payments by participants
to owners of beneficial interests in the global notes, and voting by
participants, will be governed by the customary practices between the
participants and owners of beneficial interests, as is the case with notes held
for the account of customers registered in "street name." However, payments will
be the responsibility of the participants and not of DTC, the trustee or us.
Notes represented by a global note will be exchangeable for certificate notes
with the same terms in authorized denominations only if:
- DTC notifies us that it is unwilling or unable to continue as depositary or if
DTC ceases to be a clearing agency registered under applicable law and a
successor depositary is not appointed by us within 90 days; or
- We determine not to require all of the notes of a series to be represented by
a global note and notify the trustee of our decision.
BOOK-ENTRY NOTES -- METHOD OF REPURCHASE
Participants, on behalf of the owners of beneficial interests in the global
notes, may exercise the repurchase option by delivering written notice to our
paying agent at least 30, but no more than 60, days prior to the date of
repurchase. The paying agent, The Bank of New York, must receive notice by
5:00 p.m. on the last day for giving notice. Procedures for the owners of
beneficial interests in global notes to notify their participants of their
desire to have their note repurchased will be governed by the customary
practices of the participant. The written
7
<PAGE>
notice to the paying agent must state the principal amount to be repurchased. It
is irrevocable and a duly authorized officer of the participant (with signatures
guaranteed) must sign it.
CERTIFICATE NOTES -- REGISTRATION, TRANSFER, AND PAYMENT OF INTEREST AND
PRINCIPAL
If we issue certificate notes, they will be registered in the name of the
noteholder. The notes may be transferred or exchanged, pursuant to
administrative procedures in the indenture, without the payment of any service
charge (other than any tax or other governmental charge) by contacting the
paying agent.
Holders of over $5 million in principal amount of notes can request that payment
of principal and interest be wired to them by contacting the paying agent at the
address set forth above at least one business day prior to the payment date.
Otherwise, payments will be made by check.
CERTIFICATE NOTES -- METHOD OF REPURCHASE
Noteholders desiring to exercise their repurchase option must notify the paying
agent at least 30 but not more than 45 days prior to the repayment date by
providing the bank:
- the note, with the section entitled "Option to Elect Repayment" on the reverse
of the note completed; or
- a fax or letter (first class, postage prepaid) from a member of a national
securities exchange, the National Association of Securities Dealers, or a bank
or trust company in the United States which states the following:
-- the name of the holder;
-- the principal amount of the note and the amount to be repurchased;
-- the certificate number or the maturity and a description of the terms of
the note;
-- a statement that you wish to sell all or a portion of your note; and
- a guaranty that the note with the section entitled "Option to Elect Repayment"
on the reverse of the note completed, will be received by the paying agent
within 5 business days.
The note and form must be received by the paying agent by such 5th business day.
Your notice of repurchase is irrevocable.
If you sell a portion of a note, the old note will be canceled and a new note
for the remaining principal amount will be issued to you.
INTEREST RATE
GENERAL
The interest rate on the notes will either be fixed or floating. The interest
paid will include interest accrued to, but excluding, the date of maturity,
redemption or repurchase. Interest is generally payable to the person in whose
name the note is registered at the close of business on the record date before
each interest payment date. Interest payable at maturity, redemption, or
repurchase, however, will be payable to the person to whom principal is payable.
The first interest payment on any note originally issued between a record date
and interest payment date or on an interest payment date will be made on the
interest payment date after the next record date. Interest payments, other than
those payable at maturity, redemption or repurchase will be paid, at our option,
by check or wire transfer.
FIXED RATE NOTES
Each pricing supplement will designate the fixed rate of interest payable on a
note. Interest will be paid May 1 and November 1, and upon maturity, redemption
or repurchase. If any payment date falls on a day that is not a Business Day,
payment will
8
<PAGE>
be made on the next Business Day and no additional interest will be paid. The
record dates for such notes will be April 15 (for interest to be paid on May 1)
and October 15 (for interest to be paid on November 1). Interest payments will
be the amount of interest accrued to, but excluding, each May 1 and November 1.
Interest will be computed using a 360-day year of twelve 30-day months.
"BUSINESS DAY" means any day other than a Saturday or Sunday that (a) is not a
day on which banking institutions in the state of Maryland, or in New York, New
York, are authorized or obligated by law or executive order to be closed, and
(b) with respect to floating rate notes with a LIBOR interest rate formula only,
is a day on which dealings in deposits in U.S. dollars are transacted in the
London interbank market.
FLOATING RATE NOTES
GENERAL
Each floating rate note will have an interest rate formula. The formula may be
based on:
- the commercial paper rate;
- the prime rate;
- the CD rate;
- the federal funds effective rate;
- the LIBOR;
- the Treasury rate;
- the CMT rate; or
- another interest rate index.
The interest rate for each interest period will be based on the formula plus a
spread or multiplied by a spread multiplier, if any, as indicated in the
applicable pricing supplement. In addition, any floating rate note may have a
maximum or minimum interest rate limitation.
DATE OF INTEREST RATE CHANGE
The interest rate on each floating rate note may be reset daily, weekly,
monthly, quarterly, semi-annually, or annually based on the Index Maturity for
the interest rate formula as specified in the applicable pricing supplement.
"INDEX MATURITY" means the period to maturity on the referenced floating
interest rate contract on which the interest rate formula is based. The specific
dates on which the interest rate will reset (Interest Reset Date) will be
specified in the applicable pricing supplement and will be:
- for notes which reset daily, each Business Day;
- for notes (other than Treasury rate notes) which reset weekly, the Wednesday
of each week;
- for Treasury rate notes which reset weekly, the Tuesday of each week;
- for notes which reset monthly, the third Wednesday of each month;
- for notes which reset quarterly, the third Wednesday of March, June, September
and December;
- for notes which reset semi-annually, the third Wednesday of the two months of
each year indicated in the applicable pricing supplement; and
- for notes which reset annually, the third Wednesday of the month of each year
indicated in the applicable pricing supplement.
The initial interest rate or interest rate formula on each note effective until
the first Interest Reset Date will be indicated in the applicable pricing
supplement. Thereafter, the interest rate will be the rate determined on the
next Interest Determination Date, as explained below. Each time a new interest
rate is determined, it will become effective on the subsequent Interest Reset
Date. If any Interest Reset Date is not a Business Day, then the Interest Reset
Date will be
9
<PAGE>
postponed to the next Business Day. However, in the case of a LIBOR note, if the
next Business Day is in the next calendar month, the Interest Reset Date will be
the immediately preceding Business Day.
WHEN INTEREST RATE IS DETERMINED
The interest rate for all notes (except Treasury rate notes) will be the rate
determined on the second Business Day before the Interest Reset Date (Interest
Determination Date).
The Interest Determination Date for Treasury rate notes will be the day of the
week in which the Interest Reset Date falls on which Treasury bills would
normally be auctioned. Treasury bills are usually sold at auction on Monday of
each week, unless that day is a legal holiday, in which case the auction is
usually held on Tuesday. However, the auction may be held on the preceding
Friday. If an auction is held on the preceding Friday, that day will be the
Interest Determination Date pertaining to the Interest Reset Date occurring in
the next week. If an auction date falls on any Interest Reset Date then the
Interest Reset Date will instead be the first Business Day immediately following
the auction date.
The Bank of New York or its successor, the Calculation Agent, will calculate the
interest rate on the tenth day or if not a business day, the next business day,
after the related Interest Determination Date (Calculation Date) for all
floating rate notes except LIBOR notes. For LIBOR notes the Calculation Date
will be the Interest Determination Date.
Upon request, the Calculation Agent, will provide the current interest rate and,
if different, the interest rate which will become effective on the next Interest
Reset Date.
WHEN INTEREST IS PAID
Interest is paid as follows:
- for notes which reset daily or weekly, on the third Wednesday of March, June,
September and December;
- for notes which reset monthly, on the third Wednesday of each month or on the
third Wednesday of March, June, September and December (as indicated in the
applicable pricing supplement);
- for notes which reset quarterly, on the third Wednesday of March, June,
September, and December;
- for notes which reset semi-annually, on the third Wednesday of the two months
specified in the applicable pricing supplement;
- for notes which reset annually, on the third Wednesday of the month specified
in the applicable pricing supplement; and
- at maturity, redemption or repurchase.
If interest is payable on a day which is not a Business Day, payment will be
postponed to the next Business Day. However, for LIBOR notes, if the next
Business Day is in the next calendar month, interest will be paid on the
preceding Business Day.
The record date will be 15 calendar days prior to each day interest is paid,
whether or not such day is a Business Day.
The interest payable will be the amount of interest accrued to, but excluding,
the interest payment date. However, for notes on which the interest resets daily
or weekly, the interest payable will include interest accrued to and including
the record date prior to the interest payment date. If the interest payment date
is also a day that principal is due, the interest payable will include interest
accrued to, but exclude, the date of maturity, redemption or repurchase.
10
<PAGE>
The accrued interest for any period is calculated by multiplying the principal
amount of a note by an accrued interest factor. The accrued interest factor is
computed by adding the interest factor calculated for each day in the period to
the date for which accrued interest is being calculated. The interest factor
(expressed as a decimal rounded upwards if necessary, as described below) is
computed by dividing the interest rate (expressed as a decimal rounded upwards
if necessary) applicable to such date by 360, unless the notes are Treasury rate
notes or CMT rate notes in which case it will be divided by the actual number of
days in the year.
All percentages resulting from any calculation of floating rate notes will be
rounded, if necessary, to the nearest one-hundred thousandth of a percentage
point, with five one-millionths of a percentage point rounded upwards (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655) and 9.876544%
(or .09876544) being rounded to 9.87654% (or .0987654)), and all dollar amounts
used in or resulting from such calculation will be rounded to the nearest cent
(with one-half cent being rounded upwards).
COMMERCIAL PAPER RATE NOTES
Each commercial paper rate note will bear interest at the rate (calculated with
reference to the Commercial Paper Rate and the spread and/or spread multiplier,
if any) specified on the commercial paper rate note and in the applicable
pricing supplement.
"Commercial Paper Rate" means, with respect to any Commercial Paper Interest
Determination Date, the Money Market Yield (calculated as described below) of
the rate on such date for commercial paper having the Index Maturity specified
in the applicable pricing supplement as published in H.15(519) under the heading
"Commercial Paper." "H.15(519)"means the weekly statistical release entitled
"Statistical Release H.15(519), Selected Interest Rates," or any successor
publication, published by the Board of Governors of the Federal Reserve System.
The "MONEY MARKET YIELD" is the yield (expressed as a percentage rounded
upwards, if necessary, to the next higher one-hundred thousandth of a percentage
point) calculated in accordance with the following formula:
Money Market Yield =
<TABLE>
<C> <S>
D X 360
--------------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the period for which interest is being calculated.
The following procedures will occur if the rate cannot be set as described
above:
(a) If that rate is not published in H.15(519) prior to 9:00 A.M. on the
Calculation Date, then the Commercial Paper Rate will be the Money Market Yield
of the rate on the Commercial Paper Interest Determination Date for commercial
paper having the Index Maturity specified in the applicable pricing supplement
as published in Composite Quotations under the heading "Commercial Paper."
"COMPOSITE QUOTATIONS" means the daily statistical release entitled "Composite
3:30 P.M. Quotations for U.S. Government Securities," or any successor
publication, published by The Federal Reserve Bank of New York.
(b) If the rate is not published or in Composite Quotations by 3:00 P.M. on the
Calculation Date, the Commercial Paper Rate for that Commercial Paper Interest
Determination Date will then be calculated by the Calculation Agent in the
following manner.
11
<PAGE>
The Commercial Paper Rate will be calculated as the Money Market Yield of the
average for the offered rates, as of 11:00 A.M., on that date, of three leading
dealers of commercial paper in New York selected for commercial paper having the
applicable Index Maturity placed for an industrial issuer whose bond rating is
"AA," or the equivalent, from a nationally recognized rating agency.
(c) Finally, if fewer than three dealers are quoting as mentioned, the rate of
interest in effect for the applicable period will be the same as the rate of
interest in effect for the prior interest reset period.
PRIME RATE NOTES
Each prime rate note will bear interest at the rate (calculated with reference
to the Prime Rate and the spread and/or spread multiplier, if any) specified on
the prime rate note and in the applicable pricing supplement.
"Prime Rate" means, with respect to any Prime Rate Interest Determination Date,
the rate set forth on such date in H.15(519) under the heading "Bank Prime
Loan."
The following procedures will occur if the rate cannot be set as described
above:
(a) If that rate is not published in H.15(519) prior to 9:00 A.M. on the
Calculation Date, then the Prime Rate will be the average (rounded upwards, if
necessary, to the next higher one-hundred thousandth of a percentage point) of
the rates of interest publicly announced by each bank that appear on the Reuters
Screen USPRIMEONE Page as its prime rate or base lending rate as in effect for
that Prime Rate Interest Determination Date.
(b) If fewer than four, but more than one, rates appear on the Reuters Screen
USPRIMEONE Page or replacement page, the Prime Rate will be the average of the
prime rates (quoted on the basis of the actual number of days in the year
divided by a 360-day year) as of the close of business on the Prime Rate
Interest Determination Date by four major money center banks in New York
selected by the Calculation Agent.
(c) If fewer than two rates appear, the Prime Rate shall be determined on the
basis of the rates furnished in New York by the appropriate number of substitute
banks or trust companies organized and doing business under the laws of the
United States, or any State thereof, having total equity capital of at least
$500 million and being subject to supervision or examination by a Federal or
State authority, as selected by the Calculation Agent.
(d) Finally, if the banks are not quoting as mentioned above, the rate of
interest in effect for the applicable period will be the same as the rate of
interest in effect for the prior interest reset period.
CD RATE NOTES
Each CD rate note will bear interest at the rate (calculated with reference to
the CD Rate and the spread and/or spread multiplier, if any) specified on the CD
rate note and in the applicable pricing supplement.
"CD Rate" means, with respect to any CD Rate Interest Determination Date, the
rate on that date for negotiable certificates of deposit having the Index
Maturity specified in the applicable pricing supplement as published in
H.15(519) under the heading "CDs (Secondary Market)."
The following procedures will occur if the rate cannot be set as described
above:
(a) If that rate is not published in H.15(519) prior to 9:00 A.M. on the
Calculation Date, then the CD Rate will be the rate on that CD Rate Interest
Determination Date for negotiable certificates of deposit having the applicable
Index Maturity
12
<PAGE>
as published in Composite Quotations under the heading "Certificates of
Deposit."
(b) If that rate is not published in Composite Quotations by 3:00 P.M. on that
Calculation Date, the CD Rate for that CD Interest Determination Date shall be
calculated by the Calculation Agent as follows:
The CD Rate will be calculated as the average of the secondary market offered
rates, as of 10:00 A.M., of three leading nonbank dealers of negotiable U.S.
dollar certificates of deposit in New York selected by the Calculation Agent for
negotiable certificates of deposit of major United States money market banks
with a remaining maturity closest to the Index Maturity specified in the
applicable pricing supplement in a denomination of $5,000,000.
(c) Finally, if fewer than three dealers are quoting as mentioned, the rate of
interest in effect for the applicable period will be the same as the rate of
interest in effect for the prior interest reset period.
FEDERAL FUNDS EFFECTIVE RATE NOTES
Each federal funds effective rate note will bear interest at the rate
(calculated with reference to the Federal Funds Effective Rate and the spread
and/or spread multiplier, if any) specified on the federal funds effective rate
note and in the applicable pricing supplement.
"Federal Funds Effective Rate" means, with respect to any Federal Funds
Effective Interest Determination Date, the rate on such date for Federal Funds
as published in H.15(519) prior to 11:00 A.M. under the heading "Federal Funds
(Effective)."
The following procedures will occur if the rate cannot be set as described
above:
(a) If that rate is not published in H.15(519) prior to 11:00 A.M. on the
Calculation Date, then the Federal Funds Effective Rate will be the rate on that
Federal Funds Effective Interest Determination Date as published in Composite
Quotations under the heading "Federal Funds/Effective Rate."
(b) If that rate is not published in Composite Quotations by 3:00 P.M. on the
Calculation Date, the Federal Funds Effective Rate for that Federal Funds
Effective Interest Determination Date will be calculated by the Calculation
Agent as follows:
The Federal Funds Effective Rate will be the average of the rates, as of
11:00 A.M. on that date, for the last transaction in overnight Federal Funds
arranged by three leading brokers of federal funds transaction in New York
selected by the Calculation Agent.
(c) Finally, if fewer than three brokers are quoting as mentioned above, the
rate of interest in effect for the applicable period will be the same as the
rate of interest in effect for the prior interest reset period.
LIBOR NOTES
Each LIBOR note will bear interest at the rate (calculated with reference to
LIBOR and the spread and/or spread multiplier, if any) specified on the LIBOR
note and in the applicable pricing supplement.
LIBOR will be determined by the Calculation Agent as follows:
(a) With respect to any LIBOR Interest Determination Date, LIBOR will be
determined by either:
(1) the average of the offered rates for deposits of not less than
$1,000,000 in U.S. dollars having the Index Maturity specified in the
applicable pricing supplement, beginning on the second Business Day
immediately after that date, that appear on the Reuters Screen LIBO Page as
of 11:00 A.M., London time, on that date, if at least two offered rates
appear on the Reuters Screen LIBO Page; or
13
<PAGE>
(2) the rate for deposits in U.S. dollars having the Index Maturity
designated in the applicable pricing supplement, beginning on the second
London Business Day immediately after such date, that appears on the
Telerate Page 3750 as of 11:00 A.M., London time, on that date.
If neither Reuters Screen LIBO Page nor Telerate Page 3750 is specified in the
applicable pricing supplement, LIBOR will be determined as if Telerate Page 3750
had been specified.
In the case where (1) above applies, if fewer than two offered rates appear on
the Reuters Screen LIBO Page, or, in the case where (2) above applies, if no
rate appears on the Telerate Page 3750, LIBOR for that date will be determined
as follows:
(b) LIBOR will be determined based on the rates at approximately 11:00 A.M.,
London time, on that LIBOR Interest Determination Date at which deposits of not
less than $1,000,000 in U.S. dollars having the applicable Index Maturity are
offered to prime banks in the London interbank market by four major banks in the
London interbank market selected by the Calculation Agent that in the
Calculation Agent's judgment is representative for a single transaction in such
market at such time (a "Representative Amount"). The offered rates must begin on
the second Business Day immediately after that LIBOR Interest Determination
Date.
The Calculation Agent will request the principal London office of each such bank
to provide a quotation of its rate. If at least two such quotations are
provided, LIBOR for such date will be the average of such quotations.
(c) If fewer than two quotations are provided, LIBOR for that date will be the
average of the rates quoted at approximately 11:00 A.M., New York City time, on
such date by three major banks in New York, selected by the Calculation Agent.
The rates will be for loans in U.S. dollars to leading European banks having the
specified Index Maturity beginning on the second Business Day after that date
and in a Representative Amount.
(d) Finally, if fewer than three banks are quoting as mentioned, the rate of
interest in effect for the applicable period will be the same as the rate of
interest in effect for the prior interest reset period.
TREASURY RATE NOTES
Each Treasury rate note will bear interest at the rate (calculated with
reference to the Treasury Rate and the spread and/or spread multiplier, if any)
specified on the Treasury rate note and in the applicable pricing supplement.
"Treasury Rate" means, with respect to any Treasury Interest Determination Date,
the rate for the most recent auction of direct obligations of the United States
("Treasury bills") having the Index Maturity specified in the applicable pricing
supplement as published in H.15(519) under the heading "U.S. Government
Securities/Treasury Bills/Auction Average (Investment)."
The following procedures will occur if the rate cannot be set as described
above:
(a) If that rate is not published in H.15(519) by 9:00 A.M. on the applicable
Calculation Date, the rate will be the auction average rate (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) for such auction as otherwise announced by the United
States Department of the Treasury.
(b) If the results of the auction of Treasury bills having the applicable Index
Maturity are not published in H.15(519) by 9:00 A.M., or otherwise published or
reported as provided above by 3:00 P.M., on the Calculation Date, or if no
auction is
14
<PAGE>
held in a particular week, then the Treasury Rate shall be calculated by the
Calculation Agent as follows:
The rate will be calculated as a yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the average of the secondary market bid rates as of
approximately 3:30 P.M. on the Treasury Interest Determination Date, of three
leading primary United States government securities dealers in New York selected
by the Calculation Agent for the issue of Treasury bills with a remaining
maturity closest to the specified Index Maturity.
(c) Finally, if fewer than three dealers are quoting as mentioned, the rate of
interest in effect for the period will be the same as the rate of interest in
effect for the prior interest reset period.
CMT RATE NOTES
Each CMT rate note will bear interest at the rate (calculated with reference to
the CMT Rate and the Spread or Spread Multiplier, if any) specified on such CMT
rate note and in the applicable pricing supplement.
"CMT Rate" means, with respect to any CMT Interest Determination Date, the rate
displayed on the Designated CMT Telerate Page under the caption "... Treasury
Constant Maturities. Federal Reserve Board Release H.15... Mondays Approximately
3:45 P.M.," under the column for the applicable Index Maturity designated in the
applicable pricing supplement for:
(1) if the Designated CMT Telerate Page is 7055, the rate for the
applicable CMT Interest Determination Date; or
(2) if the Designated CMT Telerate Page is 7052, the week, or the month,
as applicable, ended immediately preceding the week in which the CMT
Interest Determination Date occurs.
The following procedures will occur if the rate cannot be set as described
above:
(a) If no page is specified in the applicable pricing supplement and on the face
of such CMT Rate Note, the Designated CMT Telerate Page shall be 7052, for the
most recent week. If such rate is no longer displayed on the relevant page, or
if it is not displayed by 3:00 P.M. on the related Calculation Date, then the
CMT Rate will be the Treasury constant maturity rate for the applicable Index
Maturity as published in the relevant H.15 (519).
(b) If that rate is no longer published in H.15(519), or is not published by
3:00 P.M. on the related Calculation Date, then the CMT Rate for such CMT
Interest Determination Date will be the Treasury constant maturity rate for the
applicable Index Maturity (or other United States Treasury rate for such Index
Maturity for that CMT Interest Determination Date with respect to such Interest
Reset Date) as may then be published by either the Federal Reserve Board or the
United States Department of the Treasury that the Calculation Agent determines
to be comparable to the rate formerly displayed on the Designated CMT Telerate
Page and published in the relevant H.15(519).
(c) If that information is not provided by 3:00 P.M. on the related Calculation
Date, then the CMT Rate for that CMT Interest Determination Date will be
calculated by the Calculation Agent as follows:
The rate will be calculated as a yield to maturity, based on the average of the
secondary market closing offer side prices as of approximately 3:30 P.M. on that
CMT Interest Determination Date reported, according to their written records, by
three leading primary United States government securities
15
<PAGE>
dealers (each, a "Reference Dealer") in New York selected by the Calculation
Agent. These dealers will be selected from five such Reference Dealers.
The Calculation Agent will eliminate the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest), for the most recently issued direct noncallable
fixed rate obligations of the United States ("Treasury Note") with an original
maturity of approximately the applicable Index Maturity and a remaining term to
maturity of not less than such Index Maturity minus one year.
If two Treasury Notes with an original maturity as described in the preceding
sentence have remaining terms to maturity equally close to the applicable Index
Maturity, the quotes for the Treasury Note with the shorter remaining term to
maturity will be used.
(d) If the Calculation Agent cannot obtain three such Treasury Note quotations,
the CMT Rate for that CMT Interest Determination Date will be calculated by the
Calculation Agent as follows:
The rate will be calculated as a yield to maturity based on the average of the
secondary market offer side prices as of approximately 3:30 P.M. on that CMT
Interest Determination Date of three Reference Dealers in New York selected by
the Calculation Agent using the same method described above, for Treasury Notes
with an original maturity of the number of years that is the next highest to the
applicable Index Maturity with a remaining term to maturity closest to such
Index Maturity and in an amount of at least $100 million.
If three or four (and not five) of the Reference Dealers are quoting as
described above, then the CMT Rate will be based on the average of the offer
prices obtained and neither the highest nor the lowest of such quotes will be
eliminated.
(e) Finally, if fewer than three Reference Dealers are quoting as mentioned, the
rate of interest in effect for the applicable period will be the same as the
rate of interest in effect for the prior interest reset period.
EVENT OF DEFAULT
"Event of Default" means any of the following:
- failure to pay the principal of (or premium, if any, on) any note of a series
when due and payable;
- failure to pay for 30 days any interest on any note of any series;
- failure to perform any other requirements in the notes, or in the indenture in
regard to such notes, for 60 days after notice; or
- certain events of insolvency.
An Event of Default for a particular series of notes does not necessarily mean
that an Event of Default has occurred for any other series of notes issued under
the indenture. If an Event of Default shall have occurred and be continuing the
Trustee or the holders of at least 33% of the principal amount of the notes of
the series affected by an Event of Default may require us to repay the entire
principal of the notes of such series immediately. Subject to certain
conditions, this requirement may be rescinded by the holders of at least a
majority in aggregate principal amount of the notes of the series.
The trustee must within 90 days after a default occurs, notify the holders of
the notes of the series of the default if we have not remedied it (default is
defined to include the events specified above without the grace periods or
notice). The trustee may withhold notice to the holders of such notes of any
default (except in the payment of principal or interest) if it in good faith
considers such withholding in the interest of
16
<PAGE>
the holders. We are required to file an annual certificate with the trustee,
signed by an officer, about any default by us under any provisions of the
indenture.
Subject to the provisions of the indenture relating to its duties in case of
default, the trustee shall be under no obligation to exercise any of its rights
or powers under the indenture at the request, order or direction of any holders
unless such holders offer the trustee reasonable indemnity. Subject to the
provisions for indemnification and certain other limitations, the holders of a
majority in principal amount of the notes of any series may direct the time,
method and place of conducting any proceedings for any remedy available to, or
exercising any trust or power conferred on, the trustee with respect to such
notes.
MODIFICATION OF INDENTURE
Under the indenture, our rights and obligations and the rights of the holders of
any notes may be changed. Any change requires the consent of the holders of not
less than 66 2/3% in aggregate principal amount of the outstanding notes of all
series to be affected, voting as one class. However, no changes to the terms of
payment of principal or interest, or reducing the percentage required for
changes, is effective against any holder without its consent.
CONSOLIDATION, MERGER OR SALE
We may not merge or consolidate with any corporation or sell substantially all
of our assets as an entirety unless:
- we are the continuing corporation or the successor corporation expressly
assumes the payment of principal, and premium, if any, and interest on the
notes and the performance and observance of all the covenants and conditions
of the indenture binding on us; and
- we, or the successor corporation, are not immediately after the merger,
consolidation, or sale in default in the performance of a covenant or
condition in the indenture.
PLAN OF DISTRIBUTION
We may sell the notes (a) through agents; (b) through underwriters or dealers;
or (c) directly to one or more purchasers.
BY AGENTS
Notes may be sold on a continuing basis through agents designated by us. The
agents agree to use their reasonable efforts to solicit purchases for the period
of their appointment under the terms of an agency agreement between the agents
and us.
For each note and in total, we have set out below the offering price, the
compensation we will pay the agents and the proceeds we will receive, before
deducting expenses of approximately $365,000, depending on the maturity of the
notes they sell.
<TABLE>
<CAPTION>
PER NOTE
--------
<S> <C>
Public Offering Price 100%
Agents' Commissions 0.125%-0.75%
--------------
Proceeds to Constellation
Energy (before expenses) 99.875%-99.25%
TOTAL
--------------
</TABLE>
<TABLE>
<S> <C>
Public Offering Price $500,000,000
Agents' Commissions $625,000-$3,750,000
-------------------------
Proceeds to Constellation
Energy (before expenses) $499,375,000-$496,250,000
</TABLE>
The agents will not be obligated to make a market in the notes. We cannot
predict the amount of trading or liquidity of the notes.
BY UNDERWRITERS
If underwriters are used in the sale, the notes will be acquired by the
underwriters for their own account. The underwriters may resell the notes in one
or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices
17
<PAGE>
determined at the time of sale. The obligations of the underwriters to purchase
the notes will be subject to certain conditions. The underwriters will be
obligated to purchase all the notes of the series offered if any of the notes
are purchased. Any initial public offering price and any discounts or
concessions allowed or re-allowed or paid to dealers may be changed from time to
time.
DIRECT SALES
We may also sell notes directly. In this case, no underwriters or agents would
be involved.
GENERAL INFORMATION
In connection with sales by an agent or an underwritten offering, the SEC rules
permit the underwriters or agents to engage in transactions that stabilize the
price of the notes. These transactions may include purchases for the purpose of
fixing or maintaining the price of the notes.
The underwriters or agents may create a short position in the notes in
connection with the offering. That means they sell a larger principal amount of
the notes than is shown on the cover page of the prospectus or the applicable
pricing supplement. If they create a short position, the underwriters or agents
may purchase notes in the open market to reduce the short position.
If the underwriters or agents purchase the notes to stabilize the price or to
reduce their short position, the price of the notes could be higher than it
might be if they had not made such purchases. The underwriters or agents make no
representation or prediction about any effect that the purchases may have on the
price of the notes. These transactions may be affected on the open market and
may be discontinued at any time.
Underwriters, dealers, and agents that participate in the distribution of the
notes may be underwriters as defined in the Securities Act of 1933 (the "Act"),
and any discounts or commissions received by them from us and any profit on the
resale of the notes by them may be treated as underwriting discounts and
commissions under the Act.
We may have agreements with the underwriters, dealers and agents to indemnify
them against certain civil liabilities, including liabilities under the Act, or
to contribute with respect to payments which the underwriters, dealers or agents
may be required to make.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, us or our subsidiaries in the ordinary course of their businesses.
One of our subsidiaries, Constellation Power Source, has an exclusive
arrangement with a subsidiary of Goldman, Sachs & Co. to serve as an advisor for
power marketing and related risk management services. In addition, our
subsidiary, Constellation Enterprises, Inc., has an ownership interest in Orion
Power Holdings, Inc. with an affiliate of Goldman, Sachs & Co. to acquire
electric generating plants in the United States and Canada. An underwriter or
agent may engage in transactions with, or perform services for, us or our
subsidiaries in the ordinary course of its businesses.
LEGAL OPINIONS
One of our lawyers will issue an opinion regarding certain legal matters in
connection with the notes offered pursuant to this prospectus. Cahill Gordon &
Reindel, New York, NY will issue an opinion for any underwriters, dealers or
agents. Cahill Gordon & Reindel will rely on the opinion of our lawyers as to
matters of Maryland law and the applicability of the Public Utility Holding
Company Act of 1935.
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EXPERTS
The financial statements and financial statement schedule incorporated in this
Prospectus by reference to the Annual Report on Form 10-K of Constellation
Energy Group, Inc. for the year ended December 31, 1999 have been so
incorporated in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting
WHERE YOU CAN FIND
MORE INFORMATION
Constellation Energy will file annual, quarterly and special reports, proxy
statements and other information with the SEC. Prior to Constellation Energy
becoming BGE's holding company, reports, statements and other information were
filed by BGE under the name "Baltimore Gas and Electric Company." You may read
and copy any document filed by BGE or Constellation Energy at the SEC's public
reference room at 450 Fifth Street, N.W., Washington, D.C., 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference room.
The SEC maintains an internet site at http://www.sec.gov that contains reports,
proxy and information statements, and other information, regarding issuers
(including Constellation Energy and BGE) that file documents with the SEC
electronically. Constellation Energy's SEC filings may also be obtained from our
web site at http://www.constellationenergy.com.
This prospectus is part of a registration statement we filed with the SEC. In
addition, the SEC allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until we sell all the notes.
- Annual Report on Form 10-K for the year ended December 31, 1999.
- Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 filed with
the SEC on May 15, 2000.
- Current Reports on Form 8-K filed with the SEC on February 15, 2000 and
March 17, 2000.
This prospectus is part of a registration statement we filed with the SEC.
Any person, including any beneficial owner, may request a copy of these filings,
at no cost, by writing or telephoning us at the following address:
Shareholder Services
Constellation Energy Group, Inc.
39 W. Lexington Street
Baltimore, Maryland 21201
410-783-5920
You should rely only on the information incorporated by reference or provided in
this prospectus or any supplement. We have not authorized anyone else to provide
you with different information. We are not making an offer of these notes in any
state where the offer is not permitted. You should not assume that the
information in this prospectus or any supplement is accurate as of any date
other than the date on the front of those documents.
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[LOGO]
$300,000,000
EXTENDIBLE NOTES DUE JUNE 21, 2010
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PROSPECTUS SUPPLEMENT
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LEHMAN BROTHERS
MERRILL LYNCH & CO.
BANC OF AMERICA SECURITIES LLC
BNY CAPITAL MARKETS, INC.
FIRST UNION SECURITIES, INC.
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
SCOTIA CAPITAL
SUNTRUST EQUITABLE SECURITIES
June 16, 2000
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