<PAGE>
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-75217
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information is this prospectus supplement and prospectus is not complete +
+and may be changed. An effective registration statement relating to these se- +
+curities has been filed with the Securities and Exchange Commission. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion Dated March 22, 2000
PROSPECTUS SUPPLEMENT
(To Prospectus dated May 3, 1999)
[Constellation Energy Group Logo] Constellation Energy Group, Inc.
250 W. Pratt Street
Baltimore, Maryland 21201
(410) 234-5000
$
% Medium-Term Notes, Series A
Due
We are offering $ of % Medium-Term Notes, Series A due . We will
pay interest on the notes semi-annually on and , beginning ,
2000. We may redeem the notes at any time prior to maturity, in whole or in
part, upon at least 30 days notice, at a redemption price calculated using the
formula explained on page S-6 of this prospectus supplement. These notes will
not be listed on any securities exchange.
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public/(1)/ Commission Company
----------- ------------ -----------
<S> <C> <C> <C>
Per note.................................... $ $ $
Total....................................... $ $ $
</TABLE>
- -----
/(1)/ Plus accrued interest, if any, from , 2000.
We urge you to carefully read this prospectus supplement and accompanying pro-
spectus which will describe the specific terms of the offering before you make
your investment decision.
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities commis-
sion has approved or disapproved of these securities or passed upon the ade-
quacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS
BANC OF AMERICA SECURITIES LLC GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO. SALOMON SMITH BARNEY
BNY CAPITAL MARKETS, INC. SCOTIA CAPITAL (USA) INC.
SUNTRUST EQUITABLE SECURITIES CORPORATION
UTENDAHL CAPITAL PARTNERS, L.P.
The date of this prospectus supplement is , 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Supplement
Forward Looking Statements................................................. S-3
Current Events............................................................. S-4
Ratio of Earnings to Fixed Charges......................................... S-6
Certain Terms of the Notes................................................. S-6
Underwriting............................................................... S-8
Where You Can Find More Information........................................ S-9
Prospectus
Forward Looking Statements................................................. 2
Constellation Energy....................................................... 3
Pricing Supplement......................................................... 3
Use of Proceeds............................................................ 3
Ratio of Earnings to Fixed Charges......................................... 3
Description of the Notes................................................... 4
Plan of Distribution....................................................... 14
Legal Opinions............................................................. 15
Experts.................................................................... 16
Where You Can Find More Information........................................ 16
Glossary................................................................... 17
</TABLE>
S-2
<PAGE>
FORWARD-LOOKING STATEMENTS
We make statements in this prospectus supplement and the documents we incorpo-
rate 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 im-
portant factors that could cause our actual performance or achievements to be
materially different from those we project. These risks, uncertainties and fac-
tors 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 PSC resolving major
issues surrounding electric restructuring in Maryland;
. 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; and
. inability to pass on to electric retail customers costs associated with pro-
viding them service during the electric rate freeze period.
Given these uncertainties, you should not place undue reliance on these for-
ward-looking statements. Please see the documents we incorporate by reference
for more information on these factors. These forward-looking statements repre-
sent our estimates and assumptions only as of the date of this prospectus sup-
plement.
S-3
<PAGE>
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 dis-
cussed further in our Annual Report on Form 10-K for the year ended December
31,1999. See Where You Can Find More Information.
As a result of the deregulation of the electric generation owned by Baltimore
Gas and Electric Company (BGE), our electric and gas public utility company, no
earlier than July 1, 2000, and upon receipt of all regulatory approvals, we ex-
pect that BGE will transfer, at book value, its 1) nuclear generating assets,
2) nuclear decommissioning trust fund, 3) fossil generating assets and 4) par-
tial ownership interest in two coal plants and a hydroelectric plant located in
Pennsylvania, to our nonregulated subsidiaries. In total, these generating as-
sets represent about 6,240 megawatts of generation capacity with a total pro-
jected 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 $1.1 billion 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 associated with
the generating assets to our nonregulated subsidiaries.
Under the Restructuring Order, BGE will provide standard offer service to cus-
tomers 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 discon-
tinued effective July 1, 2000.
Our nonregulated subsidiaries will provide BGE with the energy and capacity re-
quired 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 ex-
tent 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 serv-
ice 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 re-
quired.
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 pro-
ductive 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 out-
age, we would be required to purchase additional power in the wholesale energy
market. If the price of obtaining energy in the
S-4
<PAGE>
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.
Calvert Cliffs License Extension
In 1998, we filed an application with the Nuclear Regulatory Commission (NRC)
for a 20-year license extension for Calvert Cliffs to extend its license be-
yond 2014 for Unit 1 and 2016 for Unit 2. License renewal evaluations focus on
age-related issues in long-lived passive components (passive components in-
clude buildings, the reactor vessel, piping, ventilation ducts, electric ca-
bles, etc.). We must demonstrate that we can ensure that these passive compo-
nents will continue to perform their intended functions through the renewal
period. The NRC will also consider the impact of the 20-year license extension
on the environment.
According to the NRC's timetable, approval of BGE's application is expected in
April 2000. However, we cannot predict the actual timing of the NRC's deci-
sion, or the impact, if any, on our financial results. If we do not receive
the license extension, we may not be able to operate the Calvert Cliffs units
beyond 2014 and 2016.
BGE is currently involved in a lawsuit titled National Whistleblower Center v.
Nuclear Regulatory Commission and Baltimore Gas and Electric Company regarding
its license extension process. The matter involves an appeal of the NRC's dis-
missal of Whistleblower's petition to intervene in the license renewal pro-
ceeding. At issue was the NRC's adoption of a streamlined procedure for the
proceeding, including the requirement that any requests for extensions of time
be justified by a showing of "unavoidable and extreme circumstances" rather
than the "good cause" standard previously applied. Applying the new standard,
the NRC ultimately dismissed Whistleblower's petition to intervene. Oral argu-
ments have been held and a decision from the court is pending.
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 domes-
tic 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 mar-
ket.
S-5
<PAGE>
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 December 31,
-------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
2.87 2.60 2.35 2.44 2.52
</TABLE>
The calculation of the ratios include the amount equal to the pre-tax earnings
which would be required to meet dividend requirements on BGE preference stock
and pay all fixed charges. The ratios shown on page 3 of the accompanying pro-
spectus do not include the amounts necessary to meet dividend requirements on
BGE preference stock. 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.
CERTAIN TERMS OF THE NOTES
This prospectus supplement is the pricing supplement referred to throughout the
accompanying prospectus.
Interest Rate and Maturity
The notes will mature on and will accrue interest at the fixed rate of
% per annum beginning on . We will make interest payments on the notes
semiannually on and , beginning , 2000. On each interest
payment date, we will pay interest on each note to the person in whose name the
note is registered at the close of business on the 15th day before the interest
payment date.
Optional Redemption
We have the option to redeem all or any part of the notes at any time prior to
their maturity date. We will give notice of any redemption at least 30 days,
but not more than 60 days, before a redemption date. We will pay a redemption
price equal to the sum of:
1) 100% of the principal amount of notes being redeemed, plus
2) all accrued and unpaid interest on those notes, plus
3) any "make-whole premium."
We will appoint an independent investment banking institution of national
standing to calculate the make-whole premium. Lehman Brothers Inc. will make
that calculation if: 1) we do not appoint someone else at least 30 days before
the redemption date, or 2) the institution we appoint is unwilling or unable to
make the calculation. If Lehman Brothers Inc. is unwilling or unable to make
the calculation, then the Bank of New York, who is the trustee, will appoint an
independent investment banking institution of national standing to make the
calculation.
The amount of the make-whole premium, if any, will be equal to the excess of:
1) the sum of the present values, calculated as of the redemption date, of:
a) each interest payment on each interest payment date after the redemp-
tion date that would have been paid on the notes (this does not include any
accrued interest paid at the redemption date); and
b) the principal amount that would have been payable at the final maturity
of the notes being redeemed; over
2) the principal amount of the notes being redeemed.
S-6
<PAGE>
An independent investment banker will calculate the present values of interest
and principal payments in accordance with generally accepted principles of fi-
nancial analysis. The present values will be calculated by discounting the
amount of each payment of interest or principal from the date that each pay-
ment would have been paid to the redemption date at a discount rate that is
equal to the Treasury Yield (as defined below) plus basis points.
The Treasury Yield in the calculation will be an annual interest rate that is
equal to the weekly average yield to maturity of United States Treasury Notes
having a constant maturity corresponding to the remaining term to maturity of
the notes that will be redeemed. This interest rate will be calculated to the
nearest 1/12th of a year. The independent investment banker will determine the
Treasury Yield on the third business day before the redemption date.
The independent investment banker will determine the weekly average yields of
United States Treasury Notes from the most recent statistical release pub-
lished by the Federal Reserve Bank of New York entitled "H.15(519) Selected
Interest Rates" or any successor publication. If the H.15 Statistical Release
gives a weekly average yield for United States Treasury Notes having a con-
stant maturity that is the same as the remaining term of the notes, then the
Treasury Yield will equal that weekly average yield. In all other cases, the
independent investment banker will calculate the Treasury Yield by interpolat-
ing, on a straight-line basis, the weekly average yields from the H.15 Statis-
tical Release on the United States Treasury Notes having a constant maturity
closest to but greater than the remaining term of the notes and the United
States Treasury Notes having a constant maturity closest to and less than the
remaining term. The independent investment banker will round any weekly aver-
age yields calculated by interpolation to the nearest 1/100th of 1%, and will
round the percentage up for any figure of 1/200th of 1% or above.
If weekly average yields for United States Treasury Notes are not available in
the H.15 Statistical Release, or anywhere else, the independent investment
banker will select comparable rates and calculate the Treasury Yield using
these rates.
If we decide to redeem only a part of the notes, the Trustee will select the
particular notes to be redeemed using any method that it decides is fair.
The redemption will not be made unless the redemption moneys are received by
the Trustee by the redemption date. The failure to redeem will not be an event
of default.
S-7
<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>
Principal
Amount of
Underwriter Notes
- ----------- ---------
<S> <C>
Lehman Brothers Inc. .................................................
Banc of America Securities LLC........................................
Goldman, Sachs & Co. .................................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated .............................................
Salomon Smith Barney Inc. ............................................
BNY Capital Markets, Inc. ............................................
Scotia Capital (USA) Inc..............................................
SunTrust Equitable Securities Corporation.............................
Utendahl Capital Partners, L.P........................................
-------
Total............................................................... $
=======
</TABLE>
The obligations of the underwriters to purchase the notes are subject to cer-
tain 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
$365,000 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 %. The
underwriters may allow, and such dealers may reallow, a discount not in excess
of % 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 in-
clude 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 re-
duce 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 contribute with respect to payments which the underwriters may be required
to make.
One of our subsidiaries, Constellation Power Source, has an exclusive arrange-
ment 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 own-
S-8
<PAGE>
ership interest in Orion Power Holdings, Inc. with an affiliate of Goldman,
Sachs & Co. to acquire electric generating plants in the United States and Can-
ada. An underwriter may engage in transactions with, or perform services for,
us or our subsidiaries in the ordinary course of its businesses.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other in-
formation with the SEC. We incorporate by reference the document 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.
. Current Reports on Form 8-K filed with the SEC on February 15, 2000 and March
17, 2000.
Please refer to Where You Can Find More Information on page 16 of the accompa-
nying prospectus to see how you can find more information about us.
S-9
<PAGE>
[Constellation Energy Group Logo]
$500,000,000
Medium Term Notes Constellation Energy Group, Inc.
Series A 39 W. Lexington Street
Baltimore, Maryland 21201
(410) 234-5678
- -------------------------------------------------------------------------------
P R O S P E C T U S
- -------------------------------------------------------------------------------
Terms of Sale
The following terms may apply to the notes which we may sell at one or more
times. The final terms for each note will be included in a pricing supplement.
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.
. Mature 9 months to 30 years . Certificate or book-entry form
. Fixed or floating interest rate. . Subject to redemption and repur-
The floating interest rate formula chase at option of Constellation
would be based on: Energy or holder
-- Commercial paper rate . Not convertible, amortized or sub-
ject to a sinking fund
-- Prime rate
. Interest paid on fixed rate notes
-- CD rate on May 1 and November 1
-- Federal Funds effective rate . Interest paid on floating rate
notes monthly, quarterly, semi-
-- LIBOR annually, or annually
-- Treasury rate . Minimum denominations of $1,000,
increased in multiples of $1,000
-- CMT rate
. Remarketing features
----------------------
We urge you to carefully read this prospectus and the pricing supplement
which will describe the specific terms of the offering before you make your
investment decision.
- -------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities com-
mission has approved or disapproved of these securities or passed upon the ad-
equacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
- -------------------------------------------------------------------------------
LEHMAN BROTHERS GOLDMAN, SACHS & CO.
Agents
May 3, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Constellation Energy....................................................... 3
Pricing Supplement......................................................... 3
Use of Proceeds............................................................ 3
Ratio of Earnings to Fixed Charges......................................... 3
Description of the Notes................................................... 4
Plan of Distribution....................................................... 14
Legal Opinions............................................................. 15
Experts.................................................................... 16
Where You Can Find More Information........................................ 16
Glossary................................................................... 17
</TABLE>
FORWARD-LOOKING STATEMENTS
We make statements in this prospectus and the documents we incorporate by ref-
erence 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 per-
formance and are subject to risks, uncertainties and other important factors
that could cause our actual performance or achievements to be materially dif-
ferent from those we project. These risks, uncertainties and factors include:
. 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;
. industry restructuring and cost recovery (including the potential effect of
stranded investments);
. commodity price risk; and
. year 2000 readiness
Given these uncertainties, you should not place undue reliance on these for-
ward-looking statements. Please see the documents we incorporate by reference
for more information on these factors. These forward-looking statements repre-
sent 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") and its diversified businesses on April 30, 1999. Constellation
Energy owns all the outstanding shares of common stock of BGE and the subsidi-
aries 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 en-
gaged in diversified energy-services businesses. They are:
. Constellation Power Source, Inc. -- our wholesale power marketing and trading
business;
. Constellation Power, Inc. and Subsidiaries -- our power projects business;
. Constellation Energy Source, Inc. -- our energy products and services busi-
ness; and
. BGE Home Products & Services, Inc. and Subsidiaries -- our home products,
commercial building systems, and residential and small commercial gas retail
marketing business.
Constellation Energy also has two other subsidiaries:
. Constellation Investments, Inc. -- our financial investments business; and
. Constellation Real Estate Group, Inc. -- our real estate and senior living
facilities business.
PRICING SUPPLEMENT
The pricing supplement for each offering of notes will contain the specific in-
formation and terms for that offering. The pricing supplement may also add, up-
date 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 principally relating to our
diversified energy-services businesses, including repayment of commercial paper
borrowings used to finance capital expenditures and operations. We may, howev-
er, 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 In-
formation.
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 December 31, 1998
-------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
2.94 2.78 3.10 3.21 3.14
</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.
3
<PAGE>
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. If you would like more information on these provi-
sions, review the indenture and its supplements that we filed with the SEC. See
Where You Can Find More Information on how to locate the indenture and the sup-
plements. You may also review the indenture at the Trustee's offices at 101
Barclay Street, New York, New York.
The indenture does not limit the amount of notes that may be issued. Each se-
ries 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 indebted-
ness. 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 is-
sue 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 time
is New York City time, unless otherwise noted.
The following terms may apply to each note as specified in the applicable pric-
ing 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 provi-
sions.
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.
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
4
<PAGE>
be transferred; except that DTC, its nominees, and their successors may trans-
fer 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 partici-
pants.
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 pro-
visions of Section 17A of the Securities Exchange Act of 1934. DTC holds secu-
rities 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 Par-
ticipant. 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, Inc. 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 pur-
poses. 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 in-
terest, 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 partici-
pants to owners of beneficial interests in the global notes, and voting by par-
ticipants, will be governed by the customary practices between the participants
and owners of beneficial interests, as is the case with notes held for the ac-
count 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 repur-
chase. The paying agent, The Bank of New York, must receive notice by 5:00 p.m.
on the last day
5
<PAGE>
for giving notice. Procedures for the owners of beneficial interests in global
notes to notify their participants of their desire to have their note repur-
chased will be governed by the customary practices of the participant. The
written notice to the paying agent must state the principal amount to be re-
purchased. 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 administra-
tive 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 pay-
ment 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 pay-
ing 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 re-
verse 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 Repay-
ment" 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
We have provided a Glossary at the end of this prospectus to define the capi-
talized words used in discussing the interest rates payable on the notes.
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 re-
purchase, 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
6
<PAGE>
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 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.
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 applicable pricing supplement will also indicate the Spread and/or Spread
Multiplier, if any. In addition, any floating rate note may have a maximum or
minimum interest rate limitation.
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.
Date of Interest Rate Change
The interest rate on each floating rate note may be reset daily, weekly,
monthly, quarterly, semi-annually, or annually. The Interest Reset Date 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 un-
til 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 Re-
set Date will be 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 Inter-
est Reset Date will be the immediately preceding Business Day.
When Interest Rate Is Determined
The Interest Determination Date for all notes (except Treasury rate notes) is
the second Business Day before the Interest Reset 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 nor-
mally be auctioned. Treasury bills are usually sold at auction on Monday of
7
<PAGE>
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 Fri-
day. If an auction is held on the preceding Friday, that day will be the Inter-
est 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 Inter-
est Reset Date will instead be the first Business Day immediately following the
auction 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, Sep-
tember, 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 Busi-
ness 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 that 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 in-
cluding 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 in-
clude interest accrued to, but exclude, the date of maturity, redemption or re-
purchase.
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 pric-
ing supplement.
8
<PAGE>
"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 head-
ing "Commercial Paper."
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 Cal-
culation 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."
(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 In-
terest Determination Date will then be calculated by the Calculation Agent in
the following manner.
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 Cal-
culation 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, 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 substi-
tute 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 Fed-
eral or State authority, as selected by the Calculation Agent.
(d) Finally, if the banks are not quoting as mentioned above, the rate of in-
terest in effect for the applicable period will be the same as the
9
<PAGE>
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 Ma-
turity 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 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 (calcu-
lated 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 Effec-
tive 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 Cal-
culation 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 Ef-
fective 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 ar-
ranged by three leading brokers of federal funds transaction in New York se-
lected by the Calculation Agent.
10
<PAGE>
(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 de-
termined 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
(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 Deter-
mination 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 refer-
ence to the Treasury
11
<PAGE>
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 auc-
tion is 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 equiva-
lent, 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 approxi-
mately 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 appli-
cable 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 Inter-
est 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 In-
dex Maturity as published in the relevant H.15 (519).
12
<PAGE>
(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 Calcula-
tion 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 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 In-
dex 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 high-
est 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 se-
ries when due and payable;
. failure to pay for 30 days any interest on any note of any series;
13
<PAGE>
. 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 un-
der 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 en-
tire principal of the notes of such series immediately. Subject to certain con-
ditions, this requirement may be rescinded by the holders of at least a major-
ity 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 no-
tice). The Trustee may withhold notice to the holders of such notes of any de-
fault (except in the payment of principal or interest) if it in good faith con-
siders such withholding in the interest of 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 pro-
visions for indemnification, 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 con-
ferred 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 as-
sumes 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, con-
solidation, 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 pe-
riod 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 com-
pensation we will pay the agents and the proceeds we will
14
<PAGE>
receive, before deducting expenses of approximately $365,000 depends on the
maturity of the note they sell.
Per Note
--------
Public Offering Price 100%
Agents' Commissions 0.125%-0.75%
------------
Proceeds to Constellation Energy
(before expenses) 99.875%-99.25%
Total
-----
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
The agents will not be obligated to make a market in the notes. We cannot pre-
dict 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 under-
writers for their own account. The underwriters may resell the notes in one or
more transactions, including negotiated transactions, at a fixed public offer-
ing price or at varying prices determined at the time of sale. The obligations
of the underwriters to purchase the notes will be subject to certain condi-
tions. The underwriters will be obligated to purchase all the notes of the se-
ries 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 deal-
ers 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 stabi-
lize 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 connec-
tion 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.
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 dis-
counts 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.
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 (a partnership including a professional corporation), New York, NY
will issue an opinion for any underwriters, dealers
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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.
EXPERTS
PricewaterhouseCoopers LLP, independent accountants, audited our annual
financial statements and schedule incorporated by reference in this prospectus
and elsewhere in the registration statement. These documents are incorporated
by reference herein in reliance upon the authority of PricewaterhouseCoopers
LLP as experts in accounting and auditing.
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 in-
corporate 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 Ex-
change Act of 1934 until we sell all the notes.
. BGE's Annual Report on Form 10-K for the year ended December 31, 1998.
. Constellation Energy's Current Report on Form 8-K filed April 30, 1999
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 fil-
ings, 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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GLOSSARY
Set forth below are definitions of some of the terms used in this Prospectus.
"Business Day" means any day other than a Saturday or Sunday that (a) is not a
day on which banking institutions in Baltimore, Maryland, or in New York, New
York, are authorized or obligated by law or executive order to be closed, and
(b) with respect to LIBOR Notes only, is a day on which dealings in deposits in
U.S. dollars are transacted in the London interbank market.
"Calculation Agent" means the entity chosen by us to perform the duties related
to interest rate calculation and resets for floating rate notes.
"Calculation Date" means the date on which the Calculation Agent calculates an
interest rate for a floating rate note, which will be one of the following:
"Prime Rate" -- tenth day after the related Prime Rate Interest Determi-
nation Date or, if such day is not a Business Day, the next Business Day.
"CD Rate" -- tenth day after the related CD Rate Interest Determination
Date or, if such day is not a Business Day, the next Business Day.
"CMT Rate" -- tenth day after the related CMT Rate Interest Determination
Date or, if such day is not a Business Day, the next Business Day.
"Commercial Paper Rate" -- tenth day after the related Commercial Paper
Rate Interest Determination Date or, if such day is not a Business Day, the
next Business Day.
"LIBOR" -- the LIBOR Interest Determination Date.
"Treasury Rate" -- tenth day after the related Treasury Rate Interest De-
termination Date or, if such day is not a Business Day, the next Business
Day.
"Federal Funds Effective Rate" -- tenth day after the related Federal
Funds Effective Rate Interest Determination Date or, if such day is not a
Business Day, the next Business Day.
"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.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable pricing supplement and on the
face of such CMT Rate Note (or any other page as may replace such page on that
service) for the purpose of displaying Treasury Constant Maturities as reported
in H.15(519).
"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.
"Index Maturity" means, with respect to a floating rate note, the period to ma-
turity of the note on which the interest rate formula is based, as indicated in
the applicable pricing supplement.
"Interest Determination Date" means the date as of which the interest rate for
a floating rate note is to be calculated, to be effective as of the following
Interest Reset Date and calculated on the related Calculation Date (except in
the case of LIBOR which is calculated on the related LIBOR Interest
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Determination Date). The Interest Determination Dates will be indicated in the
applicable pricing supplement and in the note.
"Interest Reset Date" means the date on which a floating rate note will begin
to bear interest at the variable interest rate determined on any Interest De-
termination Date. The Interest Reset Dates will be indicated in the applicable
pricing supplement and in the note.
"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:
D X 360
Money Market Yield = ------------ X 100
360-(D X M)
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.
"Reuters Screen LIBO Page" means the display designated as page "LIBO" on the
Reuters Monitor Money Rates Service (or such other page as may replace the LIBO
page on that service for the purpose of displaying London interbank offered
rates of major banks).
"Reuters Screen USPRIMEONE Page" means the display designated as page
USPRIMEONE on the Reuters Monitor Money Rates Service (or such other page as
may replace the USPRIMEONE page on that service for the purpose of displaying
prime rates or base lending rates of major United States banks).
"Spread" means the number of basis points specified in the applicable pricing
supplement as being applicable to the interest rate for a floating rate note.
"Spread Multiplier" means the percentage specified in the applicable pricing
supplement as being applicable to the interest rate for a floating rate note.
"Telerate Page 3750" means the display designated as page "3750" on the
Telerate Service (or such other page as may replace the 3750 page on that serv-
ice or such other service or services as may be nominated by the British Bank-
ers Association for the purpose of displaying London interbank offered rates
for U.S. dollar deposits).
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[Constellation Energy Group Logo]
$
% Medium-Term Notes, Series A
Due
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P R O S P E C T U S S U P P L E M E N T
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LEHMAN BROTHERS
BANC OF AMERICA SECURITIES LLC
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
BNY CAPITAL MARKETS, INC.
SCOTIA CAPITAL (USA) INC.
SUNTRUST EQUITABLE SECURITIES CORPORATION
UTENDAHL CAPITAL PARTNERS, L.P.
, 2000
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