SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
POTOMAC ELECTRIC POWER COMPANY
(Name of Issuer)
Common Stock, $1.00 par value
(Title of Class of Securities)
737679100
(CUSIP Number)
BALTIMORE GAS AND ELECTRIC COMPANY
Charles W. Shivery
Vice President and Chief Financial Officer
Gas and Electric Building,
Charles Center
Baltimore, Maryland 21201
(410) 783-5000
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
With a copy to:
Stephen R. Rusmisel, Esq.
WINTHROP, STIMSON, PUTNAM & ROBERTS
One Battery Park Plaza
New York, New York 10004
(212) 858-1442
September 22, 1995
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Statement because of Rule
13d-1(b)(3) or (4), check the following: |_|
Check the following box if a fee is being paid with this Statement: |X|
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SCHEDULE 13D
CUSIP No. 737679100
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Baltimore Gas and Electric Company
52-0280210
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC/OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |_|
PURSUANT TO ITEMS 2(d) OR 2(e)
N/A
6 CITIZENSHIP OR PLACE OF ORGANIZATION
State of Maryland
NUMBER OF 7 SOLE VOTING POWER
SHARES 23,579,900*
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 0
EACH 9 SOLE DISPOSITIVE POWER
PERSON 23,579,900*
WITH 10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
23,579,900*
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES o
N/A
13 PERCENT OF CLASS REPRESENTED BY AMOUNT ON ROW (11)
19.9%
14 TYPE OF REPORTING PERSON
CO
* Beneficial ownership disclaimed. See Item 5 below.
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Item 1. Security and Issuer.
The class of equity securities to which this Statement relates
is the common stock, $1.00 par value ("PEPCO Common Stock"), of Potomac Electric
Power Company, a District of Columbia and Commonwealth of Virginia corporation
("PEPCO"), which has its principal executive offices at 1900 Pennsylvania
Avenue, N.W., Washington, D.C. 20063.
Item 2. Identity and Background.
This Statement is being filed by Baltimore Gas and Electric
Company, a Maryland corporation ("BGE"), which conducts its principal business
and maintains its principal office at Liberty and Lexington Streets, Baltimore,
Maryland 21201. BGE and its subsidiaries are engaged in utility operations and
related businesses through BGE. BGE is primarily engaged in the business of
producing, purchasing, and selling electricity, and purchasing, transporting,
and selling natural gas within the State of Maryland. BGE is also qualified to
do business in the District of Columbia and the Commonwealth of Pennsylvania.
BGE is engaged in diversified businesses primarily through two wholly owned
subsidiaries, Constellation Holdings, Inc. and its subsidiaries and BGE Home
Products & Services, Inc. and its subsidiary, Maryland Environmental Systems,
Inc.
The name, business address, present principal occupation or
employment and citizenship of each executive officer and director of BGE are set
forth in Schedule A hereto which is incorporated herein by reference.
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During the past five years, neither BGE nor, to the best of
its knowledge, any of BGE's executive officers or directors (i) has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and, as a result of such
proceeding, was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
Concurrently with entering into the Merger Agreement
(defined in Item 4 below), BGE was granted the Option (defined in Item 4 below).
None of the triggering events permitting the exercise of the Option have
occurred as of the date of this Schedule 13D. In the event that the Option
becomes exercisable and BGE wishes to purchase for cash the PEPCO Common Stock
subject thereto, BGE will fund the exercise price from working capital or
through other sources, which could include borrowings.
Item 4. Purpose of Transaction.
BGE, PEPCO and RH Acquisition Corp., a Maryland corporation
("Newco"), the outstanding capital stock of which is owned 50% by BGE and 50% by
PEPCO, have entered into an Agreement and Plan of Merger, dated as of September
22, 1995 (the "Merger Agreement"), which provides for a strategic business
combination involving BGE and PEPCO (the "Merger"). The Merger, which was
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unanimously approved by the Boards of Directors of BGE and PEPCO, is expected to
close by the early part of 1997 after all of the conditions to the consummation
of the Merger, including obtaining applicable regulatory approvals, are met or
waived.
The Merger Agreement, the related Stock Option Agreements (as
defined below), and the joint press release issued in connection therewith, are
incorporated herein by reference to Exhibits (2)-1, (2)-2, (2)-3, and (99-1),
respectively, to BGE's Current Report on Form 8-K dated and filed with the
Securities and Exchange Commission (the "SEC") on September 27, 1995. The
descriptions of the Merger Agreement and the Stock Option Agreements set forth
herein do not purport to be complete and are qualified in their entirety by the
provisions of the Merger Agreement and the Stock Option Agreements, as the case
may be.
Under the terms of the Merger Agreement, BGE and PEPCO will
each be merged with and into Newco, with Newco being the surviving corporation.
A new name will be selected for Newco in the near future. At the effective time
of the Merger (the "Effective Time"), each outstanding share of common stock, no
par value, of BGE ("BGE Common Stock") shall be converted into a right to
receive one share of common stock, no par value, of Newco ("Newco Common
Stock"). Each outstanding share of PEPCO Common Stock shall be converted into a
right to receive 0.997 shares of Newco Common Stock. As of August 31, 1995, BGE
had 147.5 million common shares outstanding and PEPCO had 118.5 million common
shares outstanding. Each outstanding share of each series of BGE Preferred
Stock, $100.00 par value, shall be converted into one share of the respective
series of preferred
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stock of Newco ("Newco Preferred Stock"), $100 par value, with equal stated
value and dividends and like redemption provisions and other terms and
conditions. Each outstanding share of each series of BGE Preference Stock,
$100.00 par value, shall be converted into a right to receive one share of the
respective series of preference stock, $100 par value, of Newco ("Newco
Preference Stock") with equal stated value and dividends and like redemption and
other terms and conditions. Each outstanding share of PEPCO Preferred Stock,
$50.00 par value, shall be converted into one share of the respective series of
Newco Preferred Stock, $50 par value, with equal stated value and dividends and
like redemption provisions and other terms and conditions. (See Article II of
the Merger Agreement.)
The conversion of PEPCO Common Stock at the Effective Time
into shares of Newco Common Stock is expected to cause PEPCO Common Stock to
cease to be quoted on the New York Stock Exchange, and to make PEPCO Common
Stock eligible for termination of registration pursuant to Section 12(g)(4) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). It is
anticipated that Newco Common Stock will be traded on the New York Stock
Exchange, and listing on the New York Stock Exchange of Newco Common Stock
issuable in connection with the Merger, subject to notice of issuance, is a
condition precedent to the consummation of the Merger.
Newco will adopt BGE's dividend policy. The annual dividend at
the expected 1997 closing date is expected to be $1.67 per share of Newco Common
Stock. BGE currently pays $1.56
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annually per share of common stock and PEPCO currently pays $1.66 annually per
share of common stock.
The Merger is subject to customary closing conditions,
including, without limitation, the receipt of required shareholder approvals of
BGE and PEPCO; and the receipt of all necessary governmental approvals and the
making of all necessary governmental filings, including approvals of the utility
regulators in the District of Columbia, Maryland and certain other states, the
approval of the Federal Energy Regulatory Commission and the Nuclear Regulatory
Commission, and the filing of the requisite notification with the Federal Trade
Commission and the Department of Justice under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the expiration of applicable waiting
periods thereunder. The Merger is also subject to receipt of opinions of counsel
that the Merger will qualify as a tax-free reorganization, and assurances from
the parties' independent accountants that the Merger will qualify as a pooling
of interests for accounting purposes. In addition, the Merger is conditioned
upon the effectiveness of a registration statement to be filed with the SEC with
respect to Newco Common Stock, Newco Preferred Stock, and Newco Preference Stock
to be issued in the Merger. (See Article VIII of the Merger Agreement.)
Shareholder meetings to vote upon the merger are expected to be held in early
1996.
The Merger Agreement contains certain covenants of the parties
pending the consummation of the Merger. Generally, the parties must carry on
their businesses in the ordinary course consistent with past practice, may not
increase dividends on
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common stock beyond specified levels, and may not issue any capital stock beyond
certain limits. The Merger Agreement also requires consent from both BGE and
PEPCO for either to make, among other things, certain charter and bylaw
amendments; capital expenditures, acquisitions, dispositions, or incurrence of
indebtedness above specified levels; and certain increases in employee
compensation and benefits. (See Article VI of the Merger Agreement.)
The Merger Agreement provides that, after the Effective Time,
the corporate headquarters and principal executive offices of Newco will be
located in the Annapolis, Maryland area and Newco will maintain significant
operations in the District of Columbia and Baltimore, Maryland. Newco's Board of
Directors, which will be divided into three classes, will consist of a total of
16 directors, 9 of whom will be designated by BGE and 7 of whom will be
designated by PEPCO. Mr. Edward F. Mitchell, the current Chairman of the Board
and Chief Executive Officer of PEPCO, will serve as Chairman of Newco's Board of
Directors until one year from the Closing. Mr Christian H. Poindexter, the
current Chairman of the Board and CEO of BGE, will serve as Chief Executive
Officer of Newco until the date when Mr. Mitchell ceases to be Chairman of the
Board, at which time Mr. Poindexter will assume the additional role of Chairman
of the Board. Mr. Edward A. Crooke, the current President of BGE, will serve as
Vice Chairman of Newco from the Effective Time and Chairman of the Board of
Newco's diversified business subsidiaries. Mr. John M. Derrick, Jr., the current
President of PEPCO, will serve as
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President and Chief Operating Officer of Newco from the Effective Time. (See
Article VII of the Merger Agreement.)
The Merger Agreement may be terminated in certain
circumstances, listed below. Where indicated, termination results in the payment
of expenses and termination fees in the amounts listed below as liquidated
damages, provided that the liquidated damages, when added to the aggregate
amount which could be payable by BGE or PEPCO upon a required purchase of the
options granted pursuant to the Stock Option Agreements (defined below), may not
exceed $125 million in the aggregate. (See Article IX of the Merger Agreement).
Such circumstances include (i) by mutual consent of the parties (no liquidated
damages); (ii) by any party if the Merger is not consummated by March 31, 1997
(provided, however, that such termination date shall be extended to March 31,
1998 if all conditions to closing the Merger, other than the receipt of certain
statutory approvals by any of the parties, have been satisfied by March 31, 1997
(no liquidated damages)); (iii) by any party if BGE's or PEPCO's shareholders
vote against the Merger ($85 million liquidated damages if the vote follows a
third-party offer of the type described below in clause (vii) that has not been
rejected by the target and its Board and withdrawn by the third party; otherwise
no liquidated damages); (iv) by any party if any state or federal law or court
order prohibits the Merger (no liquidated damages); (v) by a non-breaching party
if there exists a material breach of any material representation or warranty
contained in the Merger Agreement, or any material breach of any covenant or
agreement, and such breach is not cured within twenty (20) days after notice
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($10 million liquidated damages); (vi) by either party if the Board of Directors
of the other party shall withdraw or adversely modify its approval or
recommendation of the Merger ($85 million liquidated damages); or (vii) by
either party, under certain circumstances, as a result of a third-party tender
offer or business combination proposal which such party's board of directors
determines in good faith that their fiduciary duties requires be accepted, after
the other party has first been given an opportunity to make adjustments in the
terms of the Merger Agreement so as to enable the Merger to proceed ($85 million
liquidated damages). (See Article IX of the Merger Agreement.)
Concurrently with entering into the Merger Agreement, BGE and
PEPCO entered into reciprocal stock option agreements each granting the other,
for no additional consideration, an irrevocable option to purchase, under
certain circumstances, up to that number of shares of common stock of the other
company which equals 19.9% of the number of shares of the common stock of the
other company outstanding on August 31, 1995 (the "Stock Option Agreements").
Specifically, under the PEPCO Stock Option Agreement, PEPCO granted BGE an
irrevocable option to purchase (the "Option"), up to 23,579,900 shares (subject
to adjustment for changes in capitalization) of PEPCO Common Stock at an
exercise price of $21.225 per share (the "Exercise Price") under certain
circumstances if the Merger Agreement becomes terminable by BGE as a result of
PEPCO's breach and as a result of PEPCO becoming the subject of a third-party
proposal for a business combination. The Exercise Price is payable, at BGE's
election, either in cash or shares of BGE Common Stock. If the Option
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becomes exercisable, BGE may request PEPCO to repurchase from BGE all or any
portion of the Option (or if the Option is exercised, to repurchase from BGE all
or any portion of the acquired shares of PEPCO Common Stock) at the price
specified in the PEPCO Stock Option Agreement.
Each party to the Stock Option Agreements agreed to vote,
prior to September 22, 2000 (the "Expiration Date"), any shares of capital stock
of the other party acquired by such party pursuant to the Stock Option
Agreements or otherwise beneficially owned by such party on each matter
submitted to a vote of stockholders of such other party for and against such
matter in the same proportion as the vote of all other stockholders of such
other party is voted for and against such matter.
The Stock Option Agreements provide that prior to the
Expiration Date, neither BGE nor PEPCO shall sell, assign, pledge or otherwise
dispose of or transfer the shares they acquire pursuant to the Stock Option
Agreements (collectively, the "Restricted Shares") except as otherwise provided
in the Stock Option Agreements. In addition to the repurchase rights mentioned
above, subsequent to the termination of the Merger Agreement, the parties have
the right to have such shares of the other party registered under the Securities
Act of 1933, as amended, for sale in a public offering, unless the issuer of the
shares elects to repurchase them at their then market value. The Stock Option
Agreements also provide that, following the termination of the Merger Agreement,
either party may sell any Restricted Shares pursuant to a tender or exchange
offer approved or recommended, or otherwise determined to be fair and in the
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best interests of such other party's shareholders, by a majority of the Board of
Directors of such other party.
Except as set forth in this Item 4 and as otherwise
contemplated by the Merger Agreement and the PEPCO Stock Option Agreement,
neither BGE nor, to the best of its knowledge, any of BGE's executive officers
or directors, has any other present plans or proposals which would result in or
relate to any of the actions described in paragraphs (a) through (j) of Item 4
of Schedule 13D under the Exchange Act.
Item 5. Interest in Securities of the Issuer.
(a)-(b) By reason of the PEPCO Stock Option Agreement,
pursuant to Rule 13d-3(d)(1)(i) promulgated under the Exchange Act, BGE may be
deemed to have sole voting power and dispositive power with respect to the PEPCO
Common Stock subject to the Option and, accordingly, may be deemed to
beneficially own 23,579,900 shares of PEPCO Common Stock, or approximately 19.9%
of the PEPCO Common Stock outstanding on September 22, 1995 assuming exercise of
the Option. However, BGE expressly disclaims any beneficial ownership of the
23,579,900 shares of PEPCO Common Stock which are obtainable by BGE upon
exercise of the Option, because the Option is exercisable only in the
circumstances set forth in Item 4, none of which has occurred as of the date
hereof. Furthermore, even if events did occur which rendered the Option
exercisable, BGE believes it would be a practical impossibility to obtain the
regulatory approvals necessary to acquire shares of PEPCO Common Stock pursuant
to the Option within 60 days.
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Except as set forth on Schedule B, neither BGE nor, to the
best of BGE's knowledge, any of the individuals named in Schedule A hereto, owns
any PEPCO Common Stock.
(c) Except as set forth above, neither BGE nor, to the best of
BGE's knowledge, any of the individuals named in Schedule A hereto, has effected
any transaction in the PEPCO Common Stock during the past 60 days.
(d) So long as BGE has not purchased the PEPCO Common Stock
subject to the Option, BGE does not have the right to receive or the power to
direct the receipt of dividends from, or the proceeds from the sale of, any of
the PEPCO Common Stock.
(e) Inapplicable.
Item 6. Relationships With Respect to Securities of the Issuer.
The Merger Agreement contains certain customary restrictions
on the conduct of the business of PEPCO pending the Merger, including certain
customary restrictions relating to the PEPCO Common Stock. Except as provided
the Merger Agreement, or the PEPCO Stock Option Agreement or as set forth
herein, neither BGE, nor, to the best of BGE's knowledge, any of the individuals
named in Schedule A hereto, has any contracts, arrangements, understandings, or
relationships (legal or otherwise), with any person with respect to any
securities of PEPCO, including, but not limited to, transfer or voting of any
securities, finder's fees, joint ventures, loan or option arrangements, puts or
calls, guarantees of profits, division of profits or losses, or the giving or
withholding of proxies.
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Item 7. Material to be Filed as Exhibits.
Schedule the following exhibits by reference to the filing set forth below:
(2)-1 Agreement and Plan of Merger by and among
Baltimore Gas and Electric Company, Potomac
Electric Power Company, and RH Acquisition Corp.
dated as of September 22, 1995. (Exhibit (2)-1 to
BGE's September 27, 1995 Form 8-K.)
(2)-2 PEPCO Stock Option Agreement by and between Baltimore
Gas and Electric Company and Potomac Electric Power
Company, dated as of September 22, 1995. (Exhibit
(2)-3 to BGE's September 27, 1995 Form 8-K.)
(2)-3 BGE Stock Option Agreement by and between Baltimore
Gas and Electric Company and Potomac Electric Power
Company, dated as of September 22, 1995 (Exhibit
(2)-2 to BGE's September 27, 1995 Form 8-K.)
(99)-1 Joint Press Release of Baltimore Gas and Electric
Company and Potomac Electric Power Company, dated
September 25, 1995. (Exhibit (99)-1 to BGE's
September 27, 1995 Form 8-K).
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this Statement is true,
complete and correct. Dated: October 2, 1995
BALTIMORE GAS AND ELECTRIC COMPANY
By: /s/CHARLES W. SHIVERY
----------------------
Charles W. Shivery
Vice President and Chief
Financial Officer
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SCHEDULE A
The following information sets forth the name, citizenship,
business address and present principal occupation of each of the directors and
executive officers of BGE. Each of the directors and executive officers of BGE
is a citizen of the United States. Each of the executive officer's business
address is Liberty and Lexington Streets, Baltimore, Maryland 21203, unless
otherwise indicated.
Name and Business Address Present Principal Occupation
- -------------------------
Directors of BGE
- ----------------
H. Furlong Baldwin Chairman of the Board and
Mercantile Bankshares Chief Executive Officer
Corporation
P.O. Box 1477
Baltimore, MD 21203
(2 Hopkins Plaza, 2nd Flr.
Baltimore, MD 21201)
Beverly B. Byron
4000 Cathedral Avenue
Washington, DC 20016
J. Owen Cole Chairman of the Executive
First Maryland Bancorp Committee
P.O. Box 1596
Baltimore, MD 21203
(25 S. Charles Street
Baltimore, MD 21201)
Dan A. Colussy Chairman, President & Chief
UNC Incorporated Executive Officer
175 Admiral Cochrane Dr.
Annapolis, MD 21401-7394
Edward A. Crooke President and Chief Operating
Baltimore Gas and Electric Officer
Company
P.O. Box 1475
Baltimore, MD 21203
James R. Curtiss Partner
Winston & Strawn
1400 L Street, N.W.
Washington, DC 20005-3502
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Jerome W. Geckle Chairman of the Board (Ret.)
PHH Corporation
P.O. Box 305
Maryland Line, MD 21105
(Hand Deliveries Only:
1007 Harris Mill Road
Maryland Line, MD 21105
Martin L. Grass President and Chief Operating
Rite Aid Corporation Officer
P.O. Box 3165
Harrisburg, PA 17105
(Hand Deliveries Only:
30 Hunter Lane
Camp Hill, PA 17011)
Dr. Freeman A. Hrabowski, III President
University of Maryland
Baltimore County
5401 Wilkens Avenue
Catonsville, MD 21228
Nancy Lampton Chairman and Chief Executive
American Life and Accident Officer
Insurance Company of Kentucky
3 Riverfront Plaza
Louisville, Kentucky 40202
George V. McGowan Chairman of the Executive
Baltimore Gas and Electric Committee
Company
P.O. Box 1475
Baltimore, MD 21203
Christian H. Poindexter Chairman of the Board and
Baltimore Gas and Electric Chief Executive Officer
Company
P.O. Box 1475
Baltimore, MD 21203
George L. Russell, Jr. Partner
Piper & Marbury
1100 Charles Center South
36 South Charles Street
Baltimore, MD 21201
Michael D. Sullivan Chairman of the Board
Lombardi Research Group, LLC
106 Old Court Road
Suite 303
Baltimore, MD 21208
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Executive Officers of BGE
- -------------------------
Christian H. Poindexter Chairman of the Board and
Chief Executive Officer
Edward A. Crooke President and Chief Operating
Officer
Bruce M. Ambler President and Chief Executive
Officer of Constellation
Holdings, Inc.
George C. Creel Senior Vice President
Generation
Thomas F. Brady Vice President
Customer Service and
Distribution
Herbert D. Coss, Jr. Vice President
Gas
Robert E. Denton Vice President
Nuclear Energy
Carserlo Doyle Vice President
Electric Interconnection and
Transmission
Jon M. Files Vice President
Management Services
Ronald W. Lowman Vice President
Fossil Energy
G. Dowell Schwartz, Jr. Vice President
General Services
Charles W. Shivery Vice President
Finance and Accounting,
Chief Financial Officer and
Secretary
Joseph A. Tiernan Vice President
Corporate Affairs
Stephen F. Wood Vice President
Marketing and Sales
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SCHEDULE B
Name Shares Owned Percentage of Class
- ---- ------------ -------------------
Jon M. Files 100 Less than one percent
(.00008%)
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BALTIMORE GAS AND ELECTRIC COMPANY
SCHEDULE 13D
EXHIBIT INDEX
Exhibit
Number Document
- ------- --------
(2)-1 Agreement and Plan of Merger by and among Baltimore
Gas and Electric Company, Potomac Electric Power
Company, and RH Acquisition Corp, dated as of
September 22, 1995. (Incorporated by reference to
Exhibit (2)-1 to BGE's September 27,
1995 Form 8-K.)
(2)-2 PEPCO Stock Option Agreement by and between Baltimore
Gas and Electric Company and Potomac Electric Power
Company, dated as of September 22, 1995.
(Incorporated by reference to Exhibit (2)-3 to BGE's
September 27, 1995 Form 8-K.)
(2)-3 BGE Stock Option Agreement by and between Baltimore
Gas and Electric Company and Potomac Electric Power
Company, dated as of September 22, 1995.
(Incorporated by reference to Exhibit (2)-2 to BGE's
September 27, 1995 Form 8-K.)
(99)-1 Joint Press Release of Baltimore Gas and Electric
Company and Potomac Electric Power Company, dated
September 25, 1995. (Incorporated by reference to
Exhibit (99)-1 to BGE's September 27, 1995 Form 8-
K).
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