10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended September 30, 2006

Commission File Number	Exact name of registrant as specified in its charter	IRS Employer Identification No.
1-12869	CONSTELLATION ENERGY GROUP, INC.	52-1964611
1-1910	BALTIMORE GAS AND ELECTRIC COMPANY	52-0280210

	MARYLAND
(State of Incorporation of both registrants)

750 E. PRATT STREET,                      BALTIMORE, MARYLAND	21202
(Address of principal executive offices)	(Zip Code)

	410-783-2800
(Registrants’ telephone number, including area code)

	NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) have been subject to such filing requirements for the past 90 days. Yes x    No o

Indicate by check mark whether Constellation Energy Group, Inc. is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.

(Check one):

Large accelerated filer x    Accelerated filer o    Non-accelerated filer o

Indicate by check mark whether Baltimore Gas and Electric Company is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.

(Check one):

Large accelerated filer o    Accelerated filer o    Non-accelerated filer x

Indicate by check mark whether Constellation Energy Group, Inc. is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o    No x

Indicate by check mark whether Baltimore Gas and Electric Company is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o    No x

Common Stock, without par value 180,007,617 shares outstanding of

Constellation Energy Group, Inc. on October 31, 2006.

Baltimore Gas and Electric Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form in the reduced disclosure format.

TABLE OF CONTENTS

	Page
Part I—Financial Information
Item 1—Financial Statements
Constellation Energy Group, Inc. and Subsidiaries
Consolidated Statements of Income	3
Consolidated Statements of Comprehensive Income	3
Consolidated Balance Sheets	4
Consolidated Statements of Cash Flows	6
Baltimore Gas and Electric Company and Subsidiaries
Consolidated Statements of Income	7
Consolidated Balance Sheets	8
Consolidated Statements of Cash Flows	10
Notes to Consolidated Financial Statements	11
Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction and Overview	25
Business Environment	25
Events of 2006	28
Results of Operations	30
Financial Condition	45
Capital Resources	48
Item 3—Quantitative and Qualitative Disclosures About Market Risk	52
Item 4—Controls and Procedures	52
Part II—Other Information	53
Item 1—Legal Proceedings	53
Item 1A—Risk Factors	53
Item 2—Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 5—Other Information	54
Item 6—Exhibits	55
Signature	56

2

PART I—FINANCIAL INFORMATION

Item 1—Financial Statements

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Constellation Energy Group, Inc. and Subsidiaries

	Three Months Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
	(In millions, except per share amounts)
Revenues
Nonregulated revenues	$	4,672.1		$	4,183.4		$	12,428.7		$	9,771.0
Regulated electric revenues	649.9			626.8			1,652.6			1,583.4
Regulated gas revenues	111.7			112.2			671.8			618.5
Total revenues	5,433.7			4,922.4			14,753.1			11,972.9
Expenses
Fuel and purchased energy expenses	4,096.5			3,953.2			11,416.4			9,218.0
Operating expenses	519.5			415.4			1,622.5			1,339.3
Workforce reduction costs	21.7			3.9			23.9			3.9
Merger-related costs	3.4			—			12.4			—
Depreciation, depletion, and amortization	140.7			143.3			413.8			407.4
Accretion of asset retirement obligations	17.1			15.8			50.3			46.2
Taxes other than income taxes	74.9			73.8			222.7			209.4
Total expenses	4,873.8			4,605.4			13,762.0			11,224.2
Income from Operations	559.9			317.0			991.1			748.7
Other Income	8.7			16.1			36.5			43.0
Fixed Charges
Interest expense	83.1			75.7			239.3			230.2
Interest capitalized and allowance for borrowed funds used during construction	(3.5		)	(2.1		)	(10.1		)	(7.6		)
BGE preference stock dividends	3.3			3.3			9.9			9.9
Total fixed charges	82.9			76.9			239.1			232.5
Income from Continuing Operations Before Income Taxes	485.7			256.2			788.5			559.2
Income Tax Expense	161.3			72.1			257.9			138.7
Income from Continuing Operations	324.4			184.1			530.6			420.5
Income from discontinued operations, net of income taxes of $4.1, $0.5 and $12.0, respectively	—			1.4			0.9			7.4
Net Income	$	324.4		$	185.5		$	531.5		$	427.9
Earnings Applicable to Common Stock	$	324.4		$	185.5		$	531.5		$	427.9
Average Shares of Common Stock Outstanding—Basic	179.7			178.1			179.1			177.5
Average Shares of Common Stock Outstanding—Diluted	181.6			180.5			180.9			179.6
Earnings Per Common Share from Continuing Operations—Basic	$	1.81		$	1.03		$	2.96		$	2.37
Income from discontinued operations	—			0.01			0.01			0.04
Earnings Per Common Share—Basic	$	1.81		$	1.04		$	2.97		$	2.41
Earnings Per Common Share from Continuing Operations—Diluted	$	1.79		$	1.02		$	2.93		$	2.34
Income from discontinued operations	—			0.01			0.01			0.04
Earnings Per Common Share—Diluted	$	1.79		$	1.03		$	2.94		$	2.38
Dividends Declared Per Common Share	$	0.3775		$	0.335		$	1.1325		$	1.005

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

Constellation Energy Group, Inc. and Subsidiaries

	Three Months Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
	(In millions)
Net Income	$	324.4		$	185.5		$	531.5		$	427.9
Other comprehensive income (OCI)
Reclassification of net loss (gain) on sales of securities from OCI to net income, net of taxes	—			1.6			(0.3		)	1.5
Reclassification of net loss (gain) on hedging instruments from OCI to net income, net of taxes	193.0			(318.7		)	407.1			(416.9		)
Net unrealized (loss) gain on hedging instruments, net of taxes	(369.7		)	820.8			(1,418.7		)	906.9
Net unrealized gain on securities, net of taxes	16.7			6.7			20.0			15.3
Net unrealized (loss) gain on foreign currency, net of taxes	(0.3		)	0.7			0.8			1.1
Comprehensive Income (Loss)	$	164.1		$	696.6		$	(459.6	)	$	935.8

See Notes to Consolidated Financial Statements.

3

CONSOLIDATED BALANCE SHEETS

Constellation Energy Group, Inc. and Subsidiaries

	September 30,				December 31,
	2006*				2005
	(In millions)
Assets
Current Assets
Cash and cash equivalents		$	320.7			$	813.0
Accounts receivable (net of allowance for uncollectibles of $53.2 and $47.4, respectively)		2,959.5				2,727.9
Fuel stocks		605.7				489.5
Materials and supplies		204.2				197.0
Mark-to-market energy assets		889.3				1,339.2
Risk management assets		231.2				1,244.3
Unamortized energy contract assets		40.9				55.6
Deferred income taxes		472.0				—
Other		531.3				555.3
Total current assets		6,254.8				7,421.8
Investments and Other Assets
Nuclear decommissioning trust funds		1,170.4				1,110.7
Investments in qualifying facilities and power projects		312.5				306.2
Regulatory assets (net)		283.4				154.3
Goodwill		157.1				147.1
Mark-to-market energy assets		814.1				1,089.3
Risk management assets		360.3				626.0
Unamortized energy contract assets		120.5				141.2
Other		340.7				410.6
Total investments and other assets		3,559.0				3,985.4
Property, Plant and Equipment
Nonregulated property, plant and equipment		8,928.3				8,580.8
Regulated property, plant and equipment		5,673.5				5,520.5
Nuclear fuel (net of amortization)		362.8				302.0
Accumulated depreciation		(4,579.1		)		(4,336.6		)
Net property, plant and equipment		10,385.5				10,066.7
Total Assets		$	20,199.3			$	21,473.9

* Unaudited

See Notes to Consolidated Financial Statements.

4

CONSOLIDATED BALANCE SHEETS

Constellation Energy Group, Inc. and Subsidiaries

	September 30,				December 31,
	2006*				2005
	(In millions)
Liabilities and Equity
Current Liabilities
Short-term borrowings		$	185.0			$	0.7
Current portion of long-term debt		1,186.1				491.3
Accounts payable and accrued liabilities		1,719.9				1,667.9
Customer deposits and collateral		419.8				458.9
Mark-to-market energy liabilities		822.9				1,348.7
Risk management liabilities		1,120.7				483.5
Unamortized energy contract liabilities		412.7				489.5
Deferred income taxes		—				151.4
Accrued expenses and other		738.4				780.4
Total current liabilities		6,605.5				5,872.3
Deferred Credits and Other Liabilities
Deferred income taxes		1,268.7				1,180.8
Asset retirement obligations		956.2				908.0
Mark-to-market energy liabilities		467.8				912.3
Risk management liabilities		840.6				1,035.5
Unamortized energy contract liabilities		1,022.3				1,118.7
Net pension liability		421.8				401.4
Postretirement and postemployment benefits		395.3				382.6
Deferred investment tax credits		58.9				64.1
Other		104.8				101.0
Total deferred credits and other liabilities		5,536.4				6,104.4
Long-term Debt
Long-term debt of Constellation Energy		3,051.5				3,049.1
Long-term debt of nonregulated businesses		329.0				357.5
First refunding mortgage bonds of BGE		244.5				342.8
Other long-term debt of BGE		824.5				861.5
6.20% deferrable interest subordinated debentures due October 15, 2043 to BGE wholly owned BGE Capital Trust II relating to trust preferred securities		257.7				257.7
Unamortized discount and premium		(5.2		)		(8.0		)
Current portion of long-term debt		(1,186.1		)		(491.3		)
Total long-term debt		3,515.9				4,369.3
Minority Interests		21.9				22.4
BGE Preference Stock Not Subject to Mandatory Redemption		190.0				190.0
Common Shareholders’ Equity
Common stock		2,698.8				2,620.8
Retained earnings		3,137.4				2,810.2
Accumulated other comprehensive loss		(1,506.6		)		(515.5		)
Total common shareholders’ equity		4,329.6				4,915.5
Commitments, Guarantees, and Contingencies (see Notes)
Total Liabilities and Equity		$	20,199.3			$	21,473.9

* Unaudited

See Notes to Consolidated Financial Statements.

5

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Constellation Energy Group, Inc. and Subsidiaries

Nine Months Ended September 30,	2006			2005
	(In millions)
Cash Flows From Operating Activities
Net income	$	531.5		$	427.9
Adjustments to reconcile to net cash provided by operating activities
(Gain) loss on sales of discontinued operations	(0.9		)	2.4
Depreciation, depletion, and amortization	417.1			494.9
Accretion of asset retirement obligations	50.3			46.2
Deferred income taxes	73.8			7.5
Investment tax credit adjustments	(5.2		)	(5.4		)
Deferred fuel costs	(164.7		)	12.1
Pension and postemployment benefits	35.5			4.0
Workforce reduction costs	23.9			3.9
Merger-related costs	12.4			—
Equity in earnings of affiliates less than dividends received	12.9			28.3
Proceeds from derivative power sales contracts classified as financing activities under SFAS No. 149	(38.9		)	(47.4		)
Changes in
Accounts receivable	(367.7		)	(719.8		)
Mark-to-market energy assets and liabilities	(241.5		)	(98.6		)
Risk management assets and liabilities	(2.0		)	(51.5		)
Materials, supplies, and fuel stocks	(267.9		)	(126.0		)
Other current assets	53.9			(186.1		)
Accounts payable and accrued liabilities	30.9			646.2
Other current liabilities	32.9			665.9
Other	(23.2		)	(5.2		)
Net cash provided by operating activities	163.1			1,099.3
Cash Flows From Investing Activities
Investments in property, plant and equipment	(668.0		)	(476.9		)
Acquisitions, net of cash acquired	(133.5		)	(238.1		)
Investments in nuclear decommissioning trust fund securities	(275.0		)	(258.7		)
Proceeds from nuclear decommissioning trust fund securities	266.2			245.5
Sales of investments and other assets	43.5			1.9
Contract and portfolio acquisitions	(2.3		)	(23.7		)
Proceeds from sale of discontinued operations	—			217.6
Issuances of loans receivable	(65.4		)	(82.8		)
Other investments	33.8			(28.5		)
Net cash used in investing activities	(800.7		)	(643.7		)
Cash Flows From Financing Activities
Net issuance of short-term borrowings	184.3			10.0
Proceeds from issuance of
Common stock	56.2			66.5
Long-term debt	122.0			—
Repayment of long-term debt	(285.8		)	(338.4		)
Common stock dividends paid	(195.7		)	(169.1		)
Proceeds from contract and portfolio acquisitions contracts	221.3			403.3
Proceeds from derivative power sales contracts classified as financing activities under SFAS No. 149	38.9			47.4
Other	4.1			(41.8		)
Net cash provided by (used in) financing activities	145.3			(22.1		)
Net (Decrease) Increase in Cash and Cash Equivalents	(492.3		)	433.5
Cash and Cash Equivalents at Beginning of Period	813.0			706.3
Cash and Cash Equivalents at End of Period	$	320.7		$	1,139.8	*

*Includes $4.8 million related to “Assets held for sale” at September 30, 2005

See Notes to Consolidated Financial Statements.

Certain prior-period amounts have been reclassified to conform with the current period’s presentation.

6

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Baltimore Gas and Electric Company and Subsidiaries

	Three Months Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
	(In millions)
Revenues
Electric revenues	$	649.9		$	626.8		$	1,652.6		$	1,583.4
Gas revenues	114.6			115.9			678.4			626.9
Total revenues	764.5			742.7			2,331.0			2,210.3
Expenses
Operating expenses
Electricity purchased for resale	391.1			362.5			933.8			849.0
Gas purchased for resale	66.4			72.1			448.6			422.5
Operations and maintenance	123.9			112.7			364.2			332.5
Merger-related costs	0.8			—			3.3			—
Depreciation and amortization	57.2			58.6			172.1			176.6
Taxes other than income taxes	42.1			41.9			126.4			126.7
Total expenses	681.5			647.8			2,048.4			1,907.3
Income from Operations	83.0			94.9			282.6			303.0
Other Income	3.9			1.2			4.9			4.7
Fixed Charges
Interest expense	24.8			23.9			73.3			71.4
Allowance for borrowed funds used during construction	(0.5		)	(0.6		)	(1.4		)	(1.6		)
Total fixed charges	24.3			23.3			71.9			69.8
Income Before Income Taxes	62.6			72.8			215.6			237.9
Income Taxes	23.7			27.1			83.3			91.0
Net Income	38.9			45.7			132.3			146.9
Preference Stock Dividends	3.3			3.3			9.9			9.9
Earnings Applicable to Common Stock	$	35.6		$	42.4		$	122.4		$	137.0

See Notes to Consolidated Financial Statements.

7

CONSOLIDATED BALANCE SHEETS

Baltimore Gas and Electric Company and Subsidiaries

	September 30,				December 31,
	2006*				2005
	(In millions)
Assets
Current Assets
Cash and cash equivalents		$	14.9			$	15.1
Accounts receivable (net of allowance for uncollectibles of $15.4 and $13.0, respectively)		310.7				480.5
Accounts receivable, affiliated companies		30.9				1.8
Fuel stocks		115.0				102.7
Materials and supplies		42.2				40.1
Prepaid taxes other than income taxes		28.0				45.7
Other		36.1				6.5
Total current assets		577.8				692.4
Investments and Other Assets
Regulatory assets (net)		283.4				154.3
Receivable, affiliated company		160.0				154.7
Other		121.5				144.0
Total investments and other assets		564.9				453.0
Utility Plant
Plant in service
Electric		4,000.8				3,891.1
Gas		1,136.0				1,116.7
Common		434.0				416.0
Total plant in service		5,570.8				5,423.8
Accumulated depreciation		(1,972.5		)		(1,923.8		)
Net plant in service		3,598.3				3,500.0
Construction work in progress		99.8				93.9
Plant held for future use		2.9				2.8
Net utility plant		3,701.0				3,596.7
Total Assets		$	4,843.7			$	4,742.1

* Unaudited

See Notes to Consolidated Financial Statements.

8

CONSOLIDATED BALANCE SHEETS

Baltimore Gas and Electric Company and Subsidiaries

	September 30,				December 31,
	2006*				2005
	(In millions)
Liabilities and Equity
Current Liabilities
Current portion of long-term debt		$	565.9			$	469.6
Accounts payable and accrued liabilities		164.8				169.7
Accounts payable and accrued liabilities, affiliated companies		134.1				152.8
Borrowing from cash pool, affiliated company		147.3				3.2
Customer deposits		70.4				65.1
Accrued taxes		19.2				35.5
Accrued expenses and other		86.0				79.6
Total current liabilities		1,187.7				975.5
Deferred Credits and Other Liabilities
Deferred income taxes		669.0				608.9
Postretirement and postemployment benefits		278.1				277.7
Deferred investment tax credits		13.9				15.1
Other		17.7				19.0
Total deferred credits and other liabilities		978.7				920.7
Long-term Debt
First refunding mortgage bonds of BGE		244.5				342.8
Other long-term debt of BGE		824.5				861.5
6.20% deferrable interest subordinated debentures due October 15, 2043 to wholly owned BGE Capital Trust II relating to trust preferred securities		257.7				257.7
Long-term debt of nonregulated business		25.0				25.0
Unamortized discount and premium		(1.8		)		(2.3		)
Current portion of long-term debt		(565.9		)		(469.6		)
Total long-term debt		784.0				1,015.1
Minority Interest		18.2				18.3
Preference Stock Not Subject to Mandatory Redemption		190.0				190.0
Common Shareholder’s Equity
Common stock		912.2				912.2
Retained earnings		772.2				709.6
Accumulated other comprehensive income		0.7				0.7
Total common shareholder’s equity		1,685.1				1,622.5
Commitments, Guarantees, and Contingencies (see Notes)
Total Liabilities and Equity		$	4,843.7			$	4,742.1

* Unaudited

See Notes to Consolidated Financial Statements.

9

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Baltimore Gas and Electric Company and Subsidiaries

Nine Months Ended September 30,	2006			2005
	(In millions)
Cash Flows From Operating Activities
Net income	$	132.3		$	146.9
Adjustments to reconcile to net cash provided by operating activities
Depreciation and amortization	180.1			187.5
Deferred income taxes	59.0			(6.4		)
Investment tax credit adjustments	(1.2		)	(1.3		)
Deferred fuel costs	(164.7		)	12.1
Pension and postemployment benefits	(2.5		)	(5.2		)
Merger-related costs	3.3			—
Allowance for equity funds used during construction	(2.6		)	(2.8		)
Changes in
Accounts receivable	169.8			22.1
Receivables, affiliated companies	(29.1		)	(33.0		)
Materials, supplies, and fuel stocks	(14.4		)	(22.9		)
Other current assets	(11.7		)	(20.9		)
Accounts payable and accrued liabilities	(8.3		)	(3.0		)
Accounts payable and accrued liabilities, affiliated companies	(18.7		)	(20.1		)
Other current liabilities	(3.7		)	9.5
Other	(12.0		)	(23.1		)
Net cash provided by operating activities	275.6			239.4
Cash Flows From Investing Activities
Utility construction expenditures (excluding equity portion of allowance for funds used during construction)	(225.2		)	(199.2		)
Change in cash pool at parent	144.1			10.8
Other	10.3			(14.5		)
Net cash used in investing activities	(70.8		)	(202.9		)
Cash Flows From Financing Activities
Distribution to parent	(59.8		)	—
Repayment of long-term debt	(135.3		)	(23.5		)
Preference stock dividends paid	(9.9		)	(9.9		)
Net cash used in financing activities	(205.0		)	(33.4		)
Net (Decrease) Increase in Cash and Cash Equivalents	(0.2		)	3.1
Cash and Cash Equivalents at Beginning of Period	15.1			8.2
Cash and Cash Equivalents at End of Period	$	14.9		$	11.3

See Notes to Consolidated Financial Statements.

10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Various factors can have a significant impact on our results for interim periods. This means that the results for this quarter are not necessarily indicative of future quarters or full year results given the seasonality of our business.

Our interim financial statements on the previous pages reflect all adjustments that management believes are necessary for the fair statement of the results of operations for the interim periods presented. These adjustments are of a normal recurring nature.

Basis of Presentation

This Quarterly Report on Form 10-Q is a combined report of Constellation Energy Group, Inc. (Constellation Energy) and Baltimore Gas and Electric Company (BGE). References in this report to “we” and “our” are to Constellation Energy and its subsidiaries, collectively. References in this report to the “regulated business(es)” are to BGE.

Subsequent Events

Termination of Merger Agreement with
FPL Group, Inc.

On October 24, 2006, Constellation Energy and FPL Group, Inc. (FPL Group) agreed to terminate the Agreement and Plan of Merger the parties had entered into on December 18, 2005.

Gas-Fired Plants

In October 2006, we announced an agreement to sell the following natural gas-fired plants owned by our merchant energy business for $1.635 billion:

Facility	Capacity (MW)	Unit Type	Location
High Desert	830	Combined Cycle	California
Rio Nogales	800	Combined Cycle	Texas
Holland	665	Combined Cycle	Illinois
University Park	300	Peaking	Illinois
Big Sandy	300	Peaking	West Virginia
Wolf Hills	250	Peaking	Virginia

We expect the transaction to close by the end of 2006 or the first quarter of 2007. We estimate that we will recognize a pre-tax gain of approximately $250 million and we expect to receive approximately $1.5 billion in cash after tax payments on the gain. We expect to apply the proceeds from the sale to reduce debt and invest in our business or repurchase equity.

In October 2006, we designated these plants as held for sale and we reclassified the assets associated with these gas-fired plants to “Assets held for sale” and the liabilities to “Liabilities associated with assets held for sale” in our Consolidated Balance Sheets, we ceased recording depreciation expense, and discontinued hedge accounting for these facilities. The assets and liabilities associated with these gas-fired plants will be removed from our Consolidated Balance Sheets at closing.

Variable Interest Entities

We have a significant interest in the following variable interest entities (VIE) for which we are not the primary beneficiary:

VIE	Nature of Involvement	Date of Involvement
Power projects and fuel supply entities	Equity investment and guarantees	Prior to 2003
Power contract monetization entities	Power sale agreements, loans, and guarantees	March 2005
Oil and gas fields	Equity investment	May 2006
Retail power supply	Power sale agreement	September 2006

We discuss the nature of our involvement with the power contract monetization VIEs in detail in Note 4 to our 2005 Annual Report on Form 10-K.

The following is summary information available as of September 30, 2006 about the VIEs in which we have a significant interest, but are not the primary beneficiary:

	Power Contract Monetization VIEs			All Other VIEs		Total
	(In millions)
Total assets		$	833.6	$	396.3	$	1,229.9
Total liabilities		652.3		167.6		819.9
Our ownership interest		—		54.5		54.5
Other ownership interests		181.3		174.2		355.5
Our maximum exposure to loss		68.9		102.7		171.6

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The maximum exposure to loss represents the loss that we would incur in the unlikely event that our interests in all of these entities were to become worthless and we were required to fund the full amount of all guarantees associated with these entities. Our maximum exposure to loss as of September 30, 2006 consists of the following:

¨outstanding receivables, loans, and letters of credit totaling $104.5 million,

¨the carrying amount of our investment totaling $54.4 million, and

¨debt and performance guarantees totaling $12.7 million.

We assess the risk of a loss equal to our maximum exposure to be remote.

Merger-Related Costs

We incurred costs during the quarter ended September 30, 2006 related to the proposed merger with FPL Group. The merger was terminated on October 24, 2006. These costs totaled $3.4 million pre-tax for the quarter ended September 30, 2006 and $12.4 million pre-tax for the nine months ended September 30, 2006. Through September 30, 2006, we have recognized a cumulative total of $29.4 million pre-tax of merger costs. Currently, we estimate our total pre-tax merger-related costs will be approximately $35 million.

Workforce Reduction Costs

In March 2006, we approved a restructuring of the workforce at our Ginna nuclear facility. In connection with this restructuring, 32 employees were terminated. During the quarter ended March 31, 2006, we recognized costs of $2.2 million pre-tax related to recording a liability for severance and other benefits under our existing benefit programs.

The following table summarizes the status of the involuntary severance liability for Ginna at September 30, 2006:

	(In millions)
Initial severance liability balance		$	2.2
Amounts recorded as pension and postretirement liabilities		(0.3		)
Net cash severance liability		1.9
Cash severance payments		(1.0		)
Other		—
Severance liability balance for Ginna at September 30, 2006		$	0.9

In July 2006, we announced a planned restructuring of the workforce at our Nine Mile Point nuclear facility. We recognized costs during the quarter ended September 30, 2006 of $15.1 million pre-tax related to the elimination of 126 positions associated with this restructuring. We also initiated a restructuring of the workforce at our Calvert Cliffs nuclear facility during the third quarter of 2006 and we recognized costs of $3.1 million pre-tax related to the elimination of 32 positions associated with this restructuring.

In addition, as a result of the Nine Mile Point restructuring, we incurred a pre-tax settlement charge of $3.5 million in accordance with Statement of Financial Accounting Standards (SFAS) No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits. We discuss the settlement charges that we recorded during 2006 in the Pension and Postretirement Benefits section on page 16.

Discontinued Operations

In the fourth quarter of 2005, we completed the sale of Constellation Power International Investments, Ltd. We recognized an after-tax gain of $0.9 million for the nine months ended September 30, 2006 due to the resolution of an outstanding contingency related to the sale. We discuss the details of the outstanding contingency in Note 2 of our 2005 Annual Report on Form 10-K.

Earnings Per Share

Basic earnings per common share (EPS) is computed by dividing earnings applicable to common stock by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

Our dilutive common stock equivalent shares consist of stock options and other stock-based compensation awards. The following table presents stock options that were not dilutive and were excluded from the computation of diluted EPS in each period, as well as the dilutive common stock equivalent shares:

	Quarter Ended September 30,				Nine Months Ended September 30,
	2006		2005		2006		2005
	(In millions)
Non-dilutive stock options		2.0		—		2.0		—
Dilutive common stock equivalent shares		1.9		2.4		1.8		2.1

Stock-Based Compensation

Under our long-term incentive plans, we granted stock options, performance-based units, performance and service-based restricted stock, and equity to officers, key employees, and members of the Board of Directors.

We adopted the provisions of SFAS No. 123 Revised (SFAS No. 123R), Share-Based Payment, on October 1, 2005, as described in more detail in Note 1 of our 2005 Annual Report on Form 10-K. Under SFAS No. 123R, we

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recognize compensation cost ratably or in tranches (depending if the award has cliff or graded vesting) over the period during which an employee is required to provide service in exchange for the award, which is typically a one to five-year period. We use a forfeiture assumption to estimate the number of awards that are expected to vest during the service period, and we ultimately true-up the estimated expense to the actual expense associated with vested awards. We estimate the fair value of stock option awards on the date of grant using the Black-Scholes option-pricing model, and we re-measure the fair value of liability awards each reporting period.

The following table illustrates the pro-forma effect on net income and earnings per share for all outstanding stock options and stock awards during the quarter and nine months ended September 30, 2005, when the fair value provisions of SFAS No. 123R were not in effect. We do not capitalize any portion of our stock-based compensation.

	Quarter Ended September 30, 2005				Nine Months Ended September 30, 2005
	(In millions, except per share amounts)
Net income, as reported		$	185.5			$	427.9
Add: Stock-based compensation expense determined under intrinsic value method and included in reported net income, net of related tax effects		7.8				17.8
Deduct: Stock-based compensation expense determined under fair value based method for all awards, net of related tax effects		(10.1		)		(24.5		)
Pro-forma net income		$	183.2			$	421.2
Earnings per share:
Basic—as reported		$	1.04			$	2.41
Basic—pro forma		$	1.03			$	2.37
Diluted—as reported		$	1.03			$	2.38
Diluted—pro forma		$	1.01			$	2.34

Accretion of Asset Retirement Obligations

SFAS No. 143, Accounting for Asset Retirement Obligations, provides the accounting requirements for recognizing an estimated liability for legal obligations associated with the retirement of tangible long-lived assets. Financial Accounting Standards Board (FASB) Interpretation (FIN) 47, Accounting for Conditional Asset Retirement Obligations—an interpretation of FASB Statement No. 143, clarifies that obligations that are conditional upon a future event are subject to the provisions of SFAS No. 143.

We measure asset retirement obligations at fair value when incurred and capitalize a corresponding amount as part of the book value of the related long-lived assets. The increase in the capitalized cost is included in determining depreciation expense over the estimated useful life of these assets. Since the fair value of the asset retirement obligations is determined using a present value approach, accretion of the liability due to the passage of time is recognized each period to “Accretion of asset retirement obligations” in our Consolidated Statements of Income until the settlement of the liability. We record a gain or loss when the liability is settled after retirement.

The change in our “Asset retirement obligations” liability during 2006 was as follows:

	(In millions)
Liability at January 1, 2006		$	908.0
Accretion expense		50.3
Liabilities incurred		0.4
Liabilities settled		(0.1		)
Revisions to expected future cash flows		(2.4		)
Other		—
Liability at September 30, 2006		$	956.2

Acquisitions

Gas Properties

In the first quarter of 2006, we acquired working interests in gas and oil producing properties for approximately $100 million in cash. We purchased leases, producing wells, and related equipment. We have included the results of operations in our merchant energy business segment since the date of acquisition.

Cogenex

In April 2005, we acquired Cogenex Corporation from Alliant Energy Corporation. We include Cogenex with our other nonregulated businesses and have included their results in our consolidated financial statements since the date of acquisition. Cogenex is a North American energy services firm providing consulting and technology solutions to industrial, institutional, and governmental customers. We acquired 100% ownership of Cogenex for $34.9 million. We acquired cash of $14.4 million as part of the purchase.

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Our final purchase price allocation for the net assets acquired is as follows:

At April 1, 2005
	(In millions)
Cash		$	14.4
Other Current Assets		12.4
Total Current Assets		26.8
Net Property, Plant and Equipment		—
Other Assets		34.9
Total Assets Acquired		61.7
Current Liabilities		(8.0		)
Deferred Credits and Other Liabilities		(18.8		)
Net Assets Acquired		$	34.9

We believe that the pro-forma impact of the Cogenex acquisition would not have been material to our results of operations in 2005.

Information by Operating Segment

Our reportable operating segments are—Merchant Energy, Regulated Electric, and Regulated Gas:

¨Our merchant energy business is nonregulated and includes:

—full requirements load-serving sales of energy, capacity, and ancillary services to utilities and commercial, industrial, and governmental customers,

—structured transactions and risk management services for various customers (including hedging of output from generating facilities and fuel costs),

—deployment of risk capital through portfolio management and trading activities,

—gas retail energy products and services to commercial, industrial, and governmental customers,

—fossil, nuclear, and interests in hydroelectric generating facilities and qualifying facilities, fuel processing facilities, and power projects in the United States,

—products and services to upstream (exploration and production) and downstream (transportation and storage) wholesale natural gas customers,

—coal sourcing services for the variable or fixed supply needs of North American and international power generators, and

—generation operations and maintenance services.¨Our regulated electric business purchases, transmits, distributes, and sells electricity in Central Maryland.

¨Our regulated gas business purchases, transports, and sells natural gas in Central Maryland.

Our remaining nonregulated businesses:

¨design, construct, and operate heating, cooling, and cogeneration facilities for commercial, industrial, and municipal customers throughout North America, and

¨provide home improvements, service electric and gas appliances, service heating, air conditioning, plumbing, electrical, and indoor air quality systems, and provide natural gas marketing to residential customers in Central Maryland.

In addition, we own several investments that we do not consider to be core operations. These include financial investments and real estate projects.

Our Merchant Energy, Regulated Electric, and Regulated Gas reportable segments are strategic businesses based principally upon regulations, products, and services that require different technology and marketing strategies. We evaluate the performance of these segments based on net income. We account for intersegment revenues using market prices. A summary of information by operating segment is shown on the next page.

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	Reportable Segments
	Merchant Energy Business			Regulated Electric Business			Regulated Gas Business				Other Nonregulated Businesses			Eliminations				Consolidated
	(In millions)
For the three months ended September 30,
2006
Unaffiliated revenues	$	4,626.6			$	649.9		$	111.7			$	45.5		$	—			$	5,433.7
Intersegment revenues	422.4				—			2.9				—			(425.3		)		—
Total revenues	5,049.0				649.9			114.6				45.5			(425.3		)		5,433.7
Net income (loss)	284.8				42.8			(7.3		)		4.1			—				324.4
2005
Unaffiliated revenues	$	4,134.2			$	626.8		$	112.2			$	49.2		$	—			$	4,922.4
Intersegment revenues	263.0				—			3.7				0.1			(266.8		)		—
Total revenues	4,397.2				626.8			115.9				49.3			(266.8		)		4,922.4
(Loss) income from discontinued operations	(0.2		)		—			—				1.6			—				1.4
Net income (loss)	141.5				51.1			(8.6		)		1.5			—				185.5
For the nine months ended September 30,
2006
Unaffiliated revenues	$	12,259.5			$	1,652.6		$	671.8			$	169.2		$	—			$	14,753.1
Intersegment revenues	862.1				—			6.6				0.1			(868.8		)		—
Total revenues	13,121.6				1,652.6			678.4				169.3			(868.8		)		14,753.1
Income from discontinued operations	—				—			—				0.9			—				0.9
Net income	400.1				96.3			26.3				8.8			—				531.5
2005
Unaffiliated revenues	$	9,627.2			$	1,583.4		$	618.5			$	143.8		$	—			$	11,972.9
Intersegment revenues	685.2				—			8.4				0.6			(694.2		)		—
Total revenues	10,312.4				1,583.4			626.9				144.4			(694.2		)		11,972.9
Income from discontinued operations	2.9				—			—				4.5			—				7.4
Net income	285.8				120.0			17.3				4.8			—				427.9

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Regulatory Assets (net)—Rate Stabilization Deferral

During the second quarter of 2006, the Maryland legislature approved Senate Bill 1, which imposes a rate stabilization measure that caps rate increases by BGE for residential customers at 15% from July 1, 2006 to May 31, 2007. As a result, BGE is recording a regulatory asset on its Consolidated Balance Sheets equal to the difference between the costs to purchase power and the revenues collected from customers, as well as related carrying charges from July 1, 2006 to May 31, 2007. During the third quarter of 2006, BGE deferred $176.0 million of purchased power costs and carrying charges as a regulatory asset related to the rate stabilization plan. BGE will amortize the regulatory asset to earnings over a period not to exceed ten years once collection from customers begins.

Pension and Postretirement Benefits

We show the components of net periodic pension benefit cost in the following table:

	Quarter Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
	(In millions)
Components of net periodic pension benefit cost
Service cost	$	11.9		$	11.0		$	36.5			$	33.5
Interest cost	22.0			20.7			66.5				62.6
Expected return on plan assets	(23.6		)	(25.3		)	(72.1		)		(74.8		)
Amortization of unrecognized prior service cost	1.4			1.4			4.2				4.3
Recognized net actuarial loss	9.2			6.5			28.0				18.6
Amount capitalized as construction cost	(3.1		)	(1.7		)	(9.8		)		(5.4		)
Net periodic pension benefit cost (1)	$	17.8		$	12.6		$	53.3			$	38.8

(1)The amounts shown above do not reflect a settlement charge of $7.6 million recorded in the third quarter of 2006 related to one of our qualified pension plans and $3.9 million in the third quarter of 2005. Net periodic pension benefit cost excludes a reduction in termination benefits of $0.4 million in 2005. BGE’s portion of our net periodic pension benefit cost was $8.9 million for the quarter ended September 30, 2006 and $5.6 million for the quarter ended September 30, 2005. BGE’s portion of our net periodic pension benefit cost was $27.1 million for the nine months ended September 30, 2006 and $16.1 million for the nine months ended September 30, 2005.

In the third quarter of 2006, we recorded a pre-tax settlement charge of $7.6 million in our Consolidated Statements of Income for one of our qualified plans under SFAS No. 88, of which $3.5 million related to our Nine Mile Point workforce restructuring. We discuss our workforce restructurings in the Workforce Reduction Costs section on page 12. This charge reflects the recognition of the portion of deferred actuarial gains and losses associated with employees who elected to receive their pension benefit in the form of a lump-sum payment. In accordance with SFAS No. 88, a settlement charge must be recognized at the point in time when lump-sum payments exceed annual pension plan service and interest cost, which occurred in July 2006. We expect to record approximately $7 million pre-tax of additional settlement charges during the remainder of 2006 as employees continue to receive lump-sum payments from this plan.

We show the components of net periodic postretirement benefit cost in the following table:

	Quarter Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
	(In millions)
Components of net periodic postretirement benefit cost
Service cost	$	1.9		$	2.0		$	6.1		$	5.7
Interest cost	6.0			6.0			18.8			17.8
Amortization of transition obligation	0.6			0.6			1.7			1.6
Amortization of unrecognized prior service cost	(0.9		)	(0.9		)	(2.8		)	(2.6		)
Recognized net actuarial loss	1.6			1.7			5.2			4.8
Amount capitalized as construction cost	(2.0		)	(2.0		)	(6.3		)	(5.9		)
Net periodic postretirement benefit cost (1)	$	7.2		$	7.4		$	22.7		$	21.4

(1)BGE’s portion of our net periodic postretirement benefit cost was $6.0 million for the quarter ended September 30, 2006 and $6.8 million for the quarter ended September 30, 2005. BGE’s portion of our net periodic postretirement benefit costs was $18.7 million for the nine months ended September 30, 2006 and $18.8 million for the nine months ended September 30, 2005.

Our non-qualified pension plans and our postretirement benefit programs are not funded; however, we have trust assets securing certain executive pension benefits. We estimate that we will incur approximately $3 million in pension benefit payments for our non-qualified pension plans and approximately $26 million for retiree health and life insurance benefit payments during 2006. We contributed $52 million to our qualified pension plans in March 2006, even though there was no IRS required minimum contribution in 2006.

16

Financing Activities

At September 30, 2006, we had $185.0 million of commercial paper outstanding, and at November 3, 2006 we had no commercial paper outstanding.

Constellation Energy had committed bank lines of credit under four credit facilities of $3.6 billion at September 30, 2006. We discuss these facilities in more detail in Note 8 of our 2005 Annual Report on Form 10-K. These facilities can issue letters of credit up to $3.6 billion. Letters of credit issued under all of our facilities totaled $1.8 billion at September 30, 2006.

In October 2006, we activated a $1.0 billion 364-day credit facility expiring in October 2007. We can borrow up to $1.0 billion directly from the banks or use the facility to issue letters of credit up to $500.0 million.

In May 2006, we issued $122.0 million of tax-exempt variable rate notes to refinance tax-exempt pollution control loans. We used $75.0 million of the net proceeds to refinance a 6.00% pollution control revenue refunding loan in June 2006 and in July 2006 we used the remaining $47.0 million of proceeds to refinance a 5.55% pollution control revenue refunding loan. As discussed in Note 9 of our 2005 Annual Report on Form 10-K, at December 31, 2005, BGE remained contingently liable for an outstanding balance of $269.8 million of tax-exempt debt that was transferred to our merchant energy business. As a result of refinancing $122.0 million of this tax-exempt debt, BGE is only contingently liable for $147.8 million.

In October 2006, BGE issued $300.0 million of 5.90% Senior Unsecured Notes, due October 1, 2016 and $400.0 million of 6.35% Senior Unsecured Notes, due October 1, 2036. We expect to use the proceeds from these issuances for general corporate purposes, including refinancing the following long-term debt of BGE:

¨$300.0 million of 5.25% Notes, due December 15, 2006,

¨$122.0 million of 7.5% First Refunding Mortgage Bonds, due January 15, 2007, and

¨$10.0 million of 6.70% Medium-term Notes, Series D, due December 1, 2006.

Additionally, under our employee benefit plans and shareholder investment plans we issued $56.2 million of common stock during the nine months ended September 30, 2006.

Income Taxes

Total income taxes are different from the amount that would be computed by applying the statutory Federal income tax rate of 35% to book income before income taxes as follows:

	Quarter Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006				2005
	(In millions)
Income from continuing operations before income taxes (excluding BGE preference stock dividends)	$	489.0		$	259.5			$	798.4			$	569.1
Statutory federal income tax rate	35		%	35		%		35		%		35		%
Income taxes computed at statutory federal rate	171.1			90.8				279.4				199.2
(Decreases) increases in income taxes due to:
Synthetic fuel tax credits	(15.2		)	(28.1		)		(91.2		)		(80.1		)
Estimated tax credit phase-out	6.4			—				48.0				—
Phase-out true-up from prior periods	(19.0		)	—				(11.5		)		—
State income taxes, net of federal tax benefit	19.0			10.8				33.1				24.0
Other	(1.0		)	(1.4		)		0.1				(4.4		)
Total income taxes	$	161.3		$	72.1			$	257.9			$	138.7
Effective tax rate	33.0		%	27.8		%		32.3		%		24.4		%

Synthetic fuel tax credits are net of our expectation of a 42% phase-out in 2006 based on forward market prices and volatilities at September 30, 2006. We recorded the effect of this phase-out estimate as a reduction in tax credits of $6.4 million during the quarter ended September 30, 2006, and we also recorded a $19.0 million increase in tax credits to reflect the effect of the change in estimate of the tax credit phase-out of 68% associated with the first six months of 2006 production to our estimate at September 30, 2006 of 42%.

Based on forward market prices and volatilities as of October 26, 2006, we estimate a 36% tax credit phase-out for the year 2006. The expected amount of synthetic fuel tax credits phased-out may change materially from period to period as a result of continued changes in oil prices.

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Commitments, Guarantees, and Contingencies

We have made substantial commitments in connection with our merchant energy, regulated electric and gas, and other nonregulated businesses. These commitments relate to:

¨purchase of electric generating capacity and energy,

¨procurement and delivery of fuels,

¨the capacity and transmission and transportation rights for the physical delivery of energy to meet our obligations to our customers, and

¨long-term service agreements, capital for construction programs, and other.

Our merchant energy business enters into various long-term contracts for the procurement and delivery of fuels to supply our generating plant requirements. In most cases, our contracts contain provisions for price escalations, minimum purchase levels, and other financial commitments. These contracts expire in various years between 2006 and 2020. In addition, our merchant energy business enters into long-term contracts for the capacity and transmission rights for the physical delivery of energy to meet our obligations to our customers. These contracts expire in various years between 2006 and 2019.

Our merchant energy business also has committed to long-term service agreements and other purchase commitments for our plants.

Our regulated electric business enters into various long-term contracts for the procurement of electricity. These contracts expire between 2007 and 2009. Our regulated gas business has gas supply, transportation, and storage contracts that expire between 2006 and 2028. As discussed in Note 1 of our 2005 Annual Report on Form 10-K, the costs under these contracts are fully recoverable by our regulated businesses.

Our other nonregulated businesses have committed to gas purchases, as well as to contribute additional capital for construction programs and joint ventures in which they have an interest.

We have also committed to long-term service agreements and other obligations related to our information technology systems.

At September 30, 2006, the total amount of commitments was $7,686.6 million. These commitments are primarily related to our merchant energy business.

Long-Term Power Sales Contracts

We enter into long-term power sales contracts in connection with our load-serving activities. We also enter into long-term power sales contracts associated with certain of our power plants. Our load-serving power sales contracts extend for terms through 2017 and provide for the sale of energy to electricity distribution utilities and certain retail customers. Our power sales contracts associated with our power plants extend for terms into 2014 and provide for the sale of all or a portion of the actual output of certain of our power plants. All long-term contracts were executed at pricing that approximated market rates, including profit margin, at the time of execution.

Guarantees

The terms of our guarantees are as follows:

	Expiration
	2006		2007- 2008		2009- 2010		Thereafter			Total
	(In millions)
Competitive supply	$	3,873.6	$	3,254.5	$	342.4		$	2,263.9	$	9,734.4
Other	0.6		15.2		1.4			1,289.8		1,307.0
Total	$	3,874.2	$	3,269.7	$	343.8		$	3,553.7	$	11,041.4

At September 30, 2006, we had a total of $11,041.4 million in guarantees outstanding related to loans, credit facilities, and contractual performance of certain of our subsidiaries as described below. These guarantees do not represent our incremental obligations, and we do not expect to fund the full amount under these guarantees.

¨Constellation Energy guaranteed $9,734.4 million on behalf of our subsidiaries for competitive supply activities. These guarantees are put into place in order to allow our subsidiaries the flexibility needed to conduct business with counterparties without having to post other forms of collateral. While the face amount of these guarantees is $9,734.4 million, our calculated fair value of obligations covered by these guarantees was $3,114.9 million at September 30, 2006. If the parent company was required to fund these subsidiary obligations, the total amount based on September 30, 2006 market prices would be $3,114.9 million. The recorded fair value of obligations in our Consolidated Balance Sheets for guarantees was $1,234.9 million at September 30, 2006.

¨Constellation Energy guaranteed $945.0 million primarily on behalf of our nuclear generating facilities mostly due to nuclear insurance and for credit support to ensure these plants have funds to meet expenses and obligations to safely operate and maintain the plants.

¨Constellation Energy guaranteed $62.6 million on behalf of our other nonregulated businesses primarily for loans and performance bonds of which $25.0 million was recorded in our Consolidated Balance Sheets at September 30, 2006.

¨Our merchant energy business guaranteed $29.2 million for loans and other performance guarantees related to certain power projects in which we have an investment.

18

¨Our other nonregulated businesses guaranteed $6.9 million for performance bonds.

¨BGE guaranteed two-thirds of certain debt of Safe Harbor Water Power Corporation, an unconsolidated investment. At September 30, 2006, Safe Harbor Water Power Corporation had outstanding debt of $20.0 million. The maximum amount of BGE’s guarantee is $13.3 million.

¨BGE guaranteed the Trust Preferred Securities of $250.0 million of BGE Capital Trust II.

The total fair value of the obligations for our guarantees recorded in our Consolidated Balance Sheets at September 30, 2006 was $1.3 billion and not the $11.0 billion of total guarantees. We assess the risk of loss from these guarantees to be minimal.

Environmental Matters

Solid and Hazardous Waste

The Environmental Protection Agency (EPA) and several state agencies have notified us that we are considered a potentially responsible party with respect to the clean-up of certain environmentally contaminated sites. We cannot estimate the final clean-up costs for all of these sites, but the current estimated costs for, and current status of, each site is described in more detail below.

Metal Bank

In 1997, the EPA, under the Comprehensive Environmental Response, Compensation and Liability Act (“Superfund”), issued a Record of Decision (ROD) for the proposed clean-up at the Metal Bank of America site, a metal reclaimer in Philadelphia. We had previously recorded a liability in our Consolidated Balance Sheets for BGE’s 15.47% share of probable clean-up costs. The EPA and potentially responsible parties, including BGE, filed cost recovery claims against Metal Bank of America for an equitable share of expected site remediation costs. In March 2006, all claims were settled. Under the terms of the settlement, the potentially responsible parties will remediate the site and the costs of the clean-up will be paid from funds held in trust for that purpose. BGE is not required to contribute to the trust and we do not believe the potentially responsible parties will incur clean-up costs in excess of the amount held by the trust; therefore, in March 2006, we reversed the previously recorded liability.

68th Street Dump

In 1999, the EPA proposed to add the 68th Street Dump in Baltimore, Maryland to the Superfund National Priorities List, which is its list of sites targeted for clean-up and enforcement, and sent a general notice letter to BGE and 19 other parties identifying them as potentially liable parties at the site. In March 2004, we and other potentially responsible parties formed the 68th Street Coalition and entered into consent order negotiations with the EPA to investigate clean-up options for the site under the Superfund Alternative Sites Program. In May 2006, a settlement among the EPA and 19 of the potentially responsible parties, including BGE, with respect to investigation of the site became effective. The settlement requires the potentially responsible parties, over the course of several years, to identify contamination at the site and recommend clean-up options. BGE is fully indemnified by a wholly-owned affiliate of Constellation Energy for costs related to this settlement, as well as any clean-up costs. The clean-up costs will not be known until the investigation is complete. However, those costs could have a material effect on our financial results.

Kane and Lombard

The EPA issued its ROD for the Kane and Lombard Drum site located in Baltimore, Maryland on September 30, 2003, which specified the clean-up plan for the site, consisting of enhanced reductive dechlorination, a soil management plan, and institutional controls. An EPA order requiring cleanup of the site by 18 parties, including Constellation Energy, is expected to become effective by the end of 2006. The EPA estimates that total clean-up costs will be approximately $7 million. Our share of site-related costs will be 11.1% of the total. We recorded a liability in our Consolidated Balance Sheets for our share of the clean-up costs that we believe is probable.

Spring Gardens

In December 1996, BGE signed a consent order with the Maryland Department of the Environment that requires it to implement remedial action plans for contamination at and around the Spring Gardens site, located in Baltimore, Maryland. The Spring Gardens site was once used to manufacture gas from coal and oil. Based on the remedial action plans, BGE estimates its probable clean-up costs will total $47 million. BGE has recorded these costs as a liability in its Consolidated Balance Sheets and has deferred these costs, net of accumulated amortization and amounts it recovered from insurance companies, as a regulatory asset. Based on the results of studies at this site, it is reasonably possible that additional costs could exceed the amount BGE has recognized by approximately $14 million. Through September 30, 2006, BGE has spent approximately $40 million for remediation at this site.

BGE also has investigated other small sites where gas was manufactured in the past. We do not expect the clean-up costs of the remaining smaller sites to have a material effect on our financial results.

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Air Quality

In late July 2005, we received two Notices of Violation (NOVs) from the Placer County Air Pollution Control District, Placer County California (District) alleging that the Rio Bravo Rocklin facility located in Lincoln, California had violated certain District air emission regulations. We have a combined 50% ownership interest in the partnership which owns the Rio Bravo Rocklin facility. The NOVs allege a total of 38 violations between January 2003 and March 2005 of either the facility’s air permit or federal, state, and county air emission standards related to nitrogen oxide, carbon monoxide, and particulate emissions, as well as violations of certain monitoring and reporting requirements during that time period. The maximum civil penalties for the alleged violations range from $10,000 to $40,000 per violation. Management of the Rio Bravo Rocklin facility is currently discussing the allegations in the NOVs with District representatives; and therefore, it is not possible to determine the actual liability, if any, of the partnership that owns the Rio Bravo Rocklin facility.

Litigation

In the normal course of business, we are involved in various legal proceedings. We discuss the significant matters below.

Western Power Markets

City of Tacoma v. AEP, et al.,—The City of Tacoma, on June 7, 2004, in the U.S. District Court, Western District of Washington, filed a complaint against over 60 companies, including Constellation Energy Commodities Group, Inc. (CCG). The complaint alleges that the defendants engaged in manipulation of electricity markets resulting in prices for power in the western power markets that were substantially above what market prices would have been in the absence of the alleged unlawful contracts, combinations and conspiracy in violation of Section 1 of the Sherman Act. The complaint further alleges that the total amount of damages is unknown, but is estimated to exceed $175 million. On February 11, 2005, the Court granted the defendants’ motion to dismiss the action based on the Court’s lack of jurisdiction over the claims in question. The plaintiff has appealed the dismissal of the action to the Ninth Circuit Court of Appeals. We believe that we have meritorious defenses to this action and intend to defend against it vigorously. However, we cannot predict the timing, or outcome, of this case, or its possible effect on our financial results.

Mercury

Beginning in September 2002, BGE, Constellation Energy, and several other defendants have been involved in numerous actions filed in the Circuit Court for Baltimore City, Maryland alleging mercury poisoning from several sources, including coal plants formerly owned by BGE. The plants are now owned by a subsidiary of Constellation Energy. In addition to BGE and Constellation Energy, approximately 11 other defendants, consisting of pharmaceutical companies, manufacturers of vaccines, and manufacturers of Thimerosal have been sued. Approximately 70 cases, involving claims related to approximately 132 children, have been filed to date, with each claimant seeking $20 million in compensatory damages, plus punitive damages, from us.

In rulings applicable to all but six of the cases, involving claims related to approximately 50 children, the Circuit Court for Baltimore City dismissed with prejudice all claims against BGE and Constellation Energy. Plaintiffs may attempt to pursue appeals of the rulings in favor of BGE and Constellation Energy once the cases are finally concluded as to all defendants. We believe that we have meritorious defenses and intend to defend the actions vigorously. However, we cannot predict the timing, or outcome, of these cases, or their possible effect on our, or BGE’s, financial results.

Asbestos

Since 1993, BGE has been involved in several actions concerning asbestos. The actions are based upon the theory of “premises liability,” alleging that BGE knew of and exposed individuals to an asbestos hazard. BGE and numerous other parties are defendants in these cases.

Approximately 522 individuals who were never employees of BGE have pending claims each seeking several million dollars in compensatory and punitive damages. Cross-claims and third-party claims brought by other defendants may also be filed against BGE in these actions. To date, most asbestos claims against us have been dismissed or resolved without any payment and a small minority have been resolved for amounts that were not material to our financial results. The remaining claims are currently pending in state courts in Maryland and Pennsylvania.

BGE does not know the specific facts necessary to estimate its potential liability for these claims. The specific facts BGE does not know include:

¨the identity of BGE’s facilities at which the plaintiffs allegedly worked as contractors,

¨the names of the plaintiffs’ employers,

¨the dates on which and the places where the exposure allegedly occurred, and

¨the facts and circumstances relating to the alleged exposure.

Until the relevant facts are determined, we are unable to estimate what our, or BGE’s, liability might be. Although insurance and hold harmless agreements from contractors who employed the plaintiffs may cover a portion of any awards in the actions, the potential effect on our, or BGE’s, financial results could be material.

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Revenue Sufficiency Guarantee Costs

In April 2006, the Federal Energy Regulatory Commission (FERC) issued an order requiring the Midwest Independent System Operator (MISO) to retroactively re-allocate revenue sufficiency guarantee costs (RSGs) for the period April 2005 to present based on the FERC’s finding that MISO violated its tariff and incorrectly allocated RSGs among market participants. The re-allocation of RSGs would result in some participants recognizing additional expense and others receiving refunds.

In May 2006, the MISO filed a motion with FERC seeking a stay of the FERC order. The motion was granted by FERC delaying the implementation of the original order until after the issuance of an order on rehearing. In May 2006, we and other market participants filed requests for rehearing with FERC.

In October 2006, FERC issued an order on rehearing that reversed the original retroactive re-allocation of RSGs. Based on this order we estimate the impact of the RSG re-allocation, if any, to be immaterial to our financial results. However, the order may be appealed and we cannot predict the ultimate timing or outcome of any appeal.

Insurance

We discuss our nuclear and non-nuclear insurance programs in Note 12 of our 2005 Annual Report on Form 10-K.

SFAS No. 133 Hedging Activities

We are exposed to market risk, including changes in interest rates and the impact of market fluctuations in the price and transportation costs of electricity, natural gas, and other commodities. We discuss our market risk in more detail in our 2005 Annual Report on Form 10-K.

Interest Rates

We use interest rate swaps to manage our interest rate exposures associated with new debt issuances and to optimize the mix of fixed and floating-rate debt. The swaps used to manage our exposure prior to the issuance of new debt are designated as cash-flow hedges under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, with the effective portion of gains and losses, net of associated deferred income tax effects, recorded in “Accumulated other comprehensive income” in our Consolidated Balance Sheets, in anticipation of planned financing transactions. We reclassify gains and losses on the hedges from “Accumulated other comprehensive income” into “Interest expense” in our Consolidated Statements of Income during the periods in which the interest payments being hedged occur.

The swaps used to optimize the mix of fixed and floating-rate debt are designated as fair value hedges under SFAS No. 133. We record any gains or losses on swaps that qualify for fair value hedge accounting treatment, as well as changes in the fair value of the debt being hedged, in “Interest expense,” and we record any changes in fair value of the swaps and the debt in “Risk management assets and liabilities” and “Long-term debt” in our Consolidated Balance Sheets. In addition, we record the difference between interest on hedged fixed-rate debt and floating-rate swaps in “Interest expense” in the periods that the swaps settle.

“Accumulated other comprehensive income” includes net unrealized pre-tax gains on interest rate cash-flow hedges terminated upon debt issuance totaling $13.2 million at September 30, 2006 and $15.4 million at December 31, 2005. We expect to reclassify $1.3 million of pre-tax net gains on these cash-flow hedges from “Accumulated other comprehensive income” into “Interest expense” during the next twelve months.

During 2004, to optimize the mix of fixed and floating-rate debt, we entered into interest rate swaps qualifying as fair value hedges relating to $450.0 million of our fixed-rate debt maturing in 2012 and 2015, and converted this notional amount of debt to floating-rate. The fair value of these hedges was an unrealized pre-tax loss of $0.4 million at September 30, 2006 and an unrealized pre-tax loss of $0.9 million at December 31, 2005 and was recorded as an increase in our “Risk management liabilities” and a decrease in our “Long-term debt.” We have not recognized any hedge ineffectiveness on these interest rate swaps.

Commodity Prices

At September 30, 2006 our merchant energy business had designated certain purchase and sale contracts as cash-flow hedges of forecasted transactions for the years 2006 through 2015 under SFAS No. 133.

Under the provisions of SFAS No. 133, we record gains and losses on energy derivative contracts designated as cash-flow hedges of forecasted transactions in “Accumulated other comprehensive income” in our Consolidated Balance Sheets prior to the settlement of the anticipated hedged physical transaction. We reclassify these gains or losses into earnings upon settlement of the underlying hedged transaction. We record derivatives used for hedging activities from our merchant energy business in “Risk management assets and liabilities” in our Consolidated Balance Sheets.

Our merchant energy business has net unrealized pre-tax losses of $2,143.7 million at September 30, 2006 and $517.1 million at December 31, 2005 on these hedges recorded in “Accumulated other comprehensive income.” We expect to reclassify $1,262.5 million of net pre-tax losses on cash-flow hedges from “Accumulated other comprehensive income” into earnings during the next twelve months based on the market prices at September 30, 2006. However, the actual amount reclassified into earnings could vary from the amounts recorded at September 30, 2006 due to future changes in market prices.

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We recognized into earnings a pre-tax loss of $1.9 million for the quarter ended September 30, 2006 and a pre-tax loss of $4.8 million for the quarter ended September 30, 2005 related to the ineffective portion of our hedges.

We recognized into earnings a pre-tax gain of $3.7 million for the nine months ended September 30, 2006 and a pre-tax loss of $3.6 million for the nine months ended September 30, 2005 related to the ineffective portion of our hedges. In addition, during the nine months ended September 30, 2006, we de-designated contracts previously designated as cash-flow hedges for which the forecasted transaction originally hedged is probable of not occurring, and as a result we recognized a pre-tax loss of $10.5 million.

Our merchant energy business also enters into natural gas storage contracts under which the gas in storage qualifies for fair value hedge accounting treatment under SFAS No. 133. We recognized a $6.3 million pre-tax net gain for the quarter ended September 30, 2006 and a pre-tax net loss of $3.6 million for the quarter ended September 30, 2005 due to hedge ineffectiveness. We recognized a $7.9 million pre-tax net gain for the nine months ended September 30, 2006 and a pre-tax net loss of $3.1 million for the nine months ended September 30, 2005 due to hedge ineffectiveness. We record changes in fair value of these hedges as a component of “Fuel and purchased energy expenses” in our Consolidated Statements of Income.

Accounting Standards Issued

SFAS No. 157

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures for fair value measurements. SFAS No. 157 is effective for all fair value measurements beginning January 1, 2008. We are currently assessing the potential impact of SFAS No. 157. Based upon our initial assessment, we believe that SFAS No. 157 will affect the accounting for derivatives, which is one of our critical accounting policies, in at least two ways:

¨We record mark-to-market energy assets net of a close-out valuation adjustment, a portion of which represents the initial contract margin when we are unable to obtain observable market price information for similar contracts. As a result, we do not recognize gains or losses in earnings at the inception of such contracts;  instead, we recognize gains or losses in earnings as we realize cash flows under the contract or when observable market data becomes available. SFAS No. 157 will require us to record mark-to-market energy assets at fair value without such a valuation adjustment, resulting in the recognition of gains or losses in earnings at the inception of new mark-to-market derivative contracts executed after the effective date.

¨We presently determine fair value for mark-to-market energy liabilities and risk management liabilities for which prices are not available from external sources by discounting the expected cash flows from the contracts using a risk-free discount rate. We do not apply a credit-spread valuation adjustment to reflect our own credit risk in determining fair value for these liabilities. SFAS No. 157 will require us to record all liabilities measured at fair value including the effect of the obligor’s credit risk. As a result, we will have to apply a credit-spread adjustment in order to reflect our own credit risk in determining fair value for these liabilities, which we expect would result in a lower recorded fair value for these liabilities.

Because SFAS No. 157 applies broadly to all fair value measurements, we have not completed our assessment of its requirements, the effects of which could extend beyond the matters discussed above. In accordance with the statement’s provisions, we will record the initial effects of applying SFAS No. 157 by adjusting opening retained earnings as of the required January 1, 2008 adoption date for the effect of eliminating the close-out valuation adjustment for inception gains. The remaining impacts of adoption will be reflected in earnings in 2008. The ultimate impact of applying the provisions of SFAS No. 157 could be material to our, or BGE’s, financial results.

SFAS No. 158

In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 106 and 132(R). SFAS No. 158 requires the underfunded status of defined benefit postretirement plans to be recognized as a liability in the balance sheets and the recognition of any subsequent changes in funded status in the year in which changes occur through accumulated other comprehensive income. SFAS No. 158 is effective for us on December 31, 2006.

If our pension plan assets earn 2.2% during the fourth quarter of 2006, one quarter of our 8.75%  annual return on pension assets assumption, and interest rates remain at current levels, we estimate an after-tax charge to equity of approximately $90 million would be recorded at December 31, 2006 upon the adoption of SFAS No. 158. The adoption of SFAS No. 158 will not have any impact on our, or BGE’s, debt covenants.

The amounts that will ultimately be recorded upon the adoption of SFAS No. 158 will be determined by our discount rate assumption, which depends on year end interest rates, our actual 2006 return on pension assets, and other factors. As a result, the charge to equity could be materially different from our current estimate.

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FIN 48

In July 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in Income Taxes. FIN 48 provides guidance for the recognition and measurement of an entity’s uncertain tax positions through the use of a “more-likely-than-not” threshold. This threshold would be used to evaluate whether each tax position will be sustained based solely on its technical merits and assuming examination by a taxing authority. FIN 48 must be applied to all tax positions beginning January 1, 2007. The cumulative effect of adopting FIN 48 will be recorded in retained earnings upon adoption. We are currently assessing the potential impact of FIN 48; however, the impact could be material to our, or BGE’s, financial results.

SAB 108

In September 2006, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 108 (SAB 108), Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. SAB 108 was issued in order to eliminate the diversity in practice surrounding how public companies quantify financial statement misstatements.

SAB 108 establishes an approach that requires quantification of financial statement misstatements based on the effects of the misstatements on each financial statement and the related financial statement disclosures. This model requires quantification of errors based on both an income statement and balance sheet approach. SAB 108 permits existing public companies to initially apply its provisions for fiscal periods ending after November 15, 2006.

We do not expect the implementation of SAB 108 to have any effect on our financial results.

Accounting Standards Adopted

FSP FIN 46R-6

In April 2006, the FASB issued Staff Position (FSP) FIN 46R-6, Determining the Variability to Be Considered in Applying FASB Interpretation No. 46R. FSP FIN 46R-6 provides that, in applying FASB Interpretation No. 46R, Consolidation of Variable Interest Entities an Interpretation of ARB No. 51, the reporting enterprise should consider the design of the entity, the nature of the entity’s risks, and the purpose for which the entity was created. FSP FIN 46R-6 must be applied prospectively to new or modified contracts beginning July 1, 2006. The adoption of this FSP did not have a material impact on our, or BGE’s, financial results.

FSP 115-1 and 124-1

In November 2005, FSP SFAS 115-1 and SFAS 124-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments, was issued to replace the measurement and recognition criteria of EITF 03-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments. FSP 115-1 and 124-1 references existing guidance in SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, SEC Staff Accounting Bulletin No. 59, Accounting for Noncurrent Marketable Equity Securities, and APB No. 18, The Equity Method of Accounting for Investments in Common Stock. FSP 115-1 and 124-1 requires an other-than-temporary analysis to be completed each reporting period (i.e., every quarter) beginning after December 15, 2005. The adoption of this standard did not have a material impact on our, or BGE’s, financial results.

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Related Party Transactions—BGE

Income Statement

BGE provides standard offer service to those customers that do not choose an alternate electric supplier. Our wholesale marketing and risk management operation supplies a portion of BGE’s standard offer service obligation to commercial and industrial customers and provided BGE the energy and capacity required to meet all of its residential standard offer service obligations through June 30, 2006.

Our wholesale marketing and risk management operation will continue to supply a substantial portion of BGE’s standard offer service obligation to residential customers through May 31, 2007, as well as a portion of BGE’s standard offer service obligations from June 1, 2007 through May 31, 2009. Bidding to supply BGE’s standard offer service to customers will occur from time to time through a competitive bidding process approved by the Maryland Public Service Commission.

The cost of BGE’s purchased energy from nonregulated subsidiaries of Constellation Energy to meet its standard offer service obligation was as follows:

	Quarter Ended September 30,				Nine Months Ended September 30,
	2006		2005		2006		2005
	(In millions)
Purchased energy	$	412.5	$	248.7	$	820.8	$	647.2

In addition, Constellation Energy charges BGE for the costs of certain corporate functions. Certain costs are directly assigned to BGE. We allocate other corporate function costs based on a total percentage of expected use by BGE. We believe this method of allocation is reasonable and approximates the cost BGE would have incurred as an unaffiliated entity.

The following table presents the costs Constellation Energy charged to BGE in each period.

	Quarter Ended September 30,				Nine Months Ended September 30,
	2006		2005		2006			2005
	(In millions)
Charges to BGE	$	37.5	$	28.4		$	99.2		$	81.1

Balance Sheet

BGE participates in a cash pool under a Master Demand Note agreement with Constellation Energy. Under this arrangement, participating subsidiaries may invest in or borrow from the pool at market interest rates. Constellation Energy administers the pool and invests excess cash in short-term investments or issues commercial paper to manage consolidated cash requirements. BGE had borrowed $147.3 million at September 30, 2006 and $3.2 million at December 31, 2005 under this arrangement.

BGE’s Consolidated Balance Sheets include intercompany amounts related to corporate functions performed at the Constellation Energy holding company, BGE’s purchases to meet its standard offer service obligation, BGE’s charges to Constellation Energy and its nonregulated affiliates for certain services it provides them, and the participation of BGE’s employees in the Constellation Energy pension plan.

We believe our allocation methods are reasonable and approximate the costs that would be charged to unaffiliated entities.

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Item 2. Management’s Discussion

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction and Overview

Constellation Energy Group, Inc. (Constellation Energy) is an energy company that conducts its business through various subsidiaries including a merchant energy business and Baltimore Gas and Electric Company (BGE). We describe our operating segments in the Notes to Consolidated Financial Statements on page 14.

This Quarterly Report on Form 10-Q is a combined report of Constellation Energy and BGE. References in this report to “we” and “our” are to Constellation Energy and its subsidiaries, collectively. References in this report to the “regulated business(es)” are to BGE.

Our 2005 Annual Report on Form 10-K includes a detailed discussion of various items impacting our business, our results of operations, and our financial condition. These include:

¨Introduction and Overview section which provides a description of our business segments,

¨Strategy section,

¨Business Environment section, including how regulation, weather, and other factors affect our business, and

¨Critical Accounting Policies section.

Critical accounting policies are the accounting policies that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective, or complex judgment. Our critical accounting policies include accounting for derivatives, evaluation of assets for impairment and other than temporary decline in value, and asset retirement obligations.

In this discussion and analysis, we explain the general financial condition and the results of operations for Constellation Energy and BGE including:

¨factors which affect our businesses,

¨our earnings and costs in the periods presented,

¨changes in earnings and costs between periods,

¨sources of earnings,

¨impact of these factors on our overall financial condition,

¨expected future expenditures for capital projects, and

¨expected sources of cash for further capital expenditures.

As you read this discussion and analysis, refer to our Consolidated Statements of Income on page 3, which present the results of our operations for the quarters and nine months ended September 30, 2006 and 2005. We analyze and explain the differences between periods in the specific line items of our Consolidated Statements of Income.

We have organized our discussion and analysis as follows:

¨We describe changes to our business environment during the year.

¨We highlight significant events that occurred in 2006 that are important to understanding our results of operations and financial condition.

¨We then review our results of operations beginning with an overview of our total company results, followed by a more detailed review of those results by operating segment.

¨We review our financial condition, addressing our sources and uses of cash, capital resources, commitments, and liquidity.

¨We conclude with a discussion of our exposure to various market risks.

Business Environment

With the evolving regulatory environment surrounding customer choice, increasing competition, and the growth of our merchant energy business, various factors affect our financial results. We discuss these various factors in the Forward Looking Statements section on page 54 and in Item 1A. Risk Factors on page 53. We discuss our market risks in the Market Risk section beginning on page 50.

In this section, we discuss in more detail events which have impacted our business during the nine months ended September 30, 2006.

Regulation by the Maryland PSC

Electric Rates

As a result of the November 1999 Maryland Public Service Commission (Maryland PSC) order regarding the deregulation of electric generation in Maryland, BGE’s residential electric base rates were frozen until July 2006. Subsequent orders of the Maryland PSC specified that BGE would procure the power to serve BGE residential customers beginning July 2006 via auctions to be conducted in late 2005 and early 2006. The procured power costs of these auctions resulted in an average residential customer bill increase of 72%. In a special session of the Maryland legislature in June 2006, the legislature approved Senate Bill 1 which, among other things:

¨reconstitutes the Maryland PSC by dismissing all five of the current Maryland PSC commissioners effective June 30, 2006 and requiring that five new commissioners be selected by the Governor of Maryland from a list prepared by legislative leaders;

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¨imposes rate stabilization measures that (i) cap rate increases by BGE for residential Provider of Last Resort (POLR) service at 15% from July 1, 2006 to May 31, 2007, (ii) give residential POLR customers the option from June 1, 2007 until January 1, 2008 of paying a full market rate or choosing a short term rate stabilization plan in order to provide a smooth transition to market rates without adversely affecting the creditworthiness of BGE, and (iii) provide for full market rates for residential POLR service starting January 1, 2008;

¨allows BGE to recover deferred costs from its customers over a period not to exceed 10 years, on terms and conditions to be determined by the Maryland PSC, including through the issuance of rate stabilization bonds that securitize the deferred costs;

¨directs the Maryland PSC to conduct a comprehensive review of Maryland’s deregulated electricity market, including the implications of requiring or allowing utilities to construct, acquire, or lease power generating facilities and alternative approaches to power procurement;

¨directs the Maryland PSC to investigate measures to mitigate the impact of residential rate increases on BGE customers, including by investigating the prior determination of and allowances for stranded costs that occurred when BGE transferred assets to its affiliates in 2000 and by requiring the Maryland PSC to provide funds to residential customers of BGE for mitigation of BGE’s rate increases, including any adjustment in favor of BGE’s customers to allowances for such stranded costs;

¨expands the authority of the Maryland PSC to review acquisitions, dispositions, and financings by public service companies operating in Maryland;

¨requires BGE to credit residential electric rates by approximately $39 million per year for 10 years, beginning January 1, 2007, through suspending the collection of the residential return component of the administrative charge for POLR service and a credit against funds collected from BGE rate payers for the nuclear decommissioning trust for our Calvert Cliffs Nuclear Power Plant, Inc. (Calvert Cliffs); and

¨directs Maryland’s taxing authority to consider whether property tax valuation methodologies applied to power plants located in Maryland should be revised in light of the values of those properties in a restructured electric industry.

In September 2006, the Maryland Court of Appeals struck down the provisions of the new energy legislation that called for the termination and replacement of the current members of the Maryland PSC, finding such provisions to be unconstitutional. As a result, the current Maryland PSC commissioners have remained in office.

Because Senate Bill 1 requires substantial additional decisions and proceedings by the Maryland PSC and other governmental authorities to implement many of its provisions, we cannot predict the impact of the legislation on us, BGE, or the energy market in Maryland. The new legislation and its implementation through applicable regulatory proceedings could have a material adverse effect on our, or BGE’s, financial results.

One or more additional parties may challenge the constitutionality of one or more other provisions of the new energy legislation. The outcome of any additional challenges and the uncertainty that could result cannot be predicted.

Cost for Decommissioning

Under the November 1999 Maryland PSC order regarding the deregulation of electric generation, BGE ratepayers must pay a total of $520 million, in 1993 dollars adjusted for inflation, to fund the decommissioning of Calvert Cliffs through fixed annual collections. The fixed annual amount was set at approximately $18.7 million through June 30, 2006. On June 28, 2006, BGE received approval from the Maryland PSC to continue annual customer collections at $18.7 million through December 31, 2016. BGE will be required to submit a filing to determine the level of customer contributions after December 31, 2016.

As discussed above, the new Maryland legislation requires BGE to credit residential electric customers the $18.7 million collected annually for 10 years beginning January 1, 2007.

Federal Regulation

Network Transmission Rates

In May 2005, the Federal Energy Regulatory Commission (FERC) issued an order accepting BGE’s joint application to have network transmission rates established through a formula that tracks costs instead of through fixed rates. The formula approach became effective June 1, 2005, and the implementation of these rates did not have a material effect on our, or BGE’s, financial results. The use of this formula approach was allowed by FERC to become effective subject to refund based on the outcome of a hearing before an administrative law judge. However, the various parties participating in this proceeding have arrived at a settlement resolving all issues, which was approved by FERC on April 19, 2006. The settlement did not have a material effect on our, or BGE’s, financial results.

PJM Capacity Market Proposals

In April 2006, FERC issued an initial order approving PJM Interconnection’s (PJM) proposal to restructure its capacity market. Such a restructuring would change how we are paid for generating plant capacity available to PJM. However,

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FERC found that certain elements of the proposal needed further development before FERC could issue a final order and encouraged the parties to the proceeding, including Constellation Energy, to continue to seek a negotiated resolution of the remaining issues. Subsequently, FERC directed that settlement discussions be conducted among the parties, which resulted in a settlement being filed with FERC for approval. Currently, we cannot predict the timing or outcome of any additional FERC proceedings on this matter or the possible effect on our, or BGE’s, financial results.

Environmental Matters

Air Quality and Hazardous Air Emissions

In April 2006, the Healthy Air Act (HAA) was enacted into law in Maryland. The HAA establishes through two phases annual sulfur dioxide (SO2), nitrogen oxide (NOx), and mercury emission caps for specific coal-fired units in Maryland, including units located at three of our facilities. The first phase reduces SO2 emissions by 74 percent in 2010 and NOx emissions by 59 percent in 2009 (each from 2004 levels), and mercury emissions by 80 percent in 2010 (from a baseline level to be determined). The second phase reduces SO2 emissions by 80 percent in 2013 and NOx emissions by 66 percent in 2012 (each from 2004 levels), and mercury emissions by 90 percent in 2013 (from a baseline level to be determined).

In order to implement the requirements of the HAA, the Maryland Department of the Environment (MDE) is expected to finalize its Clean Power Rule (CPR) by the fourth quarter of 2006. The requirements of the HAA and the CPR for SO2, NOx, and mercury emissions are more stringent and apply sooner than those of the existing Clean Air Interstate and the Clean Air Mercury Rules. We discuss the Clean Air Interstate and the Clean Air Mercury Rules in more detail in Item 1. Business—Environmental Matters section in our 2005 Annual Report on Form 10-K.

We have reevaluated our capital expenditure estimates provided in Item 1. Business—Environmental Matters section in our 2005 Annual Report on Form 10-K and developed ranges of capital expenditure estimates based on bid results and our market information. This reevaluation is a result of our current understanding of what the CPR will require and pricing impacts resulting from current market demand for labor, materials, and contractors necessary to install additional emission control equipment. The upper end of our range would result in our capital expenditures increasing by approximately one-third above our previous estimate of $725 million. Our capital expenditure estimates may change further as we implement our compliance plan. As discussed in our 2005 Annual Report on Form 10-K, our estimates of capital expenditures continue to be subject to significant uncertainties.

For phase two implementation, we are currently assessing our various compliance alternatives, and although we cannot yet estimate the additional costs we may incur, such costs could be material.

In September 2006, the EPA adopted a stricter NAAQS for particulate matter. States will be required to meet the new standards by 2015, with a possible extension to 2020, depending on local conditions and the availability of controls. We are unable to determine the impact that complying with the stricter NAAQS for particulate matter will have on our financial results until the states in which our generating facilities are located adopt plans to meet the new standard.

New Source Review

In March 2006, the U.S. Court of Appeals for the District of Columbia annulled the equipment replacement rule adopted by the Environmental Protection Agency (EPA) in August 2003, which established a threshold for determining when major new source review requirements are triggered. We believe the Court decision, which was anticipated, should have minimal effect on us as it maintains the existing rules for equipment replacement. However, we anticipate that the EPA will continue to examine the existing equipment replacement rules and may again propose new rules. In addition, the U.S. Supreme Court has agreed to hear a case, not involving us, relating to the new source review requirements. We cannot predict the timing or outcome of any future EPA regulatory action or the outcome of the U.S. Supreme Court proceeding, or their possible effect on our financial results.

Global Climate Change

The HAA and the proposed CPR require that Maryland become a full participant in the Northeast Regional Greenhouse Gas Initiative (RGGI) by June 2007. RGGI is a regional cap-and-trade program initially covering carbon dioxide (CO2) emissions from power plants with capacity greater than 25 megawatts in the affected states. The program aims to stabilize emissions at current levels beginning in 2009 and reduce regional emissions by 10 percent before 2020.

Under the program, it is expected that affected plants would participate in an auction to obtain sufficient CO2 allowances to support the level of emissions that result from plant operations.

We continue to evaluate the potential impact of the HAA and CPR CO2 emissions requirements and RGGI participation on our financial results; however, our compliance costs could be material.

Accounting Standards Issued and Adopted

We discuss recently issued and adopted accounting standards in the Accounting Standards Issued and Accounting Standards Adopted sections of the Notes to Consolidated Financial Statements beginning on page 22.

27

Events of 2006

Termination of Merger Agreement with FPL Group, Inc.

On October 24, 2006, Constellation Energy and FPL Group, Inc. (FPL Group) agreed to terminate the Agreement and Plan of Merger the parties had entered into on December 18, 2005. In connection with the termination of the merger agreement, Constellation Energy acquired certain development rights from FPL Group relating to a wind power project in Western Maryland.

Pursuant to the terms of the termination agreement, if Constellation Energy announces its entry into certain types of transactions on or prior to September 30, 2007, including a merger or stock sale resulting in a third party owning 35% or more of the voting securities of Constellation Energy, it will be required to pay FPL Group a fee. The fee is $425 million if a transaction is announced on or prior to June 30, 2007 and $210 million if a transaction is announced between July 1, 2007 and September 30, 2007.

Commodity Prices

During the nine months ended September 30, 2006, we continued to experience significant changes in commodity prices. This volatile commodity price environment continues to impact our results of operations and financial condition, as discussed in more detail in the following sections:

¨Financial Condition beginning on page 45,

¨Mark-to-Market beginning on page 35,

¨Risk Management Assets and Liabilities on page 39,

¨Market Risk beginning on page 50, and

¨Notes to Consolidated Financial Statements on page 21.

Residential Electric Rates

We discuss the legislation enacted by the Maryland General Assembly in more detail in the Regulation by the Maryland PSC section beginning on page 25.

Gas-Fired Plants

In October 2006, we announced an agreement to sell six natural gas-fired plants. We discuss this planned sale in more detail in the Notes to Consolidated Financial Statements on page 11.

In October 2006, we designated these plants as assets held for sale and we reclassified the assets associated with these gas-fired plants to “Assets held for sale” and the liabilities to “Liabilities associated with assets held for sale” in our Consolidated Balance Sheets, we ceased recording depreciation expense, and discontinued hedge accounting for these facilities. The assets and liabilities associated with these gas-fired plants will be removed from our Consolidated Balance Sheets at closing.

Synthetic Fuel Facilities

Phase-Out of Tax Credits

As discussed in our 2005 Annual Report on Form 10-K, the Internal Revenue Code provides for a phase-out of synthetic fuel tax credits if average annual wellhead oil prices increase above certain levels. For 2006, we estimate the tax credit reduction would begin if the reference price exceeds approximately $54 per barrel and would be fully phased out if the reference price exceeds approximately $68 per barrel.

Based on forward market prices and volatilities as of September 30, 2006, we estimate a 42% tax credit phase-out in 2006. As a result, the amount of tax credits recognized in the first nine months of 2006 reflects the estimated 42% tax credit phase-out.

In July 2006, as a result of oil prices remaining at high levels, we decreased production at our South Carolina facility and production was idled at four facilities in which we have a minority ownership interest. In September 2006, as a result of a decrease in oil prices, we decided to resume full production at our South Carolina facility and in October 2006 production was restarted at our four facilities in which we have a minority ownership interest.

Based on forward market prices and volatilities as of October 26, 2006, we estimate a 36% tax credit phase-out in both 2006 and 2007. However, the ultimate amount of tax credits phased-out for 2006 and 2007, is subject to change based on the actual reference price and production levels for the entire year. In addition, our ability to claim synthetic fuel tax credits and the potential phase-out of these credits could be materially impacted by any future legislative changes to the Internal Revenue Code.

We actively monitor and manage our exposure to synthetic fuel tax credit phase-out as part of our ongoing hedging activities. In addition, we continue to monitor various options related to our South Carolina facility, including the suspension or cessation of synthetic fuel production depending on our expectation of the level of tax credit phase-out.

Impairment Analysis

The increase in estimated synthetic fuel tax credit phase-out during 2006 indicated there is a potential that we may not be able to recover our investments in synthetic fuel facilities. As a result of this triggering event, we performed an impairment analysis of our investment in synthetic fuel facilities.

At September 30, 2006, the book value of our investment in synthetic fuel facilities is approximately $17 million, substantially all of which is related to our South Carolina facility. We determined that an impairment had not occurred as the expected future undiscounted cash flows exceeded the book value of our investment at September 30, 2006.

28

We will continue to monitor the level of synthetic fuel tax credit phase-out and perform impairment analyses as new information becomes available. A future increase in synthetic fuel tax credit phase-out could result in an impairment.

Workforce Reduction Costs

During the quarter ended March 31, 2006, we incurred costs associated with a planned workforce restructuring at our R. E. Ginna Nuclear Power Plant (Ginna). In July 2006, we announced a planned workforce restructuring at our Nine Mile Point nuclear facility. We also initiated a restructuring of the workforce at our Calvert Cliffs nuclear facility during the third quarter of 2006.

In addition, during 2006, we recorded a settlement charge in our Consolidated Statements of Income for one of our qualified plans under SFAS No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits.

We discuss these restructurings in more detail in the Notes to Consolidated Financial Statements on page 12 and the settlement charge in the Notes to Consolidated Financial Statements on page 16.

Acquisition

During 2006, we acquired working interests in gas and oil producing fields. We discuss this acquisition in more detail in the Notes to Consolidated Financial Statements on page 13.Initial Public Offering of Constellation Energy Partners LLC

In June 2006, Constellation Energy Partners LLC, (CEP) a wholly owned limited liability company formed by Constellation Energy, filed a registration statement on Form S-1 with the Securities and Exchange Commission related to the potential underwritten initial public offering of CEP’s common units. CEP is principally engaged in the acquisition, development and exploitation of natural gas properties. CEP’s existing property is located in the Robinson’s Bend Field in the Black Warrior Basin of Alabama.

Although the registration statement relating to the CEP common units has been filed with the Securities and Exchange Commission, it has not yet become effective. The common units may not be sold, nor may offers to buy be accepted, prior to the time the registration statement becomes effective. However, we currently expect to complete the offering in November 2006. This quarterly report does not constitute an offer to sell or the solicitation of any offer to buy any securities of CEP, and there will not be any sale of any such securities in any state in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of such state.

Nine Mile Point License Extension

On October 30, 2006, we received Nuclear Regulatory Commission approval for license extension for both units at our Nine Mile Point nuclear facility. With the renewed licenses, we can continue to operate Unit 1 until 2029 and Unit 2 until 2046.

Ginna Uprate

During the fourth quarter of 2006, we completed a planned outage at our Ginna nuclear facility, which included an uprate of the plant from 498 megawatts to approximately 580 megawatts. We expect that the increase in capacity of the facility will result in higher revenues in future years due to higher generation.

29

Results of Operations for the Quarter and Nine Months Ended
September 30, 2006 Compared with the Same Periods of 2005

In this section, we discuss our earnings and the factors affecting them. We begin with a general overview, then separately discuss earnings for our operating segments. We discuss changes in other income, fixed charges, and income taxes, as necessary, in the aggregate for all segments in the Consolidated Nonoperating Income and Expenses section on page 44.

Overview

Results

	Quarter Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006				2005
	(In millions, after-tax)
Merchant energy	$	284.8		$	141.7			$	400.1			$	282.9
Regulated electric	42.8			51.1				96.3				120.0
Regulated gas	(7.3		)	(8.6		)		26.3				17.3
Other nonregulated	4.1			(0.1		)		7.9				0.3
Income from Continuing Operations	324.4			184.1				530.6				420.5
Income from discontinued operations	—			1.4				0.9				7.4
Net Income	$	324.4		$	185.5			$	531.5			$	427.9
Other Items Included in Operations
Workforce reduction costs	$	(13.1	)	$	(2.3	)		$	(14.4	)		$	(2.3	)
Merger-related costs	(2.5		)	—				(10.0		)		—
Non-qualifying hedges	35.9			(22.8		)		26.2				(34.5		)
Total Other Items	$	20.3		$	(25.1	)		$	1.8			$	(36.8	)

Quarter Ended September 30, 2006

Our total net income for the quarter ended September 30, 2006 increased $138.9 million, or $0.76 per share, compared to the same period of 2005 mostly because of the following:

¨We had higher earnings of approximately $129 million after-tax at our merchant energy business due to higher gross margin from the Mid-Atlantic Region. We discuss this increase in gross margin in more detail in the Mid-Atlantic Region section on page 34.

¨We had higher earnings of $38.6 million after-tax at our retail competitive supply operation primarily due to an increase in gross margin. We discuss our retail gross margin in more detail in the Competitive Supply—Retail section on page 35.

¨We had higher earnings of approximately $42 million after-tax due to higher gross margin from our wholesale competitive supply operation, including the termination and sale of an in-the-money contract. These increases were mostly offset by lower earnings of approximately $40 million after-tax due to higher operating expenses primarily because of higher labor and benefit costs due to the growth of this operation. We discuss our mark-to-market and wholesale accrual results in more detail in the Competitive Supply section beginning on page 35.

These increases were partially offset by the following:

¨We had lower earnings of $10.8 million after-tax due to workforce reduction costs incurred during the third quarter of 2006 compared to the same period of 2005.

¨We had lower earnings of $8.1 million after-tax due to higher fixed charges and lower other income. We discuss these items in more detail in the Consolidated Nonoperating Income and Expenses section on page 44.

¨We had lower earnings of $7.0 million after-tax from our regulated businesses primarily due to higher operations and maintenance expenses, partially offset by higher gas revenues mostly from the favorable impact of the increase in gas base rates that was approved in December 2005. We discuss the gas base rate increase in more detail in the Regulated Gas Business section on page 43.

Nine Months Ended September 30, 2006

Our total net income for the nine months ended September 30, 2006 increased $103.6 million, or $0.56 per share, compared to the same period of 2005 mostly because of the following:

¨We had higher earnings of approximately $72 million after-tax due to favorable mark-to-market results, including trading activities, at our wholesale competitive supply operation. We also had higher wholesale accrual gross margin of approximately $108 million after-tax. These increases were partially offset by lower earnings of approximately $108 million after-tax due to higher operating expenses mostly because of higher labor and benefit costs due to the growth of this operation. We discuss our mark-to-market and wholesale accrual results in more detail in the Competitive Supply section beginning on page 35.

¨We had higher earnings of approximately $71 million after-tax at our merchant energy business due to higher gross margin from the Mid-Atlantic Region. We discuss this increase in gross margin in more detail in the Mid-Atlantic Region section on page 34.

30

¨We had higher earnings of $39.0 million after-tax at our retail competitive supply operation primarily due to an increase in gross margin. We discuss our retail gross margin in more detail in the Competitive Supply—Retail section on page 35.

¨We had higher earnings of $9.0 million after-tax from our regulated gas business primarily due to the favorable impact of the increase in gas base rates that was approved in December 2005.

These increases were partially offset by the following:

¨We had lower earnings of $23.7 million after-tax from our regulated electric business primarily due to higher operations and maintenance expenses and lower revenues less electricity purchased for resale expenses.

¨We had lower earnings of $20.4 million after-tax at our synthetic fuel facilities mostly due to the expected phase-out of tax credits as a result of the high price of oil. We discuss the phase-out of tax credits in more detail in the Events of 2006 section beginning on page 28.

¨We had lower earnings of $12.1 million after-tax due to workforce reduction costs associated with  workforce restructurings at our nuclear generating facilities. We discuss these costs in more detail in the Notes to Consolidated Financial Statements on page 12.

¨We had lower earnings of $10.0 million after-tax due to incurring additional merger-related costs associated with our merger with FPL Group, which has now been terminated. We discuss these costs in more detail in the Notes to Consolidated Financial Statements on page 12.

¨We had lower earnings of $7.9 million after-tax due to higher fixed charges and lower other income. We discuss these items in more detail in the Consolidated Nonoperating Income and Expenses section on page 44.

¨We had lower income from discontinued operations of $6.5 million.

In the following sections, we discuss our net income by business segment in greater detail.

Merchant Energy Business

Background

Our merchant energy business is a competitive provider of energy solutions for various customers. We discuss the impact of deregulation on our merchant energy business in Item 1. Business—Competition section of our 2005 Annual Report on Form 10-K.

Our merchant energy business focuses on delivery of physical, customer-oriented products to producers and consumers, manages the risk and optimizes the value of our owned generation assets, and uses our portfolio management and trading capabilities both to manage risk and to deploy risk capital to generate additional returns. We continue to identify and pursue opportunities which can generate additional returns, through portfolio management and trading activities, within our business due to the significant growth in scale of our competitive supply operations.

We record merchant energy revenues and expenses in our financial results in different periods depending upon which portion of our business they affect. We discuss our revenue recognition policies in the Critical Accounting Policies section and Note 1 of our 2005 Annual Report on Form 10-K. We summarize our revenue and expense recognition policies as follows:

¨We record revenues as they are earned and fuel and purchased energy costs as they are incurred for contracts and activities subject to accrual accounting, including certain load-serving activities.

¨Prior to the settlement of the forecasted transaction being hedged, we record changes in the fair value of contracts designated as cash-flow hedges in other comprehensive income to the extent that the hedges are effective. We record the effective portion of the changes in fair value of hedges in earnings in the period the settlement of the hedged transaction occurs. We record the ineffective portion of the changes in fair value of hedges, if any, in earnings in the period in which the change occurs.

¨We record changes in the fair value of contracts that are subject to mark-to-market accounting in revenues or fuel and purchased energy expenses in the period in which the change occurs.

Mark-to-market accounting requires us to make estimates and assumptions using judgment in determining the fair value of certain contracts and in recording revenues from those contracts. We discuss the effects of mark-to-market accounting on our results in the Competitive Supply—Mark-to-Market section beginning on page 35.

Our wholesale marketing and risk management operation actively transacts in energy and energy-related commodities in order to manage our portfolio of energy purchases and sales to customers through structured transactions. As part of these activities we trade energy and energy-related commodities and deploy risk capital in the management of our portfolio in order to earn additional returns. These activities are managed through daily value at risk and stop loss limits and liquidity guidelines, and may have a material impact on our financial results. We discuss the impact of our trading activities in more detail in the Competitive Supply—Mark-to-Market section beginning on page 35 and value at risk in the Market Risk section beginning on page 50.

31

Results

	Quarter Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
	(In millions)
Revenues	$	5,049.0		$	4,397.2		$	13,121.6		$	10,312.4
Fuel and purchased energy expenses	(4,056.0		)	(3,778.0		)	(10,863.3		)	(8,606.6		)
Operating expenses	(372.6		)	(273.4		)	(1,171.2		)	(931.8		)
Workforce reduction costs	(21.7		)	(3.9		)	(23.9		)	(3.9		)
Merger-related costs	(2.5		)	—			(8.8		)	—
Depreciation, depletion, and amortization	(72.9		)	(74.3		)	(213.2		)	(202.6		)
Accretion of asset retirement obligations	(17.1		)	(15.8		)	(50.3		)	(46.2		)
Taxes other than income taxes	(32.6		)	(31.3		)	(94.9		)	(81.3		)
Income from Operations	$	473.6		$	220.5		$	696.0		$	440.0
Income from Continuing Operations (after-tax)	$	284.8		$	141.7		$	400.1		$	282.9
Income from discontinued operations (after-tax)	—			(0.2		)	—			2.9
Net Income	$	284.8		$	141.5		$	400.1		$	285.8
Other Items Included in Operations (after-tax)
Workforce reduction costs	$	(13.1	)	$	(2.3	)	$	(14.4	)	$	(2.3	)
Merger-related costs	(1.8		)	—			(7.0		)	—
Non-qualifying hedges	35.9			(22.8		)	26.2			(34.5		)
Total Other Items	$	21.0		$	(25.1	)	$	4.8		$	(36.8)

Above amounts include intercompany transactions eliminated in our Consolidated Financial Statements. The Information by Operating Segment section within the Notes to Consolidated Financial Statements on page 15 provides a reconciliation of operating results by segment to our Consolidated Financial Statements.

Revenues and Fuel and Purchased Energy Expenses

Our merchant energy business manages the revenues we realize from the sale of energy to our customers and our costs of procuring fuel and energy. As discussed on the previous page, our merchant energy business uses either accrual or mark-to-market accounting to record our revenues and expenses. Mark-to-market results reflect the net impact of amounts recorded in either revenues or fuel and purchased energy expenses to recognize changes in fair value of derivative contracts subject to mark-to-market accounting during the reporting period.

The difference between revenues and fuel and purchased energy expenses, including all direct expenses, is the gross margin of our merchant energy business, and this measure is a useful tool for assessing the profitability of our merchant energy business. Accordingly, we believe it is appropriate to discuss the operating results of our merchant energy business by analyzing the changes in gross margin between periods. In managing our portfolio, we may terminate, restructure, or acquire contracts. Such transactions are within the normal course of managing our portfolio and may materially impact the timing of our recognition of revenues, fuel and purchased energy expenses, and cash flows.

We analyze our merchant energy gross margin in the following categories because of the risk profile of each category, differences in the revenue sources, and the nature of fuel and purchased energy expenses. With the exception of a portion of our competitive supply activities that we are required to account for using the mark-to-market method of accounting, all of these activities are accounted for on an accrual basis.

¨Mid-Atlantic Region—our fossil, nuclear, and hydroelectric generating facilities and load-serving activities in the PJM region. This also includes active portfolio management of the generating assets and other physical and financial contractual arrangements, as well as other PJM competitive supply activities. In addition, due to the expiration of its power purchase agreement, beginning in June 2006, the results of our University Park generating facility are included with the Mid-Atlantic Region. University Park was previously included in Plants with Power Purchase Agreements.

¨Plants with Power Purchase Agreements—our generating facilities outside the Mid-Atlantic Region with long-term power purchase agreements, including the Nine Mile Point, Ginna, and High Desert facilities. We discuss the pending sale of our High Desert facility in the Notes to Consolidated Financial Statements on page 11.

¨Wholesale Competitive Supply—our marketing and risk management operation that provides energy products and services (including portfolio management and trading activities) primarily to distribution utilities, power generators, and other wholesale customers. We also provide global coal and upstream and downstream natural gas services.

¨Retail Competitive Supply—our operation that provides electric and gas energy products and services to commercial, industrial, and governmental customers.

¨Other—our investments in qualifying facilities and domestic power projects and our generation operations and maintenance services.

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We provide a summary of our revenues, fuel and purchased energy expenses, and gross margin as follows:

	Quarter Ended September 30,						Nine Months Ended September 30,
	2006			2005				2006			2005
	(Dollar amounts in millions)
Revenues:
Mid-Atlantic Region	$	1,002.2		$	746.7			$	2,119.2		$	1,736.9
Plants with Power Purchase Agreements	255.0			254.6				639.7			639.0
Competitive Supply
Retail	2,094.8			1,990.1				5,964.9			4,713.6
Wholesale	1,668.9			1,383.0				4,339.3			3,180.6
Other	28.1			22.8				58.5			42.3
Total	5,049.0			$	4,397.2			$	13,121.6		$	10,312.4
Fuel and purchased energy expenses:
Mid-Atlantic Region	$	(605.3	)	$	(563.8	)		$	(1,370.3	)	$	(1,105.0	)
Plants with Power Purchase Agreements	(16.8		)	(23.7		)		(52.2		)	(57.6		)
Competitive Supply
Retail	(1,964.9		)	(1,938.0		)		(5,667.6		)	(4,530.9		)
Wholesale	(1,469.0		)	(1,252.5		)		(3,773.2		)	(2,913.1		)
Other	—			—				—			—
Total	$	(4,056.0	)	$	(3,778.0	)		$	(10,863.3	)	$	(8,606.6	)

			% of Total					% of Total					% of Total				% of Total
Gross Margin:
Mid-Atlantic Region	$	396.9		40	%	$	182.9		30	%	$	748.9	33	%	$	631.9		37	%
Plants with Power Purchase Agreements	238.2			24		230.9			37		587.5		26		581.4			34
Competitive Supply
Retail	129.9			13		52.1			8		297.3		13		182.7			11
Wholesale	199.9			20		130.5			21		566.1		25		267.5			16
Other	28.1			3		22.8			4		58.5		3		42.3			2
Total	$	993.0		100	%	$	619.2		100	%	$	2,258.3	100	%	$	1,705.8		100	%

33

Mid-Atlantic Region

	Quarter Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
	(In millions)
Revenues	$	1,002.2		$	746.7		$	2,119.2		$	1,736.9
Fuel and purchased energy expenses	(605.3		)	(563.8		)	(1,370.3		)	(1,105.0		)
Gross margin	$	396.9		$	182.9		$	748.9		$	631.9

The increase of $214.0 million in gross margin during the quarter ended September 30, 2006 compared to the same period of 2005 is primarily due to favorable portfolio management, including the absence of higher load-serving costs, and the expiration on July 1, 2006 of fixed-price agreements established six years earlier.  These increases were partially offset by lower competitive transition charge (CTC) revenues of approximately $21 million mostly due to the end of the collection of residential CTC revenues in July 2006. We discuss our CTC revenues in more detail in our 2005 Annual Report on Form 10-K.

The increase of $117.0 million in gross margin during the nine months ended September 30, 2006 compared to the same period of 2005 is primarily due to favorable portfolio management, new contracts that began in 2006, and higher revenues from the expiration of the six-year, fixed-price contracts. These increases were partially offset by the negative impact of higher variable costs, including emissions and coal, that continued to increase compared to fixed revenues under the six-year contracts.

These increases in gross margin were partially offset by:

¨lower CTC revenues of approximately $42 million due to customers that completed their obligation and the continued decline in the CTC rate, and

¨lower generation at Calvert Cliffs, which resulted in lower gross margin of approximately $27 million, mostly because of a longer planned 2006 refueling outage that included replacement of the reactor vessel head.

Plants with Power Purchase Agreements

	Quarter Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
	(In millions)
Revenues	$	255.0		$	254.6		$	639.7		$	639.0
Fuel and purchased energy expenses	(16.8		)	(23.7		)	(52.2		)	(57.6		)
Gross margin	$	238.2		$	230.9		$	587.5		$	581.4

Gross margin from our Plants with Power Purchase Agreements increased slightly for the quarter and nine months ended September 30, 2006 compared to the same periods of 2005. This was due to an increase in gross margin of approximately $17 million primarily related to our nuclear generating assets in New York mostly due to favorable pricing on the portion of the facilities sold into the wholesale market, partially offset by the absence of approximately $10 million in gross margin from the University Park facility. As discussed in the Revenues and Fuel and Purchased Energy Expenses section on page 32, the University Park power purchase agreement expired in May 2006. Beginning in June 2006, the results of University Park are included in the Mid-Atlantic Region.

Competitive Supply

We analyze our retail accrual, wholesale accrual, and combined mark-to-market competitive supply activities below.

Retail

	Quarter Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
	(In millions)
Accrual revenues	$	2,083.3		$	2,000.6		$	5,943.2		$	4,727.3
Fuel and purchased energy expenses	(1,981.3		)	(1,938.0		)	(5,664.8		)	(4,530.9		)
Retail accrual activities	102.0			62.6			278.4			196.4
Mark-to-market activities	27.9			(10.5		)	18.9			(13.7		)
Gross margin	$	129.9		$	52.1		$	297.3		$	182.7

The increase in gross margin of $39.4 million from our retail accrual activities during the quarter ended September 30, 2006 compared to the same period of 2005 is primarily due to higher margins mostly because of lower costs related to our load-serving obligations. We had lower costs mostly because of the absence of extreme summer

weather compared to the same period of the prior year.

The increase in gross margin of $82.0 million from our retail accrual activities during the nine months ended September 30, 2006 compared to the same period of 2005 is primarily due to:

¨3.6 million megawatt hours more of electricity and 41 billion cubic feet more of natural gas served to retail customers during the nine months ended September 30, 2006 compared to the same period of 2005, and

¨higher margins mostly because of lower costs related to our load-serving obligations. We had lower costs mostly because of the absence of extreme summer weather compared to the prior year.

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Wholesale

	Quarter Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
	(In millions)
Accrual revenues	$	1,565.1		$	1,264.8		$	4,032.8		$	2,993.4
Fuel and purchased energy expenses	(1,469.0		)	(1,252.5		)	(3,773.2		)	(2,913.1		)
Wholesale accrual activities	96.1			12.3			259.6			80.3
Mark-to-market revenues	103.8			118.2			306.5			187.2
Gross margin	$	199.9		$	130.5		$	566.1		$	267.5

Our wholesale marketing and risk management operation had $83.8 million of higher gross margin from accrual activities during the quarter ended September 30, 2006 compared to the same period of 2005 due to:

¨approximately $75 million related to new contracts entered into during 2006, higher realized gross margin associated with existing contracts, and an in-the-money contract that we terminated and sold in exchange for an upfront cash payment and the cancellation of future performance obligations. This contract termination and sale, which accounted for a majority of the increase in wholesale accrual gross margin for the quarter, allowed us to eliminate our exposure to performance risk under this contract and resulted in the realization of earnings during the quarter ended September 30, 2006 that would have been recognized over the life of the contract, and

¨approximately $9 million related primarily to the growth in our coal and natural gas activities.

Our wholesale marketing and risk management operation had $179.3 million of higher gross margin from accrual activities during the nine months ended September 30, 2006 compared to the same period of 2005 due to:

¨approximately $90 million primarily due to new contracts entered into during 2006 and higher realized gross margin on existing contracts,

¨approximately $70 million related primarily to the growth in our coal and natural gas activities, and

¨a net increase of approximately $20 million from contract restructurings related to unit contingent power purchase agreements during the nine months ended September 2006 compared to the same period of 2005. The termination and sale of these contracts has allowed us to eliminate our exposure to performance risk under these contracts.

Mark-to-Market

Mark-to-market results include net gains and losses from origination, trading, and risk management activities for which we use the mark-to-market method of accounting. We discuss these activities and the mark-to-market method of accounting in more detail in the Critical Accounting Policies section of our 2005 Annual Report on Form 10-K.

As a result of the nature of our operations and the use of mark-to-market accounting for certain activities, mark-to-market earnings will fluctuate. We cannot predict these fluctuations, but the impact on our earnings could be material. We discuss our market risk in more detail in the Market Risk section beginning on page 50. The primary factors that cause fluctuations in our mark-to-market results are:

¨the number, size, and profitability of new transactions, including termination or restructuring of existing contracts,

¨the number and size of our open derivative positions, and

¨changes in the level and volatility of forward commodity prices and interest rates.

Mark-to-market results were as follows:

	Quarter Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
	(In millions)
Unrealized mark-to-market results
Origination gains	$	3.6		$	3.2		$	9.6		$	12.8
Risk management and trading—mark-to-market
Unrealized changes in fair value	128.1			104.5			315.8			160.7
Changes in valuation techniques	—			—			—			—
Reclassification of settled contracts to realized	(95.4		)	(62.8		)	(324.3		)	(124.6		)
Total risk management and trading—mark-to-market	32.7			41.7			(8.5		)	36.1
Total unrealized mark-to-market*	36.3			44.9			1.1			48.9
Realized mark-to-market	95.4			62.8			324.3			124.6
Total mark-to-market results	$	131.7		$	107.7		$	325.4		$	173.5

* Total unrealized mark-to-market is the sum of origination gains and total risk management and trading—mark-to-market.

Origination gains arise primarily from contracts that our wholesale marketing and risk management operation structures to meet the risk management needs of our customers or relate to our trading activities. Transactions that result in origination gains may be unique and provide the potential for individually significant gains from a single transaction.

Origination gains represent the initial fair value recognized on these transactions. The recognition of origination gains is dependent on sufficient observable market data that validates the initial fair value of the contract. Liquidity and market conditions impact our ability to identify sufficient, objective market-price information to permit recognition of origination gains. As a result, while our strategy and competitive position provide the opportunity to continue to originate such transactions,

35

the level of origination gains we are able to recognize may vary from period to period as a result of the number, size, and market-price transparency of the individual transactions executed in any period.

Risk management and trading—mark-to-market represents both realized and unrealized gains and losses from changes in the value of our portfolio, including the recognition of gains associated with decreases in the close-out adjustment when we are able to obtain sufficient market price information. We discuss the changes in mark-to-market results below. We show the relationship between our mark-to-market results and the change in our net mark-to-market energy asset later in this section.

The increase in mark-to-market results for the quarter and nine-months ended September 30, 2006, reflects our continued deployment of risk capital in order to take advantage of existing market conditions which generated significant returns and captured additional value within our trading portfolio. Additionally, our mark-to-market results included higher gains on transactions that are not trading positions. These positions are economic hedges of accrual transactions. These economic hedges receive mark-to-market accounting treatment as they are derivative contracts that are not designated for either cash-flow hedge or accrual accounting.

Mark-to-market results increased $24.0 million during the quarter ended September 30, 2006 compared to the same period of 2005 mostly because of higher unrealized changes in fair value. The increase in unrealized changes in fair value included higher pre-tax gains of approximately $97 million related to the positive impact of certain economic hedges primarily related to gas transportation and storage contracts that do not qualify for or are not designated as cash-flow hedges under Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. The mark-to-market accounting for these economic hedges produces a timing difference in the recognition of earnings on these transactions, as we will recognize the earnings on the accrual transactions related to these hedges in future periods. This increase in unrealized changes in fair value from these economic hedges was partially offset by lower pre-tax gains of approximately $73 million related to changes in commodity prices, price volatility, and other factors.

Mark-to-market results increased $151.9 million during the nine months ended September 30, 2006 compared to the same period of 2005 because of an increase in unrealized changes in fair value. Unrealized changes in fair value increased $155.1 million primarily due to:

¨higher pre-tax gains of approximately $100 million related to the positive impact of certain economic hedges primarily related to gas transportation and storage contracts that do not qualify for or are not designated as cash-flow hedges, and

¨the impact of a higher level of risk management and trading—mark-to-market activities mostly due to a higher level of open positions that resulted in increased gains of approximately $80 million.

These increases were partially offset by the absence of a $24.0 million favorable impact related to changes in the close-out adjustment during the nine months ended September 30, 2006 compared to the same period of 2005. The close-out adjustments are determined by the change in open positions, new transactions where we did not have observable market price information, and existing transactions where we have now observed sufficient market price information and/or we realized cash flows since the transactions’ inception. We discuss the close-out adjustment in more detail in the Critical Accounting Policies section of our 2005 Annual Report on Form 10-K.

36

Mark-to-Market Energy Assets and Liabilities

Our mark-to-market energy assets and liabilities are comprised of derivative contracts subject to mark-to-market accounting and consisted of the following:

	September 30, 2006			December 31, 2005
	(In millions)
Current Assets		$	889.3		$	1,339.2
Noncurrent Assets		814.1			1,089.3
Total Assets		1,703.4			2,428.5
Current Liabilities		822.9			1,348.7
Noncurrent Liabilities		467.8			912.3
Total Liabilities		1,290.7			2,261.0
Net mark-to-market energy asset		$	412.7		$	167.5

The following are the primary sources of the change in the net mark-to-market energy asset during the quarter and nine months ended September 30, 2006:

	Quarter Ended September 30, 2006							Nine Months Ended September 30, 2006
	(In millions)
Fair value beginning of period					$	353.7					$	167.5
Changes in fair value recorded in earnings
Origination gains		$	3.6					$	9.6
Unrealized changes in fair value		128.1						315.8
Changes in valuation techniques		—						—
Reclassification of settled contracts to realized		(95.4		)				(324.3		)
Total changes in fair value recorded in earnings					36.3						1.1
Changes in value of exchange-listed futures and options					41.5						173.4
Net change in premiums on options					(30.3		)				58.8
Contracts acquired					—						—
Other changes in fair value					11.5						11.9
Fair value at end of period					$	412.7					$	412.7

Changes in the net mark-to-market energy asset that affected earnings were as follows:

¨Origination gains represent the initial unrealized fair value at the time these contracts are executed to the extent permitted by applicable accounting rules.

¨Unrealized changes in fair value represent unrealized changes in commodity prices, the volatility of options on commodities, the time value of options, and other valuation adjustments.

¨Changes in valuation techniques represent improvements in estimation techniques, including modeling and other statistical enhancements used to value our portfolio to more accurately reflect the fair value of our contracts.

¨Reclassification of settled contracts to realized represent the portion of previously unrealized amounts settled during the period and recorded as realized revenues.

The net mark-to-market energy asset also changed due to the following items recorded in accounts other than in our Consolidated Statements of Income:

¨Changes in value of exchange-listed futures and options are adjustments to remove unrealized changes in fair value of exchange-traded contracts that are included in risk management and trading—mark-to-market results. The fair value of these contracts is recorded in “Accounts receivable” rather than “Mark-to-market energy assets” in our Consolidated Balance Sheets because these amounts are settled through our margin account with a third-party broker.

¨Net changes in premiums on options reflects the accounting for premiums on options purchased as an increase in the net mark-to-market energy asset and premiums on options sold as a decrease in the net mark-to-market energy asset.

¨Contracts acquired represents the initial fair value of acquired derivative contracts recorded in “Mark-to-market energy assets and liabilities.”

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The settlement terms of the net mark-to-market energy asset and sources of fair value as of September 30, 2006 are as  follows:

	Settlement Term
	2006			2007		2008		2009			2010			2011			Thereafter			Fair Value
	(In millions)
Prices provided by external sources (1)	$	12.9		$	129.7	$	199.2	$	63.0		$	27.8		$	14.8			$	4.9		$	452.3
Prices based on models	(6.3		)	8.4		9.3		(9.6		)	(24.7		)	(18.1		)		1.4			(39.6		)
Total net mark-to-market energy asset	$	6.6		$	138.1	$	208.5	$	53.4		$	3.1		$	(3.3	)		$	6.3		$	412.7

(1)Includes contracts actively quoted and contracts valued from other external sources.

We manage our mark-to-market risk on a portfolio basis based upon the delivery period of our contracts and the individual components of the risks within each contract. Accordingly, we record and manage the energy purchase and sale obligations under our contracts in separate components based upon the commodity (e.g., electricity or gas), the product (e.g., electricity for delivery during peak or off-peak hours), the delivery location (e.g., by region), the risk profile (e.g., forward or option), and the delivery period (e.g., by month and year).

Consistent with our risk management practices, we have presented the information in the table above based upon the ability to obtain reliable prices for components of the risks in our contracts from external sources rather than on a contract-by-contract basis. Thus, the portion of long-term contracts that is valued using external price sources is presented under the caption “prices provided by external sources.” This is consistent with how we manage our risk, and we believe it provides the best indication of the basis for the valuation of our portfolio. Since we manage our risk on a portfolio basis rather than contract-by-contract, it is not practicable to determine separately the portion of long-term contracts that is included in each valuation category. We describe the commodities, products, and delivery periods included in each valuation category in detail below.

The amounts for which fair value is determined using prices provided by external sources represent the portion of forward, swap, and option contracts for which price quotations are available through brokers or over-the-counter transactions. The term for which such price information is available varies by commodity, region, and product. The fair values included in this category are the following portions of our contracts:

¨forward and swap purchases and sales of electricity during peak and off-peak hours for delivery terms primarily through 2009, but up to 2011, depending upon the region,

¨options for the purchase and sale of electricity during peak hours for delivery terms through 2008, depending upon the region,

¨forward purchases and sales of electric capacity for delivery terms primarily through 2007, but up to 2008, depending upon the region,

¨forward and swap purchases and sales of natural gas, coal, and oil for delivery terms primarily through 2011, and

¨options for the purchase and sale of natural gas, coal, and oil for delivery terms through 2008.

The remainder of the net mark-to-market energy asset is valued using models. The portion of contracts for which such techniques are used includes standard products for which external prices are not available and customized products that are valued using modeling techniques to determine expected future market prices, contract quantities, or both.

Modeling techniques include estimating the present value of cash flows based upon underlying contractual terms and incorporate, where appropriate, option pricing models and statistical and simulation procedures. Inputs to the models include:

¨observable market prices,

¨estimated market prices in the absence of quoted market prices,

¨the risk-free market discount rate,

¨volatility factors,

¨estimated correlation of energy commodity prices, and

¨expected generation profiles of specific regions.

Additionally, we incorporate counterparty-specific credit quality and factors for market price and volatility uncertainty and other risks in our valuation. The inputs and factors used to determine fair value reflect management’s best estimates.

The electricity, fuel, and other energy contracts we hold have varying terms to maturity, ranging from contracts for delivery the next hour to contracts with terms of ten years or more. Because an active, liquid electricity futures market comparable to that for other commodities has not developed, the majority of contracts used in the wholesale marketing and risk management operation are direct contracts between market participants and are not exchange-traded or financially settling contracts that can be readily liquidated in their entirety through an exchange or other market mechanism. Consequently, we and other market participants generally realize the value of these contracts as cash flows become due or payable under the terms of the contracts rather than through selling or liquidating the contracts themselves.

38

Consistent with our risk management practices, the amounts shown in the table on the previous page as being valued using prices from external sources include the portion of long-term contracts for which we can obtain reliable prices from external sources. The remaining portions of these long-term contracts are shown in the table as being valued using models. In order to realize the entire value of a long-term contract in a single transaction, we would need to sell or assign the entire contract. If we were to sell or assign any of our long-term contracts in their entirety, we may not realize the entire value reflected in the table. However, based upon the nature of the wholesale marketing and risk management operation, we expect to realize the value of these contracts, as well as any contracts we may enter into in the future to manage our risk, over time as the contracts and related hedges settle in accordance with their terms. Generally, we do not expect to realize the value of these contracts and related hedges by selling or assigning the contracts themselves in total.

The fair values in the table represent expected future cash flows based on the level of forward prices and volatility factors as of September 30, 2006 and could change significantly as a result of future changes in these factors. Additionally, because the depth and liquidity of the power markets varies substantially between regions and time periods, the prices used to determine fair value could be affected significantly by the volume of transactions executed.

Management uses its best estimates to determine the fair value of commodity and derivative contracts it holds and sells. These estimates consider various factors including closing exchange and over-the-counter price quotations, time value, volatility factors, and credit exposure. However, future market prices and actual quantities will vary from those used in recording mark-to-market energy assets and liabilities, and it is possible that such variations could be material.

Risk Management Assets and Liabilities

We record derivatives that qualify for designation as hedges under SFAS No. 133 in “Risk management assets and liabilities” in our Consolidated Balance Sheets. Our risk management assets and liabilities consisted of the following:

	September 30, 2006				December 31, 2005
	(In millions)
Current Assets		$	231.2			$	1,244.3
Noncurrent Assets		360.3				626.0
Total Assets		591.5				1,870.3
Current Liabilities		1,120.7				483.5
Noncurrent Liabilities		840.6				1,035.5
Total Liabilities		1,961.3				1,519.0
Net risk management (liability) asset		$	(1,369.8	)		$	351.3

The decrease in our net risk management asset of $1,721.1 million since December 31, 2005 was due primarily to decreases in power prices that reduced the fair value of our cash-flow hedge positions and the settlement of cash-flow hedges during the nine months ended September 30, 2006. A decrease in the fair value of our cash-flow hedges indicates an increase in value of the accrual positions to which these hedges are related.

Other

	Quarter Ended September 30,				Nine Months Ended September 30,
	2006		2005		2006		2005
	(In millions)
Revenues	$	28.1	$	22.8	$	58.5	$	42.3

Our merchant energy business holds up to a 50% voting interest in 24 operating domestic energy projects that consist of electric generation, fuel processing, or fuel handling facilities. Of these 24 projects, 17 are “qualifying facilities” that receive certain exemptions and pricing under the Public Utility Regulatory Policy Act of 1978 based on the facilities’ energy source or the use of a cogeneration process.

We believe the current market conditions for our equity-method investments that own geothermal, coal, hydroelectric, and fuel processing projects provide sufficient positive cash flows to recover our investments. We continuously monitor issues that potentially could impact future profitability of these investments, including environmental and legislative initiatives. We discuss the impact of subsidies from the State of California in more detail in the Merchant Energy Business—Other section in our 2005 Annual Report on Form 10-K.

We discuss certain risks and uncertainties in more detail in the Forward Looking Statements section on page 54 and in Item 1A. Risk Factors section on page 53. However, should future events cause these investments to become uneconomic, our investments in these projects could become impaired under the provisions of APB No. 18.

If our strategy were to change from an intent to hold to an intent to sell for any of our equity-method investments in qualifying facilities or power projects, we would need to adjust their book value to fair value, and that adjustment could be material. If we were to sell these investments in the current market, we may have losses that could be material.

39

Operating Expenses

Our merchant energy business operating expenses increased $99.2 million during the quarter ended September 30, 2006 compared to the same period of 2005 mostly due to an increase at our competitive supply operations totaling $79.8 million primarily related to higher labor and benefit costs and the impact of inflation on other costs.

Our merchant energy business operating expenses increased $239.4 million during the nine months ended September 30, 2006 compared to the same period of 2005 mostly due to an increase of $220.3 million at our competitive supply operations primarily related to higher labor and benefit costs and the impact of inflation on other costs and higher costs of $11.0 million due to an outage at our High Desert facility. These increases in operating expenses were partially offset by lower expenses at our nuclear generating facilities of approximately $15 million mostly due to our productivity initiatives.

Workforce Reduction Costs

During the nine months ended September 30, 2006, our merchant energy business recognized expenses associated with our workforce reduction efforts at our nuclear facilities. We discuss the workforce reduction programs in more detail in the Notes to Consolidated Financial Statements on page 12.

Merger-Related Costs

We discuss costs related to the merger, which has been terminated, with FPL Group in more detail in the Notes to Consolidated Financial Statements on page 12.

Depreciation, Depletion, and Amortization Expense

Merchant energy depreciation, depletion, and amortization expenses increased $10.6 million during the nine months ended September 30, 2006 compared to the same period of 2005 mostly due to an increase of $10.3 million related to our working interests in gas and oil producing properties.

Taxes Other Than Income Taxes

Taxes other than income taxes increased $13.6 million during the nine months ended September 30, 2006 compared to the same period of 2005 mostly due to $8.6 million related to higher gross receipts taxes at our retail competitive supply operation and $2.9 million related to our working interests in gas producing properties.

Regulated Electric Business

Our regulated electric business is discussed in detail in Item 1. Business—Electric Business section of our 2005 Annual Report on Form 10-K.

Results

	Quarter Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
	(In millions)
Revenues	$	649.9		$	626.8		$	1,652.6		$	1,583.4
Electricity purchased for resale expenses	(391.1		)	(362.5		)	(933.8		)	(849.0		)
Operations and maintenance expenses	(89.3		)	(79.6		)	(258.9		)	(235.4		)
Merger-related costs	(0.6		)	—			(2.3		)	—
Depreciation and amortization	(45.6		)	(46.9		)	(137.1		)	(141.1		)
Taxes other than income taxes	(34.7		)	(34.7		)	(101.5		)	(102.2		)
Income from Operations	$	88.6		$	103.1		$	219.0		$	255.7
Net Income	$	42.8		$	51.1		$	96.3		$	120.0
Other Items Included in Operations (after-tax):
Merger-related costs	$	(0.5	)	$	—		$	(2.0	)	$	—

Above amounts include intercompany transactions eliminated in our Consolidated Financial Statements. The Information by Operating Segment section within the Notes to Consolidated Financial Statements on page 15 provides a reconciliation of operating results by segment to our Consolidated Financial Statements.

Net income from the regulated electric business decreased $8.3 million during the quarter ended September 30, 2006 compared to the same period of 2005 mostly because of higher operations and maintenance expenses of $5.9 million after-tax.

Net income from the regulated electric business decreased $23.7 million during the nine months ended September 30, 2006 mostly because of higher operations and maintenance expenses of $14.2 million after-tax and decreased revenue less electricity purchased for resale expenses of $9.4 million after-tax.

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Electric Revenues

The changes in electric revenues in 2006 compared to 2005 were caused by:

	Quarter Ended September 30, 2006 vs. 2005				Nine Months Ended September 30, 2006 vs. 2005
	(In millions)
Distribution volumes		$	(13.6	)		$	(28.2	)
Standard offer service		214.4				270.5
Rate stabilization credits		(174.4		)		(174.4		)
Total change in electric revenues from electric system sales		26.4				67.9
Other		(3.3		)		1.3
Total change in electric revenues		$	23.1			$	69.2

Distribution Volumes

Distribution volumes are the amount of electricity that BGE delivers to customers in its service territory.

The percentage changes in our distribution volumes, by type of customer, in 2006 compared to 2005 were:

	Quarter Ended September 30, 2006 vs. 2005			Nine Months Ended September 30, 2006 vs. 2005
Residential		(6.7	)%		(5.5	)%
Commercial		(1.1	)		(1.2	)
Industrial		(12.1	)		(6.3	)

During the quarter and nine months ended September 30, 2006 compared to the same periods of 2005, we distributed less electricity to residential and commercial customers mostly due to milder weather and decreased usage per customer, partially offset by an increased number of customers. We distributed less electricity to industrial customers mostly due to decreased usage per customer.

Standard Offer Service

BGE provides standard offer service for customers that do not select an alternative generation supplier as discussed in Item 1. Business—Electric Regulatory Matters and Competition section of our 2005 Annual Report on Form 10-K. We discuss the legislation enacted by the Maryland General Assembly related to the residential electric rate stabilization plan in the Regulation by the Maryland PSC section beginning on page 25.

Standard offer service revenues increased during the quarter and nine months ended September 30, 2006 compared to the same periods of 2005 mostly due to an increase to market prices in the standard offer service rates due to the expiration of the residential rate freeze in July 2006, partially offset by lower standard offer service volumes.

Rate Stabilization Credits

As a result of the legislation enacted by the Maryland General Assembly related to the residential electric rate stabilization plan, we are required to defer a portion of the full market rate increase during the eleven month period from July 1, 2006 until May 31, 2007 for recovery in the future. Therefore, the increase in standard offer service revenues is partially offset by rate stabilization credits in order to reduce rates for residential customers from market price to the approved increase of 15% in the enacted legislation.

Electricity Purchased for Resale Expenses

Electricity purchased for resale expenses include the cost of electricity purchased for resale to our standard offer service customers. These costs do not include the cost of electricity purchased by delivery service only customers. The following table summarizes our regulated electricity purchased for resale expenses:

	Quarter Ended September 30,					Nine Months Ended September 30,
	2006			2005		2006			2005
	(In millions)
Actual costs	$	565.5		$	362.5	$	1,108.2		$	849.0
Deferral under rate stabilization plan	(174.4		)	—		(174.4		)	—
Total electricity purchased for resale	$	391.1		$	362.5	$	933.8		$	849.0

In accordance with the rate stabilization plan, we defer the difference between our actual costs of electricity purchased for resale and what we are allowed to bill customers under legislation enacted by the Maryland General Assembly. During the quarter and nine months ended September 30, 2006, we deferred $174.4 million in electricity purchased for resale expenses. These deferred expenses, plus carrying charges, are included in “Regulatory Assets (net)” in our, and BGE’s, Consolidated Balance Sheets. We discuss the legislation enacted by the Maryland General Assembly related to the residential electric rate stabilization plan in the Regulation by the Maryland PSC section beginning on page 25.

Electricity purchased for resale expenses increased $28.6 million in the quarter and $84.8 million in the nine month periods ended September 30, 2006 compared to the same periods of 2005 mostly due to increased costs to serve standard offer service customers partially offset by decreased standard offer service volumes.

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Electric Operations and Maintenance Expenses

Regulated electric operations and maintenance expenses increased $9.7 million in the quarter ended September 30, 2006 compared to the same period of 2005 mostly due to $3.9 million of incremental distribution service restoration expenses associated with 2006 storms, as well as higher labor and benefit costs and the impact of inflation on other costs.

Regulated electric operations and maintenance expenses increased $23.5 million in the nine months ended September 30, 2006 compared to the same period of 2005 mostly due to higher labor and benefit costs and the impact of inflation on other costs and $10.0 million of incremental distribution service restoration expenses associated with 2006 storms.

Merger-Related Costs

We discuss costs related to the merger, which has been terminated, with FPL Group in more detail in the Notes to Consolidated Financial Statements on page 12.

Regulated Gas Business

Our regulated gas business is discussed in detail in Item 1. Business—Gas Business section of our 2005 Annual Report on Form 10-K.

Results

	Quarter Ended September 30,							Nine Months Ended September 30,
	2006				2005			2006			2005
	(In millions)
Gas revenues		$	114.6		$	115.9		$	678.4		$	626.9
Gas purchased for resale expenses		(66.4		)	(72.1		)	(448.6		)	(422.5		)
Operations and maintenance expenses		(34.6		)	(33.1		)	(105.3		)	(97.1		)
Merger-related costs		(0.2		)	—			(1.0		)	—
Depreciation and amortization		(11.6		)	(11.7		)	(35.0		)	(35.5		)
Taxes other than income taxes		(7.4		)	(7.2		)	(24.9		)	(24.5		)
(Loss) Income from operations		$	(5.6	)	$	(8.2	)	$	63.6		$	47.3
Net (Loss) Income		$	(7.3	)	$	(8.6	)	$	26.3		$	17.3
Other Items Included in Operations (after-tax):
Merger-related costs		$	(0.2	)	$	—		$	(0.8	)	$	—

Above amounts include intercompany transactions eliminated in our Consolidated Financial Statements. The Information by Operating Segment section within the Notes to Consolidated Financial Statements on page 15 provides a reconciliation of operating results by segment to our Consolidated Financial Statements.

Net income from the regulated gas business increased $9.0 million during the nine months ended September 30, 2006 compared to the same period of 2005 mostly due to increased revenues less gas purchased for resale expenses of $15.4 million after-tax, which was primarily due to the increase in gas base rates that was approved by the Maryland PSC in December 2005. This increase was partially offset by higher operations and maintenance expenses of $5.0 million after-tax.

42

Gas Revenues

The changes in gas revenues in 2006 compared to 2005 were caused by:

	Quarter Ended September 30, 2006 vs. 2005				Nine Months Ended September 30, 2006 vs. 2005
	(In millions)
Distribution volumes		$	0.3			$	(22.8	)
Base rates		3.4				22.3
Weather normalization		(1.7		)		14.8
Gas cost adjustments		(6.2		)		13.2
Total change in gas revenues from gas system sales		(4.2		)		27.5
Off-system sales		2.9				22.4
Other		—				1.6
Total change in gas revenues		$	(1.3	)		$	51.5

Distribution Volumes

The percentage changes in our distribution volumes, by type of customer, in 2006 compared to 2005 were:

	Quarter Ended September 30, 2006 vs. 2005			Nine Months Ended September 30, 2006 vs. 2005
Residential		0.5	%		(17.0	)%
Commercial		(1.2	)		(15.3	)
Industrial		(5.7	)		9.2

During the quarter ended September 30, 2006 compared to the same period in 2005, we distributed about the same amount of gas to residential customers. We distributed less gas to commercial customers mostly due to decreased usage per customer, partially offset by an increased number of customers. We distributed less gas to industrial customers due to decreased usage per customer.

During the nine months ended September 30, 2006 compared to the same period in 2005, we distributed less gas to residential and commercial customers mostly due to milder weather and decreased usage per customer, partially offset by an increased number of customers. We distributed more gas to industrial customers mostly due to increased usage per customer.

Base Rates

The Maryland PSC issued an order in December 2005 granting BGE an annual increase in its gas base rates of $35.6 million. Certain parties to the proceeding have sought judicial review and Maryland PSC rehearing of the decision. BGE will not seek review of any aspect of the order. We cannot provide assurance that a court will not reverse any aspect of the order or that it will not remand certain issues to the Maryland PSC.

Weather Normalization

The Maryland PSC allows us to record a monthly adjustment to our gas distribution revenues to eliminate the effect of abnormal weather patterns on our gas distribution volumes. This means our monthly gas base rate revenues are based on weather that is considered “normal” for the month and, therefore, are not affected by actual weather conditions.

Gas Cost Adjustments

We charge our gas customers for the natural gas they purchase from us using gas cost adjustment clauses set by the Maryland PSC as described in Note 1 of our 2005 Annual Report on Form 10-K.

Gas cost adjustment revenues decreased during the quarter ended September 30, 2006 compared to the same period of 2005 mostly due to less gas sold.

Gas cost adjustment revenues increased during the nine months ended September 30, 2006 compared to the same period of 2005 because we sold gas at higher prices, partially offset by less gas sold.

Off-System Gas Sales

Off-system gas sales are low-margin direct sales of gas to wholesale suppliers of natural gas outside our service territory. Off-system gas sales, which occur after we have satisfied our customers’ demand, are not subject to gas cost adjustments. The Maryland PSC approved an arrangement for part of the margin from off-system sales to benefit customers (through reduced costs) and the remainder to be retained by BGE (which benefits shareholders). Changes in off-system sales do not significantly impact earnings.

Revenues from off-system gas sales increased during the quarter ended September 30, 2006 compared to the same period of 2005 because we sold more gas, partially offset by lower prices.

Revenues from off-system gas sales increased during the nine months ended September 30, 2006 compared to the same period of 2005 because we sold more gas at higher prices.

Gas Purchased For Resale Expenses

Gas purchased for resale expenses include the cost of gas purchased for resale to our customers and for off-system sales. These costs do not include the cost of gas purchased by delivery service only customers.

Gas purchased for resale expenses decreased $5.7 million during the quarter ended September 30, 2006 compared to the same period of 2005 because we purchased less gas.

Gas costs increased $26.1 million during the nine months ended September 30, 2006 compared to the same period of 2005 because the gas we purchased was at higher prices, partially offset by less gas purchased.

43

Gas Operations and Maintenance Expenses

Regulated gas operations and maintenance expenses increased $8.2 million in the nine months ended September 30, 2006 compared to the same period of 2005 mostly due to higher labor and benefit costs and the impact of inflation on other costs.

Merger-Related Costs

We discuss costs related to the merger, which has been terminated, with FPL Group in more detail in the Notes to Consolidated Financial Statements on page 12.

Other Nonregulated Businesses

Results

	Quarter Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
	(In millions)
Revenues	$	45.5		$	49.3		$	169.3		$	144.4
Operating expense	(31.3		)	(36.7		)	(126.6		)	(109.1		)
Merger-related costs	(0.1		)	—			(0.3		)	—
Depreciation and amortization	(10.6		)	(10.4		)	(28.5		)	(28.2		)
Taxes other than income taxes	(0.2		)	(0.6		)	(1.4		)	(1.4		)
Income from Operations	$	3.3		$	1.6		$	12.5		$	5.7
Income from continuing operations (after-tax)	$	4.1		$	(0.1	)	$	7.9		$	0.3
Income from discontinued operations (after-tax)	—			1.6			0.9			4.5
Net Income	$	4.1		$	1.5		$	8.8		$	4.8
Other Items Included in Operations (after-tax):
Merger-related costs	$	—		$	—		$	(0.2	)	$	—

Above amounts include intercompany transactions eliminated in our Consolidated Financial Statements. The Information by Operating Segment section within the Notes to Consolidated Financial Statements on page 15 provides a reconciliation of operating results by segment to our Consolidated Financial Statements.

As discussed in our 2005 Annual Report on Form 10-K, we decided to sell certain non-core assets and accelerate the exit strategies on other assets that we will continue to hold and own over the next several years. While our intent is to dispose of these assets, market conditions and other events beyond our control may affect the actual sale of these assets. In addition, a future decline in the fair value of these assets could result in losses.

Consolidated Nonoperating Income and Expenses

Other Income

Our other income decreased mostly because of a lower level of interest income earned due to a lower cash balance during the quarter and nine months ended September 30, 2006 compared to the same periods of 2005.

Fixed Charges

Our fixed charges increased mostly because of a higher debt balance, including commercial paper borrowings, and higher interest rates during the quarter and nine months ended September 30, 2006 compared to the same periods of 2005.

Income Taxes

During the quarter ended September 30, 2006, our income taxes increased $89.2 million compared to the same period of 2005 mostly because of a $229.5 million increase in pre-tax income.

During the nine months ended September 30, 2006, our income taxes increased $119.2 million compared to the same period of 2005 mostly because of a $229.3 million  increase in pre-tax income and a $25.4 million decrease in synthetic fuel tax credits claimed. We discuss the phase-out of synthetic fuel tax credits in more detail in the Events of 2006 section beginning on page 28.

During the quarter and nine months ended September 30, 2006, BGE’s income taxes decreased compared to the same periods of 2005 mostly because of lower pre-tax income.

44

Financial Condition

Cash Flows

The following table summarizes our cash flows for 2006 and 2005, excluding the impact of changes in intercompany balances.

	2006 Segment Cash Flows										Consolidated Cash Flows
	Nine Months Ended September 30, 2006										Nine Months Ended September 30,
	Merchant			Regulated				Other			2006			2005
	(In millions)
Operating Activities
Net income	$	400.1			$	122.6		$	8.8		$	531.5		$	427.9
Non-cash adjustments to net income	284.2				73.8			22.7			380.7			542.5
Changes in working capital	(949.5		)		134.1			54.0			(761.4		)	130.1
Pension and postemployment benefits*	—				—			—			35.5			4.0
Other	(32.6		)		(16.1		)	25.5			(23.2		)	(5.2		)
Net cash (used in) provided by operating activities	(297.8		)		314.4			111.0			163.1			1,099.3
Investing activities
Investments in property, plant and equipment	(402.6		)		(225.1		)	(40.3		)	(668.0		)	(476.9		)
Acquisitions, net of cash acquired	(133.5		)		—			—			(133.5		)	(238.1		)
Investments in nuclear decommissioning trust fund securities	(275.0		)		—			—			(275.0		)	(258.7		)
Proceeds from nuclear decommissioning trust fund securities	266.2				—			—			266.2			245.5
Sale of investments and other assets	23.2				0.5			19.8			43.5			1.9
Contract and portfolio acquisitions	(2.3		)		—			—			(2.3		)	(23.7		)
Proceeds from sale of discontinued operations	—				—			—			—			217.6
Issuances of loans receivable	(65.4		)		—			—			(65.4		)	(82.8		)
Other investments	28.1				10.3			(4.6		)	33.8			(28.5		)
Net cash used in investing activities	(561.3		)		(214.3		)	(25.1		)	(800.7		)	(643.7		)
Cash flows from operating activities less cash flows from investing activities	$	(859.1	)		$	100.1		$	85.9		(637.6		)	455.6
Financing Activities*
Net issuance (repayment) of debt											20.5			(328.4		)
Proceeds from issuance of common stock											56.2			66.5
Common stock dividends paid											(195.7		)	(169.1		)
Proceeds from contract and portfolio acquisitions											221.3			403.3
Other											43.0			5.6
Net cash provided by (used in) financing activities											145.3			(22.1		)
Net (Decrease) Increase in Cash and Cash Equivalents											$	(492.3	)	$	433.5

*Items are not allocated to the business segments because they are managed for the company as a whole.

Cash Flows from Operating Activities

Cash provided by operating activities was $163.1 million in 2006 compared to $1,099.3 million in 2005. This $936.2 million decrease was primarily due to unfavorable changes in working capital and a decrease in non-cash adjustments to net income in the first nine months of 2006.

Changes in working capital had a negative impact of $761.4 million on cash flow from operations in 2006 compared to a positive impact of $130.1 million in 2005. The net decrease of $891.5 million was primarily due to the commodity price environment and increased risk management and trading activities that resulted in the following negative working capital changes during the nine months ended September 30, 2006:

¨an increase of approximately $630 million in net cash collateral requirements, including requirements for exchange-settled transactions. This increase in cash collateral requirements was accompanied by a decrease in our letters of credit requirements, and

¨an increase in our net mark-to-market energy asset of approximately $245 million. We discuss the changes in our net mark-to-market energy asset in more detail in the Mark-to-Market Energy Assets and Liabilities section on page 37.

Non-cash adjustments to net income decreased by $161.8 million in 2006 compared to 2005 primarily due to the change in deferred fuel costs of $176.8 million related mostly to the deferred recovery of electricity purchased for resale under the BGE rate stabilization plan. We discuss the rate stabilization plan in more detail in the Notes to Consolidated Financial Statements on page 16.

45

Cash Flows from Investing Activities

Cash used in investing activities was $800.7 million in 2006 compared to $643.7 million in 2005. The $157.0 million increase in cash used in 2006 compared to 2005 was primarily due to a $191.1 million increase in cash paid for investments in property, plant and equipment and the absence in 2006 of $217.6 million of proceeds from the sale of discontinued operations. This increase in cash used in investing activities was partially offset by the following:

¨a $104.6 million decrease in cash paid for acquisitions,

¨an increase of $62.3 million of cash provided by other investing activities,

¨an increase of $41.6 million of cash provided by sales of investments,

¨ a $21.4 million decrease in cash paid for contract and portfolio acquisitions, and

¨a decrease of $17.4 million from issuances of loans receivable.

Cash Flows from Financing Activities

Cash provided by financing activities was $145.3 million in 2006 compared to a use of $22.1 million in 2005. The increase of $167.4 million in cash provided in 2006 compared to 2005 was primarily due to a net increase in cash related to changes in short-term borrowings and long-term debt of $348.9. This increase was partially offset by a decrease of $182.0 million related to proceeds from acquired contracts and higher dividend payments in 2006 compared to 2005 of $26.6 million. We discuss the proceeds from acquired contracts below.

Contract and Portfolio Acquisitions

During 2006 and 2005, our merchant energy business acquired pre-existing energy contracts, which generated significant cash flows at the inception of the agreements. These agreements had contract prices that differed from market prices at closing, which resulted in cash payments from the counterparty at the acquisition of the contract.

We received $219.0 million during the nine months ended September 30, 2006 and $379.6 million during the same period of 2005 for these contract acquisitions. We reflect the underlying contracts on a gross basis as assets or liabilities in our Consolidated Balance Sheets depending on whether they were at above- or below-market prices at closing; therefore, we have also reflected them on a gross basis in cash flows from investing and financing activities in our Consolidated Statements of Cash Flows as follows:

Nine Months Ended September 30,	2006			2005
	(In millions)
Financing activities—proceeds from contract and portfolio acquisitions	$	221.3		$	403.3
Investing activities—contract and portfolio acquisitions	(2.3		)	(23.7		)
Cash flows from contract and portfolio acquisitions	$	219.0		$	379.6

We record the proceeds we receive to acquire energy purchase and sale agreements as a financing cash inflow because it constitutes a prepayment for a portion of the market price of energy, which we will buy or sell over the term of the agreements and does not represent a cash inflow from current period operating activities. For those acquired contracts that are derivatives, we record the ongoing cash flows related to the contract as financing cash flows in accordance with SFAS No. 149.

Security Ratings

Independent credit-rating agencies rate Constellation Energy’s and BGE’s fixed-income securities. The ratings indicate the agencies’ assessment of each company’s ability to pay interest, distributions, dividends, and principal on these securities. These ratings affect how much it will cost each company to sell these securities; the better the rating, the lower the cost of the securities to each company when they sell them.

The factors that credit rating agencies consider in establishing Constellation Energy’s and BGE’s credit ratings include, but are not limited to, cash flows, liquidity, business risk profile, regulatory and legislative climate, and the amount of debt as a component of total capitalization.

In April 2006, as a result of regulatory and legislative developments in Maryland, Standard & Poor’s Rating Group, Moody’s Investors Service, and Fitch Ratings reviewed our ratings and took the following actions:

¨Fitch Ratings downgraded Constellation Energy’s Senior Unsecured Debt rating from A- to BBB+, downgraded BGE’s Senior Unsecured Debt ratings from A to A-, and reduced certain other credit ratings as noted in the table on the next page.

¨Fitch Ratings changed Constellation Energy’s outlook to “evolving” and BGE’s outlook to “negative.”

46

¨Moody’s Investor Service downgraded BGE’s Senior Unsecured Debt rating from A2 to A3, reduced certain other credit ratings. In July 2006, Moody’s Investor Service made further changes in BGE and CEG’s credit ratings and outlook as discussed below.

¨Moody’s Investor Service revised Constellation Energy’s rating outlook from “positive” to “developing.”

¨Standard & Poor’s Ratings Group placed the ratings of Constellation Energy and BGE on “credit watch developing” from “positive.”

In July 2006, Moody’s Investors Service completed a review of BGE’s rating and took the following actions:

¨downgraded BGE’s senior unsecured debt from A3 to Baa2, and

¨changed Constellation Energy’s outlook to “negative” from “developing.”

These actions were a result of the Maryland General Assembly actions and a difficult and uncertain regulatory environment. We discuss the Maryland General Assembly actions in more detail in the Regulation by the Maryland PSC section beginning on page 25.

In September 2006, Standard & Poor’s Ratings Group completed its annual review of Constellation Energy and BGE. Standard & Poor’s Ratings Group revised its outlook for Constellation Energy’s and BGE’s senior unsecured debt to “positive” from “developing.” Standard & Poor’s Ratings Group also raised Constellation Energy’s senior unsecured debt rating to BBB+ from BBB.

In connection with the announcement of the agreement to terminate the merger with FPL Group, the rating agencies took the following actions:

¨Standard & Poor’s Ratings Group reaffirmed Constellation Energy’s and BGE’s credit ratings and revised its outlook on Constellation Energy and BGE to “negative” from “positive.”

¨Moody’s Investor Service reaffirmed Constellation Energy’s and BGE’s credit ratings and outlook.

¨Fitch—Ratings reaffirmed Constellation Energy’s and BGE’s credit ratings and changed its outlook on Constellation Energy to “stable” from “evolving.”

At the date of this report, our credit ratings were as follows:

	Standard & Poor’s Rating Group			Moody’s Investors Service		Fitch- Ratings
Constellation Energy
Commercial Paper		A-2			P-2		F-2
Senior Unsecured Debt		BBB+	*		Baa1		BBB+	*
BGE
Commercial Paper		A-2			P-2*		F-2*
Mortgage Bonds		A			A2*		A*
Senior Unsecured Debt		BBB+			Baa2*		A-*
Trust Preferred Securities		BBB-			Baa1*		BBB+	*
Preference Stock		BBB-			Baa2*		BBB+	*

* In 2006, these credit ratings were adjusted to this current rating.

Available Sources of Funding

We continuously monitor our liquidity requirements and believe that our facilities and access to the capital markets provide sufficient liquidity to meet our business requirements. We discuss our available sources of funding in more detail below.

Constellation Energy

At September 30, 2006, we had $185.0 million of commercial paper outstanding, and at November 3, 2006 we had no commercial paper outstanding.

Constellation Energy has committed bank lines of credit under four credit facilities of $3.6 billion at September 30, 2006. We discuss these credit facilities in more detail in Note 8 of our 2005 Annual Report on Form 10-K. These facilities can issue letters of credit up to $3.6 billion. Letters of credit issued under all of our facilities totaled $1.8 billion at September 30, 2006.

In October 2006, Constellation Energy activated a $1.0 billion 364-day credit agreement expiring October 23, 2007. We can borrow up to $1 billion directly from the banks or use the agreements to issue letters of credit up to $500.0 million. As a result, Constellation Energy has committed bank lines of credit under five credit facilities of $4.6 billion as of November 7, 2006.

We have executed an agreement to sell six gas-fired generating facilities. We expect the sale to close by the end of 2006 or the first quarter of 2007 and expect to receive approximately  $1.5 billion in cash after tax payments. The proceeds from the sale are expected to be applied to reduce debt and invest in our business or repurchase equity. We discuss this sale in more detail in the Notes to Consolidated Financial Statements on page 11.

47

BGE

BGE currently maintains $175.0 million in annual committed credit facilities expiring May 2007 through September 2007. BGE can borrow directly from the banks or use the facilities to allow commercial paper to be issued. As of September 30, 2006, BGE had no outstanding commercial paper, which results in $175.0 million in unused credit facilities.

In October 2006, BGE issued $300.0 million of 5.90% Senior Unsecured Notes, due October 1, 2016 and $400.0 million of 6.35% Senior Unsecured Notes, due October 1, 2036. We expect that the proceeds from these issuances will be used for general corporate purposes, including refinancing the following long-term debt of BGE:

¨$300.0 million of 5.25% Notes, due December 15, 2006,

¨$122.0 million of 7.5% First Refunding Mortgage Bonds, due January 15, 2007, and

¨$10.0 million of 6.70% Medium-term Notes, Series D, due December 1, 2006.

Pursuant to Senate Bill 1, the energy legislation adopted by the Maryland legislature, BGE is permitted to recover deferred costs associated with the residential electric rate deferral by issuing rate stabilization bonds after January 1, 2007 that securitize the deferred costs. We discuss Senate Bill 1 in more detail in the Regulation by the Maryland PSC section on page 25. We currently intend to issue such bonds and in November 2006, BGE filed an application with the Maryland PSC requesting approval to issue bonds in an aggregate principal amount of approximately $635 million, subject to adjustment.

Capital Resources

Our estimated annual amounts for the years 2006 and 2007 are shown in the table below.

We will continue to have cash requirements for:

¨working capital needs,

¨payments of interest, distributions, and dividends,

¨capital expenditures, and

¨the retirement of debt and redemption of preference stock.

Capital requirements for 2006 and 2007 include estimates of spending for existing and anticipated projects. We continuously review and modify those estimates. Actual requirements may vary from the estimates included in the table below because of a number of factors including:

¨regulation, legislation, and competition,

¨BGE load requirements,

¨environmental protection standards,

¨the type and number of projects selected for construction or acquisition,

¨the effect of market conditions on those projects,

¨the cost and availability of capital,

¨the availability of cash from operations, and

¨business decisions to invest in capital projects.

Our estimates are also subject to additional factors. Please see the Forward Looking Statements section on page 54 and Item 1A. Risk Factors section on page 53. We discuss legislation recently enacted by the State of Maryland and its impact on our capital expenditure estimates in the Environmental Matters section beginning on page 27.

Calendar Year Estimates	2006		2007
	(In millions)
Nonregulated Capital Requirements:
Merchant energy
Generation plants	$	205	$	170
Nuclear fuel	140		140
Environmental controls	20		215
Portfolio acquisitions/investments	365		195
Technology/other	165		155
Total merchant energy capital requirements	895		875
Other nonregulated capital requirements	25		10
Total nonregulated capital requirements	920		885
Regulated Capital Requirements:
Regulated electric	285		335
Regulated gas	65		110
Total regulated capital requirements	350		445
Total capital requirements	$	1,270	$	1,330

Capital Requirements

Merchant Energy Business

Our merchant energy business’ capital requirements consist of its continuing requirements, including expenditures for:

¨improvements to generating plants,

¨nuclear fuel costs,

¨costs of complying with the Environmental Protection Agency (EPA), Maryland, and Pennsylvania environmental regulations,

¨portfolio acquisitions, upstream gas investments, and other investments, and

¨enhancements to our information technology infrastructure.

Regulated Electric and Gas

Regulated electric and gas construction expenditures primarily include new business construction needs and improvements to existing facilities, including projects to improve reliability.

Funding for Capital Requirements

We discuss our funding for capital requirements in our 2005 Annual Report on Form 10-K.

Contractual Payment Obligations and Committed Amounts

We enter into various agreements that result in contractual payment obligations in connection with our business activities. These obligations primarily relate to our financing arrangements (such as long-term debt, preference stock, and operating leases), purchases of capacity and energy to support the growth in our merchant energy business activities, and purchases of fuel and transportation to satisfy the fuel requirements of our power generating facilities.

48

Our total contractual payment obligations as of September 30, 2006, increased approximately $445 million during the first nine months of 2006 primarily due to an increase in fuel and transportation obligations and operating leases, partially offset by a decrease in long-term debt and purchased capacity and energy. Our fuel and transportation obligations and operating leases increased mostly due to new coal and power purchase contracts related to our merchant energy business. We detail our contractual payment obligations in the following table:

					Payments
	2006		2007- 2008		2009- 2010			There- after		Total
	(In millions)
Contractual Payment Obligations
Long-term debt:1
Nonregulated
Principal	$	5.4	$	627.5		$	501.5	$	2,246.1	$	3,380.5
Interest	54.3		364.0			313.6		1,455.5		2,187.4
Total	59.7		991.5			815.1		3,701.6		5,567.9
BGE
Principal	310.0		416.0			11.5		589.2		1,326.7
Interest	19.3		97.5			71.2		775.1		963.1
Total	329.3		513.5			82.7		1,364.3		2,289.8
BGE preference stock	—		—			—		190.0		190.0
Operating leases2	49.6		340.2			171.8		552.3		1,113.9
Purchase obligations:3
Purchased capacity and energy4	133.3		726.2			453.0		558.4		1,870.9
Fuel and transportation	730.2		2,833.3			780.5		1,068.7		5,412.7
Other	67.8		147.0			59.5		128.7		403.0
Other noncurrent liabilities:
Postretirement and postemploy-ment benefits5	6.4		75.7			86.4		226.8		395.3
Other	—		—			—		—		—
Total contractual payment obligations	$	1,376.3	$	5,627.4		$	2,449.0	$	7,790.8	$	17,243.5

1    Amounts in long-term debt reflect the original maturity date. Investors may require us to repay $282.3 million early through put options and remarketing features. Interest on variable rate debt is included based on the September 30, 2006 forward curve for interest rates.

2    Our operating lease commitments include future payment obligations under certain power purchase agreements as discussed further in Note 11 of our 2005 Annual Report on Form 10-K.

3    Contracts to purchase goods or services that specify all significant terms. Amounts related to certain purchase obligations are based on future purchase expectations which may differ from actual purchases.

4    Our contractual obligations for purchased capacity and energy are shown on a gross basis for certain transactions, including both the fixed payment portions of tolling contracts and estimated variable payments under unit-contingent power purchase agreements.

5    Amounts related to postretirement and postemployment benefits are for unfunded plans and reflect present value amounts consistent with the determination of the related liabilities recorded on the Consolidated Balance Sheets.

The table below presents our contingent obligations. Our contingent obligations increased approximately $840 million during the first nine months of 2006, primarily due to guarantees by the parent company for subsidiary obligations to third parties in support of the growth of our merchant energy business, partially offset by a decrease in outstanding letters of credit.

These amounts do not represent incremental consolidated Constellation Energy obligations; rather, they primarily represent parental guarantees of certain subsidiary obligations to third parties. Our calculation of the fair value of subsidiary obligations covered by the $9,734.4 million of the competitive supply guarantees was $3,114.9 million at September 30, 2006. Accordingly, if the parent company was required to fund subsidiary obligations, the total amount based on September 30, 2006 market prices would be $3,114.9 million.

	Expiration
	2006		2007- 2008		2009- 2010		There- after		Total
	(In millions)
Contingent Obligations
Letters of credit	$	1,236.2	$	598.4	$	—	$	—	$	1,834.6
Guarantees—competitive supply1	3,873.6		3,254.5		342.4		2,263.9		9,734.4
Other guarantees, net2	0.6		15.2		1.4		1,264.8		1,282.0
Total contingent obligations	$	5,110.4	$	3,868.1	$	343.8	$	3,528.7	$	12,851.0

1    While the face amount of these guarantees is $9,734.4 million, we do not expect to fund the full amount. In the event the parent was required to fulfill subsidiary obligations, our calculation of the fair value of obligations covered by these guarantees was $3,114.9 million at September 30, 2006.

2    Other guarantees in the above table are shown net of liabilities of $25.0 million recorded at September 30, 2006 in our Consolidated Balance Sheets.

Liquidity Provisions

In many cases, customers of our wholesale marketing and risk management operation rely on the creditworthiness of Constellation Energy. A decline below investment grade by Constellation Energy would negatively impact the business prospects of that operation.

We regularly review our liquidity needs to ensure that we have adequate facilities available to meet collateral requirements. This includes having liquidity available to meet margin requirements for our competitive supply operations.

We have certain agreements that contain provisions that would require additional collateral upon significant credit rating decreases in senior unsecured debt of Constellation Energy. Decreases in Constellation Energy’s credit ratings would not trigger an early payment on any of our credit facilities.

Under counterparty contracts related to our wholesale marketing and risk management operation, we are obligated to post collateral if Constellation Energy’s senior unsecured credit ratings declined below established contractual levels. Based on contractual provisions at September 30, 2006, we

49

estimate that if Constellation Energy’s senior unsecured debt were downgraded we would have the following additional collateral obligations:

Credit Ratings Downgraded to	Level Below Current Rating		Incremental Obligations			Cumulative Incremental Obligations
	(In millions)
BBB/Baa2		1		$	—		$	—
BBB-/Baa3		2		542			542
Below investment grade		3		282			824

Based on market conditions and contractual obligations at the time of a downgrade, we could be required to post collateral in an amount that could exceed the amounts specified above, which could be material. We discuss our credit ratings in the Security Ratings section beginning on page 46 and our credit facilities in the Available Sources of Funding section beginning on page 47.

Certain credit facilities of Constellation Energy contain a provision requiring Constellation Energy to maintain a ratio of debt to capitalization equal to or less than 65%. At September 30, 2006, the debt to capitalization ratio as defined in the credit agreements was 49%. The failure by Constellation Energy to comply with these provisions could result in the acceleration of the maturity of the debt outstanding under these facilities, which is primarily letters of credit issued in support of our competitive supply operations. We detail our letters of credit in the Contractual Payment Obligations and Committed Amounts section on the previous page.

Certain credit facilities of BGE contain provisions requiring BGE to maintain a ratio of debt to capitalization equal to or less than 65%. At September 30, 2006, the debt to capitalization ratio for BGE as defined in these credit agreements was 44%. At September 30, 2006, no amount is outstanding under these facilities.

Off-Balance Sheet Arrangements

We discuss our off-balance sheet arrangements in our 2005 Annual Report on Form 10-K.

Market Risk

Commodity Risk

We measure the sensitivity of our wholesale marketing and risk management mark-to-market energy contracts to potential changes in market prices using value at risk. Value at risk represents the potential pre-tax loss in the fair value of our wholesale marketing and risk management mark-to-market energy assets and liabilities over one and ten-day holding periods. We discuss value at risk in more detail in the Market Risk section of our 2005 Annual Report on Form 10-K.

The table below is the value at risk associated with our wholesale marketing and risk management operation’s mark-to-market energy assets and liabilities, including both trading and non-trading activities. Generally, over the last several quarters, our value at risk has increased. This is the result of the combination of market conditions, increased trading activity including the growth of our gas business, and a higher number of economic hedges of accrual positions. These economic hedges receive mark-to-market accounting treatment as they are derivative contracts that are not designated for either cash-flow hedge or accrual accounting.

During the third quarter of 2006, there was an increase in our value-at-risk primarily due to a higher number of economic hedges of accrual positions. We discuss our mark-to-market results in more detail in the Competitive Supply section beginning on page 35.

	Quarter Ended
	September 30, 2005			December 31, 2005			March 31, 2006			June 30, 2006			September 30, 2006
	(In millions)
99% Confidence Level, One-Day Holding Period
Average		$	6.8		$	10.6		$	15.4		$	13.0		$	18.2
High		12.3			14.5			23.5			17.5			24.2
95% Confidence Level, One-Day Holding Period
Average*		5.2			8.0			11.7			9.9			13.9
High		9.4			11.0			17.9			13.3			18.4
95% Confidence Level, Ten-Day Holding Period
Average		16.4			25.4			37.1			31.2			43.9
High		29.6			34.9			56.5			42.0			58.2

* For 2005, average value at risk was $4.7 million.

The following table details our value at risk for the trading portion of our wholesale marketing and risk management mark-to-market energy assets and liabilities over a one-day holding period at a 99% confidence level for the following quarters:

	Quarter Ended
	September 30, 2005			December 31, 2005			March 31, 2006			June 30, 2006			September 30, 2006
	(In millions)
Average		$	6.5		$	9.3		$	12.0		$	10.8		$	10.0
High		11.4			13.3			17.6			15.6			16.2

Due to the inherent limitations of statistical measures such as value at risk and the seasonality of changes in market prices, the value at risk calculation may not reflect the full extent of our commodity price risk exposure. Additionally, actual changes in the value of options may differ from the value at risk calculated using a linear approximation inherent in our calculation method.

As a result, actual changes in the fair value of mark-to-market energy assets and liabilities could differ from the calculated value at risk, and such changes could have a material impact on our financial results.

50

Wholesale Credit Risk

We actively monitor the credit portfolio of our wholesale marketing and risk management operation to attempt to reduce the impact of counterparty default. As of September 30, 2006 and December 31, 2005, the credit portfolio of our wholesale marketing and risk management operation had the following public credit ratings:

	September 30, 2006			December 31, 2005
Rating
Investment Grade1		62	%		53	%
Non-Investment Grade		4			7
Not Rated		34			40

1 Includes counterparties with an investment grade rating by at least one of the major credit rating agencies. If split rating exists, the lower rating is used.

We utilize internal credit ratings to evaluate the creditworthiness of our wholesale customers, including those companies that do not have public credit ratings. The “Not Rated” category in the table above includes counterparties that do not have public credit ratings and include governmental entities, municipalities, cooperatives, power pools, and other load-serving entities, and marketers for which we determine creditworthiness based on internal credit ratings.

The following table provides the breakdown of the credit quality of our wholesale credit portfolio based on our internal credit ratings.

	September 30, 2006			December 31, 2005
Investment Grade Equivalent		82	%		80	%
Non-Investment Grade		18			20

A portion of our wholesale credit risk is related to transactions that are recorded in our Consolidated Balance Sheets. These transactions primarily consist of open positions from our wholesale marketing and risk management operation that are accounted for using mark-to-market accounting, as well as amounts owed by wholesale counterparties for transactions that settled but have not yet been paid. The following table highlights the credit quality and exposures related to these activities at September 30, 2006:

Rating	Total Exposure Before Credit Collateral			Credit Collateral			Net Exposure			Number of Counterparties Greater than 10% of Net Exposure		Net Exposure of Counterparties Greater than 10% of Net Exposure
	(Dollars in millions)
Investment grade		$	1,194		$	125		$	1,069		—		$	—
Split rating		14			12			2			—		—
Non-investment grade		93			28			65			—		—
Internally rated—investment grade		472			73			399			—		—
Internally rated—non-investment grade		114			2			112			—		—
Total		$	1,887		$	240		$	1,647		—		$	—

Due to the possibility of extreme volatility in the prices of energy commodities and derivatives, the market value of contractual positions with individual counterparties could exceed established credit limits or collateral provided by those counterparties. If such a counterparty were then to fail to perform its obligations under its contract (for example, fail to deliver the electricity our wholesale marketing and risk management operation had contracted for), we could incur a loss that could have a material impact on our financial results.

Additionally, if a counterparty were to default and we were to liquidate all contracts with that entity, our credit loss would include the loss in value of mark-to-market contracts, the amount owed for settled transactions, and additional payments, if any, we would have to make to settle unrealized losses on accrual contracts.

Interest Rate Risk, Retail Credit Risk, Foreign Currency Risk, and Equity Price Risk

We discuss our exposure to interest rate risk, retail credit risk, foreign currency risk, and equity price risk in the Market Risk section of our 2005 Annual Report on Form 10-K.

51

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We discuss the following information related to our market risk:

¨SFAS No. 133 hedging activities section in the Notes to Consolidated Financial Statements beginning on page 21,

¨activities of our wholesale marketing and risk management operation in the Merchant Energy Business section of Management’s Discussion and Analysis beginning on page 31,

¨evaluation of commodity and credit risk in the Market Risk section of Management’s Discussion and Analysis beginning on page 50, and

¨changes to our business environment in the Business Environment section of Management’s Discussion and Analysis beginning on page 25.

Item 4. Controls and Procedures

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Constellation Energy or BGE have been detected. These inherent limitations include errors by personnel in executing controls due to faulty judgment or simple mistakes, which could occur in situations such as when personnel performing controls are new to a job function or when inadequate resources are applied to a process. Additionally, controls can be circumvented by the individual acts of some persons or by collusion of two or more people.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no absolute assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions or personnel, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.Evaluation of Disclosure Controls and Procedures

The principal executive officers and principal financial officer of both Constellation Energy and BGE have evaluated the effectiveness of the disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the fiscal quarter covered by this quarterly report (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, Constellation Energy’s and BGE’s disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

During the quarter ended September 30, 2006, there has been no change in either Constellation Energy’s or BGE’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, either Constellation Energy’s or BGE’s internal control over financial reporting.

52

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We discuss our Legal Proceedings in the Notes to Consolidated Financial Statements beginning on page 20.

Item 1A. Risk Factors

The risk factors included in our 2005 Annual Report on Form 10-K have not materially changed except as set forth below. You should consider carefully the following risks, along with the risks described under Item 1A. Risk Factors in our 2005 Annual Report on Form 10-K. The risks and uncertainties described herein and in our 2005 Annual Report on Form 10-K are not the only ones that may affect us. Additional risks and uncertainties also may adversely affect our business and operations including those discussed in Item 2. Management’s Discussion and Analysis. If any of the events described actually occur, our business and financial results could be materially adversely affected.

Energy and environmental legislation recently adopted in Maryland may be implemented in a manner that could materially adversely affect our business prospects and financial results.

The recent adoption in Maryland of energy legislation was a response to anticipated increases in residential electric rates. The legislation, among other things, introduces a temporary cap on rate increases and requires the Maryland PSC to evaluate the status of Maryland’s deregulated electricity market, including the implications of requiring or allowing utilities to construct or acquire generating facilities, to re-evaluate the allowance for stranded costs under the Maryland Electric Customer Choice and Competition Act of 1999 and to consider adjustments to power plant property taxes. Because the energy legislation is still in the process of being implemented, and in light of recently decided and still pending court cases involving the legislation, we do not know the impact such legislation will have on our business or financial results.

In addition, Maryland has adopted the Healthy Air Act, which will mandate, among other things, more rapid emission reductions by Maryland power generation facilities (including those owned and operated by us) than are required by current federal laws and regulations. This legislation will be implemented through the Clean Power Rule, which we expect to be finalized in the fourth quarter of 2006.

If either the energy or environmental legislation is implemented in a manner adverse to us, our financial results could be negatively impacted.

Item 2. Unregistered Sales of Equity Securities and Use of Proceed

The following table presents shares surrendered by employees to satisfy tax withholding obligations on vested restricted stock.

Period	Total Number of Shares Purchased		Average Price Paid for Shares			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans and Programs
July 1—July 31, 2006		575		$	55.90		—		—
August 1—August 31, 2006		832		57.87			—		—
September 1 - September 30, 2006		1,391		59.54			—		—
Total		2,798		$	58.30		—		—

53

Item 5. Other Information

Forward Looking Statements

We make statements in this report that are considered forward looking statements within the meaning of the Securities Exchange Act of 1934. Sometimes these statements will contain words such as “believes,” “anticipates,” “expects,” “intends,” “plans,” and other similar words. We also disclose non-historical information that represents management’s expectations, which are based on numerous assumptions. These statements and projections are not guarantees of our future performance and are subject to risks, uncertainties, and other important factors that could cause our actual performance or achievements to be materially different from those we project. These risks, uncertainties, and factors include, but are not limited to:

¨the timing and extent of changes in commodity prices and volatilities for energy and energy related products including coal, natural gas, oil, electricity, nuclear fuel, and emission allowances,

¨the liquidity and competitiveness of wholesale markets for energy commodities,

¨the effect of weather and general economic and business conditions on energy supply, demand, and prices,

¨the ability to attract and retain customers in our competitive supply activities and to adequately forecast their energy usage,

¨the timing and extent of deregulation of, and competition in, the energy markets, and the rules and regulations adopted on a transitional basis in those markets,

¨uncertainties associated with estimating natural gas reserves, developing properties, and extracting natural gas,

¨regulatory or legislative developments that affect deregulation, transmission or distribution rates and revenues, demand for energy, or increases in costs, including costs related to nuclear power plants, safety, or environmental compliance,

¨the inability of Baltimore Gas and Electric Company (BGE) to recover all its costs associated with providing electric residential customer service,

¨the conditions of the capital markets, interest rates, availability of credit, liquidity, and general economic conditions, as well as Constellation Energy Group’s (Constellation Energy) and BGE’s ability to maintain their current credit ratings,

¨the effectiveness of Constellation Energy’s and BGE’s risk management policies and procedures and the ability and willingness of our counterparties to satisfy their financial and performance commitments,

¨operational factors affecting commercial operations of our generating facilities (including nuclear facilities) and BGE’s transmission and distribution facilities, including catastrophic weather-related damages, unscheduled outages or repairs, unanticipated changes in fuel costs or availability, unavailability of coal or gas transportation or electric transmission services, workforce issues, terrorism, liabilities associated with catastrophic events, and other events beyond our control,

¨the actual outcome of uncertainties associated with assumptions and estimates using judgment when applying critical accounting policies and preparing financial statements, including factors that are estimated in determining the fair value of energy contracts, such as the ability to obtain market prices and, in the absence of verifiable market prices, the appropriateness of models and model inputs (including, but not limited to, estimated contractual load obligations, unit availability, forward commodity prices, interest rates, correlation and volatility factors),

¨changes in accounting principles or practices,

¨losses on the sale or write down of assets due to impairment events or changes in management intent with regard to either holding or selling certain assets,

¨the ability to successfully identify and complete acquisitions and sales of businesses and assets, and

¨cost and other effects of legal and administrative proceedings that may not be covered by insurance, including environmental liabilities.

Given these uncertainties, you should not place undue reliance on these forward looking statements. Please see the other sections of this report and our other periodic reports filed with the Securities and Exchange Commission for more information on these factors. These forward looking statements represent our estimates and assumptions only as of the date of this report.

Changes may occur after that date, and neither Constellation Energy nor BGE assume responsibility to update these forward looking statements.

54

Item 6. Exhibits

Exhibit No. 2(a)	Purchase and Sale Agreement by and between Constellation Power, Inc. and TPF Generation Holdings, LLC dated as of October 10, 2006.
Exhibit No. 2(b)*	Termination and Release Agreement, dated October 24, 2006, by and among Constellation Energy Group, Inc., FPL Group, Inc. and CF Merger Corporation (Designated as Exhibit 2.1 to the Current Report on Form 8-K dated October 25, 2006, File Nos. 1-12869 and 1-1910.)
Exhibit No. 3(a)	Bylaws of Constellation Energy Group, Inc. as amended to October 20, 2006.
Exhibit No. 4(a)	First Supplemental Indenture between Baltimore Gas and Electric Company and Deutsche Bank Trust Company Americas, as trustee, dated as of October 13, 2006.
Exhibit No. 4(b)	Registration Rights Agreement dated October 13, 2006 among Baltimore Gas and Electric Company and the parties named therein relating to 5.90% Notes due 2016.
Exhibit No. 4(c)	Registration Rights Agreement dated October 13, 2006 among Baltimore Gas and Electric Company and the parties named therein relating to 6.35% Notes due 2036.
Exhibit No. 10(a)	Constellation Energy Group, Inc. Deferred Compensation Plan for Non-Employee Directors, as amended and restated.
Exhibit No. 10(b)	Constellation Energy Group, Inc. Executive Long-Term Incentive Plan, as amended and restated.
Exhibit No. 10(c)	Constellation Energy Group, Inc. 2002 Senior Management Long-Term Incentive Plan, as amended and restated.
Exhibit No. 10(d)	Constellation Energy Group, Inc. Management Long-Term Incentive Plan, as amended and restated.
Exhibit No. 12(a)	Constellation Energy Group, Inc. Computation of Ratio of Earnings to Fixed Charges.
Exhibit No. 12(b)	Baltimore Gas and Electric Company Computation of Ratio of Earnings to Fixed Charges and Computation of Ratio of Earnings to Combined Fixed Charges and Preferred and Preference Dividend Requirements.
Exhibit No. 31(a)	Certification of Chairman of the Board, President, and Chief Executive Officer of Constellation Energy Group, Inc. as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit No. 31(b)	Certification of Executive Vice President, Chief Financial Officer, and Chief Administrative Officer of Constellation Energy Group, Inc. as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit No. 31(c)	Certification of President and Chief Executive Officer of Baltimore Gas and Electric Company as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit No. 31(d)	Certification of Senior Vice President and Chief Financial Officer of Baltimore Gas and Electric Company as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit No. 32(a)	Certification of Chairman of the Board, President, and Chief Executive Officer of Constellation Energy Group, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit No. 32(b)	Certification of Executive Vice President, Chief Financial Officer, and Chief Administrative Officer of Constellation Energy Group, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit No. 32(c)	Certification of President and Chief Executive Officer of Baltimore Gas and Electric Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit No. 32(d)	Certification of Senior Vice President and Chief Financial Officer of Baltimore Gas and Electric Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Incorporated by Reference.

55

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		CONSTELLATION ENERGY GROUP, INC.
		(Registrant)
		BALTIMORE GAS AND ELECTRIC COMPANY
		(Registrant)
Date:	November 9, 2006	/s/ E. Follin Smith
		E. Follin Smith,
		Executive Vice President of Constellation Energy Group, Inc. and Senior Vice President of Baltimore Gas and Electric Company, and as Principal Financial Officer of each Registrant

56

EX-2.(A)

EXHIBIT 2(a)

PURCHASE AND SALE AGREEMENT

by and between

CONSTELLATION POWER, INC.

as Seller,

and

TPF GENERATION HOLDINGS, LLC,

as Buyer

dated as of October 10, 2006

TABLE OF CONTENTS

			Page
ARTICLE I	DEFINITIONS AND CONSTRUCTION		1
Section 1.1		Definitions	1
Section 1.2		Rules of Construction	11
ARTICLE II	PURCHASE AND SALE AND CLOSING		12
Section 2.1		Purchase and Sale	12
Section 2.2		Purchase Price	12
Section 2.3		Closing	13
Section 2.4		Aggregate Net Working Capital Adjustment Amount; Gas Inventory Amount	13
Section 2.5		Allocation of Purchase Price	14
ARTICLE III	REPRESENTATIONS AND WARRANTIES REGARDING SELLER AND PARENT COMPANIES		15
Section 3.1		Organization	15
Section 3.2		Authority	15
Section 3.3		No Conflicts; Consents and Approvals	15
Section 3.4		Capitalization	16
Section 3.5		Legal Proceedings	16
Section 3.6		Business	16
Section 3.7		Brokers	16
Section 3.8		Taxes	17
ARTICLE IV	REPRESENTATIONS AND WARRANTIES REGARDING THE PROJECT COMPANIES		17
Section 4.1		Organization	17
Section 4.2		No Conflicts; Consents and Approvals	17
Section 4.3		Capitalization	18
Section 4.4		Business	18
Section 4.5		Bank Accounts	18
Section 4.6		Subsidiaries	18
Section 4.7		Legal Proceedings	18
Section 4.8		Compliance with Laws and Orders	19
Section 4.9		Liabilities	19
Section 4.10		Taxes	19
Section 4.11		Regulatory Status	20
Section 4.12		Contracts	20
Section 4.13		Real Property	21
Section 4.14		Permits	21
Section 4.15		Environmental Matters	22
Section 4.16		Insurance	23
Section 4.17		Intellectual Property	23
Section 4.18		Brokers	23
Section 4.19		Employees and Labor Matters	23

i

			Page
Section 4.20		Employee Benefits	24
Section 4.21		Absence of Certain Changes	24
ARTICLE V	REPRESENTATIONS AND WARRANTIES OF BUYER		24
Section 5.1		Organization	24
Section 5.2		Authority	25
Section 5.3		No Conflicts	25
Section 5.4		Legal Proceedings	25
Section 5.5		Compliance with Laws and Orders	25
Section 5.6		Brokers	25
Section 5.7		Acquisition as Investment	25
Section 5.8		Financial Resources	26
Section 5.9		No Conflicting Contracts	26
Section 5.10		Opportunity for Independent Investigation	26
Section 5.11		Bankruptcy	26
ARTICLE VI	COVENANTS		27
Section 6.1		Regulatory and Other Approvals	27
Section 6.2		Access of Buyer	27
Section 6.3		Certain Restrictions	28
Section 6.4		Use of Certain Names	30
Section 6.5		Support Obligations	30
Section 6.6		Excluded Items	32
Section 6.7		Employee and Benefit Matters	32
Section 6.8		Termination of Certain Services, Contracts and Other Affiliate Transactions	36
Section 6.9		Spare Parts; Distributions	36
Section 6.10		Insurance	37
Section 6.11		Casualty	37
Section 6.12		Condemnation	38
Section 6.13		Transfer Taxes	38
Section 6.14		Tax Matters	39
Section 6.15		Affiliate Contracts	42
Section 6.16		Appointment of Representatives	42
Section 6.17		Updating	42
Section 6.18		Announcements	43
Section 6.19		Buyer Financing	43
Section 6.20		Further Assurances	43
ARTICLE VII	BUYER’S CONDITIONS TO CLOSING		44
Section 7.1		Representations and Warranties	44
Section 7.2		Performance	44
Section 7.3		Officer’s Certificate	44
Section 7.4		Orders and Laws	44

ii

			Page
Section 7.5		Consents and Approvals	44
Section 7.6		Resignation of Members, Managers, Officers and Directors	44
Section 7.7		Seller Deliverables	44
Section 7.8		Financing	45
ARTICLE VIII	SELLER’S CONDITIONS TO CLOSING		45
Section 8.1		Representations and Warranties	46
Section 8.2		Performance	46
Section 8.3		Officer’s Certificate	46
Section 8.4		Orders and Laws	46
Section 8.5		Consents and Approvals	46
Section 8.6		Release of Support Obligations	46
Section 8.7		Buyer Deliverables	46
ARTICLE IX	TERMINATION		47
Section 9.1		Termination	47
Section 9.2		Effect of Termination	47
Section 9.3		Break-up Fee	47
ARTICLE X	INDEMNIFICATION, LIMITATIONS OF LIABILITY, WAIVERS AND ARBITRATION		48
Section 10.1		Indemnification	48
Section 10.2		Limitations of Liability	49
Section 10.3		Notice; Duty to Mitigate	50
Section 10.4		Indirect Claims	50
Section 10.5		Waiver of Other Representations	50
Section 10.6		Waiver of Remedies	51
Section 10.7		Procedure with Respect to Third-Party Claims	51
Section 10.8		Access to Information	52
ARTICLE XI	MISCELLANEOUS		53
Section 11.1		Notices	53
Section 11.2		Entire Agreement	54
Section 11.3		Expenses	54
Section 11.4		Disclosure	54
Section 11.5		Waiver	54
Section 11.6		Amendment	55
Section 11.7		No Third Party Beneficiary	55
Section 11.8		Assignment; Binding Effect	55
Section 11.9		Headings	55
Section 11.10		Invalid Provisions	55
Section 11.11		Counterparts; Facsimile	55
Section 11.12		Governing Law; Jurisdiction; Waiver of Jury Trial	55
Section 11.13		Attorneys’ Fees	56

iii

EXHIBITS
Exhibit A	-	Form of Membership Interests Assignment Agreement
Exhibit B	-	Form of Assignment and Assumption Agreement
Exhibit C	-	Transition Services Agreement Term Sheet
SCHEDULES
1.1-A		Sample Aggregate Net Working Capital Calculation
1.1-AC		Affiliate Contracts
1.1-D		Designated Commodities Contracts
1.1-K(i)		Knowledge of Seller
1.1-K(ii)		Knowledge of Buyer
1.1-PL		Permitted Liens
3.3(c)		Seller Approvals
3.4		Capitalization
3.8(a) and (b)		Taxes (Parent Companies) – Tax Returns Filed and Paid
3.8(e) and (f)		Taxes (Parent Companies) – Statute of Limitations and Audits
4.2		Company Consents
4.4		Sufficiency of Assets
4.5		Bank Accounts
4.7		Legal Proceedings
4.9		Liabilities
4.10(a) and (b)		Taxes (Project Companies) – Tax Returns Filed and Paid
4.10(e) and (f)		Taxes (Project Companies) – Statute of Limitations, Audits and Legal Proceedings
4.10(i)		Taxes (Project Companies) – Projects Classified as Disregarded Entites for Federal Income Tax Purposes
4.10(j)		Taxes (Project Companies) – Projects Classifed as Partnerships for Federal Income Tax Purposes
4.12		Material Contracts
4.13		Real Property
4.14(a)		Permits
4.14(b)		Alleged Violations
4.15(a)		Environmental Matters – Material Environmental Site Assessments and Material Compliance Audits
4.15(b)		Material Environmental Permits
4.15(c)		Environmental Laws and Permits Material Compliance
4.15(d)		Material Environmental Claims, Actions, Proceedings or Investigations
4.15(e)		Release of any Hazardous Materials at or from Project Properties that would result in a material Environmental Claim
4.15(f)		Emissions Allowances and Credits

iv

4.16	Insurance
4.19	Employee and Labor Matters
5.3	Buyer Approvals
5.9	Conflicts
6.3	Exceptions to Conduct of Business
6.5(a)	Support Obligations
6.6	Excluded Items
6.7(a)	Plant Employees
6.7(b)	Plant Employees to Receive Unvested Pension Payments
6.8	Terminated Contracts

v

PURCHASE AND SALE AGREEMENT

This PURCHASE AND SALE AGREEMENT dated as of October 10, 2006 (this “Agreement”), by and between CONSTELLATION POWER, INC., a Maryland corporation (“Seller”), and a TPF GENERATION HOLDINGS, LLC, a Delaware limited liability company (“Buyer”).

RECITALS

Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, 100% of the stock of and membership interests in the direct or indirect owners of six natural gas-fired power plants, together with certain related companies, all on the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and the agreements in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

ARTICLE I
DEFINITIONS AND CONSTRUCTION

Section 1.1Definitions.  As used in this Agreement, the following capitalized terms have the meanings set forth below:

“1933 Act” has the meaning set forth in Section 5.7.

“Actual Aggregate Net Working Capital Adjustment Amount” has the meaning set forth in Section 2.4(b).

“Actual Gas Inventory Amount” has the meaning set forth in Section 2.4(b).

“Affiliate” means any Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the Person specified. For purposes of this definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether through ownership of voting securities or ownership interests, by contract or otherwise, and specifically with respect to a corporation, partnership or limited liability company, means direct or indirect ownership of more than 50% of the voting securities in such corporation or of the voting interest in a partnership or limited liability company.

“Affiliate Contracts” means, collectively, those contracts listed on Schedule 1.1-AC.

“Aggregate Net Working Capital” means (without duplication) the sum of the net working capital of the Project Companies as determined in accordance with the methodology used in the preparation of the sample calculation of Aggregate Net Working Capital set forth on Schedule 1.1-A, and otherwise in accordance with GAAP as of 12:01 A.M. (Eastern time) on the Closing Date.  In the event the Closing does not occur on the last day of a month, then each item

included in the calculation of Aggregate Net Working Capital shall be prorated to the extent applicable as of the Closing Date by multiplying the amount of each such item for the full calendar month by a fraction, the numerator of which is the number of days elapsed from and including the first day of the month in which the Closing Date occurs to but excluding the Closing Date, and the denominator of which is the total number of days in such month, provided that to the extent items may be determined on a daily basis, such amounts will be allocated on a daily basis.

“Aggregate Net Working Capital Adjustment Amount” means the amount by which the Aggregate Net Working Capital, expressed as a positive or negative number, is greater than or less than zero as of the Closing Date.

“Agreement” has the meaning set forth in the introductory paragraph to this Agreement.

“Assets” of any Person means all assets and properties of every kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible and wherever situated), including the goodwill related thereto, operated, owned or leased by such Person.

“Assigned Contracts” means, collectively, each Affiliate Contract in respect of which the Counterparty thereto has consented to (or for which no consent is required for) the assignment thereof by the Assignor to the Assignee as contemplated by Section 7.7(b).

“Assignee” has the meaning set forth in Section 7.7(b).

“Assignment and Assumption Agreement” has the meaning set forth in Section 7.7(b).

“Assignor” has the meaning set forth in Section 7.7(b).

“Base Purchase Price” has the meaning set forth in Section2.2(a).

“Benefit Plan” means (a) each “employee benefit plan,” as such term is defined in Section 3(3) of ERISA, (b) each plan that would be an “employee benefit plan”, as such term is defined in Section 3(3) of ERISA, if it was subject to ERISA, such as foreign plans and plans for directors, (c) each stock bonus, stock ownership, stock option, stock purchase, stock appreciation rights, phantom stock, or other stock plan (whether qualified or nonqualified), and (d) each bonus or incentive compensation plan.

“Big Sandy Peaker” means Big Sandy Peaker Plant, LLC, a Maryland limited liability company.

“Big Sandy Project” means the approximately 300 megawatt (nominal) natural gas-fired simple-cycle electric generating plant located in Kenova, West Virginia, together with all auxiliary equipment, ancillary and associated facilities and equipment, electrical transformers, pipeline and electrical interconnection and metering facilities (whether owned or leased by Big Sandy Peaker) used for the receipt of fuel and water and the delivery of the electrical output of

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said generating plant, and all other improvements related to the ownership, operation and maintenance of said generating plant and associated equipment.

“Break-up Fee Security” means, at the option of Buyer, (a) cash delivered into escrow pursuant to an escrow agreement and with an escrow agent, in each case reasonably satisfactory to Seller or (b) an irrevocable stand-by letter of credit for the benefit of Seller that is in a form and issued by a bank, in each case reasonably satisfactory to Seller.

“Business” as to any Project Company, means the ownership, lease and/or operation, as applicable, of the respective Project, including the generation and sale of electricity and capacity by such Project Company at or from the Project, the receipt by such Project Company of natural gas and the conduct of other activities by such Project Company related or incidental to the foregoing.

“Business Day” means a day other than Saturday, Sunday or any day on which banks located in the State of Maryland or the State of New York are authorized or required to close.

“Buyer” has the meaning set forth in the introductory paragraph to this Agreement.

“Buyer Approvals” has the meaning set forth in Section 5.3(c).

“Buyer Commitment Letter” means the financing commitment letter from Credit Suisse and Credit Suisse Securities (USA) LLC, dated September 29, 2006, or any other financing commitment reasonably satisfactory to Seller, to provide financing for the Purchase Price.

“Buyer Service Companies” has the meaning set forth in Section 6.7(a).

“CDWR” has the meaning set forth in Section 6.5(b)(ii).

“CDWR Agreement” has the meaning set forth in Section 6.5(b)(ii).

“CEG” means Constellation Energy Group, Inc., a Maryland corporation.

“Charter Documents” means with respect to any Person, the certificate or articles of incorporation or organization and by-laws, the limited partnership agreement, the partnership agreement, the limited liability company agreement or the trust agreement, or such other organizational documents of such Person, including those that are required to be registered or kept in the jurisdiction of incorporation, organization or formation of such Person and which establish the legal personality of such Person.

“Claim” means any demand, claim, action, investigation, legal proceeding (whether at law or in equity) or arbitration.

“Claiming Party” has the meaning set forth in Section 10.7(a).

“Closing” means the consummation of the transactions contemplated by this Agreement.

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“Closing Date” means the date on which Closing occurs.

“Code” means the Internal Revenue Code of 1986.

“Companies” means, collectively, each of the Project Companies, CP High Desert I, CP High Desert II, CP High Desert LP, Rio Nogales I, Rio Nogales II, HE Supply and UP Supply.

“Company Consents” has the meaning set forth in Section 4.2(b).

“Confidentiality Agreement” means that certain Confidentiality Agreement between Buyer and CEG effective June 16, 2006.

“Continued Employee” has the meaning set forth in Section 6.7(b).

“Continuing Support Letter of Credit” has the meaning set forth in Section 6.5(d).

“Continuing Support Obligation” has the meaning set forth in Section 6.5(d).

“Contract” means any written contract, lease, license, evidence of indebtedness, mortgage, indenture, purchase order, binding bid, letter of credit, security agreement or other legally binding arrangement.

“Counterparty” has the meaning set forth in Section 6.15.

“CP High Desert I” means CP High Desert I, Inc., a Maryland corporation.

“CP High Desert II” means CP High Desert II, Inc., a Maryland corporation.

“CP High Desert LP” means CP High Desert Limited Partnership, a Maryland limited partnership.

“Credit Rating” means, with respect to any Person, each rating given to such Person’s long-term unsecured debt obligations by Standard & Poor’s Ratings Group (a division of McGraw Hill, Inc.), Moody’s Investors Services, Inc. or Fitch Ratings, as applicable, and any successors thereto.

“Deductible Amount” has the meaning set forth in Section 10.2(c).

“Designated Commodities Contracts” means each of the contracts listed on Schedule 1.1-D.

“Dollars” and “$” mean United States dollars.

“Environmental Claim” means any claim, loss, cost, expense, liability, fine, penalty or damage arising out of or related to any violation of, or liability under, Environmental Law.

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“Environmental Law” means all applicable Law relating to pollution or protection of public heath and the environment, including, but not limited to the Federal Water Pollution Control Act (33 U.S.C. §1251 et seq.), Resources Conservation and Recovery Act (42 U.S.C. §6901 et. seq.), Safe Drinking Water Act (42 U.S.C. §3000(f) et. seq.), Toxic Substances Control Act (15 U.S.C. §2601 et seq.), Clean Air Act (42 U.S.C. §7401 et. seq.), Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. §9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. §1801, et seq.), the Clean Water Act (33 U.S.C. §1311, et seq.), the Emergency Planning and Community Right-to-Know Act of 1986 (42 U.S.C. §11001, et seq.) and the Occupational Safety and Health Act of 1970 (29 U.S.C. §651, et seq.).

“ERISA” means the Employee Retirement Income Security Act of 1974.

“ERISA Affiliate” means any entity, trade or business that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes Seller, or that is a member of the same “controlled group” as Seller pursuant to Section 4001(a)(14) of ERISA; provided, however, that the Project Companies shall not be considered to be ERISA Affiliates from and after the Closing Date.

“Estimated Aggregate Net Working Capital Adjustment Amount” has the meaning set forth in Section 2.4(a).

“Estimated Gas Inventory Amount” has the meaning set forth in Section 2.4(a).

“Excluded Contracts” has the meaning set forth in Section 6.8.

“Excluded Items” has the meaning set forth in Section 6.6.

“FERC” means the Federal Energy Regulatory Commission.

“GAAP” means generally accepted accounting principles in the United States of America, applied on a consistent basis.

“Gas Inventory Amount” means the value of the physical gas inventory as of the Closing Date determined in accordance with Schedule 1.1-A.

“GE LTSA” means the Long Term Service Agreement between General Electric International, Inc. and Seller, to the extent the same relates to a Project.

“Governmental Authority” means any court, tribunal, arbitrator, authority, agency, commission, legislative body, official or other instrumentality of the United States or any state, county, city or other political subdivision or similar governing entity, and including any governmental, quasi–governmental or non-governmental body administering, regulating or having general oversight over gas, electricity, power or other markets.

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“Hazardous Material” means and includes each substance designated as a hazardous waste, hazardous substance, hazardous material, pollutant, contaminant or toxic substance under any Environmental Law and any petroleum or petroleum products that have been released into the environment in concentrations or locations for which remedial action is required under any applicable Environmental Law.

“HE Supply” means HE Supply Company, LLC, a Maryland limited liability company.

“High Desert Power” means High Desert Power Project, LLC, a California limited liability company.

“High Desert Power Trust” means High Desert Power Trust, a Delaware trust.

“High Desert Project” means the approximately 830 megawatt (nominal) natural gas-fired combined-cycle electric generating plant located in Victorville, California, together with all auxiliary equipment, ancillary and associated facilities and equipment, electrical transformers, pipeline and electrical interconnection and metering facilities (whether owned or leased by High Desert Power or High Desert Power Trust) used for the receipt of fuel and water and the delivery of the electrical output of said generating plant, and all other improvements related to the ownership, operation and maintenance of said generating plant and associated equipment.

“Holland Energy” means Holland Energy, LLC, a Maryland limited liability company.

“Holland Project” means the approximately 665 megawatt (nominal) natural gas-fired combined-cycle electric generating plant located in Beecher City, Illinois, together with all auxiliary equipment, ancillary and associated facilities and equipment, electrical transformers, pipeline and electrical interconnection and metering facilities (whether owned or leased by Holland Energy) used for the receipt of fuel and water and the delivery of the electrical output of said generating plant, and all other improvements related to the ownership, operation and maintenance of said generating plant and associated equipment.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

“Intellectual Property” means the following intellectual property rights, both statutory and common law rights, if applicable: (a) copyrights, registrations and applications for registration thereof, (b) trademarks, service marks, trade names, slogans, domain names, business names, logos, trade dress, and registrations and applications for registrations thereof, (c) patents, as well as any reissued and reexamined patents and extensions corresponding to the patents, and any patent applications, as well as any related continuation, continuation in part and divisional applications and patents issuing therefrom and (d) trade secrets and confidential information, including ideas, designs, concepts, compilations of information, methods, techniques, procedures, processes and other know-how, whether or not patentable.

“Interim Period” has the meaning set forth in Section 6.1.

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“Investment Grade” means a Credit Rating of at least “BBB-” from Standard & Poor’s Ratings Group (a division of McGraw Hill, Inc.), at least “Baa3” from Moody’s Investors Services, Inc., and at least “BBB-” from Fitch Ratings.

“Knowledge” when used (i) in a particular representation and warranty in this Agreement with respect to Seller, means the actual knowledge (as opposed to any constructive or imputed knowledge) of the individuals listed on Schedule 1.1-K(i), without any duty of inquiry, and (ii) in Section 6.17 with respect to Buyer, means the actual knowledge (as opposed to any constructive or imputed knowledge) of the individuals listed on Schedule 1.1-K(ii), without any duty of inquiry.

“Laws” means all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of any Governmental Authority.

“Lien” means any mortgage, pledge, assessment, security interest, lien or other encumbrance on property.

“Loss” means any and all judgments, losses, liabilities, amounts paid in settlement, damages, fines, penalties, deficiencies, losses and expenses (including interest, court costs, reasonable fees of attorneys, accountants and other experts or other reasonable expenses of litigation or other proceedings or of any claim, default or assessment), but only to the extent such losses are not covered by a payment from some third party or by insurance or otherwise recoverable from third parties and are net of any associated benefits arising in connection with such loss, including any associated tax benefits.  For all purposes in this Agreement the term “Losses” does not include any Non-reimbursable Damages.

“Material Adverse Effect” means a material adverse effect on (i) the business, operations, properties or condition (financial or otherwise) of any of the Companies or (ii) the ability of Seller to consummate the transactions contemplated by this Agreement; provided, however, that in determining whether a Material Adverse Effect has occurred, there shall not be taken into account any effect resulting from (a) any change in economic conditions generally or in the industry in which a Project Company operates, (b) any change in general regulatory or political conditions, including any acts of war or terrorist activities, in each case, excluding any such change to the extent that it only or disproportionately affects a specific Project Company, (c) any change in any Laws (including Environmental Laws), (d) the failure of Seller or any Non-Company Affiliate to effect the assignment of any Contract to Buyer, any Project Company, or any Affiliate of Buyer, (e) any increases in the costs of commodities or supplies, including fuel, or decreases in the price of electricity, (f) any change in the financial condition or results of operation of a Project Company caused by the pending sale of such Project Company to Buyer, including changes due to the Credit Rating of Buyer, (g) any actions to be taken pursuant to or in accordance with this Agreement, and (h) the announcement or pendency of the transactions contemplated hereby.

“Material Contracts” has the meaning set forth in Section 4.12 (a).

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“Membership Interests” means 100% of the membership interests of each of Holland Energy, HE Supply, Big Sandy Peaker, University Park Energy, UP Supply and Wolf Hills Energy.

“Membership Interests Assignment Agreement” has the meaning set forth in Section 7.7(a).

“Non-Company Affiliate” means any Affiliate of Seller, except for the Companies.

“Non-reimbursable Damages” has the meaning set forth in Section 10.6(b).

“Parent Company” means each Company that is not a Project Company.

“Parties” means each of Buyer and Seller.

“Permits” means all licenses, permits, certificates of authority, authorizations, approvals, registrations, franchises and similar consents granted by a Governmental Authority.

“Permitted Lien” means (a) any Lien for Taxes not yet due or delinquent or being contested in good faith by appropriate proceedings, (b) any Lien arising in the ordinary course of business by operation of Law with respect to a liability that is not yet due or delinquent or which is being contested in good faith by Seller or a Project Company, (c) all matters that are disclosed (whether or not subsequently deleted or endorsed over) on any survey or in the title policies insuring a Property or any commitments therefor that have been made available to Buyer if copies of the underlying exception documents have been made available to Buyer, (d) imperfections or irregularities of title that would not, individually or in the aggregate, reasonably be expected to adversely affect operations of any of the Projects, (e) zoning, planning, and other similar limitations and restrictions, and all rights of any Governmental Authority to regulate a Property, (f) the terms and conditions of the Material Contracts or the Contracts listed on Schedule 4.12, (g) any Lien to be released on or prior to Closing and (h) the matters identified on Schedule 1.1-PL.

“Person” means any natural person, corporation, general partnership, limited partnership, limited liability company, proprietorship, other business organization, trust, union, association or Governmental Authority.

“Plant Employees” has the meaning set forth in Section 6.7(a).

“Pre-Closing Taxable Period” has the meaning set forth in Section 6.14(a).

“Project” or “Projects” means one or more of the High Desert Project, the Rio Nogales Project, the Holland Project, the Big Sandy Project, the University Park Project and the Wolf Hills Project.

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“Project Company” means each of High Desert Power and High Desert Power Trust, Rio Nogales Power, Holland Energy, Big Sandy Peaker, University Park Energy and Wolf Hills Energy.

“Property” means the real property on which a Project is located, including leasehold interests, easements and rights-of-way appertaining or related thereto.

“Property Taxes” has the meaning set forth in Section 6.14(b).

“Purchase Price” has the meaning set forth in Section 2.2.

“Purchase Price Allocation Schedule” has the meaning set forth in Section 2.5.

“Purchased Assets” means all of the Assets of the Companies.

“Purchased Interests” means, collectively, the Membership Interests and the Shares.

“Release” means any release, spill, emission, migration, leaking, pumping, injection, deposit, disposal or discharge of any Hazardous Materials into the environment, to the extent giving rise to liability under applicable Environmental Laws.

“Representatives” means, as to any Person, its officers, directors, employees, counsel, accountants, financial advisers, insurers, financing sources and consultants.

“Responding Party” has the meaning set forth in Section 10.7(a).

“Rio Nogales I” means Rio Nogales I, Inc., a Maryland corporation.

“Rio Nogales II” means Rio Nogales II, Inc., a Maryland corporation.

“Rio Nogales Power” means Rio Nogales Power Project L.P., a Delaware limited partnership.

“Rio Nogales Project” means the approximately 800 megawatt (nominal) natural gas-fired combined-cycle electric generating plant located in Seguin, Texas, together with all auxiliary equipment, ancillary and associated facilities and equipment, electrical transformers, pipeline and electrical interconnection and metering facilities (whether owned or leased by Rio Nogales Power) used for the receipt of fuel and water and the delivery of the electrical output of said generating plant, and all other improvements related to the ownership, operation and maintenance of said generating plant and associated equipment.

“Schedules” means the disclosure schedules attached to this Agreement.

“Seller” has the meaning set forth in the introductory paragraph to this Agreement.

“Seller Approvals” has the meaning set forth in Section 3.3(c).

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“Seller Marks” has the meaning set forth in Section 6.4.

“Seller Plans” has the meaning set forth in Section 6.7(d).

“Shares” means all of the shares of capital stock of each of CP High Desert I, CP High Desert II, Rio Nogales I and Rio Nogales II.

“Siemens LTMP” means the Program Parts, Shop Repairs, Miscellaneous Hardware and Scheduled Outages Services Contract between High Desert Power and Siemens Power Generation, Inc.

“Straddle Taxable Period” has the meaning set forth in Section 6.14(a).

“Support Obligations” has the meaning set forth in Section 6.5(a).

“Tax” or “Taxes” means any federal, state, local or foreign income, gross receipts, ad valorem, sales and use, employment, social security, disability, occupation, property, severance, value added, transfer, capital stock, excise or other taxes imposed by or on behalf of any Governmental Authority, including any interest, penalty or addition thereto.

“Taxing Authority” means, with respect to any Tax, the Governmental Authority or that imposes such Tax, and the Governmental Authority charged with the collection of such Tax for such entity or subdivision.

“Terminated Contracts” has the meaning set forth in Section 6.8.

“Transfer Taxes” means all transfer, sales, use, goods and services, value added, documentary, stamp duty, gross receipts, excise, transfer and conveyance Taxes and other similar Taxes, duties, fees or charges.

“Transition Services Agreement” means a Transition Services Agreement in a form reasonably acceptable to Seller and Buyer that incorporates the terms set forth in the term sheet attached hereto as Exhibit C.

“University Park Energy” means University Park Energy, LLC, a Maryland limited liability company.

“University Park Project” means the approximately 300 megawatt (nominal) natural gas-fired simple-cycle electric generating plant located in suburban Chicago, Illinois, together with all auxiliary equipment, ancillary and associated facilities and equipment, electrical transformers, pipeline and electrical interconnection and metering facilities (whether owned or leased by University Park Energy) used for the receipt of fuel and water and the delivery of the electrical output of said generating plant, and all other improvements related to the ownership, operation and maintenance of said generating plant and associated equipment.

“UP Supply” means UP Supply, LLC, a Maryland limited liability company.

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“Welfare Benefits” has the meaning set forth in Section 6.7(g).

“Wolf Hills Energy” means Wolf Hills Energy, LLC, a Maryland limited liability company.

“Wolf Hills Project” means the approximately 250 megawatt (nominal) natural gas-fired simple-cycle electric generating plant located in Bristol, Virginia, together with all auxiliary equipment, ancillary and associated facilities and equipment, electrical transformers, pipeline and electrical interconnection and metering facilities (whether owned or leased by Wolf Hills Energy) used for the receipt of fuel and water and the delivery of the electrical output of said generating plant, and all other improvements related to the ownership, operation and maintenance of said generating plant and associated equipment.

Section 1.2Rules of Construction.

(a)All article, section, paragraph, schedules and exhibit references used in this Agreement are to articles, sections, paragraphs, schedules and exhibits to this Agreement unless otherwise specified.  The exhibits and schedules attached to this Agreement constitute a part of this Agreement and are incorporated herein for all purposes.

(b)A term defined as one part of speech (such as a noun) shall have a corresponding meaning when used as another part of speech (such as a verb).  Unless the context of this Agreement clearly requires otherwise words importing the masculine gender shall include the feminine and neutral genders and vice versa.  A term defined in the singular number shall include the correlative plural and vice versa.  The words “includes” or “including” shall mean “including without limitation,” the words “hereof,” “hereby,” “herein,” “hereunder” and similar terms in this Agreement shall refer to this Agreement as a whole and not any particular section or article in which such words appear and unless otherwise specified, any reference to a Law shall include any amendment thereof or any successor thereto and any rules and regulations promulgated thereunder.

(c)Time is of the essence in this Agreement.  Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified. Whenever any action must be taken hereunder on or by a day that is not a Business Day, then such action may be validly taken on or by the next day that is a Business Day.

(d)All accounting terms used herein and not expressly defined herein shall have the meanings given to them under, and all accounting determinations hereunder shall be made in accordance with, GAAP.

(e)Each Party acknowledges that this Agreement was negotiated by it with the benefit of representation by legal counsel, and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any Party shall not apply to any construction or interpretation hereof.

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ARTICLE II
PURCHASE AND SALE AND CLOSING

Section 2.1Purchase and Sale.  On the terms and subject to the conditions set forth in this Agreement:

(a)Seller agrees to sell and convey to Buyer, and Buyer agrees to purchase and accept from Seller, all of the Purchased Interests.

(b)Buyer agrees to assume, or cause an Affiliate of Buyer designated by Buyer to assume, at Closing from each of the Non-Company Affiliates who are party to an Assigned Contract, and Seller agrees to cause such Non-Company Affiliates to assign to Buyer, or to an Affiliate of Buyer designated by Buyer, all of the rights and obligations of such Non-Company Affiliates, as applicable, arising from and after Closing under the Assigned Contracts, in each case, to the extent that such Assigned Contract may be assigned either without the consent of another Person or with the consent of another Person which consent is in full force and effect.

Section 2.2Purchase Price.  The purchase price (the “Purchase Price”) for the Purchased Interests shall be an amount equal to:

(a)$1,635,000,000 (the “Base Purchase Price”); plus

(b)the Aggregate Net Working Capital Adjustment Amount (whether a positive or a negative amount); plus

(c)the Gas Inventory Amount; plus

(d)$15,000,000, if prior to the Closing Date, Seller demonstrates to the reasonable satisfaction of Buyer that the net capacity and net heat rate information for the Holland Project provided in the table “Performance Data” on page 36 of the Confidential Information Memorandum, dated June 2006, and relating to the transactions contemplated by this Agreement, including footnote and other explanatory information, is an accurate representation of actual Holland Project net performance; provided that if such demonstration by Seller is not satisfactory to Buyer, Buyer shall, prior to the Closing Date, provide a reasonably detailed written explanation to Seller as to the basis for such demonstration not being satisfactory to Buyer; minus

(e)the amount, if applicable, by which (i) the value of expensed stock parts and capitalized stock parts in the inventory of the Companies as reflected in the books and records of the Companies on the Closing Date (and, at Buyer’s option, the existence of the inventory (as reflected in the books and records of the Company) may be verified by a physical inventory conducted immediately prior to the Closing Date) plus (ii) the value of any such stock parts used in scheduled outages under the GE LTSA and the Siemens LTMP after August 29, 2006 and prior to the Closing Date, is less than $29,200,000; plus

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(f)if applicable, the amount of any lump sum payments made for planned outages under the GE LTSA subsequent to January 1, 2007 and prior to the Closing.

Section 2.3Closing.  The Closing shall take place at the offices of Paul, Hastings, Janofsky & Walker LLP, 75 East 55th Street, New York, New York at 10:00 A.M. local time, on the third Business Day after the conditions to Closing set forth in Articles VII and VIII (other than actions to be taken or items to be delivered at Closing) have been satisfied or waived, or on such other date and at such other time and place as Buyer and Seller mutually agree in writing.  All actions listed in Section 7.7 or 8.7 that occur on the Closing Date shall be deemed to occur simultaneously at the Closing.  The Closing shall be deemed effective as of 12:01 A.M. (Eastern time) on the Closing Date.

Section 2.4Aggregate Net Working Capital Adjustment Amount; Gas Inventory Amount.

(a)At least five Business Days prior to the Closing Date, Seller will deliver to Buyer a worksheet setting forth Seller’s good faith reasonable estimate of the Aggregate Net Working Capital Adjustment Amount as of the Closing Date (the “Estimated Aggregate Net Working Capital Adjustment Amount”), as well as a computation thereof.  If the Estimated Aggregate Net Working Capital Adjustment Amount is a positive number, the Base Purchase Price payable at Closing will be increased by an amount equal to such Estimated Aggregate Net Working Capital Adjustment Amount.  If the Estimated Aggregate Net Working Capital Adjustment Amount is a negative number, the Base Purchase Price payable at Closing will be decreased by an amount equal to such Estimated Aggregate Net Working Capital Adjustment Amount.  At the same time that Seller delivers the Estimated Aggregate Net Working Capital Adjustment Amount to Buyer, Seller shall also deliver to Buyer Seller’s good faith reasonable estimate of the Gas Inventory Amount as of the Closing Date determined in accordance with Schedule 1.1-A (the “Estimated Gas Inventory Amount”) and the Base Purchase Price payable at Closing will be increased by such Estimated Gas Inventory Amount.

(b)Within 60 days after the Closing, Buyer will prepare and deliver to Seller a computation of the actual Aggregate Net Working Capital Adjustment Amount as of the Closing Date (the “Actual Aggregate Net Working Capital Adjustment Amount”).  If within 60 days following delivery of such computation Seller does not object in writing thereto to Buyer, then the Actual Aggregate Net Working Capital Adjustment Amount shall be as reflected on the computation provided by Buyer pursuant to the immediately preceding sentence.  If within such 60 days Seller objects to Buyer in writing to such computation, then Buyer and Seller shall negotiate in good faith and attempt to resolve their disagreement.  Should such negotiations not result in an agreement within 20 days after receipt by Buyer of such written objection from Seller, then the matter shall be submitted to Grant Thornton LLP (the “Neutral Auditor”).  All fees and expenses relating to the work, if any, to be performed by the Neutral Auditor will be borne equally by Buyer and Seller.  The Neutral Auditor will deliver to Buyer and Seller a written determination of the Actual Aggregate Net Working Capital Adjustment Amount (such determination to include a worksheet setting forth all material calculations used in arriving at such determination and to be based solely on information provided to the Neutral Auditor by

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Buyer and Seller) within 30 days of the submission of the dispute to the Neutral Auditor, which determination will be final, binding and conclusive on the Parties.  If, following the determination of the Actual Aggregate Net Working Capital Adjustment Amount (as agreed between the Parties or as determined by the Neutral Auditor), the Estimated Aggregate Net Working Capital Adjustment Amount less the Actual Aggregate Net Working Capital Adjustment Amount is a positive number, then Seller shall be obligated to pay Buyer a cash payment equal to such excess.  If the Estimated Aggregate Net Working Capital Adjustment Amount less the Actual Aggregate Net Working Capital Adjustment Amount is a negative number, then Buyer shall be obligated to pay Seller a cash payment equal to such deficit.  At the same time that Buyer delivers the Actual Aggregate Net Working Capital Adjustment Amount to Seller, Buyer shall also deliver to Seller a determination of the actual Gas Inventory Amount as of the Closing Date determined in accordance with Schedule 1.1-A (the “Actual Gas Inventory Amount”), together with a computation supporting such determination.  Any objection that Seller may have to Buyer’s determination of the Actual Gas Inventory Amount shall be raised and resolved as provided in this Section 2.4(b) with respect to the Actual Aggregate Net Working Capital Adjustment Amount.  If following the determination of the Actual Gas Inventory Amount (as agreed between the Parties or as determined by the Neutral Auditor), the Estimated Gas Inventory Amount less the Actual Gas Inventory Amount is a positive number, then Seller shall be obligated to pay Buyer a cash payment equal to such excess.  If the Estimated Gas Inventory Amount less the Actual Gas Inventory Amount is a negative number, then Buyer shall be obligated to pay Seller a cash payment equal to such deficit.  Any such net excess or deficit payment in respect of the Actual Aggregate Net Working Capital Adjustment Amount and the Actual Gas Inventory Amount, together with interest thereon at the rate of five percent (5%) per annum from the date of determination through the date of payment, will be due and payable within 15 days after the Actual Aggregate Net Working Capital Adjustment Amount and the Actual Gas Inventory Amount are finally determined as provided in this Section 2.4(b) and will be payable by wire transfer of immediately available funds to such account or accounts as shall be specified by Buyer or Seller, as applicable.

(c)Following the Closing, Seller and Buyer shall cooperate and provide each other and, if applicable the Neutral Auditor, reasonable access to such books, records and employees (including those of the Project Companies) as are reasonably requested in connection with the matters addressed in Section 2.4 (b).

Section 2.5Allocation of Purchase Price.  Buyer shall prepare and provide to the Seller within 60 days after the Closing, a schedule allocating the Purchase Price among the Purchased Assets (the “Purchase Price Allocation Schedule”).  Such schedule shall be prepared in good faith and in accordance with applicable provisions of the Code.  Unless Seller objects to the Buyer’s allocation schedule within 15 days after receipt thereof, such schedule shall become final.  If Seller objects to the Buyer’s allocation within 15 days of receipt, then the parties agree to meet and resolve the dispute in good faith.  Seller and Buyer each shall prepare a mutually acceptable and substantially identical IRS Form 8594 “Asset Acquisition Statement Under Section 1060” consistent with the Purchase Price Allocation Schedule which the Parties shall use to report the transactions contemplated by this Agreement to the applicable Taxing Authorities. 

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Each of Seller and Buyer agrees to provide the other promptly with any other information required to complete Forms 8594.  The Purchase Price Allocation Schedule shall be revised to take into account subsequent adjustments to the Purchase Price, including any indemnification payments (which shall be treated for Tax purposes as adjustments to the Purchase Price), in accordance with the provisions of section 1060 of the Code and the Treasury Regulations thereunder.

ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING SELLER AND PARENT COMPANIES

Except as disclosed in the Schedules (with any disclosure in a Schedule being deemed and understood to be disclosure in each other Schedule to which the applicability of the disclosure is apparent on its face, notwithstanding reference to a specific section or paragraph), Seller hereby represents and warrants to Buyer as follows:

Section 3.1Organization.  Each of Seller and each Parent Company is a corporation, limited liability company or limited partnership, as applicable, duly formed, validly existing and in good standing under the Laws of its jurisdiction of incorporation or formation, as applicable.  Seller is duly qualified or licensed to do business in each other jurisdiction where the obligations to be performed by it hereunder makes such qualification or licensing necessary, except in those jurisdictions where the failure to be so qualified or licensed would not reasonably be expected to result in a material adverse effect on Seller’s ability to perform such obligations hereunder.

Section 3.2Authority.  Seller has all requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.  The execution and delivery by Seller of this Agreement, and the performance by Seller of its obligations hereunder, have been duly and validly authorized by all necessary corporate action.  This Agreement has been duly and validly executed and delivered by Seller and constitutes the legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, arrangement, moratorium or other similar Laws relating to or affecting the rights of creditors generally, or by general equitable principles.

Section 3.3No Conflicts; Consents and Approvals.  The execution and delivery by Seller of this Agreement do not, and the performance by Seller of its obligations under this Agreement will not:

(a)conflict with or result in a violation or breach of any of the terms, conditions or provisions of the Charter Documents of Seller or of any Parent Company;

(b)be in violation of or result in a default (or give rise to any right of termination, cancellation or acceleration) under any material Contract to which Seller or any Parent Company is a party, except for any such violations or defaults (or rights of termination, cancellation or acceleration) which would not, in the aggregate, reasonably be expected to result

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in a material adverse effect on Seller’s ability to perform its obligations hereunder or on the consummation of the transactions contemplated hereby; and

(c)assuming all required filings, waivers, approvals, consents, authorizations and notices set forth on Schedule 3.3(c) (collectively, the “Seller Approvals”), the Company Consents and other notifications provided in the ordinary course of business have been made, obtained or given, (i) conflict with, violate or breach any material term or provision of any Law applicable to Seller, the Parent Companies or any of its or their material Assets or (ii) require any material consent or approval of any Governmental Authority under any applicable Law.

Section 3.4Capitalization.  Schedule 3.4 accurately sets forth the ownership structure of Seller, the Parent Companies and the Project Companies.  Each of Seller and each of the Parent Companies owns, holds of record and is the beneficial owner of the ownership interests shown as being owned by it on Schedule 3.4 free and clear of all Liens, restrictions on transfer or other encumbrances other than those arising pursuant to this Agreement, the Material Contracts (including the limited liability company agreements of the Project Companies) or applicable securities Laws, and, without limiting the generality of the foregoing, none of the Purchased Interests are subject to any voting trust, shareholder agreement or voting agreement other than, as applicable, the limited liability company agreements and limited partnership agreements of the Companies.

Section 3.5Legal Proceedings.  There is no Claim pending or, to Seller’s Knowledge threatened against, Seller, any Parent Company or any Project Company, which seeks a writ, judgment, order or decree restraining, enjoining or otherwise prohibiting or making illegal any of the transactions contemplated by this Agreement.

Section 3.6Business.  No Parent Company (other than HE Supply and UP Supply) conducts or has conducted any business or activity other than its direct or indirect ownership interest of the applicable Project Company, and no Parent Company (other than HE Supply and UP Supply) has any liability that would be required to be reflected as of the date of this Agreement on a balance sheet of such Parent Company prepared in accordance with GAAP.  No Parent Company (other than HE Supply and UP Supply) owns any Assets other than its direct or indirect ownership interest of the applicable Project Company.  The sole business or activity conducted by HE Supply is and has been the purchase of all spare parts for Holland Project and the resale thereof to Holland Energy or Rio Nogales Power.  The sole business or activity of UP Supply is and has been the purchase for resale to University Park Energy of all materials for the construction of the University Park Project.  Neither HE Supply nor UP Supply has any liability, that would be required to be reflected as of the date of this Agreement on a balance sheet of such Company prepared in accordance with GAAP, other than liabilities owed to Affiliates which will be satisfied or eliminated prior to Closing in accordance with Section 6.8.  The Parent Companies do not have and never have had employees or any Benefit Plans.

Section 3.7Brokers.  None of Seller or any Parent Company has any liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement for which Buyer could become liable or obligated.

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Section 3.8Taxes.  Except as set forth on Schedule 3.8 or as would not, in the aggregate, reasonably be expected to result in a Material Adverse Effect: (a) all Tax returns that are required to be filed on or before the Closing Date by each Parent Company have been or will have been duly and timely filed, (b) all such Tax returns are true, correct and complete, (c) all Taxes that are shown to be due on such Tax returns and all other Taxes whether or not shown as due on such Tax returns (including estimated tax payments) that are due and owing have been or will have been timely paid in full or have been or will be adequately reserved, (d) all withholding Tax requirements imposed on the Parent Companies have been satisfied in full in all respects, except for amounts that are being contested in good faith, (e) no Parent Company has in force any waiver of any statute of limitations in respect of Taxes or any extension of time with respect to a Tax assessment or deficiency, (f) there are no pending or active audits or legal proceedings involving Tax matters or, to Seller’s Knowledge, threatened audits or proposed deficiencies or other claims for unpaid Taxes of the Parent Companies, (g) there are no liens for Taxes upon any of the assets of the Parent Companies except liens for current Taxes not yet due and payable, (h) none of the Parent Companies is a party to or has any liability under any tax sharing or tax indemnification agreement, (i) each of HE Supply and UP Supply is, and always has been, classified as an entity disregarded as separate from its owner for federal income tax purposes, (j) CP High Desert LP and Rio Nogales Power are, and always have been, classified as a partnership for federal income tax purposes, and (k) no claim has been made by any Taxing Authority (domestic or foreign) in any jurisdiction where the Parent Companies do not file Tax returns that any such entity (or its owner for Tax purposes in the case of a disregarded entity) may be subject to Tax by that jurisdiction.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING
THE PROJECT COMPANIES

Except as disclosed in the Schedules (with any disclosure in a Schedule being deemed and understood to be disclosure in each other Schedule to which the applicability of the disclosure is apparent on its face, notwithstanding reference to a specific section or paragraph), Seller hereby represents and warrants to Buyer as follows:

Section 4.1Organization.  Each Project Company is a limited liability company, limited partnership or statutory trust, as applicable, duly formed, validly existing and in good standing under the Laws of its jurisdiction of formation, and has all requisite limited liability company, trust or limited partnership, as applicable, power and authority to conduct its business as it is now being conducted and to own, lease and operate its Assets.  Each Project Company is duly qualified or licensed to do business in each jurisdiction in which the ownership or operation of its Assets make such qualification or licensing necessary, except in those jurisdictions where the failure to be so duly qualified or licensed would not reasonably be expected to result in a Material Adverse Effect.

Section 4.2No Conflicts; Consents and Approvals.  The execution and delivery by Seller of this Agreement do not, and the performance by Seller of its obligations hereunder do not and the consummation of the transactions contemplated hereby will not:

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(a)conflict with or result in a violation or breach of any of the terms, conditions or provisions of the Charter Documents of any Project Company;

(b)assuming the consents set forth on Schedule 4.2 (the “Company Consents”) have been obtained, be in violation of or result in a default (or give rise to any right of termination, cancellation or acceleration) under any Material Contract, except for any such violations or defaults (or rights of termination, cancellation or acceleration) which would not, in the aggregate, reasonably be expected to result in a Material Adverse Effect; and

(c)assuming the Seller Approvals, the Company Consents and other notifications provided in the ordinary course of business have been made, obtained or given, (i) conflict with or result in a violation or breach of any material term or provision of any Law applicable to any Project Company or any of its material Purchased Assets or (ii) require any material consent or approval of any Governmental Authority under any applicable Law.

Section 4.3Capitalization.  No Project Company is a party to any written or oral agreement, and no Project Company has granted to any Person any option or any right or privilege capable of becoming an agreement or option, for the purchase, subscription, allotment or issue of any unissued interests, units or other securities (including convertible securities, warrants or convertible obligations of any nature) of any Project Company other than those arising pursuant to the Material Contracts (including the limited liability company agreement, limited partnership agreement or trust agreement, as applicable, of the Project Companies).

Section 4.4Business.  The Business of each Project Company is the only business operation carried on by each such Project Company.  Except as disclosed in Schedule 4.4, the Purchased Assets owned, leased or licensed by each Project Company and the Purchased Assets that each Project Company otherwise has the right to use constitute the tangible Assets that are sufficient to operate its Business as currently operated, except for (a) the Excluded Items and (b) matters that would not, in the aggregate, reasonably be expected to result in a Material Adverse Effect.  Each Project Company has good and marketable title to the Purchased Assets it purports to own, free and clear of any Lien (other than Permitted Liens) and has valid leases, licenses or other rights to use the other Purchased Assets referred to in the prior sentence, subject to the exceptions referred to in the prior sentence.

Section 4.5Bank Accounts.  Schedule 4.5 sets forth an accurate and complete list of the names and locations of banks, trust companies and other financial institutions at which each Project Company maintains accounts of any nature or safe deposit boxes and the names of all Persons authorized to draw thereon, make withdrawals therefrom or have access thereto.

Section 4.6Subsidiaries.  None of the Project Companies have subsidiaries or own equity interests in any Person except as disclosed on Schedule 3.4.

Section 4.7Legal Proceedings.  Except as set forth on Schedule 4.7, there is no Claim pending, or to Seller’s Knowledge threatened against, any Company that (a) affects any Company or the Purchased Assets and would, in the aggregate, reasonably be expected to result

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in a Material Adverse Effect or would reasonably be expected to result in (x) liabilities in excess of $1,000,000 for any Company or (y) other relief that would adversely affect the ability of any Company after the Closing to conduct its operations in the ordinary course consistent with past practice or (b) seeks a writ, judgment, order or decree restraining, enjoining or otherwise prohibiting or making illegal any of the transactions contemplated by this Agreement.  Except as set forth on Schedule 4.7, there are no condemnation or similar proceedings affecting any of the Purchased Assets that are currently pending or, to the Knowledge of Seller, threatened.

Section 4.8Compliance with Laws and Orders.  Each Project Company is in compliance with all Laws and orders applicable to it except where any such non-compliance would not, in the aggregate, reasonably be expected to result in a Material Adverse Effect; provided, however, that this Section 4.8 does not address Taxes, which are exclusively addressed by Section 4.10; Employees and Labor Matters, which are exclusively addressed by Sections 4.19 and 4.20; or Environmental Laws, which are exclusively addressed by Section 4.15.

Section 4.9Liabilities.  As of the date of this Agreement, except for current liabilities or as disclosed in Schedule 4.9, no Project Company has any liability in excess of $100,000 individually (or $1,000,000 in the aggregate as to all Project Companies) that would be required to be reflected as of the date of this Agreement on a balance sheet of such Project Company prepared in accordance with GAAP.

Section 4.10Taxes.  Except as set forth on Schedule 4.10 or as would not, in the aggregate, reasonably be expected to result in a Material Adverse Effect: (a) all Tax returns that are required to be filed on or before the Closing Date by each Project Company have been or will have been duly and timely filed, (b) all such Tax returns are true, correct and complete, (c) all Taxes that are shown to be due on such Tax returns and all other Taxes whether or not shown as due on such Tax returns (including estimated tax payments) that are due and owing have been or will have been timely paid in full or have been or will be adequately reserved, (d) all withholding Tax requirements imposed on the Project Companies have been satisfied in full in all respects, except for amounts that are being contested in good faith, (e) no Project Company has in force any waiver of any statute of limitations in respect of Taxes or any extension of time with respect to a Tax assessment or deficiency, (f) there are no pending or active audits or legal proceedings involving Tax matters or, to Seller’s Knowledge, threatened audits or proposed deficiencies or other claims for unpaid Taxes of the Project Companies, (g) there are no liens for Taxes upon any of the assets of the Project Companies except liens for current Taxes not yet due and payable, (h) none of the Project Companies (A) is a party to or has any liability under any tax sharing or tax indemnification agreement, or (B) has any tax liability for Taxes of any other Person, (i) each of the Project Companies set forth on Schedule 4.10(i) is, and always has been, classified as an entity disregarded as separate from its owner for federal income tax purposes, (j) each of the Project Companies set forth on Schedule 4.10(j) is, and always has been, classified as a partnership for federal income tax purposes, (k) no claim has been made by any Taxing Authority (domestic or foreign) in any jurisdiction where the Project Companies do not file Tax returns that any such entity (or its owner for Tax purposes in the case of a disregarded entity) may be subject to Tax by that jurisdiction, and (l) to Seller’s Knowledge, no claim has been

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made by any Taxing Authority for any Tax purpose that a Project Company should be subject to an entity classification that is different from its entity classification under federal tax laws.

Section 4.11Regulatory Status.  Each Project Company meets the requirements for, and has been determined by FERC to be, an “Exempt Wholesale Generator” within the meaning of the Public Utility Holding Company Act of 2005, as amended.  Each Project Company (other than Rio Nogales Power) has received authorization from FERC to charge market-based rates under a filed tariff in a final and nonappealable order, and each such filed tariff is in compliance in all material respects with FERC regulations and orders.

Section 4.12Contracts.  (a)  Excluding the Terminated Contracts and the Excluded Items, Schedule 4.12 sets forth a list of the following Contracts to which a Project Company is a party or by which the Purchased Assets may be bound (the “Material Contracts”):

(i)Contracts for the future purchase, exchange or sale of gas;

(ii)Contracts for the future purchase, exchange or sale of electric power or ancillary services;

(iii)Contracts for the future transportation of gas;

(iv)Contracts for the future transmission of electric power;

(v)interconnection Contracts;

(vi)other than Contracts of the nature addressed by Section 4.12(a)(i) - (iv), Contracts (A) for the sale of any Asset or (B) that grant a right or option to purchase or sell any Asset, other than in each case Contracts entered into in the ordinary course of business relating to Assets with a value of less than $500,000 individually or $5,000,000 in the aggregate;

(vii)other than Contracts of the nature addressed by Section 4.12(a)(i) - (iv), Contracts for the future receipt of any Assets or services requiring payments in excess of $500,000 for each individual Contract;

(viii)Contracts under which it has created, incurred, assumed or guaranteed any outstanding indebtedness for borrowed money or any capitalized lease obligation, or under which it has imposed a security interest on any of its Assets, tangible or intangible, which security interest secures outstanding indebtedness for borrowed money;

(ix)outstanding agreements of guaranty, surety or indemnification, direct or indirect, by such Project Company;

(x)Contracts with Seller or any Non-Company Affiliate relating to the future provision of goods or services;

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(xi)Contracts for consulting services providing annual compensation in excess of $100,000 and which are not cancelable by such Project Company on notice of 90 days or less;

(xii)outstanding futures, swap, collar, put, call, floor, cap, option or other Contracts that are intended to benefit from or reduce or eliminate the risk of fluctuations in the price of commodities, including electric power, gas or securities;

(xiii)Contracts that purport to limit such Project Company’s freedom to compete in any line of business or in any geographic area;

(xiv)partnership, joint venture or limited liability company agreements; and

(xv)Contracts relating to any material Intellectual Property (other than Excluded Items) or any lease, easement or other use of Property (other than owned Property).

(b)Seller has provided Buyer with, or access to, accurate and complete copies of all Material Contracts and all Assigned Contracts.

(c)Each of the Material Contracts and the Assigned Contracts is in full force and effect in all material respects and constitutes a valid and binding obligation of the Project Company party thereto (or, as to the Assigned Contracts, the Non-Company Affiliate that is a party thereto) and, to Seller’s Knowledge, of the other parties thereto except in each case where the failure to be in full force and effect or constitute a binding obligation would not reasonably be expected to result in a Material Adverse Effect.

(d)(i) No Project Company is in breach or default in any material respect under any Material Contract, (ii) none of the Non-Company Affiliates that is a party to an Assigned Contract is in breach or default in any material respect under such Assigned Contract, and (iii) to Seller’s Knowledge, no other party to any of the Material Contracts or Assigned Contracts is in breach or default in any material respect thereunder.

Section 4.13Real Property.  Each Project Company owns or leases all Property described in the Contracts listed on Schedule 4.13 as being owned or leased by such Project Company, in each case, free and clear of all Liens (except for Permitted Liens) created by, through or under such Project Company, except pursuant to this Agreement and the Contracts listed, and as otherwise noted, on Schedule 4.13.  No other Property that is material to the business or operations of any Project Company is owned, leased or used by any Project Company.

Section 4.14Permits.  (a)   Except as to Environmental Law, which is addressed in Section 4.15, Schedule 4.14(a) sets forth all material Permits held by any of the Project Companies.  The Project Companies hold, and have timely applied for renewal of, all material

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Permits that are required for the ownership, use or operation of the Projects by the Project Companies in the manner in which they are currently owned and operated, and consistent with each Project’s design capacity, except any such Permits relating exclusively to the construction (and not operation) of a Project and any such Permits, the absence of which would not, in the aggregate, reasonably be expected to result in a Material Adverse Effect.  All such Permits are in full force and effect.  There are no proceedings pending or, to Seller’s Knowledge, threatened which might reasonably result in the revocation, suspension, or adverse modification of any such Permits.  Seller has provided Buyer with accurate and complete copies of all Permits set forth in Schedule 4.14(a).

(b)Each Project Company is in compliance with all Permits set forth on Schedule 4.14 as being held by such Project Company, except where any such non-compliance would not, in the aggregate, reasonably be expected to result in a Material Adverse Effect, and neither Seller nor any Company has received any written notification from any Governmental Authority alleging that any Project Company is in material violation of any of such Permits, other than in respect of any allegation that no longer remains pending.

Section 4.15Environmental Matters.  (a)   Schedule 4.15(a) sets forth all material environmental site assessment reports and facility compliance audit reports for the past two years in the possession of Seller or a Project Company that are not subject to a claim of legal privilege by Seller or a Project Company and that relate to environmental matters concerning the operation of a Project or Property.

(b)The Project Companies hold, and have timely applied for renewal of, all material Permits under Environmental Law that are required for the ownership, use or operation of the Projects by the Project Companies in the manner in which they are currently owned and operated and consistent with each Project’s design capacity, except any such Permits relating exclusively to the construction (and not operation) of a Project and any such Permits, the absence of which would not, in the aggregate, reasonably be expected to result in a Material Adverse Effect.  All such Permits under Environmental Law are in full force and effect and are set forth in Schedule 4.15(b).  Seller has provided Buyer with accurate and complete copies of all Permits under Environmental Law set forth in Schedule 4.15(b).

(c)Except as set forth in Schedule 4.15(c), each Project Company and Facility is in compliance in all material respects with all Environmental Laws and Permits under Environmental Law and to Seller’s Knowledge, there are no existing events, conditions, or circumstances that would reasonably be expected to adversely affect the Project Companies ability to comply with Environmental Laws or Permits in the future or increase the cost of such compliance, except as would not reasonably be expected to have a Material Adverse Effect.

(d)Except as set forth in Schedule 4.15(d), no Project Company has been served with notice of any material Environmental Claims, actions, proceedings or investigations that are currently outstanding, and to the Knowledge of Seller, no Environmental Claims are threatened, against a Project Company by any Person under any Environmental Laws.

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(e)Except as set forth in Schedule 4.15(e), since the initial ownership date of each Project by Seller or its Affiliates, there has been no Release of any Hazardous Material at, adjacent to or from a Project to any other location in connection with a Project Company’s operations at such Project that would result in a material Environmental Claim.

(f)Schedule 4.15(f) lists all air pollutant emissions allowances and credits currently allocated for the Projects’ use, and neither Seller nor any of the Project Companies has entered into any contracts or commitments to transfer or sell any such allowances.

Section 4.16Insurance.  Schedule 4.16 sets forth a list of all insurance policies and fidelity bonds covering the Project Companies, the tangible Assets of the Project Companies, the Business of each Project Company and the Plant Employees, other than any such insurance policies and fidelity bonds related to Benefit Plans.  Schedule 4.16 sets forth a list of all pending claims of $500,000 or more under any such policies, and, with respect to such pending claims, coverage has not been denied by the underwriters of such policies and bonds.  All premiums due and payable under such policies and bonds have been paid, and each Project Company is otherwise in material compliance with the terms and conditions of all such policies and bonds.  To the Knowledge of Seller, there is no threatened termination of any of such policies and bonds.

Section 4.17Intellectual Property.

(a)The Project Companies own, or have the licenses or rights to use for their respective Businesses, all material Intellectual Property (other than the Excluded Items) currently used in their respective Businesses.

(b)Neither Seller nor any Company has received from any Person a claim in writing that any Project Company is infringing in any material respect the Intellectual Property of such Person.

Section 4.18Brokers.  The Project Companies have no liability or obligation to pay fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

Section 4.19Employees and Labor Matters.  The Project Companies do not have and have never had any employees.  With respect to Plant Employees and except as described on Schedule 4.19:

(a)no Plant Employees are represented by a union or other collective bargaining entity;

(b)in the past three years, there has not occurred, nor, to Seller’s Knowledge has there been threatened, a labor strike, request for representation, work stoppage or lockout by Plant Employees;

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(c)in the past three years, Seller has not received written notice of any charges before any Governmental Authority responsible for the prevention of unlawful employment practices; and

(d)in the past three years, Seller has not received written notice of any investigation by a Governmental Authority responsible for the enforcement of labor or employment regulations and, to the Knowledge of Seller, no such investigation is threatened.

Section 4.20Employee Benefits.  The Project Companies do not sponsor, maintain or contribute to any Benefit Plan.  With respect to any “employee benefit plan,” within the meaning of Section 3(3) of ERISA, that is sponsored, maintained or contributed to, or has been sponsored, maintained or contributed to within six years prior to the date of this Agreement, by any Project Company, Seller or any ERISA Affiliate, (a) no withdrawal liability, within the meaning of Section 4201 of ERISA, has been incurred, which withdrawal liability has not been satisfied, (b) no liability to the Pension Benefit Guaranty Corporation has been incurred by any such entity, which liability has not been satisfied, (c) no accumulated funding deficiency, whether or not waived, within the meaning of Section 302 of ERISA or Section 412 of the Code has been incurred, (d) all contributions (including installments) to such plan required by Section 302 of ERISA and Section 412 of the Code have been timely made and (e) no condition exists or event or transaction has occurred with respect to any such plan which would reasonably be expected to result in any Project Company incurring any material liability, fine or penalty for which a reserve or accrual has not been established.

Section 4.21Absence of Certain Changes.  From June 30, 2006 to the date of this Agreement, each Company has operated in the ordinary course of business, consistent with past practices.  From June 30, 2006 to the date of this Agreement, there has not been any (a) Material Adverse Effect or (b) event or condition that would reasonably be expected to result in a Material Adverse Effect or prevent or delay Seller from consummating the transactions contemplated by this Agreement.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER

Except as disclosed in the Schedules provided by Buyer (with any disclosure in such a Schedule being deemed and understood to be disclosure in each other such Schedule to which the applicability of the disclosure is apparent on its face, notwithstanding reference to a specific section or paragraph), Buyer hereby represents and warrants to Seller as follows:

Section 5.1Organization.  Buyer is a limited liability company duly formed, validly existing and in good standing under the Laws of Delaware.  Buyer is duly qualified or licensed to do business in each other jurisdiction where the obligations to be performed by it hereunder makes such qualification or licensing necessary, except in those jurisdictions where the failure to be so qualified or licensed would not reasonably be expected to result in a material adverse effect on Buyer’s ability to perform such obligations hereunder.

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Section 5.2Authority.  Buyer has all requisite limited liability company power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.  The execution and delivery by Buyer of this Agreement and the performance by Buyer of its obligations hereunder have been duly and validly authorized by all necessary limited liability company action on behalf of Buyer.  This Agreement has been duly and validly executed and delivered by Buyer and constitutes the legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, arrangement, moratorium or other similar Laws relating to or affecting the rights of creditors generally or by general equitable principles.

Section 5.3No Conflicts.  The execution and delivery by Buyer of this Agreement do not, and the performance by Buyer of its obligations hereunder and the consummation of the transactions contemplated hereby will not:

(a)conflict with or result in a violation or breach of any of the terms, conditions or provisions of its Charter Documents;

(b)be in violation of or result in a default (or give rise to any right of termination, cancellation or acceleration) under any material Contract to which Buyer is a party, except for any such violations or defaults (or rights of termination, cancellation or acceleration) which would not, in the aggregate, reasonably be expected to result in a material adverse effect on Buyer’s ability to perform its obligations hereunder; or

(c)assuming all required filings, waivers, approvals, consents, authorizations and notices set forth in Schedule 5.3 (collectively, the “Buyer Approvals”) have been made, obtained or given, (i) conflict with or result in a violation or breach of any material term or provision of any Law applicable to Buyer or any of its material Assets or (ii) require any material consent or approval of any Governmental Authority under any applicable Law.

Section 5.4Legal Proceedings.  There is no Claim pending or, to Buyer’s knowledge,  threatened against, Buyer which seeks a writ, judgment, order or decree restraining, enjoining or otherwise prohibiting or making illegal any of the transactions contemplated by this Agreement.

Section 5.5Compliance with Laws and Orders.  Buyer is not in violation of or in default under any Law or order applicable to Buyer or its Assets the effect of which, in the aggregate, would reasonably be expected to hinder, prevent or delay Buyer from performing its obligations hereunder.

Section 5.6Brokers.  Buyer does not have any liability or obligation to pay fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement for which Seller could become liable or obligated.

Section 5.7Acquisition as Investment.  Buyer is acquiring the Purchased Interests for its own account as an investment without the present intent to sell, transfer or otherwise

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distribute the same to any other Person.  Buyer has made, independently and without reliance on Seller (except to the extent that Buyer has relied on the express representations and warranties of Seller in this Agreement), its own analysis of the Purchased Interests, the Project Companies, the Projects, the Assigned Contracts and the Purchased Assets for the purpose of acquiring the Purchased Interests, and Buyer has had reasonable and sufficient access to documents, other information and materials as it considers appropriate to make its evaluations.  Buyer acknowledges that the Purchased Interests are not registered pursuant to the Securities Act of 1933 (the “1933 Act”) and that none of the Purchased Interests may be transferred, except pursuant to an applicable exemption under the 1933 Act.  Buyer is an “accredited investor” as defined in Rule 501 promulgated under the 1933 Act.

Section 5.8Financial Resources.  Buyer has commitments for financing so that it will have sufficient cash at Closing to permit it to purchase the Purchased Interests on the terms hereof.  Buyer has furnished to Seller accurate and complete copies of each such commitment, including the Buyer Commitment Letter.

Section 5.9No Conflicting Contracts.  Except as set forth in Schedule 5.9, neither Buyer nor any of its Affiliates is a party to any Contract to build, develop, acquire or operate any power facility, or otherwise owns Assets or is engaged in a business, that would reasonably be expected to hinder or cause a delay in any Governmental Authority’s granting of a Buyer Approval or a Seller Approval, and neither Buyer nor any of its Affiliates has any plans to enter into any such Contract, acquire any such Assets or engage in any such business prior to the Closing Date.

Section 5.10Opportunity for Independent Investigation.  Prior to its execution of this Agreement, Buyer has conducted to its satisfaction an independent investigation and verification of the current condition and affairs of the Project Companies, the Assigned Contracts, the Purchased Assets and the Projects.  In making its decision to execute this Agreement and to purchase the Purchased Interests and assume the Assigned Contracts, Buyer has relied and will rely solely upon the results of such independent investigation and verification and the express representations, warranties, terms and conditions of this Agreement.

Section 5.11Bankruptcy.  There are no bankruptcy, reorganization, or arrangement proceedings pending against, being contemplated by, or to the knowledge of Buyer, threatened against, it.

Section 5.12Buyer Benefits Plans.  As of the date hereof, the Benefit Plans which Buyer Affiliates and Buyer Service Companies sponsor, maintain or provide for employees of Buyer Affiliates and Buyer Service Companies with positions and responsibilities similar to the Plant Employees are, taken as a whole, comparable in all material respects to the Benefit Plans which Seller has advised Buyer are provided by Seller and its Affiliates to the Plant Employees.

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ARTICLE VI
COVENANTS

The Parties hereby covenant and agree as follows:

Section 6.1Regulatory and Other Approvals.  From the date of this Agreement until Closing (the “Interim Period”):

(a)The Parties will, in order to consummate the transactions contemplated hereby, (i) take all commercially reasonable steps necessary, and proceed diligently and in good faith and use all commercially reasonable efforts, as promptly as practicable, to obtain the Seller Approvals, Company Consents and Buyer Approvals in form and substance reasonably satisfactory to Seller and Buyer, and to make all required filings with, and to give all required notices to, the applicable Governmental Authorities and (ii) cooperate in good faith with the applicable Governmental Authorities and provide promptly such other information and communications to such Governmental Authorities or other Persons as such Governmental Authorities or other Persons may reasonably request in connection therewith.

(b)The Parties will provide prompt notification to each other when any such approval referred to in Section 6.1(a) is obtained, taken, made, given or denied, as applicable, and will advise each other of any material communications with any Governmental Authority or other Person regarding any of the transactions contemplated by this Agreement.

(c)In furtherance of the foregoing covenants:

(i)Each Party shall prepare, as soon as is practical following the execution of this Agreement, all necessary filings in connection with the transactions contemplated by this Agreement that may be required by FERC or under the HSR Act or any other federal, state or local Laws.  Each Party shall submit such filings as soon as practicable, but in no event later than 20 days after the execution hereof for filings with the FERC and under the HSR Act.  The Parties shall request expedited treatment of any such filings, shall promptly make any appropriate or necessary subsequent or supplemental filings, and shall cooperate with each other in the preparation of such filings in such manner as is reasonably necessary and appropriate.  The Parties shall consult with each and shall agree in good faith upon the timing of such filings.

(ii)Neither Party shall, and each Party shall cause its Affiliates not to, take any action that could reasonably be expected to adversely affect the approval of any Governmental Authority of any of the aforementioned filings.

Section 6.2Access of Buyer.  (a)  During the Interim Period, Seller will provide, and will cause the Project Companies to provide, Buyer and its Representatives with reasonable access, upon reasonable prior notice (but in no event less than five Business Days’ prior written notice) and during normal business hours, to the Projects and the officers and employees of Seller and its Affiliates who have significant responsibility for one or more Project Companies, but only to the extent that such access does not unreasonably interfere with the business of Seller and its Affiliates or the Businesses of the Project Companies, and that such access is reasonably related to the requesting Party’s obligations and rights hereunder, and subject to compliance with

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applicable Laws; provided, however, that Seller shall have the right to (i) have a Representative present for any communication with employees or officers of Seller or its Affiliates and (ii) impose reasonable restrictions and requirements for safety purposes.  Buyer shall be entitled, at its sole cost and expense, to have the Property surveyed and to conduct non-invasive physical inspections; provided, however, that Buyer shall not be entitled to collect any air, soil, surface water or ground water samples nor to perform any invasive or destructive sampling on the Property.  Promptly upon completion of any such entry, Buyer shall repair any damage caused by such entry.  Any disclosure to Buyer pursuant to the foregoing shall be subject to such disclosure (w) not violating any applicable Laws, (x) not resulting in the waiver of any attorney/client, work product, or like privilege, (y) not being of confidential information concerning the activities of Seller or its Affiliates (other than the Companies) that is unrelated to the Companies, the Business of any Project Company, or the Projects, or (z) not being of proprietary models of Seller or any of its Affiliates pertaining to energy project evaluation, energy or natural gas price curves or projections, or other economic predictive models.

(b)During the Interim Period, in no event shall Buyer or any of Buyer’s Affiliates hold any meetings with, or otherwise communicate with, any suppliers, other vendors or customers of any Company, or any representatives of any Governmental Authority, regarding any Project or Company without the prior consent of Seller (which consent will not be unreasonably withheld or delayed).  At any such meeting consented to by Seller, a Representative of Seller shall be entitled to participate therein.

(c)Buyer agrees to indemnify and hold harmless Seller, its Affiliates and their Representatives for any and all liabilities, losses, costs or expenses incurred by Seller, its Affiliates or their Representatives, or by any of Buyer’s Representatives for any injuries or property damage arising out of the access and other rights under this Section 6.2, caused by any of Buyer’s Representatives while present on the Property.

Section 6.3Certain Restrictions.  Except as required or permitted hereby, or as otherwise set forth in Schedule 6.3, during the Interim Period, Seller will cause the Companies and the Projects to operate in the ordinary course of business.  Without limiting the foregoing, except as otherwise required or permitted hereby or required by applicable Laws or any Material Contract or as consented to by Buyer, which consent shall not be unreasonably withheld, conditioned or delayed (except that this Section 6.3 shall not apply to Excluded Items, Terminated Contracts or services terminated pursuant to Section 6.8), Seller will, during the Interim Period, cause the Companies not to:

(a)permit or allow any Lien (other than a Permitted Lien or any Lien the release of which Seller is pursuing by commercially reasonable efforts) to be imposed on or against any of the Purchased Assets or permit or allow any Lien to be imposed on or against any of the Purchased Interests;

(b)grant any waiver of any material term under, exercise any material option under, or give any material consent with respect to, any Material Contract;

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(c)sell, transfer, convey or otherwise dispose of any material Purchased Assets outside the ordinary course of business;

(d)other than accounts payable incurred in the ordinary course of business or otherwise incurred pursuant to the Material Contracts, the Terminated Contracts or the Excluded Items, incur, create, assume or otherwise become liable for indebtedness for borrowed money or issue any debt securities or assume or guarantee the obligations of any other Person; or incur, assume, create, guarantee or otherwise become liable for any indebtedness for borrowed money or obligations of any other Person, or issue debt securities, under any existing Material Contracts in excess of $500,000, other than short term, unsecured borrowings or intercompany loans or guarantees that are paid in full and discharged prior to the Closing;

(e)except as may be required to meet the requirements of applicable Laws or GAAP, change any accounting method or practice in a manner that is inconsistent with past practice in a way that would reasonably be expected to result in a Material Adverse Effect;

(f)fail to maintain its existence or consolidate or merge with any other Person or acquire all or substantially all of the Assets of any other Person;

(g)issue or sell any equity ownership interests;

(h)liquidate, dissolve, recapitalize, reorganize or otherwise wind up its business or operations;

(i)purchase any securities of any Person, except for short-term investments made in the ordinary course of business;

(j)enter into, terminate or amend (i) any material Permit, (ii) any Material Contract or (iii) any Contract involving total consideration throughout its term in excess of $500,000 (other than Contracts entered into in the ordinary course which will be fully performed prior to Closing), or enter into any new Contract for future transportation of gas, transmission or interconnection of power, or purchase, exchange or sale of electric power or gas that can not be terminated without penalty on or before the Closing Date;

(k)cancel any debts or waive any claims or rights having a value in excess of $1,000,000, individually or in the aggregate;

(l)make any material election with respect to Taxes;

(m)amend or modify its Charter Documents;

(n)purchase any individual item of equipment involving total consideration in excess of $5,000,000;

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(o)enter into any Support Obligations or Affiliate Contracts subject to Section 6.15 if the effect thereof would be to increase Buyer’s obligations under Sections 6.5 or 6.15 by more than $1,000,000;

(p)except for regularly scheduled changes in compensation to employees made in the ordinary course of business consistent with past practice, make any change in the rate of compensation, commission, bonus or other direct or indirect remuneration payable or to become payable to any Plant Employee; or

(q)agree or commit to do any of the foregoing.

Notwithstanding the foregoing, Seller may permit the Project Companies to take commercially reasonable actions with respect to emergency situations so long as Seller shall, upon receipt of notice of any such actions, promptly inform Buyer of any such actions taken outside the ordinary course of business.

Section 6.4Use of Certain Names.  Within 30 days following Closing, Buyer shall cause the Companies to cease using the word “Constellation” and any word or expression similar thereto or constituting an abbreviation or extension thereof, and the CEG logo (the “Seller Marks”), including eliminating or covering the Seller Marks from the Property and Purchased Assets and disposing of any unused stationery and literature of the Companies bearing the Seller Marks, and thereafter, Buyer shall not, and shall cause the Companies and their Affiliates not to, use the Seller Marks or any logos, trademarks, trade names, patents or other Intellectual Property rights belonging to Seller or any Affiliate thereof, and Buyer acknowledges that it, its Affiliates and the Companies have no rights whatsoever to use such Intellectual Property.  Without limiting the foregoing:

(a)Within 10 days after the Closing Date, Buyer shall cause any Company whose name contains any of the Seller Marks to change its name to a name that does not contain any of the Seller Marks.

(b)Within 30 days after the Closing Date, Buyer shall provide evidence that is reasonably acceptable to Seller, that Buyer has made all filings required pursuant to paragraph (a) above with, and has provided notice to, all applicable Governmental Authorities and all counterparties to the Material Contracts regarding the sale of the Project Companies and the Purchased Assets to Buyer and the new addresses for notice purposes.

Section 6.5Support Obligations.  (a)  Buyer recognizes that certain of the Non-Company Affiliates have provided credit support to certain of the Project Companies with respect to the Projects pursuant to certain credit support obligations, all of which that are outstanding as of the date hereof are set forth on Schedule 6.5(a) (the “Support Obligations”).

(b)Prior to Closing, Buyer shall use commercially reasonable efforts to effect the full and unconditional release, effective as of the Closing Date, of the Non-Company Affiliates from all Support Obligations (provided, that with respect to any Support Obligations

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posted or maintained in connection with an Affiliate Contract, the terms of this Section 6.5 shall apply only to such Support Obligations posted or maintained in connection with those Affiliate Contracts that become Assigned Contracts) including by:

(i)subject to Schedule 6.5(a), furnishing a letter of credit to replace each existing letter of credit that is a Support Obligation containing terms and conditions that are substantially identical to the terms and conditions of such existing letter of credit and from lending institutions that have a Credit Rating commensurate with or better than that of lending institutions for such existing letter of credit; and

(ii)in the case of the Amended and Restated High Desert Power Master Power Purchase and Sales Agreement dated April 22, 2002 (the “CDWR Agreement”), between High Desert and the California Department of Water Resources (“CDWR”), if required, (x) furnishing a subordinated mortgage and security agreement as contemplated by Special Condition 9(ii) thereof or (y) as provided in Schedule 6.5(a)(2).

(c)Buyer shall use commercially reasonable efforts to cause the beneficiary or beneficiaries of the Support Obligations to terminate and redeliver to Seller or one of its Affiliates each original copy of each original guaranty, letter of credit or other instrument constituting or evidencing such Support Obligations released or replaced pursuant to Section 6.5(b).

(d) If Buyer is not successful in obtaining the complete and unconditional release of the Non-Company Affiliates from any Support Obligations prior to Closing (each such Support Obligation, until such time as such Support Obligation is released in accordance with this Section 6.5, a “Continuing Support Obligation”), then, subject to Section 6.5(e) and Schedule 6.5(a), Seller or its Affiliates, as applicable, shall keep in place such guaranty, letter of credit or other instrument as is necessary to maintain each Continuing Support Obligations, and Buyer shall deliver to Seller at the Closing in accordance with this Section 6.5 and Schedule 6.5(a) support for Buyer’s obligations pursuant to clause (ii) below (the “Continuing Support Letter of Credit”); provided, however, that notwithstanding the foregoing:

(i)from and after the Closing, Buyer shall continue to use commercially reasonable efforts to obtain the full and unconditional release of the Non-Company Affiliates from each Continuing Support Obligation; and

(ii)Buyer shall not, and shall cause the Project Companies not to, effect any amendments or modifications or any other changes to the contracts or obligations to which any of the Continuing Support Obligations relate, or to otherwise take any action that could increase the liability of the Non-Company Affiliates under any Continuing Support Obligation or extend the stated maturity of any Continuing Support Obligation, without Seller’s prior written consent, which consent shall not be unreasonably withheld or delayed.

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(e)During the Interim Period, Buyer shall have the right to contact and have discussions with each beneficiary of a Support Obligation in order to satisfy its obligations under this Section 6.5; provided, however, that Buyer shall give Seller not less than five Business Days’ prior notice before making any such contact, Seller shall have the right to have one of its Representatives present via telephone or in person, as applicable, during any such contact or discussion, Buyer shall only contact and hold discussions with such beneficiaries through Representatives of Buyer previously approved by Seller, and Buyer shall cause such Representatives to comply with all reasonable procedures and protocols regarding such contacts and discussions that may be established by Seller.

Section 6.6Excluded Items.  Notwithstanding anything in this Agreement to the contrary, Buyer and Seller agree that the Purchased Assets shall exclude those items listed on Schedule 6.6 (the “Excluded Items”), Seller shall retain all benefits and liabilities with respect to the Excluded Items, and Seller shall, prior to the Closing Date, use commercially reasonable efforts to cause theProject Companies to distribute, transfer or assign each Excluded Item to Seller or a Non-Company Affiliate.  Buyer acknowledges that the inability of Seller to have any Excluded Item distributed, transferred or assigned from any Project Company for any reason shall not delay Closing and any Excluded Item that Seller is unable to so distribute, transfer or assign by the Closing shall be referred to as a “Non-Transferred Excluded Item.”  After the Closing Date with respect to each Non-Transferred Excluded Item, Buyer shall permit Seller to exclusively direct and manage each Project Company’s participation in all negotiations, arbitrations, litigation, claims, and/or bankruptcy or other proceedings involving such Non-Transferred Excluded Item, whether existing on the Closing Date or arising thereafter.  Buyer shall also permit Seller to settle or compromise on behalf of any Project Company any Non-Transferred Excluded Item in Seller’s sole discretion, and shall promptly pay Seller any proceeds or recoveries received in connection with any Non-Transferred Excluded Item.  Buyer shall, at Seller’s expense:  use commercially reasonable efforts to (a) cause any Person under its control with knowledge of relevant facts pertaining to any Non-Transferred Excluded Item to provide assistance to Seller as reasonably requested by Seller; and (b) provide any relevant books, records, or other information concerning any Non Transferred Excluded Item and access to each Project site where any Non Transferred Excluded Item is located, as reasonably requested by Seller, in connection with any Non-Transferred Excluded Item; provided in each case that Buyer shall have no obligation to make available information or access without reasonable prior notice, during normal business hours and subject to compliance with normal security and safety rules applicable to the Project site.

Section 6.7Employee and Benefit Matters.  (a)  Schedule 6.7(a) sets forth a list of certain employees of Seller or its Affiliates (the “Plant Employees”) who are providing or have provided services relating to the Projects and that Seller and such Affiliates will make available to Buyer to discuss potential employment with Affiliates of Buyer or other Persons engaged by Buyer to operate any Project (“Buyer Service Companies”) (which discussions the Parties agree shall not violate Section 6.7(c)).  Prior to the execution of this Agreement, Seller has provided to Buyer (i) certain employee information relating to employee compensation and benefits of the Plant Employees (including each Plant Employee’s current base salary or wage), and (ii) specific

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information relating to each Plant Employee and as of a specified date regarding such employee’s name, job title and work location.  As soon as administratively practicable after Buyer provides Seller with a list of the Plant Employees who have accepted an employment offer from Buyer Service Companies in accordance with Section 6.7(b), Seller shall provide to Buyer, with respect to each Plant Employee on such list and subject to the consent of any such employee that Seller determines is required by Law, information as of a specified date regarding such employee’s hire date, vacation and sick leave accrual rates and severance benefits.

(b)Within 30 days after the execution of this Agreement, Buyer shall cause Buyer Service Companies to make offers of employment to each Plant Employee, and such offer shall include terms and provisions determined by Buyer that are consistent with the provisions of this Section 6.7; provided, however, that the base salary/wage rate that Buyer extends to an Plant Employee for the initial 18 consecutive month period of employment with Buyer Service Companies shall not be less than the Plant Employee’s base salary/wage rate that was in effect for the Plant Employee immediately prior to the Closing Date for employment with Seller or an Affiliate of Seller.  Within 45 days after the execution of this Agreement, Buyer shall notify Seller as to each Plant Employee who has accepted employment with Buyer or any of its Affiliates (each, a “Continued Employee”), which acceptance may be conditioned upon the occurrence of the Closing, and each Plant Employee who has rejected Buyer’s offer of employment.  Promptly following the Closing, Buyer shall pay to each of the Plant Employees listed on Schedule 6.7(b), whether or not a Continued Employee, an amount equal to such Plant Employee’s lump sum accrued benefit as of the Closing Date in CEG’s Pension Equity Plan, calculated as if the Plant Employee was fully vested as of the Closing Date.  Buyer shall indemnify and hold harmless Seller and its Affiliates with respect to all claims and liabilities relating to or arising out of Buyer’s employee selection and employment offer process described in this Section 6.7(b) (including any claim of discrimination or other illegality in such selection, offer, and lay-off process, and including any liability or loss that Seller or any Affiliates may incur either pursuant to this Section 6.7 or under the U.S. Worker Adjustment and Retraining Notification Act and the regulations promulgated thereunder, or any similar state or other Law).  The employment with Buyer Service Companies of each Plant Employee who accepts such employment shall be effective as of the Closing Date; provided, however, that on such date such Plant Employee is actively at work or is on a previously scheduled and approved (by Seller or an Affiliate of Seller) paid time-off or other paid or unpaid leave of absence (other than a leave pursuant to which the individual is eligible to receive long-term disability benefits under a Seller Plan).  Notwithstanding the foregoing, with respect to each Plant Employee who fails to become a Continued Employee as of the Closing Date because he or she did not satisfy the requirements of the preceding sentence as of the Closing Date (whether due to a previously scheduled or approved paid time-off or other paid or unpaid leave of absence), Buyer shall, or shall cause Buyer Service Companies to, at the time such Plant Employee is ready and available to return to active employment status, provide such Plant Employee with employment in a position comparable to that which the individual had prior to the commencement of his or her absence from active employment.  Each Plant Employee who becomes employed by a Buyer Service Company pursuant to the preceding sentence shall be considered a Continued Employee for purposes of this Agreement, except that transitional matters addressed in this Section 6.7 shall

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apply with respect to such employee as of the date of his or her commencement of employment with a Buyer Service Company (rather than as of the Closing Date).  Nothing in the foregoing shall affect the right of Seller, or any Affiliate of Seller, or any Buyer Service Company to terminate the employment of a Plant Employee for any reason or at any time.

(c)Buyer agrees, if the Closing has not occurred, until the date that is two years from and after the date of termination of this Agreement pursuant to Section 9.1, not to employ, and to use commercially reasonable efforts to cause its controlled Affiliates not to employ, any Plant Employees without Seller’s prior written consent.  Whether or not the Closing occurs, unless Seller should otherwise consent, Buyer agrees that neither it nor any of its controlled Affiliates will, directly or indirectly, in any manner whatsoever, solicit for hire or employment any officer or employee of the Seller or any of its Affiliates which Buyer or its Affiliates learned of in connection with the acquisition contemplated hereby for a period of one year after the date of this Agreement; provided, however, that this sentence shall not apply to any solicitation (or any hiring as a result of any solicitation) that consists of advertising in a newspaper or periodical of general circulation or through the Internet.

(d)Effective as of the Closing Date, the Continued Employees shall cease to participate in all “employee benefit plans” within the meaning of Section 3(3) of ERISA of Seller or its Affiliates providing benefits to any Continued Employees (the “Seller Plans”).  Buyer shall not assume any of the Seller Plans.

(e)From and after the Closing Date and subject to the provisions set forth in the proviso to the first sentence of Section 6.7(b), Buyer shall cause each Buyer Service Company to provide each Continued Employee with benefits on a basis substantially similar to those provided to similarly situated employees of Buyer and its Affiliates.  Notwithstanding the foregoing, Buyer shall cause each Continued Employee and his or her eligible dependents (including all such Continued Employee’s dependents) covered immediately prior to the Closing Date by a group health plan maintained by Seller or an Affiliate of Seller to be covered under a group health plan maintained by Buyer or an Affiliate of Buyer that (1) provides major medical and dental benefits coverages to the Continued Employee and such eligible dependents effective immediately upon the Closing Date and (2) credits such Continued Employee, for the year during which such coverage under such group health plan begins, with any deductibles and co-payments already incurred during such year under a group health plan maintained by Seller or an Affiliate of Seller; provided, however, that for purposes of applying this clause (2) with respect to any Continued Employee, the Continued Employee shall be responsible for providing the necessary information to Buyer based on explanation of benefit forms received by the Continued Employee from the group health plan maintained by Seller or an Affiliate of Seller.  From and after the Closing Date, Buyer shall cause a Buyer Service Company to recognize each Continued Employee’s years of company service prior to the Closing Date with Seller and its Affiliates and any other Person that was acquired by Seller or an Affiliate of Seller (whether through purchase, merger or other combination) for purposes of terms of employment, compensation and eligibility, vesting or other benefit/coverage eligibility (including eligibility for retiree benefits/coverages), benefit accrual and benefit determination under all employee benefit and

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compensation plans and programs maintained after the Closing by a Buyer Service Company in which such Continued Employee is permitted to participate, including paid vacation, paid sick time and severance benefits.  Buyer shall cause each employee welfare benefit plan or program sponsored by Buyer or a Buyer Service Company that the Continued Employees may be eligible to participate in on or after the Closing Date to waive any preexisting condition exclusion or restriction with respect to participation and coverage requirements applicable to Continued Employees.  From and after the Closing Date, Buyer shall cause a Buyer Service Company to recognize and give each Continued Employee credit for his or her accumulated sick leave balance as of the Closing Date under the sick leave program maintained by Seller and its Affiliates.  For purposes of this Section 6.7, the phrase “from and after the Closing Date” means the period commencing with the Closing Date and ending 18 months thereafter.

(f)If the employment of any Continued Employee is terminated by Buyer or an Affiliate of Buyer for a reason other than cause within 18 months following the Closing Date, then Buyer shall provide such Continued Employee with severance benefits equal to the greater of (i) the severance benefits described in the severance plan that a Buyer Service Company makes available to its similarly situated employees and that would have been provided to such employee if his or her employment had been terminated under circumstances entitling such employee to benefits under such severance plan, or (ii) the following severance benefits: (A) a lump sum payment in cash equal to the base salary or other regular hourly compensation that the Continued Employee would have collected had he or she remained employed from the date of terminating employment through the date 18 months after the Closing Date, plus (B) a lump sum payment in cash equal to a Buyer Service Company’s portion of the premium for medical and dental coverage charged with respect to active employees under the medical and dental plan such Continued Employee is actually enrolled in at the time of his or her termination of employment, if any, for the period beginning when employment terminates and ending on the date 18 months after the Closing Date, plus (C) in the case of a Continued Employee who is so terminated more than 15 months following the Closing Date, a lump sum in cash equal to (1) the equivalent of two weeks’ base salary or other regular hourly compensation of such Continued Employee as of such date of termination multiplied by (2) the number of years of service of such Continued Employee with Seller and its Affiliates and any other Person that was acquired by Seller or an Affiliate of Seller (whether through purchase, merger or other combination).  Buyer shall also offer continuation coverage to Continued Employees under the Consolidated Omnibus Budget Reconciliation Act of 1985.  Any Continued Employee whose employment terminates within 18 months following the Closing Date due to such Continued Employee’s rejection of Buyer’s offer of a position which would require the Continued Employee to relocate to a facility which is more than fifty (50) miles from the facility at which he or she is working on the day immediately prior to the Closing Date shall be entitled to severance benefits as provided in this Section 6.7(f).  All obligations under this Section 6.7(f) shall terminate on the date 18 months after the Closing Date.

(g)Claims of Continued Employees and their eligible beneficiaries and dependents for medical, dental, prescription drug, life insurance or other welfare benefits (“Welfare Benefits”) (other than disability benefits) that are incurred before the Closing Date shall be the sole responsibility of Seller and the Seller Plans.  Claims of Continued Employees

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and their eligible beneficiaries and dependents for Welfare Benefits (other than disability benefits) that are incurred from and after the Closing Date shall be the sole responsibility of Buyer and its Affiliates.  For purposes of this paragraph, a medical/dental claim shall be considered incurred on the date when the medical/dental services are rendered or medical/dental supplies are provided, and not when the condition arose or when the course of treatment began.  Claims of individuals receiving long-term disability benefits under a Seller Plan as of the Closing Date shall be the sole responsibility of Seller and the Seller Plans.  Except as provided in the preceding sentence, claims of Continued Employees and their eligible beneficiaries and dependents for short-term or long-term disability benefits from and after the Closing Date shall be the sole responsibility of Buyer and its Affiliates (without regard to whether the circumstances giving rise to such claim occurred before, on or after the Closing Date).

(h)All claims for health care and dependent care flexible spending account benefits submitted after the Closing Date for expenses incurred prior to the Closing Date by Continued Employees shall be paid by Seller’s or its Affiliates’ health care and dependent care flexible spending account plan to the extent permitted in accordance with the terms of such plan.

(i)Claims for workers’ compensation benefits arising out of occurrences prior to the Closing Date shall be the responsibility of Seller.  Claims for workers’ compensation benefits for Continued Employees arising out of occurrences on or after the Closing Date shall be the responsibility of Buyer.

Section 6.8Termination of Certain Services, Contracts and Other Affiliate Transactions.  Notwithstanding anything in this Agreement to the contrary, prior to the Closing, Seller shall, or shall cause an Affiliate of Seller, as applicable, to (i)  terminate, sever, or assign to Seller or a Non-Company Affiliate effective upon or before the Closing any services provided to any of the Project Companies by Seller or a Non-Company Affiliate, including the termination or severance of insurance policies (including those policies referred to in Section 6.10), Tax services, legal services and banking services (to include the severance of any centralized clearance accounts) and (ii) use commercially reasonable efforts to terminate or assign to Seller or a Non-Company Affiliate each Contract listed on Schedule 6.8 (collectively such Contracts listed, the “Terminated Contracts”), in each case without any liability of any kind on the part of any Company arising from any such termination, severance, assignment or otherwise.  Effective as of the Closing, all Contracts between any Company and the Seller or any Non-Company Affiliate of the Seller (“Excluded Contracts”) shall terminate and be of no further force and effect unless the Buyer has expressly agreed to have such Contract remain in effect (including the Assigned Contracts), and neither Buyer nor any Company shall have any liabilities or obligations of any kind with respect to any Excluded Contract.  In addition to the foregoing, prior to the Closing, any liability of a Company to Seller or an Affiliate of Seller, or any receivable from a Company to Seller or an Affiliate of Seller, shall be satisfied or otherwise eliminated in full.

Section 6.9Spare Parts; Distributions.  Notwithstanding anything in this Agreement to the contrary:

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(a)Subject to Section 4.4, Seller shall have the right to use items of spare parts and equipment in the ordinary course of business of the Project Companies, consistent with past practice.

(b)Subject to Section 6.3 and Section 10.1(a)(v), Seller shall have the right to cause the Project Companies to pay cash dividends, make cash distributions and assign accounts receivable to Seller or its Affiliates at any time prior to the Closing.

Section 6.10Insurance.  Seller shall maintain or cause to be maintained in full force and effect the insurance policies described on Schedule 4.16 until the Closing.  All such insurance coverage shall be terminated as of the Closing.  Buyer shall be solely responsible for providing insurance to the Project Companies for any claims made after the Closing. If any claims are actually made prior to the Closing Date under any liability insurance policy for any of the Companies, then Seller shall use commercially reasonable efforts to ensure that the applicable Company can file, notice and otherwise continue to pursue such claims and recover proceeds under the terms of such policies, and Seller will pay over to the applicable Company any proceeds of any insurance recovery under any such policy by Seller or any Non-Company Affiliate.  If any casualty loss occurs prior to the Closing which is insured under any property or casualty insurance policy for any of the Companies and claims associated with such losses, have been made prior to the Closing, then Seller shall use commercially reasonable efforts to ensure that the applicable Company can file, notice and otherwise continue to pursue such claims and recover proceeds under the terms of such policies, and Seller will pay over to the applicable Company any proceeds of any insurance recovery under any such policy by Seller or any Non-Company Affiliate, other than any such proceeds that have been or will be applied to repair or replace the property subject to such claim.

Section 6.11Casualty.  If any of the Purchased Assets is damaged or destroyed by casualty loss during the Interim Period, and the sum of (x) the cost of restoring such damaged or destroyed Purchased Assets to a condition reasonably comparable to their prior condition (as estimated by a qualified firm reasonably acceptable to Buyer and Seller), and (y) the amount of any lost profits reasonably expected to accrue after the Closing as a result of such damage or destruction to such Purchased Assets (net of and after giving effect to any insurance proceeds available to the Project Companies for such restoration and lost profits and any Tax benefits to the Companies related thereto) (such sum, the “Restoration Cost”) is greater than $2,500,000 but does not exceed 10% of the Base Purchase Price, Seller may elect to reduce the amount of the Purchase Price by such Restoration Cost, by notice to Buyer, and such casualty loss shall not affect the Closing.  If Seller does not make such an election within 45 days after the date of such casualty loss (but in any event at least 20 days prior to the Closing Date), Buyer may elect to terminate this Agreement within 10 Business Days after the end of such 45 day period by written notice to Seller.  If the Restoration Cost is in excess of 10% of the Base Purchase Price, Seller may, by notice to Buyer within 45 days after the date of such casualty loss (but in any event at least 20 days prior to the Closing Date), elect to (a) reduce the Purchase Price by the estimated Restoration Cost or (b) terminate this Agreement, in each case by providing written notice to Buyer; provided, however, that if Seller does not elect to terminate this Agreement as provided in

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this sentence, then Buyer may, by written notice to Seller, terminate this Agreement within 10 Business Days of receipt by Buyer of Seller’s notice regarding its election.  If the Restoration Cost is $2,500,000 or less, (i) neither Buyer nor Seller shall have the right or option to terminate this Agreement and (ii) there shall be no reduction in the amount of the Purchase Price.

Section 6.12Condemnation.  If any of the Purchased Assets is taken by condemnation during the Interim Period and the sum of (x) the condemnation value of such Purchased Assets (as determined by a qualified firm reasonably acceptable to Buyer and Seller) and (y) to the extent not included in the preceding clause (x), the amount of any lost profits reasonably expected to accrue after the Closing as a result of such condemnation of such Purchased Assets (net of and after giving effect to any condemnation award proceeds to be paid to the Companies and any Tax benefits to the Companies related thereto) (such sum, the “Condemnation Value”) is greater than $2,500,000 but do not have a Condemnation Value in excess of 10% of the Base Purchase Price, Seller may elect to reduce the Purchase Price by such Condemnation Value (less the amount of any condemnation award proceeds to be paid to the Companies and any Tax benefits to the Companies related thereto) by notice to Buyer, and such condemnation shall not affect the Closing.  If Seller does not make such an election within 45 days after the award of the condemnation proceeds (but in any event at least 20 days prior to the Closing Date), Buyer may elect to terminate this Agreement within 10 Business Days after such 45 day period by written notice to Seller.  If the Condemnation Value is in excess of 10% of the Base Purchase Price, Seller may, by notice to Buyer within 45 days after the award of the condemnation proceeds (but in any event at least 20 days prior to the Closing Date), elect to (a) reduce the Purchase Price by such Condemnation Value (less the amount of any condemnation award proceeds to be paid to the Companies and any Tax benefits to the Companies related thereto) or (b) terminate this Agreement, in each case by providing written notice to Buyer; provided, however, that if Seller does not elect to terminate this Agreement as provided in this sentence, then Buyer may, by written notice to Seller, terminate this Agreement within 10 Business Days of receipt by Buyer of Seller’s notice regarding its election.  If the Condemnation Value is $2,500,000 or less, (A) neither Buyer nor Seller shall have the right or option to terminate this Agreement and (B) there shall be no reduction in the amount of the Purchase Price.

Section 6.13Transfer Taxes.  Seller and Buyer shall each pay any Transfer Taxes imposed on it by Law as a result of the transactions contemplated by this Agreement, but, notwithstanding any such requirement of Law, each of Seller and Buyer shall bear half of the total of all such Transfer Taxes.  Accordingly, if either Party is required at Law to pay more than its half of any such Transfer Taxes, the other Party shall promptly reimburse such first Party for amounts in excess of such half.  Seller and Buyer shall timely file their own Transfer Tax returns as required by Law and shall notify the other Party when such filings have been made.  Seller and Buyer shall cooperate and consult with each other prior to filing such Transfer Tax returns to ensure that all such returns are filed in a consistent manner.  Without limiting the foregoing, Buyer shall be solely responsible for any Transfer Taxes arising from any action to dissolve, terminate or restructure any Project Company or to convey, distribute or transfer any assets, properties or other rights by deed, bill of sale or otherwise to or from any Project Company on or after the Closing.

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Section 6.14Tax Matters.  Except as provided in Section 6.13 relating to Transfer Taxes:

(a)With respect to any Tax return covering a taxable period ending on or before the Closing Date (a “Pre-Closing Taxable Period”) that is required to be filed after the Closing Date with respect to any Company, (i) Seller shall cause such Tax return to be prepared and shall deliver such Tax return as so prepared to Buyer not later than 14 days prior to the due date for filing such Tax return, and (ii) Buyer shall cause such Tax return to be executed and duly and timely filed with the appropriate Taxing Authority and shall pay all Taxes due with respect to the period covered by such Tax return.  With respect to any Tax return covering a taxable period beginning on or before the Closing Date and ending after the Closing Date (a “Straddle Taxable Period”) that is required to be filed after the Closing Date with respect to a Project Company, (i) Buyer shall cause such Tax return to be prepared (in a manner consistent with practices followed in prior taxable periods except as required by a change in Law or fact) and shall deliver a draft of such Tax return to Seller for Seller’s review and approval at least 14 days prior to the due date for filing such Tax return, (ii) Seller and Buyer shall cooperate and consult with each other in order to finalize such Tax return, and (iii) thereafter Buyer shall cause such Tax return to be executed and duly and timely filed with the appropriate Taxing Authority and shall pay all Taxes due with respect to the period covered by such Tax return.

(b)As between Seller and Buyer, Seller shall be responsible for and indemnify Buyer against, and Seller shall be entitled to all refunds or credits of, any Tax with respect to a Project Company that is attributable to a Pre-Closing Taxable Period or to that portion of a Straddle Taxable Period that ends on the Closing Date, in each case to the extent that such Tax exceeds the amount (if any) reflected as a current liability for such Tax in a balance sheet of such Project Company prepared in accordance with GAAP as of the Closing Date.  Within five days prior to the due date for the payment of any such Tax, if (i) the amount of such Tax for which Seller is responsible exceeds (ii) the amount reflected as a current liability for such Tax in a balance sheet of such Project Company prepared in accordance with GAAP as of the Closing Date, Seller shall pay to Buyer an amount equal to such excess; if the amount described in clause (ii) exceeds the amount described in clause (i), Buyer shall pay to Seller the amount of such excess.  With respect to a Straddle Taxable Period, Seller shall determine the Tax attributable to the portion of the Straddle Taxable Period that ends on the Closing Date by an interim closing of the books of the relevant Company as of the Closing Date, except for ad valorem or property Taxes (“Property Taxes”) and franchise Taxes based solely on capital which shall be prorated on a daily basis to the Closing Date.  For this purpose, any franchise Tax paid or payable not based solely on capital with respect to such Company shall be allocated to the taxable period for which the income, operations, assets or capital comprising the base of such Tax is measured, regardless of whether the right to do business for another period is obtained by the payment of such Tax.  In determining whether a Property Tax is attributable to a Pre-Closing Taxable Period or a Straddle Taxable Period, any Property Tax that is based on the assessed value of any assets, property or other rights as of any lien date or other specified valuation date shall be deemed a Property Tax attributable to the taxable period (whether a fiscal year or other

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tax year) specified on the relevant Property Tax bill that is issued with respect to that lien date or other valuation date.

(c)Buyer shall be responsible for and indemnify Seller against, and Buyer shall be entitled to all refunds (including, but not limited to, property tax refunds) and credits of, all Taxes of the Project Companies that are not the responsibility of Seller pursuant to Section 6.14(b).

(d)With respect to any Tax for which Seller is responsible, Seller shall have the right, at its sole cost and expense, to initiate any claim for refund and to control (in the case of a Pre-Closing Taxable Period) or participate in (in the case of a Straddle Taxable Period) the prosecution, settlement or compromise of any proceeding involving such Tax, including the determination of the value of property for purposes of real and personal property ad valorem Taxes.  Buyer shall (and shall cause the relevant Company to) take such action in connection with any such proceeding as Seller shall reasonably request from time to time to implement the preceding sentence, including the selection of counsel and experts and the execution of powers of attorney.  Buyer shall (and shall cause the relevant Company to) give written notice to Seller of its receipt of any notice of any audit, examination, claim or assessment for any Tax for which Seller is responsible within 30 days after its receipt of such notice; failure to give any such written notice within such 30-day period shall cause Buyer to forfeit any rights it may have by reason of Section 4.10 or this Section 6.14 to the extent Seller is actually prejudiced by such failure.

(e)Seller shall grant to Buyer (or its designees) access at all reasonable times to all of the information, books and records relating to the Companies within the possession of Seller (including workpapers and correspondence with Taxing Authorities), and shall afford Buyer (or its designees) the right (at Buyer’s expense) to take extracts therefrom and to make copies thereof, to the extent reasonably necessary to permit Buyer (or its designees) to prepare Tax returns, respond to Tax audits and investigations, prosecute Tax protests, appeals and refund claims and to conduct negotiations with Taxing Authorities.  Buyer shall grant or cause the Companies to grant to Seller (or its designees) access at all reasonable times to all of the information, books and records relating to the Companies within the possession of Buyer (including workpapers and correspondence with Taxing Authorities) and to the employees of the Companies, and shall afford Seller (or its designees) the right (at Seller’s expense) to take extracts therefrom and to make copies thereof, to the extent reasonably necessary to permit Seller (or its designees) to prepare Tax returns, respond to Tax audits and investigations, prosecute Tax protests, appeals and refund claims and to conduct negotiations with Taxing Authorities.  After the Closing Date, Seller and Buyer will preserve all information, records or documents in their respective possessions relating to liabilities for Taxes of the Project Companies until six months after the expiration of any applicable statute of limitations (including extensions thereof) with respect to the assessment of such Taxes; provided, that neither Party shall dispose of any of the foregoing items without first offering such items to the other Party.

(f)If after the Closing Buyer or any Company receives a refund or utilizes a credit of any Tax of any Company attributable to a Pre-Closing Taxable Period or that portion of

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a Straddle Taxable Period ending on the Closing Date, Buyer shall pay to Seller within 10 Business Days after such receipt or utilization an amount equal to such refund received or credit utilized, together with any interest received or credited thereon.  Buyer shall, and shall cause the relevant Company to, take such action to obtain a refund or credit of any Tax of such Company attributable to a Pre-Closing Taxable Period or that portion of a Straddle Taxable Period ending on the Closing Date or to mitigate, reduce or eliminate any such Tax that could be imposed for a Pre-Closing Taxable Period or that portion of a Straddle Taxable Period ending on the Closing Date (including with respect to the transactions contemplated hereby) as is reasonably requested by Seller.

(g)In the event that Seller initiates a claim for refund from a Taxing Authority with regard to any Tax of any Company attributable to a Pre-Closing Taxable Period or that portion of a Straddle Taxable Period ending on the Closing Date, whether the initiation of such claim begins prior to or after the Closing, Seller shall have all rights to and interest in such refund.  Buyer shall, upon request, provide Seller a limited power of attorney allowing Seller to pursue such claim for refund with and collect such refund from such Taxing Authority.  If after the Closing Buyer or any Company receives a refund or utilizes a credit of any such Tax with regard to a claim so initiated by Seller, Buyer shall pay to Seller within 10 Business Days after such receipt or utilization an amount equal to such refund received or credit utilized, together with any interest received or credited thereon, less any expenses Buyer has incurred as a result of such action.

(h)In the event that Seller initiates a claim for refund from a third party who improperly withheld sales and use Tax, or withheld excessive sales and use Tax, with regard to a Project Company attributable to a Pre-Closing Taxable Period or that portion of a Straddle Taxable Period ending on the Closing Date, whether the initiation of such claim begins prior to or after the Closing, Seller shall have all rights to and interest in such refund.  Buyer shall, upon request, provide Seller a limited power of attorney allowing Seller to pursue such claim for refund with and collect such refund from such third party.  If after the Closing Buyer or the Project Company receives a refund of any such Tax with regard to a claim so initiated by Seller, Buyer shall pay to Seller within 10 Business Days after such receipt an amount equal to such refund received, together with any interest received or credited thereon, less any expenses Buyer has incurred as a result of such action.

(i)Not later than the Business Day immediately preceding the Closing Date, Seller shall cause each of CP High Desert I, CP High Desert II, Rio Nogales I and Rio Nogales II to be converted to, or merged with and into, limited liability companies, the sole member of which is Seller.  In the event that any such conversion or merger results in Seller or its Affiliates being liable for an amount of Federal or state Taxes as a result of such conversion or merger that exceeds the Taxes that would have been paid by Seller or its Affiliates (assuming an election would be made under Section 338(h)(10) of the Code) had the sale and purchase of the Purchased Interests contemplated hereby not required such conversion or merger, Buyer shall pay to Seller an additional amount equal to one-half of such excess Federal or state Taxes; provided, however, that if such amount that Buyer would be obligated to pay to Seller shall be in

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excess of $2,000,000, Buyer shall not be obligated to make such payment, and if Buyer does not make such payment, Seller shall have no obligation to consummate any such conversion or merger.  At the option of Buyer, the Parties shall cooperate with one another and makes such filings as shall be required in order to make a timely election under Section 338(h)(10) of the Code and Seller shall have no obligation to consummate any such conversion or merger.  In addition, if any such excess Federal or state Taxes would be payable as a result of such conversion or merger, the Parties will cooperate in good faith and use their commercially reasonable efforts to make such modifications to this Agreement and the transactions contemplated hereby as may be required in order to avoid the applicability of any such excess Federal or state Taxes as a result of such conversion or merger.

Section 6.15Affiliate Contracts.  From and after the date hereof, Buyer and Seller shall use commercially reasonable efforts to obtain the written consent from each party (other than Seller and its Affiliates) (each a “Counterparty”) to each Affiliate Contract to the assignment and assumption of such Affiliate Contract by each Assignor to each Assignee as contemplated by Section 7.7(b) to occur at Closing, provided, however, that with respect to those Affiliate Contracts not marked with an asterisk on Schedule 1.1-AC, the failure to obtain such consent shall not delay or prevent Closing, and any obligation to seek such consent by Buyer or Seller shall terminate as of the Closing, except that Seller shall have a continuing obligation after the Closing to seek all counterparty consents with respect to the Waiver and Option Agreement dated June 24, 2005 for the High Desert Project set forth on Schedule 1.1-AC (notwithstanding that such contract is not marked with an asterisk therein).  Without limiting the foregoing, Buyer’s efforts shall include offering to replace any credit support posted or maintained by Seller or a Non-Company Affiliate in favor of any Counterparty to any Affiliate Contract in accordance with the requirements of Section 6.5, and in the case of Affiliate Contracts with respect to which none of Seller or any Non-Company Affiliate has posted or maintains any credit support, Buyer shall comply with all commercially reasonable requests from any Counterparty under such Affiliate Contracts to post or maintain credit support as security for the performance of the obligations of the Assignee thereof, in each case to the extent and in the manner set forth in Section 6.5.

Section 6.16Appointment of Representatives.  In order to facilitate the consummation of the transactions contemplated by this Agreement, each Party shall designate a representative to act as the primary point of contact to coordinate communications and other interaction between the Parties during the Interim Period.

Section 6.17Updating.  Seller shall promptly notify Buyer of any changes or additions to any of the Schedules of which it has Knowledge that may be necessary to correct any matter that would otherwise constitute a breach of any representation or warranty of Seller in Articles III or IV.  No such updates made pursuant to this Section 6.17 shall be deemed to cure any inaccuracy of any representation or warranty made in this Agreement as of the date hereof or for purposes of Section 7.1 unless Buyer specifically agrees thereto in writing; provided, however, that if the Closing shall occur, then no matters disclosed by Seller pursuant to any such change or addition at or prior to the Closing shall be the basis for any indemnification by Seller pursuant to

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Section 10.1(a) to the extent any such update relates solely to events, conditions or other matters first occurring or arising after the date of this Agreement.  Seller agrees to advise the Buyer promptly in writing of any matter or occurrence of which it has or obtains Knowledge, and Buyer agrees to advise Seller promptly in writing of any matter of which Buyer has Knowledge, which, in either case, may constitute a breach by either Party of any representation, warranty or covenant contained in this Agreement.

Section 6.18Announcements.  Prior to the Closing Date no press release or other public announcement, or public statement or comment in response to any inquiry, relating to this Agreement or the transactions contemplated hereby shall be issued or made by either Buyer or Seller, or any of their Affiliates, without the approval of Buyer or Seller, as the case may be;such consent not to be unreasonably withheld, delayed or conditioned provided, however, that a press release or other public announcement, regulatory filing, statement or comment made without such approval, including in furtherance of the requirements of Section 6.1, shall not be in violation of this Section 6.18 if it is made in order to comply with applicable Laws or stock exchange rules and in the reasonable judgment of the Party or Affiliate making such release or announcement, based upon advice of counsel, prior review and joint approval, despite reasonable efforts to obtain the same, would prevent dissemination of such release or announcement in a sufficiently timely fashion to comply with such applicable Laws or rules; provided, further, that in all instances the Buyer or Seller, as the case may be, shall provide prompt notice of any such release, announcement, statement or comment to the other Party.

Section 6.19Buyer Financing.  Buyer shall use commercially reasonable efforts to consummate the financing contemplated by the Buyer Commitment Letter and the other commitments referred to in Section 5.8 so as to enable Buyer to have sufficient cash at Closing to purchase the Purchased Interests in accordance with the terms of this Agreement.  Prior to the Closing Date, at Buyer’s sole cost and expense, Seller will, and will cause the Companies to, use commercially reasonable efforts to cooperate with Buyer in obtaining its financing under the Buyer Commitment Letter including furnishing to representatives of Buyer’s financing sources such information, access to Project sites (including for purposes of surveys and insurance inspections), Company books and records and other documentation, and taking such other actions as may be reasonably requested from time to time by Buyer.  Any assistance provided by Seller and any Company pursuant to this Section 6.19 shall be subject to the same conditions as are set forth in Section 6.2.

Section 6.20Further Assurances.  Subject to the terms and conditions of this Agreement, at any time and from time to time after the Closing, at either Party’s request and without further consideration, the other Party shall execute and deliver to such requesting Party such other instruments of sale, transfer, conveyance, assignment and confirmation, provide such materials and information and take such other actions as such Party may reasonably request in order to consummate the transactions contemplated by this Agreement.

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ARTICLE VII
BUYER’S CONDITIONS TO CLOSING

The obligation of Buyer to consummate the Closing is subject to the fulfillment of each of the following conditions (except to the extent waived in writing by Buyer in its sole discretion):

Section 7.1Representations and Warranties.  The representations and warranties made by Seller in Articles III and IV shall be true in all material respects (except for representations and warranties that are qualified by materiality, including by reference to Material Adverse Effect, which shall be true in all respects) on and as of the Closing Date as though made on and as of the Closing Date.

Section 7.2Performance.  Seller shall have performed and complied, in all material respects, with the agreements, covenants and obligations required by this Agreement to be performed or complied with by Seller at or before the Closing.

Section 7.3Officer’s Certificate.  Seller shall have delivered to Buyer at the Closing a certificate of an officer of Seller, dated as of the Closing Date, as to the matters set forth in Sections 7.1 and 7.2.

Section 7.4Orders and Laws.  There shall not be any litigation or proceedings (filed by a Person other than Buyer or its Affiliates) or Law or order restraining, enjoining or otherwise prohibiting or making illegal or threatening to restrain, enjoin or otherwise prohibit or make illegal the consummation of the transactions contemplated by this Agreement.

Section 7.5Consents and Approvals.  The Buyer Approvals, the Seller Approvals and those Company Consents marked with an asterisk on Schedule 4.2 shall have been duly obtained, made or given and shall be in full force and effect, in form and substance reasonably satisfactory to Buyer, and all terminations or expirations of waiting periods imposed by any Governmental Authority shall have occurred; provided, however, that the absence of any appeals and the expiration of any appeal period with respect to any of the foregoing shall not constitute a condition to Closing hereunder.

Section 7.6Resignation of Members, Managers, Officers and Directors.  Seller shall have caused the resignation or removal of all members, managers, officers and directors, as applicable, nominated or appointed by Seller or its Affiliates to any board or operating, management or other committee relating to the Projects or established under the Companies’ Charter Documents, and shall have delivered to Buyer at the Closing evidence of such resignations or removals, together with releases in favor of the Companies of any and all claims which any such members, managers, officers and directors may have against any of the Companies or their Subsidiaries.

Section 7.7Seller Deliverables.  Seller shall have delivered, or caused to have been delivered, to Buyer each of the following:

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(a)a counterpart, executed by Seller, of an assignment of membership interests evidencing the assignment and transfer to Buyer of all of the Membership Interests, substantially in the form of Exhibit A (the “Membership Interests Assignment Agreement”);

(b)an executed counterpart of one or more assignment and assumption agreements, each substantially in the form of Exhibit B (each an “Assignment and Assumption Agreement”) which shall effect the assignment to Buyer, one of the Project Companies or an Affiliate of Buyer (as applicable, the “Assignee”) of each Assigned Contract by the Non-Company Affiliate that is party thereto (the “Assignor”), subject to the assumption by the Assignee of all obligations of the Assignor under each Assigned Contract arising from and after the Closing Date; provided, however that, in the case of those Assigned Contracts relating to natural gas transportation on a pipeline regulated by the FERC, Seller’s obligations under this paragraph (c) are conditioned upon the Non-Company Affiliate successfully releasing its capacity permanently to Buyer or an Affiliate of Buyer and being relieved of all payment obligations under each such Assigned Contract pursuant to the terms of the applicable FERC Gas Tariff, each of Seller and Buyer agreeing to use commercially reasonable efforts to achieve such permanent releases of capacity;

(c)an executed counterpart of the Transition Services Agreement;

(d)a certification of non-foreign status in the form prescribed by Treasury Regulation Section 1.1445-2(c) with respect to Seller:

(e)originals of all documentation related to the bonds issued with respect to the Big Sandy Project, including all outstanding bonds;

(f)evidence reasonably satisfactory to Buyer of the satisfaction or release of any liabilities owed by any Company to Seller or any Non-Company Affiliate; and

(g)evidence reasonably satisfactory to Buyer of the conversion or merger of CP High Desert I, CP High Desert II, Rio Nogales I and Rio Nogales II as contemplated by Section 6.14(i).

Section 7.8Financing.  Buyer shall have obtained the proceeds of the financing contemplated by the Buyer Commitment Letter.

ARTICLE VIII
SELLER’S CONDITIONS TO CLOSING

The obligation of Seller to consummate the Closing is subject to the fulfillment of each of the following conditions (except to the extent waived in writing by Seller in its sole discretion):

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Section 8.1Representations and Warranties.  The representations and warranties made by Buyer in Article V shall be true in all material respects (except for representations and warranties that are qualified by materially, including by reference to Material Adverse Effect, which shall be true in all respects) on and as of the Closing Date as though made on and as of the Closing Date.

Section 8.2Performance.  Buyer shall have performed and complied, in all material respects, with the agreements, covenants and obligations required by this Agreement to be so performed or complied with by Buyer at or before the Closing.

Section 8.3Officer’s Certificate.  Buyer shall have delivered to Seller at the Closing a certificate of an officer of Buyer, dated as of the Closing Date, as to the matters set forth in Sections 8.1 and 8.2.

Section 8.4Orders and Laws.  There shall not be any litigation or proceedings (filed by a Person other than Seller or its Affiliates) or Law or order restraining, enjoining or otherwise prohibiting or making illegal or threatening to restrain, enjoin or otherwise prohibit or make illegal the consummation of the transactions contemplated by this Agreement.

Section 8.5Consents and Approvals.  The Seller Approvals and those Company Consents marked with an asterisk on Schedule 4.2 shall have been duly obtained, made or given and shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any Governmental Authority shall have occurred; provided, however, that the absence of any appeals and the expiration of any appeal period with respect to any of the foregoing shall not constitute a condition to Closing hereunder.

Section 8.6Release of Support Obligations.  To the extent required by Schedule 6.5(a)(2), Buyer shall either have (i) effected the full and unconditional release of Seller and the Non-Company Affiliates from all Support Obligations or (ii) provided to Seller the replacement guarantee referenced in Schedule 6.5(a)(2).

Section 8.7Buyer Deliverables.  Buyer shall have delivered, or caused to have been delivered, to Seller each of the following:

(a)a wire transfer of immediately available funds (to such account as Seller shall have given notice to Buyer not less than two Business Days prior to the Closing Date) in an amount equal to the sum of (i) the Base Purchase Price plus (ii) the Estimated Aggregate Net Working Capital Adjustment Amount (whether a positive or a negative amount) plus (iii) the Estimated Gas Inventory Amount, and as adjusted further as provided in Section 2.2(d) & (e) ;

(b)an executed counterpart of the Membership Interests Assignment Agreement;

(c)an executed counterpart of each Assignment and Assumption Agreement by the respective Assignee;

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(d)evidence reasonably satisfactory to Seller that Buyer or an Affiliate of Buyer has entered into each of the Designated Commodities Contracts with the counterparty thereto; and

(e)the duly issued Continuing Support Letter of Credit.

ARTICLE IX
TERMINATION

Section 9.1Termination.  This Agreement may be terminated, and the transactions contemplated hereby may be abandoned, as follows:

(a)at any time before the Closing, by Seller or Buyer, by written notice to the other, in the event that any Law or final order restrains, enjoins or otherwise prohibits or makes illegal the sale of the Purchased Interests pursuant to this Agreement;

(b)at any time before the Closing, by Seller or Buyer, by notice to the other, if the other has materially breached its obligations hereunder and such breach (other than a breach of Buyer’s obligation to pay the Purchase Price in accordance with the terms of Article II) has not been cured within 30 days following written notification thereof; provided, however, that if, at the end of such 30 day period, the breaching Party is endeavoring in good faith, and proceeding diligently, to cure such breach, the breaching Party shall have an additional 30 days in which to effect such cure;

(c)at any time before the Closing, by Buyer or Seller, by notice to the other, on or after the date that is 120 days after the date of this Agreement;

(d)by Buyer or Seller pursuant to Section 6.11 or 6.12, by notice to the other Party in accordance with such Sections;

(e)by Seller if Buyer shall fail to satisfy all or any of its obligations pursuant to Section 9.3(b); or

(f)by mutual written consent of Buyer and Seller.

Section 9.2Effect of Termination.  If this Agreement is validly terminated pursuant to Section 9.1, there will be no liability or obligation on the part of Seller or Buyer (or any of their respective Representatives or Affiliates), provided that (a) Sections 6.2(b), 6.18, 9.2, 9.3, 10.5, 11.3, 11.4 and 11.12 will survive any such termination and (b) each Party shall continue to be liable for any breach of this Agreement by it occurring prior to such termination.

Section 9.3Break-up Fee.  (a)  If this Agreement is terminated (i) by Seller pursuant to Section 9.1(b) or (e) or (ii) by Seller and/or Buyer pursuant to Section 9.1(c) or (f) solely because the condition in Section 7.8 or Section 8.6 has not been or cannot be satisfied, then, in any such case, in lieu of all other Claims and remedies that might otherwise be available to Seller

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with respect thereto, including elsewhere hereunder and notwithstanding any other provision of this Agreement:

(i)(A) if Buyer has breached its obligation to pay the Purchase Price or its obligations under Section 6.1(a) or 6.1(c), (B) if this Agreement is terminated pursuant to Section 9.1(e) or (C) if this Agreement is terminated pursuant to Section 9.1(c) or (f) solely because the condition in Section 7.8 or Section 8.6 has not been or cannot be satisfied, then in any such case. Buyer shall pay Seller, by wire transfer of immediately available funds within three Business Days following the date of termination, as liquidated damages, 5% of the Base Purchase Price; or

(ii)if Buyer has materially breached any representation, warranty, covenant, agreement or obligation hereunder (other than those referred to in Section 9.3(a)(i)), then Buyer shall pay Seller, by wire transfer of immediately available funds within three Business Days following the date of termination, as liquidated damages, Seller’s actual and reasonable out-of-pocket fees (including reasonable attorney’s fees and regulatory filing fees) and expenses incurred in connection with this Agreement, subject to a maximum of $5,000,000.

(b)As security for Buyer’s obligations pursuant to Section 9.3(a), (i) on October 11, 2006, Buyer shall provide Break-up Fee Security in the amount of $25,000,000, (ii) on or before October 16, 2006, Buyer shall provide Break-up Fee Security in the amount of $44,000,000 (reduced dollar for dollar by any amounts required to be paid to tolling counterparties to secure a break-up fee on contingent hedges), and (iii) on or before October 31, 2006, Buyer shall provide Break-up Fee Security in an amount equal to the excess of (x) 5% of the Base Purchase Price over (y) the sum of the amounts actually provided pursuant to clauses (i) and (ii) of this Section 9.3(b).

(c)The provision for payment of liquidated damages in this Section 9.3 has been included because, in the event of a breach by Buyer, the actual damages to be incurred by Seller can reasonably be expected to approximate the amount of liquidated damages provided for herein and because the actual amount of such damages would be difficult if not impossible to measure accurately.

ARTICLE X
INDEMNIFICATION, LIMITATIONS OF LIABILITY, WAIVERS AND ARBITRATION

Section 10.1Indemnification.  (a)  Subject to Section 10.2, from and after Closing, Seller shall indemnify, defend and hold harmless Buyer from and against all Losses incurred or suffered by Buyer resulting from:

(i)any breach of any representation or warranty of Seller contained in this Agreement;

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(ii)any breach of any covenant or agreement of Seller contained in this Agreement;

(iii)the Terminated Contracts and the Assigned Contracts, but only to the extent such Losses accrued prior to Closing;

(iv)the Excluded Items;

(v)any Claim, Loss, liability or other obligation of any kind related to any Benefit Plan or Excluded Contract; and

(vi)the matter marked with an asterisk on Schedule 4.7.

(b)Subject to Section 10.2, from and after Closing, Buyer shall indemnify, defend and hold Seller harmless from and against all Losses incurred or suffered by Seller resulting from:

(i)any breach of any representation or warranty of Buyer contained in this Agreement;

(ii)any breach of any covenant or agreement of Buyer contained in this Agreement; and

(iii)the Assigned Contracts, but only to the extent such Losses accrue on or after Closing.

Section 10.2Limitations of Liability.  Notwithstanding anything in this Agreement to the contrary, except in the case of any Claim based upon fraud or willful misconduct which shall not be subject to the following limitation:

(a)the representations, warranties, covenants, agreements and obligations in this Agreement shall survive the Closing; provided, however, that any Claim for liability pursuant to Section 10.1(a)(i) must be made in writing no later than 12 months following the Closing Date, except that (i) any Claim relating to Section 3.8 or 4.10 may be brought until 60 days following the expiration of the applicable statute of limitations, (ii) any Claim relating to Section 4.15 may be brought until 36 months following the Closing Date, and (iii) any Claim relating to Sections 3.2, 3.4 or 4.3 may be brought at any time;

(b)Seller shall have no liability for any breach of a representation or warranty in this Agreement in connection with any single item or group of related items that results in Losses of less than $500,000;

(c)Seller shall have no liability for breaches of representations and warranties in this Agreement until the aggregate amount of all Losses incurred by Buyer equals or exceeds 2% of the Base Purchase Price (the “Deductible Amount”), in which event Seller shall be liable for Losses only to the extent they are in excess of the Deductible Amount; and

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(d)in no event shall Seller’s aggregate liability arising out of or relating to this Agreement, whether relating to a breach of a representation and warranty, covenant, agreement or obligation in this Agreement and whether based on contract, tort, strict liability, other Laws or otherwise, exceed 10% of the Base Purchase Price (“Liability Cap”), except that the Liability Cap shall not apply to Losses arising out of or related to (x) any breach of the representations and warranties in Section 3.4 or 4.3 (insofar as such Sections relate to the Companies or the Purchased Interests) or the last sentence of Section 4.4 or (y) any breach of Section 10.1(a)(iii), (iv), (v) or (vi) without giving effect to the phrase “Subject to Section 10.2” solely for purposes of this Section 10.2(d).

Section 10.3Notice; Duty to Mitigate.  Each Party shall give written notice to the other Party within a reasonable period of time after becoming aware of any breach by such other Party of any representation, warranty, covenant, agreement or obligation in this Agreement.  Each Party shall have a duty to mitigate any Loss in connection with this Agreement.

Section 10.4Indirect Claims.  From and after the Closing, Buyer agrees to release, indemnify and hold harmless Seller, its Affiliates and the officers, directors and employees of the Project Companies (acting in their capacity as such) from and against any Losses for controlling stockholder liability or breach of any fiduciary or other duty relating to any pre-Closing actions or failures to act (including negligence or gross negligence) in connection with the business of the Companies prior to the Closing

Section 10.5Waiver of Other Representations.  (a)  NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IT IS THE EXPLICIT INTENT OF EACH PARTY, AND THE PARTIES HEREBY AGREE, THAT NONE OF SELLER OR ANY OF ITS AFFILIATES OR REPRESENTATIVES HAS MADE OR IS MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WRITTEN OR ORAL, INCLUDING ANY IMPLIED REPRESENTATION OR WARRANTY AS TO THE CONDITION, MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE PURCHASED INTERESTS, THE PROJECT COMPANIES OR ANY OF THE PURCHASED ASSETS, OR ANY PART THEREOF, EXCEPT THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN ARTICLES III AND IV.  SELLER MAKES NO REPRESENTATION OR WARRANTY TO BUYER WITH RESPECT TO ANY FINANCIAL PROJECTIONS OR FORECASTS RELATING TO THE PROJECT COMPANIES OR THE PURCHASED ASSETS.

(b)EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, SELLER’S INTERESTS IN THE PROJECT COMPANIES ARE BEING TRANSFERRED THROUGH THE SALE OF THE PURCHASED INTERESTS “AS IS, WHERE IS, WITH ALL FAULTS,” AND SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO THE CONDITION, VALUE OR QUALITY OF THE PROJECT COMPANIES AND THEIR ASSETS OR THE PROSPECTS (FINANCIAL OR OTHERWISE), RISKS AND OTHER INCIDENTS OF THE PROJECT COMPANIES AND THEIR ASSETS.

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Section 10.6Waiver of Remedies.  (a)  Buyer and Seller acknowledge and agree that the foregoing indemnification provisions in this Article X shall be the exclusive remedy of Buyer and Seller with respect to the transactions contemplated by this Agreement, except for fraud or willful misconduct; provided, however, that the foregoing shall not limit or restrict the availability of specific performance or other injunctive or equitable relief to the extent that specific performance or such other relief would otherwise be available to the Parties hereunder.

(b)NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NO PARTY SHALL BE LIABLE FOR SPECIAL, PUNITIVE, EXEMPLARY, INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES OR LOST PROFITS, WHETHER BASED ON CONTRACT, TORT, STRICT LIABILITY, OTHER LAW OR OTHERWISE AND WHETHER OR NOT ARISING FROM THE OTHER PARTY’S SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT (“Non-reimbursable Damages”).

(c)Notwithstanding anything in this Agreement to the contrary, no Representative or Affiliate of Seller shall have any personal liability to Buyer or any other Person as a result of the breach of any representation, warranty, covenant, agreement or obligation of Seller in this Agreement and no Representative or Affiliate of Buyer shall have any personal liability to Seller or any other Person as a result of the breach of any representation, warranty, covenant, agreement or obligation of Buyer in this Agreement.

Section 10.7Procedure with Respect to Third-Party Claims.  (a)  If any Party (or as to Buyer after Closing, any Project Company) becomes subject to a pending or threatened Claim of a third party and such Party (the “Claiming Party”) believes it has a claim against the other Party (the “Responding Party”) as a result, then the Claiming Party shall notify the Responding Party in writing of the basis for such Claim setting forth the nature of the Claim in reasonable detail.  The failure of the Claiming Party to so notify the Responding Party shall not relieve the Responding Party of liability hereunder except to the extent that the defense of such Claim is prejudiced by the failure to give such notice.

(b)If any proceeding is brought by a third party against a Claiming Party and the Claiming Party gives notice to the Responding Party pursuant to this Section 10.7 the Responding Party shall be entitled to participate in such proceeding and, to the extent that it wishes, to assume the defense of such proceeding, if (i) the Responding Party provides written notice to the Claiming Party that the Responding Party intends to undertake such defense, (ii) the Responding Party conducts the defense of the third-party Claim actively and diligently with counsel reasonably satisfactory to the Claiming Party and (iii) if the Responding Party is a party to the proceeding, the Responding Party has not determined in good faith that joint representation would be inappropriate because of a conflict in interest.  The Claiming Party shall, in its sole discretion, have the right to employ separate counsel (who may be selected by the Claiming Party in its sole discretion) in any such action and to participate in the defense thereof, and the fees and expenses of such counsel shall be paid by such Claiming Party.  The Claiming Party shall fully cooperate with the Responding Party and its counsel in the defense or compromise of such Claim.  If the Responding Party assumes the defense of a proceeding, no

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compromise or settlement of such Claims may be effected by the Responding Party without the Claiming Party’s consent unless (A) there is no finding or admission of any violation of Law or any violation of the rights of any Person and no effect on any other Claims that may be made against the Claiming Party and (B) the sole relief provided is monetary damages that are paid in full by the Responding Party.

(c)If (i) notice is given to the Responding Party of the commencement of any third-party legal proceeding and the Responding Party does not, within 30 days after the Claiming Party’s notice is given, give notice to the Claiming Party of its election to assume the defense of such legal proceeding, (ii) any of the conditions set forth in clauses (i) through (iii) of Section 10.7(b) above become unsatisfied or (iii) a Claiming Party determines in good faith that there is a reasonable probability that a legal proceeding may adversely affect it other than as a result of monetary damages for which it would be entitled to indemnification from the Responding Party under this Agreement, then the Claiming Party shall (upon notice to the Responding Party) have the right to undertake the defense, compromise or settlement of such claim; provided, however, that the Responding Party shall reimburse the Claiming Party for the costs of defending against such third-party claim (including reasonable attorneys’ fees and expenses) and shall remain otherwise responsible for any liability with respect to amounts arising from or related to such third-party claim, in both cases to the extent it is ultimately determined that such Responding Party is liable with respect to such third-party claim for a breach under this Agreement.  The Responding Party may elect to participate in such legal proceedings, negotiations or defense at any time at its own expense.

Section 10.8Access to Information.  After the Closing Date, Seller and Buyer shall grant each other (or their respective designees), and Buyer shall cause the Project Companies to grant to Seller (or its designees), access at all reasonable times upon reasonable notice to all of the information, books and records relating to the Project Companies in its possession, and shall afford such party the right (at such party’s expense) to take extracts therefrom and to make copies thereof, to the extent reasonably necessary to implement the provisions of, or to investigate or defend any claims between the Parties arising under, this Agreement other than (w) information relating to post-closing periods that is commercially sensitive, trade secret or otherwise confidential or (x) in the case of claims between the Parties, any information that is subject to any attorney client, work product or other privilege or that otherwise would not be required to be provided pursuant to a subpoena or other civil discovery procedure.  At or promptly after the Closing, Seller shall deliver to Buyer all books, records, correspondence, files, and other information of or relating to the Companies or their properties, business, operations or condition (other than Terminated Contracts and Excluded Items) to the extent such information is not in the custody or possession of the Companies on the Closing Date other than (y) information relating to pre-closing periods in respect of any Non-Company Affiliate that is commercially sensitive, trade secret or otherwise confidential or (z) in the case of claims between the Parties, any information that is subject to any attorney client, work product or other privilege or that otherwise would not be required to be provided pursuant to a subpoena or other civil discovery procedure.

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ARTICLE XI
MISCELLANEOUS

Section 11.1Notices.  (a)  Unless this Agreement specifically requires otherwise, any notice, demand or request provided for in this Agreement, or served, given or made in connection with it, shall be in writing and shall be deemed properly served, given or made if delivered in person or sent by facsimile or sent by registered or certified mail, postage prepaid, or by a nationally recognized overnight courier service that provides a receipt of delivery, in each case, to the Parties at the addresses specified below:

If to Buyer, to:

TPF Generation Holdings, LLC

1044 North 115th Street

Suite 400

Omaha, NE 68154

Attn: Paul Smith

Facsimile: (402) 691-9727

with copies to:

TPF Generation Holdings, LLC.

1044 North 115th Street

Suite 400

Omaha, NE 68154

Attn: Ryan Schroer

Facsimile: (402) 691-9727

and

Chadbourne & Parke LLP

30 Rockefeller Center

New York, NY 10012

Attn: Charles E. Hord, Esq.

Facsimile: (646) 710-5353

If to Seller, to:

Constellation Power, Inc.

c/o Constellation Energy Group, Inc.

750 East Pratt Street

Baltimore, MD 21202

Attn: John Paffenbarger

Facsimile: (410) 783-2829

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with copies to:

Constellation Energy Group, Inc.

750 East Pratt Street

Baltimore, MD 21202

Attn: Charles A. Berardesco, Esq.

Facsimile: (410) 783-3049

and

Paul, Hastings, Janofsky & Walker LLP

75 East 55th Street

New York, NY 10022

Attn: Jonathan Birenbaum, Esq.

Facsimile: (212) 319-4090

(b)Notice given by personal delivery, mail or overnight courier pursuant to this Section 11.1 shall be effective upon physical receipt.  Notice given by facsimile pursuant to this Section 11.1 shall be effective as of the date of confirmed delivery if delivered before 5:00 p.m. Eastern Time on any Business Day or the next succeeding Business Day if confirmed delivery is after 5:00 p.m. Eastern Time on any Business Day or during any non-Business Day.

Section 11.2Entire Agreement.  Except for the Confidentiality Agreement, this Agreement supersedes all prior discussions and agreements between the Parties with respect to the subject matter hereof and contains the sole and entire agreement between the Parties hereto with respect to the subject matter hereof.

Section 11.3Expenses.  Except as otherwise expressly provided in this Agreement, whether or not the transactions contemplated hereby are consummated, each Party will pay its own costs and expenses incurred in anticipation of, relating to and in connection with the negotiation and execution of this Agreement and the transactions contemplated hereby.

Section 11.4Disclosure.  Seller may, at its option, include in the Schedules items that are not material in order to avoid any misunderstanding, and any such inclusion, or any references to dollar amounts, shall not be deemed to be an acknowledgment or representation that such items are material, to establish any standard of materiality or to define further the meaning of such terms for purposes of this Agreement.

Section 11.5Waiver.  Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition.  No waiver by any Party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion.

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Section 11.6Amendment.  This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of each Party.

Section 11.7No Third Party Beneficiary.  Except for the provisions of Sections 6.2(b), 6.4, 6.5, 6.7, 6.15, 9.2, 10.4, 10.5 and 10.6(c) which are intended to be for the benefit of the Persons identified therein), the terms and provisions of this Agreement are intended solely for the benefit of the Parties and their respective successors or permitted assigns, and it is not the intention of the Parties to confer third-party beneficiary rights upon any other Person.

Section 11.8Assignment; Binding Effect.  Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any Party without the prior written consent of the other Party, except that Buyer may (without the consent of any other Party) assign this Agreement or any of its rights, interests or obligations hereunder to any Person providing financing to Buyer or its Affiliates, but no such assignment shall release Buyer of its obligations under this Agreement.  Subject to this Section 11.8, this Agreement is binding upon, inures to the benefit of and is enforceable by the Parties and their respective successors and permitted assigns.

Section 11.9Headings.  The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof.

Section 11.10Invalid Provisions.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any Party under this Agreement will not be materially and adversely affected thereby, such provision will be fully severable, this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible.

Section 11.11Counterparts; Facsimile.  This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.  Any facsimile or electronically transmitted copies hereof or signature hereon shall, for all purposes, be deemed originals.

Section 11.12Governing Law; Jurisdiction; Waiver of Jury Trial.

(a)This Agreement shall be governed by and construed in accordance with the Law of the State of New York, without giving effect to any conflict or choice of law provision that would result in the application of another state’s Law.

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(b)Each of the Parties hereby submits to the exclusive jurisdiction of the State and Federal courts located in the Borough of Manhattan in the City and State of New York with respect to any action or proceeding relating to this Agreement and the transactions contemplated hereby.

(c)EACH OF THE PARTIES IRREVOCABLY WAIVE THEIR RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 11.13Attorneys’ Fees.  If either of the Parties shall bring an action to enforce the provisions of this Agreement, the prevailing Party shall be entitled to recover its reasonable attorneys’ fees and expenses incurred in such action from the unsuccessful Party.

[signature page follows]

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officer of each Party as of the date first above written.

SELLER
CONSTELLATION POWER, INC.
By:		/s/ Charles A. Berardesco
		Name: Charles A. Berardesco
		Title: Assistant Secretary
BUYER
TPF GENERATION HOLDINGS, LLC
By: TPF Power, Inc.,
its manager
By:	/s/ Alan B. Levande
	Name: Alan B. Levande
	Title: Vice President

EXHIBIT A

ASSIGNMENT AND ASSUMPTION OF MEMBERSHIP INTERESTS

This ASSIGNMENT AND ASSUMPTION OF MEMBERSHIP INTERESTS (this “Assignment”), effective as of                            , 2006, between CONSTELLATION POWER, INC., a Maryland corporation (“Assignor”), and TPF GENERATION HOLDINGS, LLC, a Delaware limited liability company (“Assignee”).

RECITALS

ARTICLE IAssignee and Assignor entered into a Purchase and Sale Agreement dated as of October 10, 2006 (the “Purchase Agreement”), pursuant to which Assignor has agreed to transfer to Assignee 100% of its membership interests (the “Membership Interests”) in Holland Energy, LLC (“Holland Energy”), HE Supply Company, LLC (“HE Supply”), Big Sandy Peaker Plant, LLC (“Big Sandy Peaker”), University Park Energy, LLC (“University Park Energy”), UP Supply, LLC (“UP Supply”) and Wolf Hills Energy, LLC [include CP High Desert and Rio Nogales companies as appropriate] (together with Holland Energy, HE Supply, Big Sandy Peaker, University Park Energy and UP Supply, the “Limited Liability Companies”);

B.To effect the sale and purchase of the Membership Interests, Assignor and Assignee are executing and delivering this Assignment.

NOW THEREFORE, in consideration of the premises, the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor and Assignee hereby act and agree as follows:

AGREEMENTS

Definitions. Any capitalized term not otherwise defined herein shall have the meaning ascribed to such term in the Purchase Agreement.

1.Transfer of Interests. Assignor hereby sells, assigns, transfers and delivers unto Assignee (i) all of Assignor’s right, title and interest in and to the Membership Interests and (ii) all of Assignor’s rights under the limited liability company or operating agreement of each respective Limited Liability Company.

2.Assumption of Assignee. Assignee hereby accepts the sale, assignment, transfer and delivery of the Membership Interests, and assumes (i) the Membership Interests and (ii) all obligations and liabilities of the Assignor under the limited liability company or operating agreement of each respective Limited Liability Company.

3.Withdrawal of Assignor. As of the date hereof, Assignor shall be deemed to have withdrawn as a member of each Limited Liability Company.  For purposes of the limited

liability company or operating agreement of each respective Limited Liability Company, the withdrawal of Assignor and the admission of Assignee shall be deemed to have occurred simultaneously.

4.Counterparts. This Assignment may be executed in separate counterparts with separate signature pages, all of which when taken together shall constitute one instrument.  Delivery by facsimile or other electronic transmission of an executed original and/or the retransmission of any executed facsimile or other electronic transmission shall be deemed to be the same as delivery of an executed original.

5.Further Assurances. The parties hereto agree to take all such further actions and execute, acknowledge and deliver all such further documents that are necessary or useful in carrying out the purposes of this Assignment.  Without limiting the foregoing, (i) Assignor agrees to execute, acknowledge and deliver to Assignee all such other additional instruments, notices, and other documents and to do all such other and further acts and things as may be reasonably necessary to more fully and effectively sell, assign, transfer and deliver to Assignee the Membership Interests and (ii) Assignee agrees to execute, acknowledge and deliver to Assignor all such other additional instruments, notices, and other documents and to do all such other and further acts and things as may be reasonably necessary to more fully and effectively accept and assume the Membership Interests.

6.Governing Law. This Assignment shall be governed by and construed in accordance with the Laws of the State of New York, without giving effect to any conflict or choice of law provision that would result in the application of another state’s Law.

7.Successors and Assigns. This Assignment shall be binding upon and inure to the benefit of Assignor and Assignee and their respective successors and permitted assigns.

[Signature Page Follows]

2

IN WITNESS WHEREOF, each party has caused this Assignment to be executed on its behalf by its duly authorized officer, as of the day and year first above written.

ASSIGNOR:

CONSTELLATION POWER, INC.

By:

Name:

Title:

ASSIGNEE:

TPF GENERATION HOLDINGS, LLC

By:

Name:

Title:

EXHIBIT B

ASSIGNMENT AND ASSUMPTION AGREEMENT

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of this                                 , 2006 (this “Assignment”), is hereby made between [Non-Company Affiliate], a [state of incorporation/formation] [type of entity] (the “Assignor”) and [Buyer or Project Company], a [state of incorporation/formation] [type of entity] (the “Assignee”).

RECITALS

WHEREAS, Assignor is a party to the contract[s] set forth on Exhibit A (the “Assigned Contract[s]”), by and between Assignor and [Counterparty] (“Counterparty”).

WHEREAS, pursuant to the Purchase and Sale Agreement, dated as of October 10, 2006 (the “Purchase Agreement”), between Constellation Power, Inc. and TPF Generation Holdings, LLC, Assignor desires to assign to Assignee and Assignee desires to assume from Assignor, all of Assignor’s right, title, interest in and to, and all liabilities and obligations of Assignor under the Assigned Contract[s] arising from and after the Closing Date.

[WHEREAS, Counterparty has agreed to consent to the assignment and assumption set forth in this Assignment.]

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and upon the terms and subject to the conditions set forth below, the parties agree as follows:

AGREEMENTS

Definitions.  Any capitalized term not otherwise defined herein shall have the meaning ascribed to such term in the Purchase Agreement.

1.Assignments.  As of the date hereof, Assignor does hereby assign, transfer, sell and convey unto Assignee all of its respective right, title and interest in and to the Assigned Contract[s].

2.Assumptions.  As of the date hereof, Assignee hereby assumes all of the duties and obligations of Assignor relating to the Assigned Contract[s] arising from and after the Closing Date.

3.Counterparts.  This Assignment may be executed in separate counterparts with separate signature pages, all of which when taken together shall constitute one instrument.  Delivery by facsimile or other electronic transmission of an executed original and/or the retransmission of any executed facsimile or other electronic transmission shall be deemed to be the same as delivery of an executed original.

4.Further Assurances. The parties hereto agree to take all such further actions and execute, acknowledge and deliver all such further documents that are necessary or useful in carrying out the purposes of this Assignment.  Without limiting the foregoing, (i) Assignor agrees to execute, acknowledge and deliver to Assignee all such other additional instruments, notices, and other documents and to do all such other and further acts and things as may be reasonably necessary to assign, transfer, sell and convey unto Assignee all of its respective right, title, and interest in and to the Assigned Contract[s] and (ii) Assignee agrees to execute, acknowledge and deliver to Assignor all such other additional

instruments, notices, and other documents and to do all such other and further acts and things as may be reasonably necessary to more fully and effectively accept and assume all of the duties and obligations of Assignor relating to the Assigned Contract[s] arising from and after the Closing Date.

5.Governing Law. This Assignment shall be governed by and construed in accordance with the Laws of the State of New York, without giving effect to any conflict or choice of law provision that would result in the application of another state’s Law.

6.Successors and Assigns. This Assignment shall be binding upon and inure to the benefit of Assignor and Assignee and their respective successors and permitted assigns.

[Signature Page Follows]

2

IN WITNESS WHEREOF, each party has caused this Assignment to be executed on its behalf by its duly authorized officer, as of the day and year first above written.

ASSIGNOR:
[NON-COMPANY AFFILIATE]
By:
	Name:
	Title:
ASSIGNEE:
[BUYER OR PROJECT COMPANY]
By:
	Name:
	Title:

EXHIBIT A

ASSIGNED CONTRACT[S]

TRANSITION SERVICES AGREEMENT

TERM SHEET

Parties:	Constellation, or an affiliate, and Buyer, or an affiliate.
Subject:	An agreement (the “Transition Services Agreement”) for Constellation to provide Buyer with certain services, as set forth in the attachment hereto (the “Services”). Terms not otherwise defined in this term sheet have the meanings given to them in that certain Purchase and Sale Agreement between Constellation and Buyer to which this term sheet is attached.
Term:	Commencing on the Closing Date and continuing in effect until the date that is six months after the Closing Date. However, Buyer may earlier terminate any services, or services being provided for specific plants, for any reason, by giving Constellation at least five (5) days prior written notice.
Standard of
Performance:	Substantially the same degree of care, skill and diligence with which Constellation’s personnel have performed similar services for the Project Companies prior to the date of the Transition Services Agreement and in accordance with the reasonable instructions provided by the authorized representatives of Buyer.
Payment:	To be mutually agreed. Buyer would prefer a fixed monthly charge that would be reduced to the extent that Buyer reduces the scope of transition services from time to time as discussed in Term above.
Scope of
Transition
Services:	See Attachment 1. The services marked with an “X” under the column labeled “Constellation” are the proposed services currently requested by Buyer.
Operation and
Maintenance:	Buyer would strongly prefer to hire Constellation’s plant employees effective on the later of the Closing Date and January 1, 2007. Accordingly, if the Closing Date occurs prior to January 1, 2007, Buyer would like Constellation to provide the plant operation and maintenance services customarily provided by the plant employees for the period from the Closing Date until January 1, 2007. Part 1 of the attached scope of work is intended to cover these types of services and is not intended to cover any time period after January 1, 2007.

Pre-Closing
Transition:	Buyer’s proposed scope of transition services in Attachment 1 assumes cooperation from Seller during the period between PSA signing and the Closing Date (and, to the extent necessary, during the term of the TSA) to permit a smooth transition. Buyer would like to discuss with Seller the pre-closing transition work that will be required.
Personnel:	Constellation will assign those personnel it deems necessary for performance of the Services in accordance with the standard of performance set forth above. To the extent available, the same personnel who performed those Services in the past will be used.
Independent
Contractor:	Constellation shall be an independent contractor with respect to the performance of the Services.
Items to be
Furnished:	Buyer shall furnish to Constellation, at Buyer’s expense, such information, documentation, materials, supplies and third-party services (consistent with past practices) as Constellation may require to provide the Services.
Liability and
Indemnity:	Neither party will be liable for indirect, special or consequential damages. Constellation, its affiliates and their directors, officers, employees and agents will not be liable for any act or omission unless a result of breach of contract, gross negligence, willful misconduct or fraud. Buyer will be required to indemnify Constellation, its affiliates and their directors, officers, employees and agents against all losses, damages, expenses, liabilities, and claims of third parties arising from the performance of the Services. Constellation will indemnify Buyer from all losses, damages, expenses, liabilities and claims arising from the breach of contract, gross negligence, willful misconduct or fraud of Constellation in providing the Services.
Force Majeure:	Neither party will be liable or considered to be in default of any obligation, other than payment obligations, to the extent that performance of the obligation is prevented or delayed by an event of force majeure.
Governing Law:	The governing law of the Purchase and Sale Agreement will apply.
Other:	The Agreement will include other typical contractual provisions, including provisions addressing notice, confidentiality, waiver, severability, and counterparts.

Attachment 1 to Transition Services Agreement Term Sheet

CONSTELLATION POST CLOSING TRANSITIONAL SERVICES WORKSCOPE

		TPF	Constellation
1	Plant Operations Prior to January 1, 2007
1a	Operate the plant		X
1b	Maintain the plant		X
1c	Procure goods and services required to operate and maintain the plant at TPF’s expense.		X
1d	Prepare and maintain the 2007 plant level O&M budget in a month by month format.		X
1e	Prepare plant payroll records and submit to CEG home office.		X
1f	Prepare and administer plant safety procedures and OSHA compliance documentation		X
1g	Prepare and submit monthly plant level accounting reports to TPF home office accounting group		X
1h	Perform accounts payable functions for purchases made at the plant level.		X
1i	Maintain facility environmental permits. Perform monitoring and testing as required. Submit federal level permit reports to company responsible for submitting data to federal agencies.		X
1j	Prepare and submit monthly plant operating records and reports		X
1k	Prepare and submit daily plant availability and generation reports		X
1l	Respond to emergencies		X
1m	Manage plant level third party contracts		X
1n	Maintain spare parts inventory		X
2	Home Office Support – Plant Operations
2a	Monitor plant operations with respect to compliance with tolling agreements for the High Desert plant.		X
2b	Monitor plant operations with respect to compliance with tolling agreements and / or energy services agreements for the Rio Nogales, Holland, University Park, Big Sandy and Wolf Hills plants.	X

2c	Provide technical and administrative support for turbines, HRSGs and balance of plant equipment during operation and outages		X
2d	Administer GE long-term service agreement and Siemens long-term maintenance agreement		X
2e	Monitor plant compliance with environmental permit compliance, testing and reporting		X
2f	Prepare and submit plant monthly reports with respect to compliance with Tolling Agreements, Energy Services Agreements and Financing Agreements		X
2g	Monitor plant environmental, health and safety requirements and compliance		X
2h	Prepare local, state and federal regulatory compliance reports		X
2i	Submit local, state and federal regulatory compliance reports	X
2j	Provide human resources services for plant employees including benefits and payroll oversight.		X
2k	Perform ERCOT QSE services for the Rio Nogales plant		X
3	Home Office Support – Finance and Accounting
3a	Prepare and keep project level finance, accounting, and tax documents.	X
3b	Perform project level accounts payable and receivable functions. NOTE: Consistent with our proposal, we are still evaluating the best approach to handle this area.	X	X
4	Home Office Support – Asset Management
4a	Perform tolling agreement contract administration for High Desert plant		X
	Perform other project agreement contract administration for High Desert plant as necessary to administer the tolling agreement		X
	Perform tolling agreement / energy services agreement contract administration for the Rio Nogales, Holland, University Park, Big Sandy and Wolf Hills plants.	X
	Perform other project agreement contract administration for Rio Nogales, Holland, University Park, Big Sandy and Wolf Hills plants, including water supply and interconnection	X
4b	Perform energy services agreement contract administration	X
4c	Manage portfolio insurance policies	X

4d	Provide capital project engineering services	X
4e	Community relations function	X	X
5	Home Office Support - IT & Telecommunications
5a	Provide computer hardware and software support	X
5b	Provide telecommunications hardware and software support	X
5c	Provide project level and plant accounting software support	X
5d	Provide plant maintenance planning software support	X
5e	Provide high speed data communications service for plant telecommunications	X
5f	Continue to accept CAISO, PJM and MISO AGC signals and forward to the applicable plants		X
5g	Provide plant generation data to energy manager	X

EX-3.(A)

EXHIBIT NO. 3(a)

        

BY-LAWS

of

CONSTELLATION ENERGY GROUP, INC.

Amended as of October 20, 2006

ARTICLE I

OFFICES AND HEADQUARTERS

Section 1. - Name.

The name of the corporation is Constellation Energy Group, Inc. (the “Corporation”).

Section 2. - Offices.

The principal office of the Corporation is 750 East Pratt Street, Baltimore, Maryland 21202. The Corporation may also have other offices at such other places, either within or without the State of Maryland, as the Board of Directors of the Corporation (the “Board”) may determine or as the activities of the Corporation may require.

ARTICLE II

STOCKHOLDERS

Section 1. - Place of Meetings.

Meetings of stockholders of the Corporation shall be held at such places, either within or without the State of Maryland as may be fixed from time to time by the Board and stated in the notice of meeting or in a duly executed waiver of notice thereof.

Section 2. - Annual Meetings.

The Annual Meeting of the stockholders for the election of directors and for the transaction of general business shall be held on any date during the period of May 1 through May 31, as determined year to year by the Board; provided, that the Annual Meeting of the stockholders for the year 2006 shall be held on any date during the period December 1 through December 31, 2006, as determined by the Board.  The time and location of the meeting shall be determined by the Board.  Failure to hold an Annual Meeting does not invalidate the Corporation’s existence or affect any otherwise valid corporate acts.

The Chief Executive Officer of the Corporation shall prepare, or cause to be prepared, an annual report containing a full and correct statement of the affairs of the Corporation, including a balance sheet and a financial statement of operations for the preceding fiscal year, which shall be submitted to the stockholders at or prior to the Annual Meeting.

Section 3. - Special Meetings.

Special meetings of the stockholders may be held in the City of Baltimore or in any county in which the Corporation provides service or owns property upon call by the Chairman of the Board, President or a majority of the Board whenever they deem expedient, or by the Secretary upon the written request of the holders of shares entitled to not less than a majority of all the votes entitled to be cast at such meeting.  Such request of the stockholders shall state the purpose or purposes of the meeting and the matters proposed to be acted on and shall be delivered to the Secretary, who shall inform such stockholders of the reasonably estimated cost of preparing and mailing such notice of the meeting, and upon payment to the Corporation of such costs the Secretary shall give notice stating the purpose or purposes of the meeting to all stockholders entitled to vote at such meeting.  The business at all special meetings shall be confined to that specifically named in the notice thereof.

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Section 4. - Notice and Waiver; Organization of Meeting.

When stockholders are required or permitted to take any action at a meeting whether special or annual, written or printed notice of every meeting shall be given to each stockholder entitled to vote at the meeting and each other stockholder entitled to notice of the meeting.  The notice shall state the place, day, and hour of such meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called.  The written notice of any meeting shall be given, personally or by mail, not less than 10 or more than 90 days before the date of the meeting.  If mailed, such notice shall be deemed given when deposited with the United States Postal Service, postage prepaid, addressed to the stockholder at his or her address as it appears on the records of the Corporation or its registrar.  The business at all special meetings shall be confined to that specifically named in the notice thereof.

When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken unless the adjournment is for more than 120 days, or, if after the adjournment, a new record date is fixed for the adjourned meeting, in which circumstances a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.  At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting.

Notice of any meeting of stockholders may be waived in writing by any stockholders entitled to vote at such meeting.  Attendance at a meeting by any stockholder, in person or by proxy, shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

All meetings of the stockholders shall be called to order by the Chairman of the Board, or in his or her absence by the President or a Vice President; or in the case of the absence of such Officers, then by any stockholder.  The party calling the meeting to order shall be Chairman of the meeting.  The Secretary of the Corporation, if present, shall act as secretary of the meeting, unless some other person shall be elected by the stockholders at the meeting to act as secretary.  An accurate record of the meeting shall be kept by the secretary thereof, and placed in the record books of the Corporation.

Section 5. - Order of Business.

(a)At any Annual Meeting, only such business shall be conducted as shall have been brought before the Annual Meeting (i) by or at the direction of the Board, or (ii) by any stockholder who complies with the procedures set forth in this Section 5.

(b)For nominations or other business to be brought properly before an Annual Meeting by a stockholder, the stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation.  To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal office of the Corporation not less than 75 days prior to the anniversary of the date on which notice of the prior year’s Annual Meeting was given to stockholders in accordance with Section 4 of this Article II.  Notices sent by facsimile or electronically will not be accepted by the Secretary of the Corporation.  To be in proper written form, a stockholder’s notice to the Secretary shall set forth in writing as to each matter the stockholder proposes to bring before the Annual Meeting:

(i)as to each person whom the stockholder proposes to nominate for election or re-election as a Director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934 (the “Exchange Act”) or any applicable successor

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provisions thereto, including such person’s written consent to being named in the proxy statement as a nominee and to serving as a Director if elected; and as to the stockholder giving the notice, the name and address, as they appear on the Corporation’s books, of the stockholder proposing such nomination and the class and number of shares of stock of the Corporation which are beneficially owned by the stockholder.

(ii)as to any other business that the stockholder proposes to bring before the meeting:

(A)a brief description of the business desired to be brought before the Annual Meeting and the reasons for conducting such business at the Annual Meeting;

(B)the name and address, as they appear on the Corporation’s books, of the stockholder proposing such business;

(C)the class and number of shares of stock of the Corporation which are beneficially owned by the stockholder; and

(D)any material interest of the stockholder in such business.

(c)Notwithstanding anything in these by-laws to the contrary, no business shall be conducted at an Annual Meeting except in accordance with the procedures set forth in this Section 5 of Article II.  The Chairman of an Annual Meeting shall, if the facts warrant, determine and declare at the Annual Meeting that business was not properly brought before the Annual Meeting in accordance with the provisions of this Section 5 of Article II and, if the Chairman should so determine, he or she shall so declare at the Annual Meeting and any such business not properly brought before the Annual Meeting shall not be transacted.

(d)Notwithstanding the foregoing provisions of this Section, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section.  Nothing in this Section shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

Section 6. - Quorum.

At any meeting of the stockholders the presence in person or by proxy of stockholders entitled to cast a majority of the votes thereat shall constitute a quorum for the transaction of business.

When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any stockholders.

The stockholders present, although less than a quorum, may adjourn the meeting to another time or place; provided that notice of such adjourned meeting is given in accordance with the provisions of Section 4 of this Article II.

Section 7. - Voting; Proxies.

At all meetings of the stockholders each stockholder shall be entitled to one vote for each share of Common Stock standing in his or her name and, when the Preferred Stock is entitled to vote, such number of votes as shall be provided in the Charter of the Corporation for each share of Preferred Stock standing in his or her name, and the votes shall be cast by stockholders in person or by lawful proxy.  However, no proxy shall be voted 11 months after the date thereof, unless the proxy provides for a longer period.

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Section 8. -  Control Shares.

Notwithstanding any other provision of the Charter of the Corporation or these by-laws, Title 3, Subtitle 7 of the Maryland General Corporation Law (or any successor statute) shall not apply to any acquisition by any person of shares of stock of the Corporation.  This section may be repealed, in whole or in part, at any time, whether before or after an acquisition of control shares and, upon such repeal, may, to the extent provided by any successor by-law, apply to any prior or subsequent control share acquisition.

Section 9. - Method of Voting.

All elections and all other questions shall be decided by a majority of the votes cast, at a meeting at which a quorum is present, except as expressly provided otherwise by the general laws of the State of Maryland or the Charter and except that Directors shall be elected by a plurality of the votes cast.

Section 10. - Ownership of its Own Stock.

Shares of capital stock of the Corporation held by either (i) the Corporation or (ii) another corporation, if a majority of the shares entitled to vote in the election of Directors of such other corporation is held, directly or indirectly, by the Corporation (a “Controlled Corporation”), shall neither be entitled to vote nor be counted for quorum purposes.  Nothing in this Section 10 shall be construed as limiting the right of the Corporation or any Controlled Corporation to vote stock of the Corporation held by it in a fiduciary capacity.

Section 11. - Inspectors.

The Board of Directors, in advance of any meeting, may, but need not, appoint one or more individual inspectors or one or more entities that designate individuals as inspectors to act at the meeting or any adjournment thereof.  If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors.  In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the Board of Directors in advance of the meeting or at the meeting by the chairman of the meeting.  The inspectors, if any, shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders.  Each such report shall be in writing and signed by him or her or by a majority of them if there is more than one inspector acting at such meeting.  If there is more than one inspector, the report of a majority shall be the report of the inspectors.  The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof.

Section 12. - Record Date for Stockholders; Closing of Transfer Books.

The Board may fix, in advance, a date as the record for the determination of the stockholders entitled to notice of, or to vote at, any meeting of stockholders, or entitled to receive payment of any dividend, or entitled to the allotment of any rights, or for any other proper purpose.  Such date in any case shall not be more than 90 days (and in the case of a meeting of stockholders not less than 10 days) prior to the date on which the particular action requiring such determination of stockholders is to be taken.  Only stockholders of record on such date shall be entitled to notice of or to vote at such meeting or to receive such dividends or rights, as the case may be.  In lieu of fixing a record date the Board may close the stock transfer books of the Corporation for a period not exceeding 20 nor less than 10 days preceding the date of any meeting of stockholders or not exceeding 20 days preceding any other of the above mentioned events.

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ARTICLE III

BOARD OF DIRECTORS AND COMMITTEES

Section 1. - Powers of Directors

The business and affairs of the Corporation shall be managed under the direction of the Board which shall have and may exercise all the powers of the Corporation, except such as are expressly conferred upon or reserved by the stockholders by law, by Charter, or by these by-laws.  Except as otherwise provided herein, the Board shall appoint the Officers for the conduct of the business of the Corporation, determine their duties and responsibilities.  The Board may remove any Officer.

Section 2. - Number and Election of Directors.

The Corporation shall have at least seven  Directors; provided that the Board of Directors may alter the number of Directors from time to time so long as such number does not exceed 20.  Any alteration in the number of Directors will not affect the tenure of office of any Director.  The Directors shall be grouped into three classes, Class I, Class II and Class III.  Directors in each class shall serve a term of three years and until their successors are elected and qualified, or until their earlier resignation or removal.  A separate class will be elected at each Annual Meeting of the stockholders.

Section 3. - Vacancies.

If for any reason any or all the Directors cease to be Directors, such event shall not terminate the Corporation or affect these by-laws or the powers of the remaining Directors hereunder (even if fewer than three Directors remain).  Except as may be provided by the Board in setting the terms of any class or series of preferred stock, any vacancy on the Board may be filled only by a majority of the remaining Directors, even if the remaining Directors do not constitute a quorum.  Any Director elected to fill a vacancy shall serve for the remainder of the full term of the class in which the vacancy occurred and until a successor is elected and qualified.

Section 4. - Resignations.

Any Director of the Corporation may resign at any time by giving written notice to the Corporation.  Such resignation shall take effect at the time specified therein, if any, or if no time is specified therein, then upon receipt of such notice by the Corporation; and, unless otherwise provided therein, the acceptance of such resignation shall not be necessary to make it effective.

Section 5. - Meetings of the Board.

A regular meeting of the Board shall be held immediately after the Annual Meeting of stockholders or any special meeting of the stockholders at which the Board is elected, and thereafter regular meetings of the Board shall be held on such dates during the year as may be designated from time to time by the Board.  All meetings of the Board shall be held at the general offices of the Corporation in the City of Baltimore or elsewhere, as ordered by the Board.  Of all such meetings (except the regular meeting held immediately after the election of Directors) the Secretary shall give notice to each Director personally or by telephone, facsimile or electronically directed to, or by written notice deposited in the mails addressed to, his or her residence or business address at least 48 hours before such meeting.

Special meetings may be held at any time or place upon the call of the Chairman of the Board, or the President, or in their absence, on order of the Executive Committee, if any, by notices as above.  In the event all

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of the Directors in office waive notice of any meeting in writing at or before the meeting, the meeting may be held without the aforesaid advance notices.

The Chairman shall preside at all meetings of the Board, or, in his or her absence, the President or one of the Vice Presidents (if a member of the Board) shall preside.  If at any meeting none of the foregoing persons is present, the Directors present shall designate one of their number to preside at such meeting.

Section 6. - Telephone Meetings Permitted.

Members of the Board, or any committee, may participate in a meeting thereof by means of conference telephone or similar communications equipment in which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meeting.

Section 7. - Quorum.

A majority of the Directors in office shall constitute a quorum of the Board for the transaction of business.  If a quorum is not present at any meeting, a majority of the Directors present may adjourn to any time and place they may see fit.

Section 8. -  Committees.

The Board is authorized to appoint from among its members, an audit committee, a compensation committee, and a nominating and corporate governance committee, and such other committees as it may, from time to time, deem advisable and to delegate to such committee or committees any of the powers of the Board that it may lawfully delegate.  Each such committee shall consist of at least one Director, except for the audit committee which shall have, at a minimum, the number of members required by applicable law or stock exchange listing standards.  The Directors shall annually elect from among their number members for each committee established.  The members of the committees shall hold their offices for one year and until their successors are elected and qualified, or until their earlier resignation or removal.  All vacancies in said committees shall be filled by the Board.  The purposes and authority of each committee shall be as set forth in applicable law, board resolution or committee charter.  Any such charter shall be approved annually by the Board.

Section 9. - Fees and Expenses.

Each member of the Board, other than salaried Officers and employees, shall be paid an annual retainer fee, payable in such amount as shall be specified from time to time by the Board.  Each Committee Chair shall be paid an annual retainer fee, payable in  such amount as shall be specified from time to time by the Board.

Each member of the Board, other than salaried Officers and employees, shall be paid such fee as shall be specified from time to time by the Board for attending each regular or special meeting of the Board and for attending, as a committee member, each meeting of any committee appointed by the Board.  Each member shall be paid reasonable traveling expenses incident to attendance at meetings.

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ARTICLE IV

OFFICERS

Section 1. - Officers.

The Corporation shall have a Chairman of the Board, a President, one or more Vice Presidents, a Treasurer, and a Secretary who shall be elected by, and hold office at the will of, the Board.  The Chairman of the Board shall be chosen from among the Directors.  The Board shall designate either the Chairman of the Board or the President to be the Chief Executive Officer of the Corporation.  The Board shall also elect from time to time such other Officers and Assistant Officers as they may deem necessary for the conduct of the business and affairs of the Corporation, or the Board by resolution may authorize the Chief Executive Officer to designate and appoint from time to time such other Officers and Assistant Officers as he or she may deem necessary for the conduct of the business and affairs of the Corporation.  Any two offices, except those of President and Vice President, may be held by the same person, but no person shall sign checks, drafts and promissory notes, or execute, acknowledge or verify any other instrument in more than one capacity, if such instrument is required by law, the Charter, these by-laws, a resolution of the Board or order of the Chief Executive Officer to be signed, executed, acknowledged or verified by two or more Officers.  The President, any Vice President, or such other persons as may be designated by the Board, shall sign all special contracts of the Corporation, countersign checks, drafts and promissory notes, and such other papers as may be directed by the Board.  The President, or any Vice President, together with the Treasurer or an Assistant Treasurer (if any), shall have authority to sell, assign or transfer and deliver any bonds, stocks or other securities owned by the Corporation.  The Board shall require a fidelity bond to be given by each Officer, or, in its discretion, the Board may substitute a general blanket fidelity bond or insurance contract to cover all Officers and employees.

Section 2. - Duties of the Officers.

(a)Chairman of the Board

The Chairman of the Board shall preside at all meetings of the Board and of stockholders.  The Chairman of the Board shall also have such other powers and duties as from time to time may be assigned by the Board.

(b)President

The President shall have general executive powers, as well as specific powers conferred by these by-laws. The President shall also have such other powers and duties as from time to time may be assigned by the Board.  In the absence of the Chairman of the Board, the President shall perform all the duties of the Chairman of the Board.

(c)Vice Presidents

Each Vice President shall have such powers and duties as may be assigned by the Board or the Chief Executive Officer, as well as the specific powers assigned by these by-laws.  A Vice President may be designated by the Board or the Chief Executive Officer to perform, in the absence of the President, all the duties of the President.

(d)Treasurer

The Treasurer shall have the care and the custody of the funds and valuable papers of the Corporation, and shall receive and disburse all moneys in such a manner as may be prescribed by the Board or the Chief Executive Officer.  The Treasurer shall have such other powers and duties as may be assigned by the Board, or the Chief Executive Officer, as well as specific powers assigned by these by-laws.

(e)Secretary

The Secretary shall attend all meetings of the stockholders and Directors and shall notify the stockholders and Directors of such meetings in the manner provided in these by-laws.  The Secretary shall record the proceedings of all such meetings in books kept for that purpose. 

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The Secretary shall have such other powers and duties as may be assigned by the Board or the Chief Executive Officer, as well as the specific powers assigned by these by-laws.

(f)Other Officers

Such other Officers and Assistant Officers as are appointed by the Board, or the Chief Executive Officer if authorized by the Board pursuant to Section 1 above, shall exercise such duties and have such powers as by custom and applicable law generally pertain to their respective offices as well as such duties and powers as the Board or the Chief Executive Officer may assign.

Section 3. - Terms of Office; Removals and Vacancies.

Any Officer or Assistant Officer elected by the Board may be removed by the Board in its sole judgment.  Any Officer or Assistant Officer appointed by the Chief Executive Officer may be removed by the Chief Executive Officer in his or her sole judgment.  In case of removal, the salary of such Officer or Assistant Officer shall cease.  Removal shall be without prejudice to the contractual rights, if any, of the person so removed, but election or appointment of an Officer or Assistant Officer shall not of itself create contractual rights.

Each Officer or Assistant Officer shall hold office until his or her successor is elected and qualified or appointed, or until his or her earlier removal or resignation.

Any vacancy occurring in any office of the Corporation shall be filled by the Board, or by the Chief Executive Officer if authorized by the Board pursuant to Section 1 above, and the Officer or Assistant Officer so elected or appointed shall hold office for the unexpired term in respect of which the vacancy occurred and until his or her successor shall be duly elected and qualified or appointed.

In any event of absence or temporary disability of any Officer or Assistant Officer of the Corporation, the Board, or the Chief Executive Officer if authorized by the Board pursuant to Section 1 above, may authorize another person to perform the duties of that office.

Section 4. - Voting Securities Owned by the Corporation.

Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chairman, the President or any Vice President and any such Officer may, in the name of and on behalf of the Corporation, take all such action as any such Officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and powers incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present.  The Board may, by resolution, from time to time confer like powers upon any other person or persons.

ARTICLE V

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 1. - Procedure.

The Corporation shall indemnify all Directors, Officers and employees to the fullest extent permitted by the general laws of the State of Maryland and shall provide indemnification expenses in advance to the extent

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permitted thereby.  The Corporation will follow the procedures required by applicable law in determining persons eligible for indemnification and in making indemnification payments and advances.

Section 2. - Exclusivity, etc.

The indemnification and advance of expenses provided by the Charter and these by-laws shall not be deemed exclusive of any other rights to which a person seeking indemnification or advance of expenses may be entitled under any law (common or statutory), or any agreement, vote of stockholders or disinterested Directors or other provision that is consistent with law, both as to action in his or her official capacity and as to action in another capacity while holding office or while employed or acting as agent for the corporation, shall continue in respect of all events occurring while a person was a Director or Officer after such person has ceased to be a Director or Officer, and shall inure to the benefits of the estate, heirs, executors and administrators of such person.  All rights to indemnification and advance of expenses under the Charter of the Corporation and hereunder shall be deemed to be a contract between the Corporation and each Director or Officer of the Corporation who serves or served in such capacity at any time while this by-law is in effect. Nothing herein shall prevent the amendment of this by-law, provided that no such amendment shall diminish the rights of any person hereunder with respect to events occurring or claims made before its adoption or as to claims made after its adoption in respect of events occurring before its adoption.  Any repeal or modification of this by-law shall not in any way diminish any rights to indemnification or advance of expenses of such Director or Officer or the obligations of the Corporation arising hereunder with respect to events occurring, or claims made, while this by-law or any provision hereof is in force.

Section 3. - Severability; Definitions.

The invalidity or unenforceability of any provision of this Article V shall not affect the validity or enforceability  of any other provision hereof.  The phrase “this by-law” in this Article V means this Article V in its entirety.

ARTICLE VI

CAPITAL  STOCK

Section 1. - Evidence of Stock Ownership.

Evidence of ownership of stock in the Corporation may be either pursuant to a certificate(s) or a statement in compliance with the general laws of the State of Maryland, each of which shall represent the number of shares of stock owned by a stockholder in the Corporation.  Stockholders may request that their stock ownership be represented by a certificate(s).  In case any Officer who signed any certificate, in facsimile or otherwise, ceases to be such Officer of the Corporation before the certificate is issued, the certificate may nevertheless be issued by the Corporation with the same effect as if the Officer had not ceased to be such Officer as of the date of its issue.

For stock ownership evidenced by a statement, such statement shall be in such form, and executed, as required from time to time by the general laws of the State of Maryland.

Section 2. - Transfer of Shares.

Stock shall be transferable only on the books of the Corporation by assignment in writing by the registered holder thereof, his or her legally constituted attorney, or his or her legal representative, either upon surrender and cancellation of the certificate(s) therefor, if such stock is represented by a certificate, or upon receipt of

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such other documentation for stock not represented by a certificate as the Board and the general laws of the State of Maryland may, from time to time, require.

Section 3. - Lost, Stolen or Destroyed Certificates.

No certificate for shares of stock of the Corporation shall be issued in place of any other certificate alleged to have been lost, stolen, or destroyed, except upon production of such evidence of the loss, theft or destruction and upon indemnification of the Corporation to such extent and in such manner as the Board may prescribe.

Section 4. - Transfer Agents and Registrars.

The Board shall appoint a person or persons, the Corporation or any incorporated trust company or companies or any of them, as transfer agents and registrars and, if stock is represented by a certificate, may require that such certificate bear the signatures or the counter-signatures of such transfer agents and registrars, or either of them.

Section 5. - Stock Ledger.

The Corporation shall maintain at its principal office, a stock record containing the names and addresses of all stockholders and the numbers of shares of each class held by each stockholder.

ARTICLE VII

MISCELLANEOUS

Section 1. - Seal.

The Board shall provide, subject to change, a suitable corporate seal which may be used by causing it, or facsimile thereof, to be impressed or affixed or reproduced on the Corporation’s stock certificates, bonds, or any other documents on which the seal may be appropriate.

Section 2. - Amendments.

These by-laws, or any of them, may be amended or repealed, and new by-laws may be made or adopted only at any meeting of the Board, by vote of a majority of the Directors or at a meeting of the shareholders, duly called, by a vote of two-thirds of the shareholders eligible to vote thereon.  Pursuant to Articles Supplementary filed with the State Department of Assessments and Taxation of Maryland, the Corporation has elected, by resolution of the Board, to be subject to Sections 3-803, 3-804(b), 3-804(c) and 3-805 of the Maryland General Corporation Law and the following sections of these by-laws have been amended to conform to such elections, respectively: Article III, Section 2, third, fourth and last sentences; Article III, Section 2, first sentence; Article III, Section 3; and Article II, Section 3, first sentence, and therefore, such provisions may be amended, altered or repealed only by resolution of the Board.

Section 3. - Section Headings and Statutory References.

The headings of the Articles and Sections of these by-laws have been inserted for convenience of reference only and shall not be deemed to be a part of these by-laws.

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EX-4.(A)

EXHIBIT 4(a)

FIRST SUPPLEMENTAL INDENTURE, dated as of October 13, 2006 (this “First Supplemental Indenture”), between BALTIMORE GAS AND ELECTRIC COMPANY, a Maryland corporation (the “Issuer”) and DEUTSCHE BANK TRUST COMPANY AMERICAS, as trustee (the “Trustee”).

W I T N E S S E T H

WHEREAS, the Issuer and the Trustee have duly executed and delivered an Indenture, dated as of July 24, 2006 (the “Indenture”), providing for the authentication, issuance, delivery and administration of unsecured debentures, notes or other evidences of indebtedness to be issued in one or more series by the Issuer (the “Securities”);

WHEREAS, pursuant to the terms of the Indenture, the Issuer desires to provide for the establishment of new series of Securities (the “Notes”) to be issued under the Indenture in an unlimited aggregate principal amount, which may be authenticated and delivered as provided in the Indenture;

WHEREAS, the Issuer desires to amend the provisions of the Indenture to issue the Notes under the terms of the Indenture as supplemented hereby;

WHEREAS, Section 11.01 of the Indenture expressly permits the Issuer and the Trustee to enter into one or more supplemental indentures for the purposes, inter alia, of establishing the forms and terms of Securities to be issued under the Indenture or making certain provisions in the Indenture which the Issuer deems necessary or desirable, and permits the execution of such supplemental indentures without the consent of the Holders of any Securities then outstanding;

WHEREAS, for the purposes hereinabove recited, and pursuant to due corporate action, the Issuer has duly determined to execute and deliver to the Trustee this First Supplemental Indenture; and

WHEREAS, all conditions and requirements necessary to make this First Supplemental Indenture a valid, legal and binding instrument in accordance with its terms have been done and performed, and the execution and delivery hereof have been in all respects duly authorized;

NOW, THEREFORE, in consideration of the premises, the Issuer and the Trustee mutually covenant and agree as follows:

SECTION 1.DEFINITIONS.

1.1All terms contained in this First Supplemental Indenture shall, except as specifically provided herein or except as the context may otherwise require, have the meanings given to such terms in the Indenture.

1.2Unless the context otherwise requires, the following terms shall have the following meanings:

“Affiliate” of any specified person means any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For the purposes of this definition, “control” when used with respect to any specified person means the power to direct or cause the direction of the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Applicable Procedures” means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary that apply to such transfer or exchange.

“Depositary” means The Depository Trust Company or any other depositary from time to time specified pursuant to the Indenture.

“Definitive Note” means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 4 hereof, substantially in the form of Exhibit A or B hereto except that such Note shall not bear the Global Note Legend and shall not have the “Schedule of Exchanges of Interests in the Global Note” attached thereto.

“Exchange Notes” has the meaning set forth in the Registration Rights Agreement.

“Exchange Offer” has the meaning set forth in the Registration Rights Agreement.

“Exchange Offer Registration Statement” has the meaning set forth in the Registration Rights Agreement.

“Global Note Legend” means the legend set forth in Section 4.7(b) which is required to be placed on all Global Notes issued under this First Supplemental Indenture.

“Global Notes” means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, substantially in the form of Exhibit A or B hereto that bears the Global Note Legend and that has the “Schedule of Exchanges of Interests in the Global Note” attached thereto, issued in accordance with Section 4.2(d), 4.4(b) or 4.6 hereof.

“Indirect Participant” means a person who holds a beneficial interest in a Global Note through a Participant.

“Initial Purchasers” has the meaning set forth in the Purchase Agreement dated as of October 11, 2006, by and among the Issuer, Banc of America Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (as representatives of the several Initial Purchasers).

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“Letter of Transmittal” means the letter of transmittal to be prepared by the Issuer and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer.

“Non-U.S. Person” means any person that is not a U.S. person as defined in Rule 902(o) under the Securities Act.

“Notes” means the 5.90% Notes due 2016 and the 6.35% Notes due 2036 as those notes are defined in Sections 2.1 and 2.2, respectively.

“Participant” means a person who has an account with the Depositary.

“Participating Broker-Dealer” has the meaning set forth in the Registration Rights Agreement.

“Private Exchange” has the meaning set forth in the Registration Rights Agreement.

“Private Exchange Notes” has the meaning set forth in the Registration Rights Agreement.

“Private Placement Legend” means the legend set forth in Section 4.7(a) to be placed on all Notes issued under this First Supplemental Indenture except where otherwise permitted by the provisions of this First Supplemental Indenture.

“QIB” means a “qualified institutional buyer” as defined in Rule l44A.

“Registrar” means the registrar specified from time to time pursuant to Section 3.04 of the Indenture.

“Registration Rights Agreement” means each of the Registration Rights Agreements for the 5.90% Notes and the 6.35% Notes, respectively, dated as of the date hereof, by and among the Issuer, Banc of America Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (as representatives of the several initial purchasers listed therein), as such agreements may be amended, modified or supplemented from time to time.

“Regulation S” means Regulation S under the Securities Act.

“Restricted Definitive Note” means a Definitive Note bearing the Private Placement Legend.

“Restricted Global Note” means a Global Note bearing the Private Placement Legend.

“Ru1e 144” means Rule 144 promulgated under the Securities Act.

“Rule 144A” means Rule 144A promulgated under the Securities Act.

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“Securities Act” means the Securities Act of 1933, as amended.

“Shelf Registration Statement” has the meaning set forth in the Registration Rights Agreement.

“Unrestricted Definitive Note” means one or more Definitive Notes that do not bear and, pursuant to Section 4.7, are not required to bear the Private Placement Legend.

“Unrestricted Global Note” means one or more Global Notes that do not bear and, pursuant to Section 4.7, are not required to bear the Private Placement Legend.

SECTION 2.TERMS AND CONDITIONS OF THE SECURITIES.

There is hereby authorized the following series of Notes:

2.15.90% Notes due 2016.

(a)A single series consisting of two tranches of senior unsecured notes (collectively, the “5.90% Notes due 2016”) are hereby authorized and designated as the “5.90% Series A Notes due 2016” and the “5.90% Series B Notes due 2016”.

(b)The 5.90% Notes due 2016 shall initially be limited in aggregate principal amount to $300,000,000, shall bear interest at a rate of 5.90% per annum (plus additional interest, if any, pursuant to the applicable Registration Rights Agreement), shall mature on October 1, 2016, shall be subject to optional redemption at any time by the Issuer pursuant to the terms set forth in the form of Note with respect thereto attached as Exhibit A and have such other terms set forth in such form of Note.

(c)The 5.90% Series A Notes due 2016 and the 5.90% Series B Notes due 2016 shall be identical in all material respects except that the (i) 5.90% Series A Notes due 2016 and any 5.90% Series A Notes due 2016 issued in the Private Exchange shall be issued bearing the Private Placement Legend and (ii) 5.90% Series B Notes due 2016 issued pursuant to the Exchange Offer shall be issued without bearing the Private Placement Legend.  It is intended that the 5.90% Series A Notes due 2016 will be exchanged for the 5.90% Series B Notes due 2016 pursuant to Section 4.6 hereof.

2.26.35% Notes due 2036.

(a)A single series consisting of two tranches of senior unsecured notes (collectively, the “6.35% Notes due 2036”) are hereby authorized and designated as the “6.35% Series A Notes due 2036” and the “6.35% Series B Notes due 2036”.

(b)The 6.35% Notes due 2036 shall initially be limited in aggregate principal amount to $400,000,000, shall bear interest at a rate of 6.35% per annum (plus additional interest, if any, pursuant to the applicable Registration Rights Agreement), shall mature on October 1, 2036, shall be subject to optional redemption at any time by the Issuer pursuant to the terms set forth in the form of Note with respect thereto attached as Exhibit B and have such other terms set forth in such form of Note.

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(c)The 6.35% Series A Notes due 2036 and the 6.35% Series B Notes due 2036 shall be identical in all material respects except that the (i) 6.35% Series B Notes due 2036 and any 6.35% Series B Notes due 2036 issued in the Private Exchange shall be issued bearing the Private Placement Legend and (ii) 6.35% Series B Notes due 2036 issued pursuant to the Exchange Offer shall be issued without bearing the Private Placement Legend.  It is intended that the 6.35% Series A Notes due 2036 will be exchanged for the 6.35% Series B Notes due 2036 pursuant to Section 4.6 hereof.

2.3Issuance of Additional Securities.  The Issuer shall be permitted to amend this First Supplemental Indenture in order to increase the aggregate principal amount of Notes that may be issued hereunder without the consent of the Holders of Notes so affected.

SECTION 3.FORM OF NOTES.

3.1Form of Global Notes.  The Notes shall be issued in the form of Global Notes (including the Global Note Legend thereon and the “Schedule of Exchanges of Interests in the Global Note” attached thereto).  Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions.  Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee, as custodian of the Global Notes, in accordance with instructions given by the Holder thereof as required by Section 4 hereof.

SECTION 4.TRANSFER AND EXCHANGE.

Notwithstanding any provisions to the contrary set forth in Article Two of the Indenture, the following terms and conditions shall govern the transfer and exchange of the Notes.

4.1Transfer and Exchange of Global Notes.  A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary.  All Global Notes will be exchanged by the Issuer for Definitive Notes if (i) the Issuer delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Issuer within 90 days after the date of such notice from the Depositary, (ii) the Issuer in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for individual Notes and delivers a written notice to such effect to the Trustee or (iii) an Event of Default shall have occurred and be continuing with respect to the Notes.  Upon the occurrence of any of the preceding events in (i), (ii) or (iii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee.  Every Note

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authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 4 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note.  A Global Note may not be exchanged for another Note other than as provided in this Section 4, however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 4.2, 4.3 or 4.6 hereof.

4.2Transfer and Exchange of Beneficial Interests in the Global Notes.  The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of the Indenture, as supplemented by this First Supplemental Indenture, and the Applicable Procedures.  Beneficial interests in any Restricted Global Note bearing the Private Placement Legend shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act.  Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (a) or (b) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:

(a)Transfer of Beneficial Interests in the Same Global Note.  Beneficial interests in any Restricted Global Note may be transferred to persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend.  Beneficial interests in any Unrestricted Global Note may be transferred to persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note.  No written orders or instructions shall be required to be delivered to the Registrar to register the transfers described in this Section 4.2(a).

(b)All Other Transfers and Exchanges of Beneficial Interests in Global Notes.  In connection with all transfers and exchanges of beneficial interests that are not subject to Section 4.2(a) above, the transferor of such beneficial interest must deliver to the Depositary either (1) (A) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in the Global Note, or in another Global Note in the case of an exchange, in an amount equal to the beneficial interest to be transferred or exchanged and (B) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (2) (A) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (B) instructions given by the Depositary to the Registrar containing information regarding the person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (A) above.  Upon consummation of an Exchange Offer by the Issuer in accordance with Section 4.6 hereof, the requirements of this Section 4.2(b) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the holder of such beneficial interests in the Restricted Global Notes.  Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in the Indenture, as supplemented by this First Supplemental Indenture, and the Notes or

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otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 4.8 hereof.

(c)Transfer of Beneficial Interests to Another Restricted Global Note.  A beneficial interest in any Restricted Global Note may be transferred to a person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 4.2(b) above and the transferor delivers a certificate in the form of Exhibit C hereto, including the certifications in item (1) thereof.

(d)Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note.  A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 4.2(b) above and:

(i)such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal or via the Depositary’s book-entry system that it is not (A) a broker-dealer, (B) a person participating in the distribution of the Exchange Notes or (C) a person who is an affiliate (as defined in Rule 144) of the Issuer; or

(ii)such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; or

(iii)such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or

(iv)the Registrar receives the following:

(A)if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit D hereto, including the certifications in item (1 )(a) thereof; or

(B)if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (4) thereof;

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and, in each such case set forth in this subparagraph (iv), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

If any such transfer is effected pursuant to subparagraph (ii) or (iv) above at a time when an Unrestricted Global Note has not yet been issued, the Issuer shall issue and, upon receipt of an Issuer Order in accordance with Section 2.4 of the Indenture, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (ii) or (iv) above.

Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note.

4.3Transfer or Exchange of Beneficial Interests for Definitive Notes.

(a)Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes.  If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation:

(i)if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit D hereto, including the certifications in item (2)(a) thereof;

(ii)if such beneficial interest is being transferred to a QIB in accordance with Rule l44A, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (1) thereof;

(iii)if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (2) thereof;

(iv)if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (3)(a) thereof;

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(v)if such beneficial interest is being transferred to the Issuer or any of its Subsidiaries, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (3)(b) thereof; or

(vi)if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (3)(c) thereof,

the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 4.8 hereof, and the Issuer shall execute and the Trustee shall authenticate and deliver to the person designated in the instructions a Definitive Note in the appropriate principal amount.  Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 4.3(a) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant.  The Trustee shall make available for delivery such Definitive Notes to the persons in whose names such Notes are so registered.  Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 4.3(a) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein.

(b)Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes.  A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a person who takes delivery thereof in the form of an Unrestricted Definitive Note only if:

(i)such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a person participating in the distribution of the Exchange Notes or (3) a person who is an affiliate (as defined in Rule 144) of the Issuer;

(ii)such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;

(iii)such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or

(iv)the Registrar receives the following:

(A)if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the

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form of Exhibit D hereto, including the certifications in item (l)(b) thereof; or

(B)if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (iv), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

(c)Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes.  If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 4.2(b) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 4.8 hereof, and the Issuer shall execute and the Trustee shall authenticate and make available for delivery to the person designated in the instructions a Definitive Note in the appropriate principal amount.  Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 4.3(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant.  The Trustee shall make available for delivery such Definitive Notes to the persons in whose names such Notes are so registered.  Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 4.3(c) shall not bear the Private Placement Legend.

4.4Transfer and Exchange of Definitive Notes for Beneficial Interests.

(a)Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes.  If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation:

(i)if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit D hereto, including the certifications in item (2)(b) thereof;

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(ii)if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule l44A, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (1) thereof;

(iii)if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (2) thereof;

(iv)if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (3)(a) thereof;

(v)if such Restricted Definitive Note is being transferred to the Issuer or any of its Subsidiaries, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (3)(b) thereof; or

(vi)if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (3)(c) thereof;

the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of the appropriate Restricted Global Note.

(b)Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes.  A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if:

(i)such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a person participating in the distribution of the Exchange Notes or (3) a person who is an affiliate (as defined in Rule 144) of the Issuer;

(ii)such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;

(iii)such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or

(iv)the Registrar receives the following:

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(A)if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit D hereto, including the certifications in item (1)(c) thereof; or

(B)if the Holder of such Definitive Notes proposes to transfer such Notes to a person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (iv), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

Upon satisfaction of the conditions of any of the subparagraphs in this Section 4.4(b), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note.

(c)Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes.  A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time.  Upon receipt of a request for such an exchange or registration of transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes.

If any such exchange or registration of transfer from a Definitive Note to a beneficial interest in a Global Note is effected pursuant to subparagraphs (b)(ii), (b)(iv) or (c) above at a time when an Unrestricted Global Note has not yet been issued, the Issuer shall issue and, upon receipt of an Issuer Order in accordance with Section 2.4 of the Indenture, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred.

4.5Transfer and Exchange of Definitive Notes for Definitive Notes.  Upon request by a Holder of Definitive Notes and such Holder’s compliance with the provisions of this Section 4.5, the Registrar shall register the transfer or exchange of Definitive Notes.  Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney, duly authorized in writing.  In addition, the requesting Holder shall provide

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any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 4.5.

(a)Restricted Definitive Notes to Restricted Definitive Notes.  Any Restricted Definitive Note may be transferred to and registered in the name of persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following:

(i)if the transfer will be made pursuant to Rule l44A, then the transferor must deliver a certificate in the form of Exhibit C hereto, including the certifications in item (1) thereof; and

(ii)if the transfer will be made pursuant to Rule 903 or Rule 904 under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit C hereto, including the certifications in item (2) thereof;

(iii)if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit C hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable.

(b)Restricted Definitive Notes to Unrestricted Definitive Notes.  Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a person or persons who take delivery thereof in the form of an Unrestricted Definitive Note if:

(i)such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a person participating in the distribution of the Exchange Notes or (3) a person who is an affiliate (as defined in Rule 144) of the Issuer;

(ii)any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;

(iii)any such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or

(iv)the Registrar receives the following:

(A)if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit D hereto, including the certifications in item (1)(d) thereof; or

13

(B)if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (iv), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Issuer to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

(c)Unrestricted Definitive Notes to Unrestricted Definitive Notes.  A Holder of Unrestricted Definitive Notes may transfer such Notes to a person who takes delivery thereof in the form of an Unrestricted Definitive Note.  Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof.

4.6Exchange Offer.  Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Issuer shall issue and, upon receipt of an Issuer Order in accordance with Section 2.4 of the Indenture, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by persons that certify in the applicable Letters of Transmittal or via the Depositary’s book-entry system that (x) they are not broker-dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Issuer, and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer.  In addition, if pursuant to the Registration Rights Agreement, any Holder is entitled to receive Private Exchange Notes simultaneously with the consummation of the Exchange Offer and so requests, the Issuer shall issue and, upon receipt of an Issuer Order in accordance with Section 2.4 of the Indenture, the Trustee shall authenticate (i) one or more Restricted Global Notes that are identical in all material respects to the Exchange Notes, except for the Private Placement Legend, in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes accepted for exchange in the Private Exchange and (ii) Restricted Definitive Notes that are identical in all material respects to the Exchange Notes, except for the Private Placement Legend, in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Private Exchange.  Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Issuer shall execute and the Trustee shall authenticate and make available for delivery to the persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount.

4.7Legends.  The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this First Supplemental Indenture unless specifically stated otherwise in the applicable provisions hereof:

14

(a)Private Placement Legend.  Except as permitted by subparagraph (b) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form:

“THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF IS DEEMED TO HAVE AGREED TO BE BOUND BY THE PROVISIONS OF A REGISTRATION RIGHTS AGREEMENT AMONG BALTIMORE GAS AND ELECTRIC COMPANY AND THE INITIAL PURCHASERS, DATED OCTOBER 13, 2006 (THE “REGISTRATION RIGHTS AGREEMENT”).  WE WILL PROVIDE A COPY OF THE REGISTRATION RIGHTS AGREEMENT TO A HOLDER WITHOUT CHARGE UPON WRITTEN REQUEST TO US AT OUR PRINCIPAL PLACE OF BUSINESS.

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS.  NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.

THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE “RESALE RESTRICTION TERMINATION DATE”) WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH BALTIMORE GAS AND ELECTRIC COMPANY (THE “COMPANY”) OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (I) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (II) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE l44A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE l44A, (III) PURSUANT TO OFFERS AND SALES TO NON U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (IV) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, OR (V) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (INCLUDING UNDER RULE 144 UNDER THE SECURITIES ACT, IF AVAILABLE), SUBJECT TO THE COMPANY’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (III) OR (V) TO REQUIRE THE

15

DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.”

If Definitive Notes are issued, each Definitive Note will bear the following additional legend:

“IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.”

Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to Sections 4.2(d), 4.3(b), 4.4(b), 4.4(c), 4.5(b), 4.5(c) or 4.6 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend.

(b)Global Note Legends.  Each Global Note shall bear legends in substantially the following form:

“THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.02 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 4.1 OF THE FIRST SUPPLEMENTAL INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 3.07 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“DTC”) TO THE COMPANY OR ITS AGENT FOR

16

REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.  OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.”

4.8Cancellation and/or Adjustment of Global Notes.  At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 3.07 of the Indenture.  At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase.

SECTION 5.MISCELLANEOUS.

5.1Ratification of Indenture.  The Indenture, as supplemented by this First Supplemental Indenture, is in all respects ratified and confirmed, and this First Supplemental Indenture shall be deemed a part of the Indenture in the manner and to the extent herein and therein provided.

5.2GOVERNING LAW.  THIS FIRST SUPPLEMENTAL INDENTURE, EACH NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS FIRST SUPPLEMENTAL INDENTURE AND EACH NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

5.3Counterparts.  This First Supplemental Indenture may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument.

5.4The Trustee.  The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this First Supplemental Indenture or for or in respect of the recitals contained herein, all of which are made solely by the Issuer.

17

IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be executed as of the date first above written.

BALTIMORE GAS AND ELECTRIC COMPANY, as Issuer
By:	/s/ Jeanne M. Blondia
	Name:	Jeanne M. Blondia
	Title:	Treasurer and Assistant Secretary
DEUTSCHE BANK TRUST COMPANY AMERICAS,
as Trustee
By Deutsche Bank National Trust Company
By:	/s/ Yana Kalachikova
	Name: Yana Kalachikova
	Title: Assistant Vice President
By:	/s/ David Contino
	Name: David Contino
	Title: Assistant Vice President

EXHIBIT A

[FACE OF 5.90% NOTE DUE 2016]

[Insert Global Note Legends, if applicable pursuant to the provisions of the
First Supplemental Indenture]

[Insert the Private Placement Legend, if applicable pursuant to the provisions of the First Supplemental Indenture]

No.	$
	CUSIP:

BALTIMORE GAS AND ELECTRIC COMPANY

    % [Series A] [Series B] Notes due       

ORIGINAL ISSUE	INTEREST PAYMENT
DATE:	DATES: April 1 and October 1
INTEREST RATE: 5.90% per annum plus additional interest, if any, pursuant to the applicable Registration Rights Agreement (as defined below)

MATURITY DATE: October 1, 2016

Baltimore Gas and Electric Company, a Maryland corporation (together with its successors and assigns, the “Issuer”), for value received, hereby promises to pay to                 , or registered assignees, the principal sum of                 on the Maturity Date specified above and to pay interest thereon at the Interest Rate per annum specified above, semiannually in arrears on each Interest Payment Date specified above during each year commencing on the Interest Payment Date next succeeding the Original Issue Date specified above, and at maturity (or on any redemption or repayment date).

Interest on this Note will accrue from the most recent Interest Payment Date to which interest has been paid or duly provided for, or, if no interest has been paid or duly provided for, from the Original Issue Date, until the principal hereof has been paid or duly made available for payment (except as provided below).  The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, subject to certain exceptions described herein, be paid to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on the 15th day of the calendar

A-1

month prior to such Interest Payment Date (whether or not a Business Day) (each such date a “Record Date”); provided, however, that interest payable at maturity (or on any redemption or repayment date) will be payable to the person to whom the principal hereof shall be payable.  As used herein, “Business Day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or executive order to close in Baltimore Maryland or The City of New York.

The holder of this Note is entitled to the benefits of the applicable Registration Rights Agreement (as defined in the First Supplemental Indenture dated as of October 13, 2006 to the Indenture).

Payment of the principal of this Note, any premium and the interest due at maturity (or on any redemption or repayment date) will be made in immediately available funds upon surrender of this Note at the office or agency of the Paying Agent, as defined on the reverse hereof, maintained for that purpose in the Borough of Manhattan, The City of New York, or at such other paying agency as the Issuer may determine.  Payment of the principal of and premium, if any, and interest on this Note will be made by U.S. dollar check mailed to the address of the person entitled thereto as such address shall appear in the Note register.  A holder of U.S. $10,000,000 or more in aggregate principal amount of Notes having the same Interest Payment Date will be entitled to receive payments of interest, other than interest due at maturity or on any date of redemption or repayment, by wire transfer of immediately available funds if appropriate wire transfer instructions have been received by the Paying Agent in writing not less than 15 calendar days prior to the applicable Interest Payment Date.

Reference is hereby made to the further provisions of this Note set forth on the reverse hereof; which further provisions shall for all purposes have the same effect as if set forth at this place.

Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture, as defined on the reverse hereof, or be valid or obligatory for any purpose.

A-2

IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed under its corporate seal.

DATED:

BALTIMORE GAS AND ELECTRIC COMPANY
By:
		Name:
		Title:
ATTEST:
By:
	Name:
	Title:

TRUSTEE’S CERTIFICATE
OF AUTHENTICATION

This is one of the Notes referred
to in the within-mentioned Indenture.

DEUTSCHE BANK TRUST COMPANY
AMERICAS,

as Trustee

By Deutsche Bank National Trust Company

By:

Name:

Title:

By:

Name:

Title:

A-3

[BACK OF 5.90% NOTE DUE 2016]

This Note is one of a duly authorized issue of 5.90% Series [A][B] Notes due 2016 (the “Notes”) of the Issuer.  The Notes are issuable under an indenture, dated as of July 24, 2006 (as amended by the First Supplemental Indenture dated as of October 13, 2006, the “Indenture”), each between the Issuer and Deutsche Bank Trust Company Americas, as Trustee (the “Trustee,” which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities of the Issuer, the Trustee and holders of the Notes and the terms upon which the Notes are, and are to be, authenticated and delivered.  The Issuer has appointed Deutsche Bank Trust Company Americas, at its principal corporate trust office in The City of New York as the paying agent (the “Paying Agent,” which term includes any additional or successor Paying Agent appointed by the Issuer) with respect to the Notes.  To the extent not inconsistent herewith, the terms of the Indenture are hereby incorporated by reference herein.

This Note may be redeemed in whole or in part at the option of the Issuer upon payment of the redemption price specified below.  If the Issuer exercises the option to redeem this Note, the redemption price will equal the greater of (i) 100% of the principal amount of this Note or (ii) the sum, as determined by the Independent Investment Banker (defined below), of the present value of the principal amount of this Note and the remaining scheduled payments of interest on this Note from the redemption date to the Maturity Date, exclusive of interest accrued to the redemption date (the “Remaining Life”), discounted from the scheduled payment dates to the redemption date on a semiannual basis (assuming a 360-day year of 30-day months) at the Treasury Yield (defined below) plus 20 basis points, plus accrued and unpaid interest on the principal amount being redeemed to the date of redemption.  Notice of redemption shall be mailed to the registered holders of the Notes designated for redemption at their addresses as the same shall appear on the Note register not less than 30 nor more than 60 days prior to the date fixed for redemption, subject to all the conditions and provisions of the Indenture.  In the event of redemption of this Note in part only, a new Note or Notes for the amount of the unredeemed portion hereof shall be issued in the name of the holder hereof upon the cancellation hereof.

If the Issuer fails to deposit the redemption price with the Trustee on or prior to the redemption date, then notwithstanding any notice of redemption that has been given as provided in Section 4.04 of the Indenture, the Notes or portions of Notes with respect to which such notice has been given shall not become due and payable on the date and at the place or places stated in such notice.  In addition, the failure to redeem the Notes shall not constitute a default or Event of Default pursuant to Section 7.01 of the Indenture.

For purposes of the immediately preceding paragraph, the following defined terms shall have the meanings specified:

“Independent Investment Banker” means Merrill Lynch, Pierce Fenner & Smith Incorporated if (1) the Issuer does not appoint someone else at least 30 days prior to such redemption date or (2) such other institution appointed by the Issuer is unwilling or unable to calculate the redemption price.  If Merrill Lynch, Pierce Fenner & Smith Incorporated is

A-4

unwilling or unable to calculate the redemption price, then the Trustee shall appoint an independent investment banking institution of national standing to make the calculation.

“Treasury Yield” means, with respect to any redemption date, the rate determined by the Independent Investment Banker from the most recent statistical release published by the Federal Reserve Bank of New York entitled “H.15(519) Selected Interest Rate” or any successor publication as follows: (i) if the H.15 Statistical Release gives a weekly average yield for United States Treasury Notes having a constant maturity that is the same as the Remaining Life of the Notes, then the Treasury Yield will equal that weekly average yield and (ii) in all other cases, the Independent Investment Banker will calculate the Treasury Yield by interpolating, on a straight line basis, the weekly average yields from the H.15 Statistical Release on the United States Treasury Notes having a constant maturity closest to but greater than the Remaining Life of the Notes and the United States Treasury Notes having a constant maturity closest to and less than the Remaining Life of the Notes. The Independent Investment Banker shall round any weekly average yields calculated by interpolation to the nearest 1/100th of 1% and shall 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 shall select comparable rates and calculate the Treasury Yield using such rates.

Interest payments on this Note will include interest accrued to but excluding the Interest Payment Dates or the Maturity Date (or any earlier redemption or repayment date), as the case may be.  Interest payments for this Note will be computed and paid on the basis of a 360-day year of twelve 30-day months.

In the case where the Interest Payment Date or the Maturity Date (or any redemption or repayment date) does not fall on a Business Day, payment of interest, premium, if any, or principal otherwise payable on such date need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date or on the Maturity Date (or any redemption or repayment date), and no interest on such payment shall accrue for the period from and after the Interest Payment Date or the Maturity Date (or any redemption or repayment date) to such next succeeding Business Day.

This Note and all the obligations of the Issuer hereunder are direct, unsecured obligations of the Issuer and rank without preference or priority among themselves and pari passu with all other existing and future unsecured and unsubordinated indebtedness of the Issuer, subject to certain statutory exceptions in the event of liquidation upon insolvency.

This Note, and any Note or Notes issued upon registration of transfer or exchange hereof, is issuable only in fully registered form, without coupons, and is issuable only in denominations of U.S. $1,000 and any integral multiple of U.S. $1,000 in excess thereof.

The Trustee has been appointed registrar for the Notes, and the Trustee will maintain at its principal corporate trust office in The City of New York a register for the registration and transfer of Notes.  This Note may be transferred at the aforesaid office of

A-5

the Trustee by surrendering this Note for cancellation, accompanied by a written instrument of transfer in form satisfactory to the Trustee and duly executed by the registered holder hereof in person or by the holder’s attorney duly authorized in writing, and thereupon the Trustee shall issue in the name of the transferee or transferees, in exchange herefor, a new Note or Notes having identical terms and provisions and having a like aggregate principal amount in authorized denominations, subject to the terms and conditions set forth herein; provided, however, that the Trustee will not be required (i) to register the transfer of or exchange any Note that has been called for redemption in whole or in part, except the unredeemed portion of Notes being redeemed in part, (ii) to register the transfer of or exchange any Note if the holder thereof has exercised his right, if any, to require the Issuer to repurchase such Note in whole or in part, except the portion of such Note not required to be repurchased, or (iii) to register the transfer of or exchange Notes to the extent and during the period so provided in the Indenture with respect to the redemption of Notes.  Notes are exchangeable at said office for other Notes of other authorized denominations of equal aggregate principal amount having identical terms and provisions.  All such exchanges and transfers of Notes will be free of charge, but the Issuer or the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge in connection therewith.  All Notes surrendered for exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Trustee and executed by the registered holder in person or by the holder’s attorney duly authorized in writing.  The date of registration of any Note delivered upon any exchange or transfer of Notes shall be such that no gain or loss of interest results from such exchange or transfer.

In case any Note shall at any time become mutilated, defaced or be destroyed, lost or stolen and such Note or evidence of the loss, theft or destruction thereof (together with the indemnity hereinafter referred to and such other documents or proof as may be required in the premises) shall be delivered to the Trustee, a new Note of like tenor will be issued by the Issuer in exchange for the Note so mutilated or defaced, or in lieu of the Note so destroyed or lost or stolen, but, in the case of any destroyed or lost or stolen Note, only upon receipt of evidence satisfactory to the Trustee and the Issuer that such Note was destroyed or lost or stolen and, if required, upon receipt also of indemnity satisfactory to each of them.  All expenses and reasonable charges associated with procuring such indemnity and with the preparation, authentication and delivery of a new Note shall be borne by the owner of the Note mutilated, defaced, destroyed, lost or stolen.

So long as this Note shall be outstanding, the Issuer will cause to be maintained an office or agency for the payment of the principal of and premium, if any, and interest on this Note as herein provided in the Borough of Manhattan, The City of New York, and an office or agency in said Borough of Manhattan for the registration, transfer and exchange as aforesaid of the Notes.  The Issuer may designate other agencies for the payment of said principal, premium and interest at such place or places (subject to applicable laws and regulations) as the Issuer may decide.  So long as there shall be such an agency, the Issuer shall keep the Trustee advised of the names and locations of such agencies, if any are so designated.

With respect to moneys paid by the Issuer and held by the Trustee or any Paying Agent for payment of the principal of or interest or premium, if any, on any Notes that

A-6

remain unclaimed at the end of two years after such principal, interest or premium shall have become due and payable (whether at maturity or upon call for redemption or otherwise), (i) the Trustee or such Paying Agent shall notify the holders of such Notes that such moneys shall be repaid to the Issuer and any person claiming such moneys shall thereafter look only to the Issuer for payment thereof and (ii) such moneys shall be so repaid to the Issuer.  Upon such repayment all liability of the Trustee or such Paying Agent with respect to such moneys shall thereupon cease, without, however, limiting in any way any obligation that the Issuer may have to pay the principal of or interest or premium, if any, on this Note as the same shall become due.

No provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of, premium, if any, and interest on this Note at the time, place and rate, and in the coin and currency, herein prescribed unless otherwise agreed between the Issuer and the registered holder of this Note.

Prior to due presentment of this Note for registration of transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the holder in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and none of the Issuer, the Trustee or any such agent shall be affected by notice to the contrary.

No recourse under or upon any obligation, covenant or agreement contained in the Indenture, or in this Note, or because of the indebtedness evidenced hereby, shall be had against any incorporator, as such, or against any past, present or future stockholder, officer or director, as such, of the Issuer or of any successor, either directly or through the Issuer or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released.

This Note shall for all purposes be governed by, and construed in accordance with, the laws of the State of New York.

All terms used in this Note which are defined in the Indenture and not otherwise defined herein shall have the meanings assigned to them in the Indenture.

A-7

Assignment Form

To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to

(Insert assignee’s soc. sec. or tax I.D. no.)

(Print or type assignee’s name, address and zip code)

and irrevocably appoint

to transfer this Note on the books of the Issuer. The agent may substitute another to act for him.

Date:

Your Signature:

(Sign exactly as your name appears on the face of this Note)

Tax Identification No:

SIGNATURE GUARANTEE:

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

A-8

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE(1)

The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:

Date of
Exchange Amount of
decrease in
Principal Amount
of this Global
Note Amount of
increase in
Principal Amount
of this Global Note Principal Amount
of this Global
Note following
such decrease (or
increase) Signature of
authorized officer
of Trustee

(1) This should be included only if the Note is issued in global form.

A-9

EXHIBIT B

[FACE OF 6.35% NOTE DUE 2036]

[Insert Global Note Legends, if applicable pursuant to the provisions of the
First Supplemental Indenture]

[Insert the Private Placement Legend, if applicable pursuant to the provisions of the First Supplemental Indenture]

No.	$
	CUSIP:

BALTIMORE GAS AND ELECTRIC COMPANY

    % [Series A] [Series B] Notes due       

ORIGINAL ISSUE	INTEREST PAYMENT
DATE:	DATES: April 1 and October 1
INTEREST RATE: 6.35% per annum plus additional interest, if any, pursuant to the applicable Registration Rights Agreement (as defined below)

MATURITY DATE: October 1, 2036

Baltimore Gas and Electric Company, a Maryland corporation (together with its successors and assigns, the “Issuer”), for value received, hereby promises to pay to                 , or registered assignees, the principal sum of                 on the Maturity Date specified above and to pay interest thereon at the Interest Rate per annum specified above, semiannually in arrears on each Interest Payment Date specified above during each year commencing on the Interest Payment Date next succeeding the Original Issue Date specified above, and at maturity (or on any redemption or repayment date).

Interest on this Note will accrue from the most recent Interest Payment Date to which interest has been paid or duly provided for, or, if no interest has been paid or duly provided for, from the Original Issue Date, until the principal hereof has been paid or duly made available for payment (except as provided below).  The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, subject to certain exceptions described herein, be paid to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on the 15th day of the calendar

B-1

month prior to such Interest Payment Date (whether or not a Business Day) (each such date a “Record Date”); provided, however, that interest payable at maturity (or on any redemption or repayment date) will be payable to the person to whom the principal hereof shall be payable.  As used herein, “Business Day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or executive order to close in Baltimore Maryland or The City of New York.

The holder of this Note is entitled to the benefits of the applicable Registration Rights Agreement (as defined in the First Supplemental Indenture dated as of October 13, 2006 to the Indenture).

Payment of the principal of this Note, any premium and the interest due at maturity (or on any redemption or repayment date) will be made in immediately available funds upon surrender of this Note at the office or agency of the Paying Agent, as defined on the reverse hereof, maintained for that purpose in the Borough of Manhattan, The City of New York, or at such other paying agency as the Issuer may determine.  Payment of the principal of and premium, if any, and interest on this Note will be made by U.S. dollar check mailed to the address of the person entitled thereto as such address shall appear in the Note register.  A holder of U.S. $10,000,000 or more in aggregate principal amount of Notes having the same Interest Payment Date will be entitled to receive payments of interest, other than interest due at maturity or on any date of redemption or repayment, by wire transfer of immediately available funds if appropriate wire transfer instructions have been received by the Paying Agent in writing not less than 15 calendar days prior to the applicable Interest Payment Date.

Reference is hereby made to the further provisions of this Note set forth on the reverse hereof; which further provisions shall for all purposes have the same effect as if set forth at this place.

Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture, as defined on the reverse hereof, or be valid or obligatory for any purpose.

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IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed under its corporate seal.

DATED:

BALTIMORE GAS AND ELECTRIC
COMPANY
By:
	Name:
	Title:
ATTEST:
By:
	Name:
	Title:

TRUSTEE’S CERTIFICATE
OF AUTHENTICATION

This is one of the Notes referred
to in the within-mentioned Indenture.

DEUTSCHE BANK TRUST COMPANY
AMERICAS,

as Trustee

By Deutsche Bank National Trust Company

By:

Name:

Title:

By:

Name:

Title:

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[BACK OF 6.35% NOTE DUE 2036]

This Note is one of a duly authorized issue of 6.35%% Series [A][B] Notes due 2036 (the “Notes”) of the Issuer.  The Notes are issuable under an indenture, dated as of July 24, 2006 (as amended by the First Supplemental Indenture dated as of October 13, 2006, the “Indenture”), each between the Issuer and Deutsche Bank Trust Company Americas, as Trustee (the “Trustee,” which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities of the Issuer, the Trustee and holders of the Notes and the terms upon which the Notes are, and are to be, authenticated and delivered.  The Issuer has appointed Deutsche Bank Trust Company Americas, at its principal corporate trust office in The City of New York as the paying agent (the “Paying Agent,” which term includes any additional or successor Paying Agent appointed by the Issuer) with respect to the Notes.  To the extent not inconsistent herewith, the terms of the Indenture are hereby incorporated by reference herein.

This Note may be redeemed in whole or in part at the option of the Issuer upon payment of the redemption price specified below.  If the Issuer exercises the option to redeem this Note, the redemption price will equal the greater of (i) 100% of the principal amount of this Note or (ii) the sum, as determined by the Independent Investment Banker (defined below), of the present value of the principal amount of this Note and the remaining scheduled payments of interest on this Note from the redemption date to the Maturity Date, exclusive of interest accrued to the redemption date (the “Remaining Life”), discounted from the scheduled payment dates to the redemption date on a semiannual basis (assuming a 360-day year of 30-day months) at the Treasury Yield (defined below) plus 25 basis points, plus accrued and unpaid interest on the principal amount being redeemed to the date of redemption.  Notice of redemption shall be mailed to the registered holders of the Notes designated for redemption at their addresses as the same shall appear on the Note register not less than 30 nor more than 60 days prior to the date fixed for redemption, subject to all the conditions and provisions of the Indenture.  In the event of redemption of this Note in part only, a new Note or Notes for the amount of the unredeemed portion hereof shall be issued in the name of the holder hereof upon the cancellation hereof.

If the Issuer fails to deposit the redemption price with the Trustee on or prior to the redemption date, then notwithstanding any notice of redemption that has been given as provided in Section 4.04 of the Indenture, the Notes or portions of Notes with respect to which such notice has been given shall not become due and payable on the date and at the place or places stated in such notice.  In addition, the failure to redeem the Notes shall not constitute a default or Event of Default pursuant to Section 7.01 of the Indenture.

For purposes of the immediately preceding paragraph, the following defined terms shall have the meanings specified:

“Independent Investment Banker” means Merrill Lynch, Pierce Fenner & Smith Incorporated if (1) the Issuer does not appoint someone else at least 30 days prior to such redemption date or (2) such other institution appointed by the Issuer is unwilling or unable to calculate the redemption price.  If Merrill Lynch, Pierce Fenner & Smith Incorporated is

B-4

unwilling or unable to calculate the redemption price, then the Trustee shall appoint an independent investment banking institution of national standing to make the calculation.

“Treasury Yield” means, with respect to any redemption date, the rate determined by the Independent Investment Banker from the most recent statistical release published by the Federal Reserve Bank of New York entitled “H.15(519) Selected Interest Rate” or any successor publication as follows: (i) if the H.15 Statistical Release gives a weekly average yield for United States Treasury Notes having a constant maturity that is the same as the Remaining Life of the Notes, then the Treasury Yield will equal that weekly average yield and (ii) in all other cases, the Independent Investment Banker will calculate the Treasury Yield by interpolating, on a straight line basis, the weekly average yields from the H.15 Statistical Release on the United States Treasury Notes having a constant maturity closest to but greater than the Remaining Life of the Notes and the United States Treasury Notes having a constant maturity closest to and less than the Remaining Life of the Notes. The Independent Investment Banker shall round any weekly average yields calculated by interpolation to the nearest 1/100th of 1% and shall 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 shall select comparable rates and calculate the Treasury Yield using such rates.

Interest payments on this Note will include interest accrued to but excluding the Interest Payment Dates or the Maturity Date (or any earlier redemption or repayment date), as the case may be.  Interest payments for this Note will be computed and paid on the basis of a 360-day year of twelve 30-day months.

In the case where the Interest Payment Date or the Maturity Date (or any redemption or repayment date) does not fall on a Business Day, payment of interest, premium, if any, or principal otherwise payable on such date need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date or on the Maturity Date (or any redemption or repayment date), and no interest on such payment shall accrue for the period from and after the Interest Payment Date or the Maturity Date (or any redemption or repayment date) to such next succeeding Business Day.

This Note and all the obligations of the Issuer hereunder are direct, unsecured obligations of the Issuer and rank without preference or priority among themselves and pari passu with all other existing and future unsecured and unsubordinated indebtedness of the Issuer, subject to certain statutory exceptions in the event of liquidation upon insolvency.

This Note, and any Note or Notes issued upon registration of transfer or exchange hereof, is issuable only in fully registered form, without coupons, and is issuable only in denominations of U.S. $1,000 and any integral multiple of U.S. $1,000 in excess thereof.

The Trustee has been appointed registrar for the Notes, and the Trustee will maintain at its principal corporate trust office in The City of New York a register for the registration and transfer of Notes.  This Note may be transferred at the aforesaid office of

B-5

the Trustee by surrendering this Note for cancellation, accompanied by a written instrument of transfer in form satisfactory to the Trustee and duly executed by the registered holder hereof in person or by the holder’s attorney duly authorized in writing, and thereupon the Trustee shall issue in the name of the transferee or transferees, in exchange herefor, a new Note or Notes having identical terms and provisions and having a like aggregate principal amount in authorized denominations, subject to the terms and conditions set forth herein; provided, however, that the Trustee will not be required (i) to register the transfer of or exchange any Note that has been called for redemption in whole or in part, except the unredeemed portion of Notes being redeemed in part, (ii) to register the transfer of or exchange any Note if the holder thereof has exercised his right, if any, to require the Issuer to repurchase such Note in whole or in part, except the portion of such Note not required to be repurchased, or (iii) to register the transfer of or exchange Notes to the extent and during the period so provided in the Indenture with respect to the redemption of Notes.  Notes are exchangeable at said office for other Notes of other authorized denominations of equal aggregate principal amount having identical terms and provisions.  All such exchanges and transfers of Notes will be free of charge, but the Issuer or the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge in connection therewith.  All Notes surrendered for exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Trustee and executed by the registered holder in person or by the holder’s attorney duly authorized in writing.  The date of registration of any Note delivered upon any exchange or transfer of Notes shall be such that no gain or loss of interest results from such exchange or transfer.

In case any Note shall at any time become mutilated, defaced or be destroyed, lost or stolen and such Note or evidence of the loss, theft or destruction thereof (together with the indemnity hereinafter referred to and such other documents or proof as may be required in the premises) shall be delivered to the Trustee, a new Note of like tenor will be issued by the Issuer in exchange for the Note so mutilated or defaced, or in lieu of the Note so destroyed or lost or stolen, but, in the case of any destroyed or lost or stolen Note, only upon receipt of evidence satisfactory to the Trustee and the Issuer that such Note was destroyed or lost or stolen and, if required, upon receipt also of indemnity satisfactory to each of them.  All expenses and reasonable charges associated with procuring such indemnity and with the preparation, authentication and delivery of a new Note shall be borne by the owner of the Note mutilated, defaced, destroyed, lost or stolen.

So long as this Note shall be outstanding, the Issuer will cause to be maintained an office or agency for the payment of the principal of and premium, if any, and interest on this Note as herein provided in the Borough of Manhattan, The City of New York, and an office or agency in said Borough of Manhattan for the registration, transfer and exchange as aforesaid of the Notes.  The Issuer may designate other agencies for the payment of said principal, premium and interest at such place or places (subject to applicable laws and regulations) as the Issuer may decide.  So long as there shall be such an agency, the Issuer shall keep the Trustee advised of the names and locations of such agencies, if any are so designated.

With respect to moneys paid by the Issuer and held by the Trustee or any Paying Agent for payment of the principal of or interest or premium, if any, on any Notes that

B-6

remain unclaimed at the end of two years after such principal, interest or premium shall have become due and payable (whether at maturity or upon call for redemption or otherwise), (i) the Trustee or such Paying Agent shall notify the holders of such Notes that such moneys shall be repaid to the Issuer and any person claiming such moneys shall thereafter look only to the Issuer for payment thereof and (ii) such moneys shall be so repaid to the Issuer.  Upon such repayment all liability of the Trustee or such Paying Agent with respect to such moneys shall thereupon cease, without, however, limiting in any way any obligation that the Issuer may have to pay the principal of or interest or premium, if any, on this Note as the same shall become due.

No provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of, premium, if any, and interest on this Note at the time, place and rate, and in the coin and currency, herein prescribed unless otherwise agreed between the Issuer and the registered holder of this Note.

Prior to due presentment of this Note for registration of transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the holder in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and none of the Issuer, the Trustee or any such agent shall be affected by notice to the contrary.

No recourse under or upon any obligation, covenant or agreement contained in the Indenture, or in this Note, or because of the indebtedness evidenced hereby, shall be had against any incorporator, as such, or against any past, present or future stockholder, officer or director, as such, of the Issuer or of any successor, either directly or through the Issuer or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released.

This Note shall for all purposes be governed by, and construed in accordance with, the laws of the State of New York.

All terms used in this Note which are defined in the Indenture and not otherwise defined herein shall have the meanings assigned to them in the Indenture.

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Assignment Form

To assign this Note, fill in the form below:  (I) or (we) assign and transfer this Note to

(Insert assignee’s soc. sec. or tax I.D. no.)

(Print or type assignee’s name, address and zip code)

and irrevocably appoint

to transfer this Note on the books of the Issuer.  The agent may substitute another to act for him.

Date:

Your Signature:

(Sign exactly as your name appears on the face of this Note)

Tax Identification No:

SIGNATURE GUARANTEE:

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

B-8

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE(2)

The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:

Date of
Exchange Amount of
decrease in
Principal Amount
of this Global
Note Amount of
increase in
Principal Amount
of this Global Note Principal Amount
of this Global
Note following
such decrease (or
increase) Signature of
authorized officer
of Trustee

(2) This should be included only if the Note is issued in global form.

B-9

EXHIBIT C

[FORM OF CERTIFICATE OF TRANSFER]

Baltimore Gas and Electric Company

750 East Pratt Street

Baltimore, MD 21202

Attention:Secretary of the Company

Deutsche Bank Trust Company Americas

60 Wall Street, 27th Floor

New York, NY 10005
Attention: Trust and Securities Services

Re:  [    ]% Series [A][B] Notes due [        ]

Reference is hereby made to the Indenture, dated as of July 24, 2006, as amended by the First Supplemental Indenture, dated as of October 13, 2006 (as so amended and supplemented, the “Indenture”), between Baltimore Gas and Electric Company, a Maryland corporation, as issuer (the “Company”), and Deutsche Bank Trust Company Americas, as trustee.  Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

                   , (the “Transferor”) owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $                    in such Note[s] or interests (the “Transfer”), to                     (the “Transferee”), as further specified in Annex A hereto.  In connection with the Transfer, the Transferor hereby certifies that:

[CHECK ALL THAT APPLY]

1.o  Check if Transferee will take delivery of a beneficial interest in a Restricted Global Note or a Restricted Definitive Note Pursuant to Rule 144A.  The Transfer is being effected pursuant to and in accordance with Rule l44A under the United States Securities Act of 1933, as amended (the “Securities Act”), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Restricted Definitive Note is being transferred to a person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Restricted Definitive Note for its own account, or for one or more accounts with respect to which such person exercises sole investment discretion, and such person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States.  Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Restricted Definitive Note

C-1

will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act.

2.o  Check if Transferee will take delivery of a beneficial interest in a Restricted Global Note or a Restricted Definitive Note Pursuant to Regulation S.  The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act and (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act.  Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Restricted Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act.

3.o  Check and complete if Transferee will take delivery of a beneficial interest in a Definitive Note pursuant to any provision of the Securities Act other than Rule 144A or Regulation S.  The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one):

(a)o  such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act;

or

(b)o  such Transfer is being effected to the Company or a subsidiary thereof;

or

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(c)o  such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act.

4.o  Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note.

(a)o  Check if Transfer is pursuant to Rule 144.  (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act.  Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.

(b)o  Check if Transfer is Pursuant to Regulation S.  (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act.  Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.

(c)o  Check if Transfer is Pursuant to Other Exemption.  (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act.  Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture.

This certificate and the statements contained herein are made for your benefit and the benefit of the Company.

C-3

		[Insert Name of Transferor]
		By:
		Name:
		Title:
Dated:	,

C-4

ANNEX A TO CERTIFICATE OF TRANSFER

1.The Transferor owns and proposes to transfer the following:

[CHECK ONE OF (a) OR (b)]

(a)o  a beneficial interest in the Restricted Global Note; or

(b)o  a Restricted Definitive Note.

2.After the Transfer the Transferee will hold:

[CHECK ONE]

(a)o  a beneficial interest in the:

(i)o  Restricted Global Note (CUSIP             ), or

(ii)o  Unrestricted Global Note (CUSIP             ); or

(b)o  Restricted Definitive Note; or

(c)o  an Unrestricted Definitive Note,

in accordance with the terms of the Indenture.

C-5

EXHIBIT D

[FORM OF CERTIFICATE OF EXCHANGE]

Baltimore Gas and Electric Company

750 East Pratt Street

Baltimore, MD 21202

Attention:Secretary of the Company

Deutsche Bank Trust Company Americas

60 Wall Street, 27th Floor

New York, NY 10005
Attention: Trust and Securities Services

Re: [    ]% Series [A][B] Notes due [            ]

Reference is hereby made to the Indenture, dated as of July 24, 2006, as amended by the First Supplemental Indenture, dated as of October 13, 2006 (as so amended and supplemented, the “Indenture”), between Baltimore Gas and Electric Company, a Maryland corporation, as issuer (the “Company”), and Deutsche Bank Trust Company Americas, as trustee.  Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

                       , (the “Owner”) owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $                        in such Note[s] or interests (the “Exchange”).  In connection with the Exchange, the Owner hereby certifies that:

1.Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global Note.

(a)o  Check if Exchange is from beneficial interest in a Restricted Global Note to beneficial interest in an Unrestricted Global Note.  In connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the “Securities Act”), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

(b)o  Check if Exchange is from beneficial interest in a Restricted Global Note to Unrestricted Definitive Note.  In connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with

D-1

the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

(c)o  Check if Exchange is from Restricted Definitive Note to beneficial interest in an Unrestricted Global Note.  In connection with the Owner’s Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

(d)o  Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive Note.  In connection with the Owner’s Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

2.Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes.

(a)o  Check if Exchange is from beneficial interest in a Restricted Global Note to Restricted Definitive Note.  In connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner’s own account without transfer.  Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act.

(b)o  Check if Exchange is from Restricted Definitive Note to beneficial interest in a Restricted Global Note.  In connection with the Exchange of the Owner’s Restricted Definitive Note for a beneficial interest in the Restricted Global Note, the Owner hereby certifies (1) the beneficial interest is being acquired for the Owner’s own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States.  Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act.

D-2

This certificate and the statements contained herein are made for your benefit and the benefit of the Company.

		[Insert Name of Owner]
		By:
		Name:
		Title:
Dated:	,

D-3

EX-4.(B)

EXHIBIT 4(b)

Registration Rights Agreement

Dated As of October 13, 2006

among

Baltimore Gas and Electric Company

and

Banc of America Securities LLC,

Barclays Capital Inc.,

Citigroup Global Markets Inc.,

and

Merrill Lynch, Pierce, Fenner & Smith
Incorporated

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (the “Agreement”) is made and entered into this 13th day of October, 2006, among Baltimore Gas and Electric Company, a Maryland corporation (the “Company”), and Banc of America Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “Representatives”) and the other initial purchasers (collectively, the “Initial Purchasers”) named in Schedule A to the purchase agreement dated October 11, 2006, among the Company and the Initial Purchasers (the “Purchase Agreement”), which provides for the sale by the Company to the Initial Purchasers of an aggregate of $300,000,000 million principal amount of the Company’s 5.90% Notes due 2016 (the “Securities”).

This Agreement is made pursuant to the Purchase Agreement,.  In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Company has agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights set forth in this Agreement.  The execution of this Agreement is a condition to the closing under the Purchase Agreement.

In consideration of the foregoing, the parties hereto agree as follows:

1.Definitions.

As used in this Agreement, the following capitalized defined terms shall have the following meanings:

“1933 Act” shall mean the Securities Act of 1933, as amended from time to time.

“1934 Act” shall mean the Securities Exchange Act of l934, as amended from time to time.

“Closing Date” shall mean the Closing Date as defined in the Purchase Agreement.

“Company” shall have the meaning set forth in the preamble and shall also include the Company’s successors.

“Depositary” shall mean The Depository Trust Company, or any other depositary appointed by the Company, provided, however, that such depositary must have an address in the Borough of Manhattan, in The City of New York.

“Exchange Offer” shall mean the exchange offer by the Company of Exchange Securities for Registrable Securities pursuant to Section 2.1 hereof.

“Exchange Offer Registration” shall mean a registration under the 1933 Act effected pursuant to Section 2.1 hereof.

“Exchange Offer Registration Statement” shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form), and all amendments and supplements to such registration statement, including the Prospectus contained therein, all exhibits thereto and all documents incorporated by reference therein.

“Exchange Period” shall have the meaning set forth in Section 2.1 hereof.

“Exchange Securities” shall mean the 5.90% Notes due 2016 issued by the Company under the Indenture containing terms identical to the Securities in all material respects (except for references to certain interest rate provisions, restrictions on transfers and restrictive legends), to be offered to Holders of Securities in exchange for Registrable Securities pursuant to the Exchange Offer.

“Holder” shall mean an Initial Purchaser, for so long as it owns any Registrable Securities, and each of its successors, assigns and direct and indirect transferees who become registered owners of Registrable Securities under the Indenture and each Participating Broker-Dealer that holds Exchange Securities for so long as such Participating Broker-Dealer is required to deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities.

“Indenture” shall mean the Indenture relating to the Securities, dated as of July 24, 2006, between the Company and Deutsche Bank Trust Company Americas, as trustee, as supplemented by a supplemental indenture dated as of October 13, 2006 between the Company and the Trustee and as the same may be further amended, supplemented, waived or otherwise modified from time to time in accordance with the terms thereof.

“Initial Purchaser” or “Initial Purchasers” shall have the meaning set forth in the preamble.

“Majority Holders” shall mean the Holders of a majority of the aggregate principal amount of Outstanding (as defined in the Indenture) Registrable

Securities;  provided that whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company and other obligors on the Securities or any Affiliate (as defined in the Indenture) of the Company shall be disregarded in determining whether such consent or approval was given by the Holders of such required percentage amount.

“Participating Broker-Dealer” shall mean any of Banc of America Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated and any other broker-dealer which makes a market in the Securities and exchanges Registrable Securities in the Exchange Offer for Exchange Securities.

“Person” shall mean an individual, partnership (general or limited), corporation, limited liability company, trust or unincorporated organization, or a government or agency or political subdivision thereof.

“Private Exchange” shall have the meaning set forth in Section 2.1 hereof.

“Private Exchange Securities” shall have the meaning set forth in Section 2.1 hereof.

“Prospectus” shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including any such prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to a prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein.

“Purchase Agreement” shall have the meaning set forth in the preamble.

“Registrable Securities” shall mean the Securities and, if issued, the Private Exchange Securities; provided, however, that the Securities and, if issued, the Private Exchange Securities, shall cease to be Registrable Securities when (i) a Registration Statement with respect to such Securities shall have been declared effective under the 1933 Act and such Securities shall have been disposed of pursuant to such Registration Statement, (ii) such Securities have been sold to the public pursuant to Rule l44 (or any similar provision then in force, but not Rule 144A) under the 1933 Act, (iii) such Securities shall have ceased to be outstanding

or (iv) the Exchange Offer is consummated (except in the case of Securities purchased from the Company and continued to be held by the Initial Purchasers).

“Registration Expenses” shall mean any and all expenses incident to performance of or compliance by the Company with this Agreement, including without limitation:  (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. (the “NASD”) registration and filing fees, including, if applicable, the fees and expenses of any “qualified independent underwriter” (and its counsel) that is required to be retained by any holder of Registrable Securities in accordance with the rules and regulations of the NASD, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws and compliance with the rules of the NASD (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with blue sky qualification of any of the Exchange Securities or Registrable Securities and any filings with the NASD), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, (iv) all fees and expenses incurred in connection with the listing, if any, of any of the Registrable Securities on any securities exchange or exchanges, (v) all rating agency fees, (vi) the fees and disbursements of counsel for the Company and of the independent public accountants of the Company, including the expenses of any special audits or “cold comfort” letters required by or incident to such performance and compliance, (vii) the fees and expenses of the Trustee, and any escrow agent or custodian, (viii) the reasonable fees and expenses of the Initial Purchasers in connection with the Exchange Offer, including the reasonable fees and expenses of counsel to the Initial Purchasers in connection therewith, (ix) the reasonable fees and disbursements of special counsel representing the Holders of Registrable Securities and (x) any fees and disbursements of the underwriters customarily required to be paid by issuers or sellers of securities and the fees and expenses of any special experts retained by the Company in connection with any Registration Statement, but excluding underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder.

“Registration Statement” shall mean any registration statement of the Company which covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.

“SEC” shall mean the Securities and Exchange Commission or any successor agency or government body performing the functions currently performed by the United States Securities and Exchange Commission.

“Shelf Registration” shall mean a registration effected pursuant to Section 2.2 hereof.

“Shelf Registration Statement” shall mean a “shelf” registration statement of the Company pursuant to the provisions of Section 2.2 of this Agreement which covers all of the Registrable Securities or all of the Private Exchange Securities on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.

“Trustee” shall mean the trustee with respect to the Securities under the Indenture.

2.Registration Under the 1933 Act.

2.1Exchange Offer.  The Company shall, for the benefit of the Holders, at the Company’s cost, (A) prepare and, as soon as practicable but not later than 210 days following the Closing Date, file with the SEC an Exchange Offer Registration Statement on an appropriate form under the 1933 Act with respect to a proposed Exchange Offer and the issuance and delivery to the Holders, in exchange for the Registrable Securities (other than Private Exchange Securities), of a like principal amount of Exchange Securities, (B) use its reasonable best efforts to cause the Exchange Offer Registration Statement to be declared effective under the 1933 Act within 270 days of the Closing Date, (C) use its reasonable best efforts to keep the Exchange Offer Registration Statement effective until the closing of the Exchange Offer and (D) use its reasonable best efforts to cause the Exchange Offer to be consummated not later than 315 days following the Closing Date.  The Exchange Securities will be issued under the Indenture.  Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Exchange Offer, it being the objective of such Exchange Offer to enable each Holder eligible and electing to exchange Registrable Securities for Exchange Securities (assuming that such Holder (a) is not an affiliate of the Company within the meaning of Rule 405 under the 1933 Act, (b) is not a broker-dealer tendering Registrable Securities acquired directly from the Company for its own account, (c) acquired the Exchange Securities in the ordinary

course of such Holder’s business and (d) has no arrangements or understandings with any Person to participate in the Exchange Offer for the purpose of distributing the Exchange Securities) to transfer such Exchange Securities from and after their receipt without any limitations or restrictions under the 1933 Act and under state securities or blue sky laws.

In connection with the Exchange Offer, the Company shall:

(a)mail as promptly as practicable to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents;

(b)keep the Exchange Offer open for acceptance for a period of not less than 30 calendar days after the date notice thereof is mailed to the Holders (or longer if required by applicable law) (such period referred to herein as the “Exchange Period”);

(c)utilize the services of the Depositary for the Exchange Offer;

(d)permit Holders to withdraw tendered Registrable Securities at any time prior to 5:00 p.m. (Eastern Time), on the last business day of the Exchange Period, by sending to the institution specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Securities delivered for exchange, and a statement that such Holder is withdrawing such Holder’s election to have such Securities exchanged;

(e)notify each Holder that any Registrable Security not tendered will remain outstanding and continue to accrue interest, but will not retain any rights under this Agreement (except in the case of the Initial Purchasers and Participating Broker-Dealers as provided herein); and

(f)otherwise comply in all respects with all applicable laws relating to the Exchange Offer.

If, prior to consummation of the Exchange Offer, the Initial Purchasers hold any Securities acquired by them and having the status of an unsold allotment in the initial distribution, the Company upon the request of any Initial Purchaser shall, simultaneously with the delivery of the Exchange Securities in the Exchange Offer, issue and deliver to such Initial Purchaser in exchange (the “Private Exchange”) for the Securities held by such Initial Purchaser, a like principal amount of debt securities of the Company on a senior basis, that are identical (except that such securities shall bear

appropriate transfer restrictions) to the Exchange Securities (the “Private Exchange Securities”).

The Exchange Securities and the Private Exchange Securities shall be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture and which, in either case, has been qualified under the Trust Indenture Act of 1939, as amended (the “TIA”), or is exempt from such qualification and shall provide that the Exchange Securities shall not be subject to the transfer restrictions set forth in the Indenture but that the Private Exchange Securities shall be subject to such transfer restrictions.  The Indenture or such indenture shall provide that the Exchange Securities, the Private Exchange Securities and the Securities shall vote and consent together on all matters as one class and that none of the Exchange Securities, the Private Exchange Securities or the Securities will have the right to vote or consent as a separate class on any matter.  The Private Exchange Securities shall be of the same series as and the Company shall use reasonable best efforts to have the Private Exchange Securities bear the same CUSIP number as the Exchange Securities.  The Company shall not have any liability under this Agreement solely as a result of such Private Exchange Securities not bearing the same CUSIP number as the Exchange Securities.

As soon as practicable after the close of the Exchange Offer and/or the Private Exchange, as the case may be, the Company shall:

(i)  accept for exchange all Registrable Securities duly tendered and not validly withdrawn pursuant to the Exchange Offer in accordance with the terms of the Exchange Offer Registration Statement and the letter of transmittal which shall be an exhibit thereto;

(ii)  accept for exchange all Securities properly tendered pursuant to the Private Exchange;

(iii)  deliver to the Trustee for cancellation all Registrable Securities so accepted for exchange; and

(iv)  cause the Trustee promptly to authenticate and deliver Exchange Securities or Private Exchange Securities, as the case may be, to each Holder of Registrable Securities so accepted for exchange in a principal amount equal to the principal amount of the Registrable Securities of such Holder so accepted for exchange.

Interest on each Exchange Security and Private Exchange Security will accrue from the last date on which interest was paid on the Registrable Securities

surrendered in exchange therefor or, if no interest has been paid on the Registrable Securities, from the date of original issuance.  The Exchange Offer and the Private Exchange shall not be subject to any conditions, other than (i) that the Exchange Offer or the Private Exchange, or the making of any exchange by a Holder, does not violate applicable law or any applicable interpretation of the staff of the SEC, (ii) the due tendering of Registrable Securities in accordance with the Exchange Offer and the Private Exchange, (iii) that each Holder of Registrable Securities exchanged in the Exchange Offer shall have represented that all Exchange Securities to be received by it shall be acquired in the ordinary course of its business and that at the time of the consummation of the Exchange Offer it shall have no arrangement or understanding with any person to participate in the distribution (within the meaning of the 1933 Act) of the Exchange Securities and shall have made such other representations as may be reasonably necessary under applicable SEC rules, regulations or interpretations to render the use of Form S-4 or other appropriate form under the 1933 Act available and (iv) that no action or proceeding shall have been instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer or the Private Exchange which, in the Company’s judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offer or the Private Exchange.  The Company shall inform the Initial Purchasers of the names and addresses of the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall have the right to contact such Holders and otherwise facilitate the tender of Registrable Securities in the Exchange Offer.

2.2Shelf Registration.  (i) If, because of any changes in law, SEC rules or regulations or applicable interpretations thereof by the staff of the SEC, the Company is not permitted to effect the Exchange Offer as contemplated by Section 2.1 hereof, (ii) if for any other reason the Exchange Offer Registration Statement is not filed with the SEC within 210 days of the Closing Date, or if such Exchange Offer Registration Statement is not declared effective within 270 days following the original issue of the Registrable Securities or if the Exchange Offer is not consummated within 315 days after the original issue of the Registrable Securities, (iii) upon the request of any of the Initial Purchasers with respect to any Securities not eligible to be exchanged for the Exchange Securities in the Exchange Offer Registration, (iv) if a Holder is not permitted to participate in the Exchange Offer or does not receive fully tradeable Exchange Securities pursuant to the Exchange Offer, and such Holder so requests, or (v) if the Company so elects, then in case of each of clauses (i) through (v) the Company shall, at its cost:

(a)As promptly as practicable, file with the SEC, and thereafter shall use its reasonable best efforts to cause to be declared effective as promptly as practicable but no later than the later of (A) 180 days after

being required or requested by a Holder to file a Shelf Registration Statement, or (B) 270 days after the original issue of the Registrable Securities, a Shelf Registration Statement relating to the offer and sale of the Registrable Securities by the Holders from time to time in accordance with the methods of distribution elected by the Majority Holders participating in the Shelf Registration and set forth in such Shelf Registration Statement.

(b)Use its reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years from the date the Shelf Registration Statement is declared effective by the SEC, or for such shorter period that will terminate when all Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or cease to be outstanding or otherwise to be Registrable Securities (the “Effectiveness Period”);  provided, however, that the Effectiveness Period in respect of the Shelf Registration Statement shall be extended to the extent required to permit dealers to comply with the applicable prospectus delivery requirements of Rule 174 under the 1933 Act and as otherwise provided herein.

(c)Notwithstanding any other provisions hereof, use its reasonable best efforts to ensure that (i) any Shelf Registration Statement and any amendment thereto and any Prospectus forming part thereof and any supplement thereto complies in all material respects with the 1933 Act and the rules and regulations thereunder, (ii) any Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Shelf Registration Statement, and any supplement to such Prospectus (as amended or supplemented from time to time), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading.

The Company shall not permit any securities other than Registrable Securities to be included in the Shelf Registration Statement.  The Company further agrees, if necessary, to supplement or amend the Shelf Registration Statement, as required by Section 3(b) below, and to furnish to the Holders of Registrable Securities

copies of any such supplement or amendment promptly after its being used or filed with the SEC.

2.3Expenses.  The Company shall pay all Registration Expenses in connection with the registration pursuant to Section 2.1 or 2.2.  Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder’s Registrable Securities pursuant to the Shelf Registration Statement.

2.4.Effectiveness.  (a)  The Company will be deemed not to have used its reasonable efforts to cause the Exchange Offer Registration Statement or its reasonable best efforts to cause the Shelf Registration Statement, as the case may be, to become, or to remain, effective during the requisite period if the Company voluntarily takes any action that would, or omits to take any action which omission would, result in any such Registration Statement not being declared effective or in the Holders of Registrable Securities covered thereby not being able to exchange or offer and sell such Registrable Securities during that period as and to the extent contemplated hereby, unless such action is required by applicable law.

(b)An Exchange Offer Registration Statement pursuant to Section 2.1 hereof or a Shelf Registration Statement pursuant to Section 2.2 hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that if, after it has been declared effective, the offering of Registrable Securities pursuant to an Exchange Offer Registration Statement or a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have become effective during the period of such interference, until the offering of Registrable Securities pursuant to such Registration Statement may legally resume.

2.5Interest.  The Indenture executed in connection with the Securities will provide that in the event that either (a) the Exchange Offer Registration Statement is not filed with the Commission on or prior to the 210th calendar day following the date of original issue of the Securities, (b) the Exchange Offer Registration Statement (or, if a change in law or in applicable interpretations of the staff of the SEC does not permit the Company to effect a Registered Exchange Offer, the Shelf Registration Statement) has not been declared effective on or prior to the 270th calendar day following the date of original issue of the Securities, (c) the Exchange Offer is not consummated on or prior to the 315th calendar day following the date of original issue of the Securities, (d) the Shelf Registration Statement is not declared effective by the SEC within the later of (A) 180 days after being required or requested by a Holder to file a Shelf Registration Statement,

or (B) 270 days after the original issue of the Registrable Securities, or (e) after the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, is declared effective, such Registration Statement thereafter ceases to be effective or usable and the aggregate number of days in any consecutive twelve-month period for which the Shelf Registration Statement shall not be usable exceeds 30 days in the aggregate (each such event referred to in clauses (a) through (e) above, a “Registration Default”), the interest rate borne by the Securities shall be increased (“Additional Interest”) by one-quarter of one percent per annum upon the occurrence of each Registration Default, which rate will increase by one quarter of one percent each 90-day period that such Additional Interest continues to accrue under any such circumstance, provided that the maximum aggregate increase in the interest rate will in no event exceed one percent (1%) per annum.  Following the cure of all Registration Defaults the accrual of Additional Interest will cease and the interest rate will revert to the original rate.

The Company shall notify the Trustee within three business days after each and every date on which an event occurs in respect of which Additional Interest is required to be paid (an “Event Date”).  Additional Interest shall be paid by depositing with the Trustee, in trust, for the benefit of the Holders of Registrable Securities, on or before the applicable semiannual interest payment date, immediately available funds in sums sufficient to pay the Additional Interest then due.  The Additional Interest due shall be payable on each interest payment date to the record Holder of Securities entitled to receive the interest payment to be paid on such date as set forth in the Indenture.  Each obligation to pay Additional Interest shall be deemed to accrue from and including the day following the applicable Event Date.

3.Registration Procedures.

In connection with the obligations of the Company with respect to Registration Statements pursuant to Sections 2.1 and 2.2 hereof, the Company shall:

(a)prepare and file with the SEC a Registration Statement, within the relevant time period specified in Section 2, on the appropriate form under the 1933 Act, which form (i) shall be selected by the Company, (ii) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders thereof, (iii) shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all financial statements required by the SEC to be filed therewith or incorporated by reference therein, and (iv) shall comply in all respects with the requirements of Regulation S-T under the 1933 Act, and use its reasonable best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof;

(b)prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary under applicable law to keep such Registration Statement effective for the applicable period; and cause each Prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provision then in force) under the 1933 Act and comply with the provisions of the 1933 Act, the 1934 Act and the rules and regulations thereunder applicable to them with respect to the disposition of all securities covered by each Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the selling Holders thereof (including sales by any Participating Broker-Dealer);

(c)in the case of a Shelf Registration, (i) notify each Holder of Registrable Securities, at least five business days prior to filing, that a Shelf Registration Statement with respect to the Registrable Securities is being filed and advising such Holders that the distribution of Registrable Securities will be made in accordance with the method selected by the Majority Holders participating in the Shelf Registration; (ii) furnish to each Holder of Registrable Securities and to each underwriter of an underwritten offering of Registrable Securities, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or underwriter may reasonably request, including financial statements and schedules and, if the Holder so requests, all exhibits in order to facilitate the public sale or other disposition of the Registrable Securities; and (iii) hereby consent to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of Registrable Securities in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto;

(d)use its reasonable best efforts to register or qualify the Registrable Securities under all applicable state securities or “blue sky” laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement and each underwriter of an underwritten offering of Registrable Securities shall reasonably request by the time the applicable Registration Statement is declared effective by the SEC, and do any and all other acts and things which may be reasonably necessary or advisable to enable each such Holder and underwriter to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; provided, however, that the Company shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), or (ii) take any action which would subject it to general service of process or taxation in any such jurisdiction where it is not then so subject;

(e)notify promptly each Holder of Registrable Securities under a Shelf Registration or any Participating Broker-Dealer who has notified the Company that it is utilizing the Exchange Offer Registration Statement as provided in paragraph (f) below and, if requested by such Holder or Participating Broker-Dealer, confirm such advice in writing promptly (i) when a Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective, (ii) of any request by the SEC or any state securities authority for post-effective amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) in the case of a Shelf Registration, if, between the effective date of a Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the offering cease to be true and correct in all material respects, (v) of the happening of any event or the discovery of any facts during the period a Shelf Registration Statement is effective which makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein not misleading, (vi) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities or the Exchange Securities, as the case may be, for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and (vii) of any determination by the Company that a post-effective amendment to such Registration Statement would be appropriate;

(f)(A)  in the case of the Exchange Offer Registration Statement (i) include in the Exchange Offer Registration Statement a section entitled “Plan of Distribution” which section shall be reasonably acceptable to the Representatives on behalf of the Participating Broker-Dealers, and which shall contain a summary statement of the positions taken or policies made by the staff of the SEC with respect to the potential “underwriter” status of any broker-dealer that holds Registrable Securities acquired for its own account as a result of market-making activities or other trading activities and that will be the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Securities to be received by such broker-dealer in the Exchange Offer, whether such positions or policies have been publicly disseminated by the staff of the SEC or such positions or policies, in the reasonable judgment of the Representatives on behalf of the Participating Broker-Dealers and its counsel, represent the prevailing views of the staff of the SEC, including a statement that any such broker-dealer who receives Exchange Securities for Registrable Securities pursuant to the Exchange Offer may be deemed a statutory underwriter and must deliver a prospectus

meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities, (ii) furnish to each Participating Broker-Dealer who has delivered to the Company the notice referred to in Section 3(e), without charge, as many copies of each Prospectus included in the Exchange Offer Registration Statement, including any preliminary prospectus, and any amendment or supplement thereto, as such Participating Broker-Dealer may reasonably request, (iii) hereby consent to the use of the Prospectus forming part of the Exchange Offer Registration Statement or any amendment or supplement thereto, by any Person subject to the prospectus delivery requirements of the SEC, including all Participating Broker-Dealers, in connection with the sale or transfer of the Exchange Securities covered by the Prospectus or any amendment or supplement thereto, and (iv) include in the transmittal letter or similar documentation to be executed by an exchange offeree in order to participate in the Exchange Offer (x) the following provision:

“If the exchange offeree is a broker-dealer holding Registrable Securities acquired for its own account as a result of market-making activities or other trading activities, it will deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of Exchange Securities received in respect of such Registrable Securities pursuant to the Exchange Offer;” and

(y) a statement to the effect that by a broker-dealer making the acknowledgment described in clause (x) and by delivering a Prospectus in connection with the exchange of Registrable Securities, the broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the 1933 Act; and

(B)in the case of any Exchange Offer Registration Statement, the Company agrees to deliver to the Initial Purchasers on behalf of the Participating Broker-Dealers upon the effectiveness of the Exchange Offer Registration Statement an officers’ certificates substantially in the form customarily delivered in a public offering of debt securities;

(g)(i)  in the case of an Exchange Offer, furnish counsel for the Initial Purchasers and (ii) in the case of a Shelf Registration, furnish counsel for the Holders of Registrable Securities copies of any comment letters received from the SEC or any other request by the SEC or any state securities authority for amendments or supplements to a Registration Statement and Prospectus or for additional information;

(h)make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment;

(i)in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, and each underwriter, if any, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto, including financial statements and schedules (without documents incorporated therein by reference and all exhibits thereto, unless requested);

(j)in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends; and enable such Registrable Securities to be in such denominations (consistent with the provisions of the Indenture) and registered in such names as the selling Holders or the underwriters, if any, may reasonably request at least three business days prior to the closing of any sale of Registrable Securities;

(k)in the case of a Shelf Registration, upon the occurrence of any event or the discovery of any facts, each as contemplated by Sections 3(e)(v) and 3(e)(vi) hereof, as promptly as practicable after the occurrence of such an event, use its reasonable best efforts to prepare a supplement or post-effective amendment to the Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities or Participating Broker-Dealers, such Prospectus will not contain at the time of such delivery any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or will remain so qualified.  At such time as such public disclosure is otherwise made or the Company determines that such disclosure is not necessary, in each case to correct any misstatement of a material fact or to include any omitted material fact, the Company agrees promptly to notify each Holder of such determination and to furnish each Holder such number of copies of the Prospectus as amended or supplemented, as such Holder may reasonably request;

(l)in the case of a Shelf Registration, a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus after initial filing of a Registration Statement, provide copies of such document to the Initial Purchasers on behalf of such Holders; and make representatives of the Company as shall be reasonably requested by the Holders of Registrable Securities, or the Initial Purchasers on behalf of such Holders, available for discussion of such document;

(m)obtain a CUSIP number for all Exchange Securities, Private Exchange Securities or Registrable Securities, as the case may be, not later than the effective date of a Registration Statement, and provide the Trustee with printed certificates for the Exchange Securities, Private Exchange Securities or the Registrable Securities, as the case may be, in a form eligible for deposit with the Depositary;

(n)(i)  cause the Indenture to be qualified under the TIA in connection with the registration of the Exchange Securities or Registrable Securities, as the case may be, (ii) cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and (iii) execute, and use its reasonable best efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner;

(o)in the case of a Shelf Registration, enter into agreements (including underwriting agreements) and take all other customary and appropriate actions in order to expedite or facilitate the disposition of such Registrable Securities and in such connection whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration:

(i)  make such representations and warranties to the Holders of such Registrable Securities and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings as may be reasonably requested by them;

(ii)  obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, and the holders of a majority in principal amount of the Registrable Securities being sold) addressed to each selling Holder and the underwriters, if any, covering the matters customarily covered in opinions requested in sales of securities or underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters;

(iii)  obtain “cold comfort” letters and updates thereof from the Company’s independent certified public accountants (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements are, or are required to be, included in the Registration Statement) addressed to the underwriters, if any, and use reasonable efforts to have

such letter addressed to the selling Holders of Registrable Securities (to the extent consistent with Statement on Auditing Standards No. 72 of the American Institute of Certified Public Accounts), such letters to be in customary form and covering matters of the type customarily covered in “cold comfort” letters to underwriters in connection with similar underwritten offerings;

(iv)  enter into a securities sales agreement with the Holders and an agent of the Holders providing for, among other things, the appointment of such agent for the selling Holders for the purpose of soliciting purchases of Registrable Securities, which agreement shall be in form, substance and scope customary for similar offerings;

(v)  if an underwriting agreement is entered into, cause the same to set forth indemnification provisions and procedures substantially equivalent to the indemnification provisions and procedures set forth in Section 4 hereof with respect to the underwriters and all other parties to be indemnified pursuant to said Section or, at the request of any underwriters, in the form customarily provided to such underwriters in similar types of transactions; and

(vi)  deliver such documents and certificates as may be reasonably requested and as are customarily delivered in similar offerings to the Holders of a majority in principal amount of the Registrable Securities being sold and the managing underwriters, if any.

The above shall be done at (i) the effectiveness of such Registration Statement (and each post-effective amendment thereto) and (ii) each closing under any underwriting or similar agreement as and to the extent required thereunder;

(p)in the case of a Shelf Registration or if a Prospectus is required to be delivered by any Participating Broker-Dealer in the case of an Exchange Offer, make available for inspection by representatives of the Holders of the Registrable Securities, any underwriters participating in any disposition pursuant to a Shelf Registration Statement, any Participating Broker-Dealer and any counsel or accountant retained by any of the foregoing, all financial and other records, pertinent corporate documents and properties of the Company reasonably requested by any such persons, and cause the respective officers, directors, employees, and any other agents of the Company to supply all information reasonably requested by any such representative, underwriter, special counsel or accountant in connection with a Registration Statement, and make such

representatives of the Company available for discussion of such documents as shall be reasonably requested by the Initial Purchasers;

(q)(i)  in the case of an Exchange Offer Registration Statement, a reasonable time prior to the filing of any Exchange Offer Registration Statement, any Prospectus forming a part thereof, any amendment to an Exchange Offer Registration Statement or amendment or supplement to such Prospectus, provide copies of such document to the Initial Purchasers and to counsel to the Holders of Registrable Securities and make such changes in any such document prior to the filing thereof as the Initial Purchasers or counsel to the Holders of Registrable Securities may reasonably request and, except as otherwise required by applicable law, not file any such document in a form to which the Initial Purchasers on behalf of the Holders of Registrable Securities and counsel to the Holders of Registrable Securities shall not have previously been advised and furnished a copy of or to which the Initial Purchasers on behalf of the Holders of Registrable Securities or counsel to the Holders of Registrable Securities shall reasonably object, and make the representatives of the Company available for discussion of such documents as shall be reasonably requested by the Initial Purchasers; and

(ii)  in the case of a Shelf Registration, a reasonable time prior to filing any Shelf Registration Statement, any Prospectus forming a part thereof, any amendment to such Shelf Registration Statement or amendment or supplement to such Prospectus, provide copies of such document to the Holders of Registrable Securities, to the Initial Purchasers, to counsel for the Holders and to the underwriter or underwriters of an underwritten offering of Registrable Securities, if any, make such changes in any such document prior to the filing thereof as the Initial Purchasers, the counsel to the Holders or the underwriter or underwriters reasonably request and not file any such document in a form to which the Majority Holders, the Initial Purchasers on behalf of the Holders of Registrable Securities, counsel for the Holders of Registrable Securities or any underwriter shall not have previously been advised and furnished a copy of or to which the Majority Holders, the Initial Purchasers on behalf of the Holders of Registrable Securities, counsel to the Holders of Registrable Securities or any underwriter shall reasonably object, and make the representatives of the Company available for discussion of such document as shall be reasonably requested by the Holders of Registrable Securities, the Initial Purchasers on behalf of such Holders, counsel for the Holders of Registrable Securities or any underwriter.

(r)in the case of a Shelf Registration, use its best efforts to cause all Registrable Securities to be listed on any securities exchange on which similar debt securities issued by the Company are then listed if requested by the Majority Holders, or

if requested by the underwriter or underwriters of an underwritten offering of Registrable Securities, if any;

(s)in the case of a Shelf Registration, use its reasonable best efforts to cause the Registrable Securities to be rated by the appropriate rating agencies, if so requested by the Majority Holders, or if requested by the underwriter or underwriters of an underwritten offering of Registrable Securities, if any;

(t)otherwise comply with all applicable rules and regulations of the SEC and make available to its security holders, as soon as reasonably practicable, an earnings statement covering at least 12 months which shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder;

(u)cooperate and assist in any filings required to be made with the NASD and, in the case of a Shelf Registration, in the performance of any due diligence investigation by any underwriter and its counsel (including any “qualified independent underwriter” that is required to be retained in accordance with the rules and regulations of the NASD); and

(v)upon consummation of an Exchange Offer or a Private Exchange, obtain a customary opinion of counsel to the Company addressed to the Trustee for the benefit of all Holders of Registrable Securities participating in the Exchange Offer or Private Exchange, and which includes an opinion that (i) the Company has duly authorized, executed and delivered the Exchange Securities and/or Private Exchange Securities, as applicable, and the related indenture, and (ii) each of the Exchange Securities and related indenture constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its respective terms (with customary exceptions).

In the case of a Shelf Registration Statement, the Company may (as a condition to such Holder’s participation in the Shelf Registration) require each Holder of Registrable Securities to furnish to the Company such information regarding the Holder and the proposed distribution by such Holder of such Registrable Securities as the Company may from time to time reasonably request in writing.

In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Company of the happening of any event or the discovery of any facts, each of the kind described in Section 3(e)(v) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Registration Statement until such Holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(k) hereof, and, if so directed by the Company,

such Holder will deliver to the Company (at its expense) all copies in such Holder’s possession, other than permanent file copies then in such Holder’s possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice.

In the event that the Company fails to effect the Exchange Offer or file any Shelf Registration Statement and maintain the effectiveness of any Shelf Registration Statement as provided herein, the Company shall not file any Registration Statement with respect to any securities (within the meaning of Section 2(1) of the 1933 Act) of the Company other than Registrable Securities.

If any of the Registrable Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the underwriter or underwriters and manager or managers that will manage such offering will be selected by the Majority Holders of such Registrable Securities included in such offering and shall be acceptable to the Company.  No Holder of Registrable Securities may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder’s Registrable Securities on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.

4.Indemnification; Contribution.

(a)    The Company agrees to indemnify and hold harmless the Initial Purchasers, each Holder, each Participating Broker-Dealer, each Person who participates as an underwriter (any such Person being an “Underwriter”) and each Person, if any, who controls any Holder or Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:

(i)  against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment or supplement thereto) pursuant to which Exchange Securities or Registrable Securities were registered under the 1933 Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material

fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

(ii)  against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission;  provided that (subject to Section 4(d) below) any such settlement is effected with the written consent of the Company; and

(iii)  against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by any indemnified party), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above;

provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by any Holder or Underwriter expressly for use in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto).

(b)Each Holder severally, but not jointly, agrees to indemnify and hold harmless the Company, the Initial Purchasers, each Underwriter and the other selling Holders, and each of their respective directors and officers, and each Person, if any, who controls the Company, the Initial Purchasers, any Underwriter or any other selling Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 4(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Shelf Registration Statement (or any amendment thereto) or any Prospectus included therein (or any amendment or supplement thereto) in reliance upon and in conformity with written information with respect to such Holder furnished to the Company by such Holder expressly for use in the Shelf Registration Statement (or any amendment thereto) or such Prospectus (or any amendment or supplement thereto); provided, however, that no such Holder shall be liable for any claims hereunder in excess of the amount of net proceeds

received by such Holder from the sale of Registrable Securities pursuant to such Shelf Registration Statement.

(c)Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure so to notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement.  An indemnifying party may participate at its own expense in the defense of such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party.  In no event shall the indemnifying party or parties be liable for the fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 4 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

(d)If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 4(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.

(e)If the indemnification provided for in this Section 4 is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages

and expenses incurred by such indemnified party, as incurred, in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Holders and the Initial Purchasers on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.

The relative fault of the Company on the one hand and the Holders and the Initial Purchasers on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, the Holders or the Initial Purchasers and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

The Company, the Holders and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 4 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 4. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 4 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission.

Notwithstanding the provisions of this Section 4, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Securities sold by it were offered exceeds the amount of any damages which such Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.

No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

For purposes of this Section 4, each Person, if any, who controls an Initial Purchaser or Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such Initial Purchaser or Holder, and each director of the Company, and each Person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company.  The Initial Purchasers’ respective obligations to contribute pursuant to this Section 7 are several in proportion

to the principal amount of Securities set forth opposite their respective names in Schedule A to the Purchase Agreement and not joint.

5.Miscellaneous.

5.1Rule 144 and Rule 144A.  For so long as the Company is subject to the reporting requirements of Section 13 or 15 of the 1934 Act, the Company covenants that it will file the reports required to be filed by it under the 1933 Act and Section 13(a) or 15(d) of the 1934 Act and the rules and regulations adopted by the SEC thereunder.  If the Company ceases to be so required to file such reports, the Company covenants that it will upon the request of any Holder of Registrable Securities (a) make publicly available such information as is necessary to permit sales pursuant to Rule 144 under the 1933 Act, (b) deliver such information to a prospective purchaser as is necessary to permit sales pursuant to Rule 144A under the 1933 Act and it will take such further action as any Holder of Registrable Securities may reasonably request, and (c) take such further action that is reasonable in the circumstances, in each case, to the extent required from time to time to enable such Holder to sell its Registrable Securities without registration under the 1933 Act within the limitation of the exemptions provided by (i) Rule 144 under the 1933 Act, as such Rule may be amended from time to time, (ii) Rule 144A under the 1933 Act, as such Rule may be amended from time to time, or (iii) any similar rules or regulations hereafter adopted by the SEC.  Upon the request of any Holder of Registrable Securities, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements.

5.2No Inconsistent Agreements.  The Company has not entered into and the Company will not after the date of this Agreement enter into any agreement which is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof.  The rights granted to the Holders hereunder do not and will not for the term of this Agreement in any way conflict with the rights granted to the holders of the Company’s other issued and outstanding securities under any such agreements.

5.3Amendments and Waivers.  The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Securities affected by such amendment, modification, supplement, waiver or departure.

5.4Notices.  All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, registered first-class

mail, telex, telecopier, or any courier guaranteeing overnight delivery (a) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 5.4, which address initially is the address set forth in the Purchase Agreement with respect to the Initial Purchasers; and (b) if to the Company, initially at the Company’s address set forth in the Purchase Agreement, and thereafter at such other address of which notice is given in accordance with the provisions of this Section 5.4.

All such notices and communications shall be deemed to have been duly given:  at the time delivered by hand, if personally delivered; two business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery.

Copies of all such notices, demands, or other communications shall be concurrently delivered by the person giving the same to the Trustee under the Indenture, at the address specified in such Indenture.

5.5Successor and Assigns.  This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or the Indenture.  If any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such person shall be entitled to receive the benefits hereof.

5.6Third Party Beneficiaries.  The Initial Purchasers (even if the Initial Purchasers are not Holders of Registrable Securities) shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Holders, on the other hand, and shall have the right to enforce such agreements directly to the extent they deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder.  Each Holder of Registrable Securities shall be a third party beneficiary to the agreements made hereunder between the Company, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to

enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights hereunder.

5.7.Specific Enforcement.  Without limiting the remedies available to the Initial Purchasers and the Holders, the Company acknowledges that any failure by the Company to comply with its obligations under Sections 2.1 through 2.4 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it would not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company’s obligations under Sections 2.1 through 2.4 hereof.

5.8.Restriction on Resales.  Until the expiration of two years after the original issuance of the Securities, the Company will not, and will cause its “affiliates” (as such term is defined in Rule 144(a)(1) under the 1933 Act) not to, resell any Securities which are “restricted securities” (as such term is defined under Rule 144(a)(3) under the 1933 Act) that have been reacquired by any of them and shall immediately upon any purchase of any such Securities submit such Securities to the Trustee for cancellation.

5.9Counterparts.  This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

5.10Headings.  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

5.11GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.

5.12Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

BALTIMORE GAS AND ELECTRIC
COMPANY
By:	/s/ Jeanne M. Blondia
	Name: Jeanne M. Blondia
	Title: Treasurer and Assistant            Secretary

Confirmed and accepted as
of the date first above
written:
BANC OF AMERICA SECURITIES LLC
By:	/s/ Peter J. Carbone
Name: Peter J. Carbone
Title: Vice President
BARCLAYS CAPITAL INC.
By:	/s/ Pamela Kendall
Name: Pamela Kendall
Title: Director
CITIGROUP GLOBAL MARKETS INC.
By:	/s/ Brian D. Bednarkski
Name: Brian D. Bednarkski
Title: Director

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:	/s/ Jeff Kulik
Name: Jeff Kulik
Title: Managing Director

For themselves and as Representative(s) of the other Initial Purchasers named in Schedule A hereto.

EX-4.(C)

EXHIBIT 4(c)

Registration Rights Agreement

Dated As of October 13, 2006

among

Baltimore Gas and Electric Company

and

Banc of America Securities LLC,

Barclays Capital Inc.,

Citigroup Global Markets Inc.,

and

Merrill Lynch, Pierce, Fenner & Smith
Incorporated

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (the “Agreement”) is made and entered into this 13th day of October, 2006, among Baltimore Gas and Electric Company, a Maryland corporation (the “Company”), and Banc of America Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “Representatives”) and the other initial purchasers (collectively, the “Initial Purchasers”) named in Schedule A to the purchase agreement dated October 11, 2006, among the Company and the Initial Purchasers (the “Purchase Agreement”), which provides for the sale by the Company to the Initial Purchasers of an aggregate of $400,000,000 million principal amount of the Company’s 6.35% Notes due 2036 (the “Securities”).

This Agreement is made pursuant to the Purchase Agreement.  In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Company has agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights set forth in this Agreement.  The execution of this Agreement is a condition to the closing under the Purchase Agreement.

In consideration of the foregoing, the parties hereto agree as follows:

1.Definitions.

As used in this Agreement, the following capitalized defined terms shall have the following meanings:

“1933 Act” shall mean the Securities Act of 1933, as amended from time to time.

“1934 Act” shall mean the Securities Exchange Act of l934, as amended from time to time.

“Closing Date” shall mean the Closing Date as defined in the Purchase Agreement.

“Company” shall have the meaning set forth in the preamble and shall also include the Company’s successors.

“Depositary” shall mean The Depository Trust Company, or any other depositary appointed by the Company, provided, however, that such depositary must have an address in the Borough of Manhattan, in The City of New York.

“Exchange Offer” shall mean the exchange offer by the Company of Exchange Securities for Registrable Securities pursuant to Section 2.1 hereof.

“Exchange Offer Registration” shall mean a registration under the 1933 Act effected pursuant to Section 2.1 hereof.

“Exchange Offer Registration Statement” shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form), and all amendments and supplements to such registration statement, including the Prospectus contained therein, all exhibits thereto and all documents incorporated by reference therein.

“Exchange Period” shall have the meaning set forth in Section 2.1 hereof.

“Exchange Securities” shall mean the 6.35% Notes due 2036 issued by the Company under the Indenture containing terms identical to the Securities in all material respects (except for references to certain interest rate provisions, restrictions on transfers and restrictive legends), to be offered to Holders of Securities in exchange for Registrable Securities pursuant to the Exchange Offer.

“Holder” shall mean an Initial Purchaser, for so long as it owns any Registrable Securities, and each of its successors, assigns and direct and indirect transferees who become registered owners of Registrable Securities under the Indenture and each Participating Broker-Dealer that holds Exchange Securities for so long as such Participating Broker-Dealer is required to deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities.

“Indenture” shall mean the Indenture relating to the Securities, dated as of July 24, 2006, between the Company and Deutsche Bank Trust Company Americas, as trustee, as supplemented by a supplemental indenture dated as of October 13, 2006 between the Company and the Trustee and as the same may be further amended, supplemented, waived or otherwise modified from time to time in accordance with the terms thereof.

“Initial Purchaser” or “Initial Purchasers” shall have the meaning set forth in the preamble.

“Majority Holders” shall mean the Holders of a majority of the aggregate principal amount of Outstanding (as defined in the Indenture) Registrable

Securities;  provided that whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company and other obligors on the Securities or any Affiliate (as defined in the Indenture) of the Company shall be disregarded in determining whether such consent or approval was given by the Holders of such required percentage amount.

“Participating Broker-Dealer” shall mean any of Banc of America Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated and any other broker-dealer which makes a market in the Securities and exchanges Registrable Securities in the Exchange Offer for Exchange Securities.

“Person” shall mean an individual, partnership (general or limited), corporation, limited liability company, trust or unincorporated organization, or a government or agency or political subdivision thereof.

“Private Exchange” shall have the meaning set forth in Section 2.1 hereof.

“Private Exchange Securities” shall have the meaning set forth in Section 2.1 hereof.

“Prospectus” shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including any such prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to a prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein.

“Purchase Agreement” shall have the meaning set forth in the preamble.

“Registrable Securities” shall mean the Securities and, if issued, the Private Exchange Securities; provided, however, that the Securities and, if issued, the Private Exchange Securities, shall cease to be Registrable Securities when (i) a Registration Statement with respect to such Securities shall have been declared effective under the 1933 Act and such Securities shall have been disposed of pursuant to such Registration Statement, (ii) such Securities have been sold to the public pursuant to Rule l44 (or any similar provision then in force, but not Rule 144A) under the 1933 Act, (iii) such Securities shall have ceased to be outstanding

or (iv) the Exchange Offer is consummated (except in the case of Securities purchased from the Company and continued to be held by the Initial Purchasers).

“Registration Expenses” shall mean any and all expenses incident to performance of or compliance by the Company with this Agreement, including without limitation:  (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. (the “NASD”) registration and filing fees, including, if applicable, the fees and expenses of any “qualified independent underwriter” (and its counsel) that is required to be retained by any holder of Registrable Securities in accordance with the rules and regulations of the NASD, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws and compliance with the rules of the NASD (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with blue sky qualification of any of the Exchange Securities or Registrable Securities and any filings with the NASD), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, (iv) all fees and expenses incurred in connection with the listing, if any, of any of the Registrable Securities on any securities exchange or exchanges, (v) all rating agency fees, (vi) the fees and disbursements of counsel for the Company and of the independent public accountants of the Company, including the expenses of any special audits or “cold comfort” letters required by or incident to such performance and compliance, (vii) the fees and expenses of the Trustee, and any escrow agent or custodian, (viii) the reasonable fees and expenses of the Initial Purchasers in connection with the Exchange Offer, including the reasonable fees and expenses of counsel to the Initial Purchasers in connection therewith, (ix) the reasonable fees and disbursements of special counsel representing the Holders of Registrable Securities and (x) any fees and disbursements of the underwriters customarily required to be paid by issuers or sellers of securities and the fees and expenses of any special experts retained by the Company in connection with any Registration Statement, but excluding underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder.

“Registration Statement” shall mean any registration statement of the Company which covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.

“SEC” shall mean the Securities and Exchange Commission or any successor agency or government body performing the functions currently performed by the United States Securities and Exchange Commission.

“Shelf Registration” shall mean a registration effected pursuant to Section 2.2 hereof.

“Shelf Registration Statement” shall mean a “shelf” registration statement of the Company pursuant to the provisions of Section 2.2 of this Agreement which covers all of the Registrable Securities or all of the Private Exchange Securities on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.

“Trustee” shall mean the trustee with respect to the Securities under the Indenture.

2.Registration Under the 1933 Act.

2.1Exchange Offer.  The Company shall, for the benefit of the Holders, at the Company’s cost, (A) prepare and, as soon as practicable but not later than 210 days following the Closing Date, file with the SEC an Exchange Offer Registration Statement on an appropriate form under the 1933 Act with respect to a proposed Exchange Offer and the issuance and delivery to the Holders, in exchange for the Registrable Securities (other than Private Exchange Securities), of a like principal amount of Exchange Securities, (B) use its reasonable best efforts to cause the Exchange Offer Registration Statement to be declared effective under the 1933 Act within 270 days of the Closing Date, (C) use its reasonable best efforts to keep the Exchange Offer Registration Statement effective until the closing of the Exchange Offer and (D) use its reasonable best efforts to cause the Exchange Offer to be consummated not later than 315 days following the Closing Date.  The Exchange Securities will be issued under the Indenture.  Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Exchange Offer, it being the objective of such Exchange Offer to enable each Holder eligible and electing to exchange Registrable Securities for Exchange Securities (assuming that such Holder (a) is not an affiliate of the Company within the meaning of Rule 405 under the 1933 Act, (b) is not a broker-dealer tendering Registrable Securities acquired directly from the Company for its own account, (c) acquired the Exchange Securities in the ordinary

course of such Holder’s business and (d) has no arrangements or understandings with any Person to participate in the Exchange Offer for the purpose of distributing the Exchange Securities) to transfer such Exchange Securities from and after their receipt without any limitations or restrictions under the 1933 Act and under state securities or blue sky laws.

In connection with the Exchange Offer, the Company shall:

(a)mail as promptly as practicable to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents;

(b)keep the Exchange Offer open for acceptance for a period of not less than 30 calendar days after the date notice thereof is mailed to the Holders (or longer if required by applicable law) (such period referred to herein as the “Exchange Period”);

(c)utilize the services of the Depositary for the Exchange Offer;

(d)permit Holders to withdraw tendered Registrable Securities at any time prior to 5:00 p.m. (Eastern Time), on the last business day of the Exchange Period, by sending to the institution specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Securities delivered for exchange, and a statement that such Holder is withdrawing such Holder’s election to have such Securities exchanged;

(e)notify each Holder that any Registrable Security not tendered will remain outstanding and continue to accrue interest, but will not retain any rights under this Agreement (except in the case of the Initial Purchasers and Participating Broker-Dealers as provided herein); and

(f)otherwise comply in all respects with all applicable laws relating to the Exchange Offer.

If, prior to consummation of the Exchange Offer, the Initial Purchasers hold any Securities acquired by them and having the status of an unsold allotment in the initial distribution, the Company upon the request of any Initial Purchaser shall, simultaneously with the delivery of the Exchange Securities in the Exchange Offer, issue and deliver to such Initial Purchaser in exchange (the “Private Exchange”) for the Securities held by such Initial Purchaser, a like principal amount of debt securities of the Company on a senior basis, that are identical (except that such securities shall bear

appropriate transfer restrictions) to the Exchange Securities (the “Private Exchange Securities”).

The Exchange Securities and the Private Exchange Securities shall be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture and which, in either case, has been qualified under the Trust Indenture Act of 1939, as amended (the “TIA”), or is exempt from such qualification and shall provide that the Exchange Securities shall not be subject to the transfer restrictions set forth in the Indenture but that the Private Exchange Securities shall be subject to such transfer restrictions.  The Indenture or such indenture shall provide that the Exchange Securities, the Private Exchange Securities and the Securities shall vote and consent together on all matters as one class and that none of the Exchange Securities, the Private Exchange Securities or the Securities will have the right to vote or consent as a separate class on any matter.  The Private Exchange Securities shall be of the same series as and the Company shall use reasonable best efforts to have the Private Exchange Securities bear the same CUSIP number as the Exchange Securities.  The Company shall not have any liability under this Agreement solely as a result of such Private Exchange Securities not bearing the same CUSIP number as the Exchange Securities.

As soon as practicable after the close of the Exchange Offer and/or the Private Exchange, as the case may be, the Company shall:

(i)  accept for exchange all Registrable Securities duly tendered and not validly withdrawn pursuant to the Exchange Offer in accordance with the terms of the Exchange Offer Registration Statement and the letter of transmittal which shall be an exhibit thereto;

(ii)  accept for exchange all Securities properly tendered pursuant to the Private Exchange;

(iii)  deliver to the Trustee for cancellation all Registrable Securities so accepted for exchange; and

(iv)  cause the Trustee promptly to authenticate and deliver Exchange Securities or Private Exchange Securities, as the case may be, to each Holder of Registrable Securities so accepted for exchange in a principal amount equal to the principal amount of the Registrable Securities of such Holder so accepted for exchange.

Interest on each Exchange Security and Private Exchange Security will accrue from the last date on which interest was paid on the Registrable Securities

surrendered in exchange therefor or, if no interest has been paid on the Registrable Securities, from the date of original issuance.  The Exchange Offer and the Private Exchange shall not be subject to any conditions, other than (i) that the Exchange Offer or the Private Exchange, or the making of any exchange by a Holder, does not violate applicable law or any applicable interpretation of the staff of the SEC, (ii) the due tendering of Registrable Securities in accordance with the Exchange Offer and the Private Exchange, (iii) that each Holder of Registrable Securities exchanged in the Exchange Offer shall have represented that all Exchange Securities to be received by it shall be acquired in the ordinary course of its business and that at the time of the consummation of the Exchange Offer it shall have no arrangement or understanding with any person to participate in the distribution (within the meaning of the 1933 Act) of the Exchange Securities and shall have made such other representations as may be reasonably necessary under applicable SEC rules, regulations or interpretations to render the use of Form S-4 or other appropriate form under the 1933 Act available and (iv) that no action or proceeding shall have been instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer or the Private Exchange which, in the Company’s judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offer or the Private Exchange.  The Company shall inform the Initial Purchasers of the names and addresses of the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall have the right to contact such Holders and otherwise facilitate the tender of Registrable Securities in the Exchange Offer.

2.2Shelf Registration.  (i) If, because of any changes in law, SEC rules or regulations or applicable interpretations thereof by the staff of the SEC, the Company is not permitted to effect the Exchange Offer as contemplated by Section 2.1 hereof, (ii) if for any other reason the Exchange Offer Registration Statement is not filed with the SEC within 210 days of the Closing Date, or if such Exchange Offer Registration Statement is not declared effective within 270 days following the original issue of the Registrable Securities or if the Exchange Offer is not consummated within 315 days after the original issue of the Registrable Securities, (iii) upon the request of any of the Initial Purchasers with respect to any Securities not eligible to be exchanged for the Exchange Securities in the Exchange Offer Registration, (iv) if a Holder is not permitted to participate in the Exchange Offer or does not receive fully tradeable Exchange Securities pursuant to the Exchange Offer, and such Holder so requests, or (v) if the Company so elects, then in case of each of clauses (i) through (v) the Company shall, at its cost:

(a)As promptly as practicable, file with the SEC, and thereafter shall use its reasonable best efforts to cause to be declared effective as promptly as practicable but no later than the later of (A) 180 days after

being required or requested by a Holder to file a Shelf Registration Statement, or (B) 270 days after the original issue of the Registrable Securities, a Shelf Registration Statement relating to the offer and sale of the Registrable Securities by the Holders from time to time in accordance with the methods of distribution elected by the Majority Holders participating in the Shelf Registration and set forth in such Shelf Registration Statement.

(b)Use its reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years from the date the Shelf Registration Statement is declared effective by the SEC, or for such shorter period that will terminate when all Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or cease to be outstanding or otherwise to be Registrable Securities (the “Effectiveness Period”);  provided, however, that the Effectiveness Period in respect of the Shelf Registration Statement shall be extended to the extent required to permit dealers to comply with the applicable prospectus delivery requirements of Rule 174 under the 1933 Act and as otherwise provided herein.

(c)Notwithstanding any other provisions hereof, use its reasonable best efforts to ensure that (i) any Shelf Registration Statement and any amendment thereto and any Prospectus forming part thereof and any supplement thereto complies in all material respects with the 1933 Act and the rules and regulations thereunder, (ii) any Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Shelf Registration Statement, and any supplement to such Prospectus (as amended or supplemented from time to time), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading.

The Company shall not permit any securities other than Registrable Securities to be included in the Shelf Registration Statement.  The Company further agrees, if necessary, to supplement or amend the Shelf Registration Statement, as required by Section 3(b) below, and to furnish to the Holders of Registrable Securities

copies of any such supplement or amendment promptly after its being used or filed with the SEC.

2.3Expenses.  The Company shall pay all Registration Expenses in connection with the registration pursuant to Section 2.1 or 2.2.  Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder’s Registrable Securities pursuant to the Shelf Registration Statement.

2.4.Effectiveness.  (a)  The Company will be deemed not to have used its reasonable efforts to cause the Exchange Offer Registration Statement or its reasonable best efforts to cause the Shelf Registration Statement, as the case may be, to become, or to remain, effective during the requisite period if the Company voluntarily takes any action that would, or omits to take any action which omission would, result in any such Registration Statement not being declared effective or in the Holders of Registrable Securities covered thereby not being able to exchange or offer and sell such Registrable Securities during that period as and to the extent contemplated hereby, unless such action is required by applicable law.

(b)An Exchange Offer Registration Statement pursuant to Section 2.1 hereof or a Shelf Registration Statement pursuant to Section 2.2 hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that if, after it has been declared effective, the offering of Registrable Securities pursuant to an Exchange Offer Registration Statement or a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have become effective during the period of such interference, until the offering of Registrable Securities pursuant to such Registration Statement may legally resume.

2.5Interest.  The Indenture executed in connection with the Securities will provide that in the event that either (a) the Exchange Offer Registration Statement is not filed with the Commission on or prior to the 210th calendar day following the date of original issue of the Securities, (b) the Exchange Offer Registration Statement (or, if a change in law or in applicable interpretations of the staff of the SEC does not permit the Company to effect a Registered Exchange Offer, the Shelf Registration Statement) has not been declared effective on or prior to the 270th calendar day following the date of original issue of the Securities, (c) the Exchange Offer is not consummated on or prior to the 315th calendar day following the date of original issue of the Securities, (d) the Shelf Registration Statement is not declared effective by the SEC within the later of (A) 180 days after being required or requested by a Holder to file a Shelf Registration Statement,

or (B) 270 days after the original issue of the Registrable Securities, or (e) after the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, is declared effective, such Registration Statement thereafter ceases to be effective or usable and the aggregate number of days in any consecutive twelve-month period for which the Shelf Registration Statement shall not be usable exceeds 30 days in the aggregate (each such event referred to in clauses (a) through (e) above, a “Registration Default”), the interest rate borne by the Securities shall be increased (“Additional Interest”) by one-quarter of one percent per annum upon the occurrence of each Registration Default, which rate will increase by one quarter of one percent each 90-day period that such Additional Interest continues to accrue under any such circumstance, provided that the maximum aggregate increase in the interest rate will in no event exceed one percent (1%) per annum.  Following the cure of all Registration Defaults the accrual of Additional Interest will cease and the interest rate will revert to the original rate.

The Company shall notify the Trustee within three business days after each and every date on which an event occurs in respect of which Additional Interest is required to be paid (an “Event Date”).  Additional Interest shall be paid by depositing with the Trustee, in trust, for the benefit of the Holders of Registrable Securities, on or before the applicable semiannual interest payment date, immediately available funds in sums sufficient to pay the Additional Interest then due.  The Additional Interest due shall be payable on each interest payment date to the record Holder of Securities entitled to receive the interest payment to be paid on such date as set forth in the Indenture.  Each obligation to pay Additional Interest shall be deemed to accrue from and including the day following the applicable Event Date.

3.Registration Procedures.

In connection with the obligations of the Company with respect to Registration Statements pursuant to Sections 2.1 and 2.2 hereof, the Company shall:

(a)prepare and file with the SEC a Registration Statement, within the relevant time period specified in Section 2, on the appropriate form under the 1933 Act, which form (i) shall be selected by the Company, (ii) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders thereof, (iii) shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all financial statements required by the SEC to be filed therewith or incorporated by reference therein, and (iv) shall comply in all respects with the requirements of Regulation S-T under the 1933 Act, and use its reasonable best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof;

(b)prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary under applicable law to keep such Registration Statement effective for the applicable period; and cause each Prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provision then in force) under the 1933 Act and comply with the provisions of the 1933 Act, the 1934 Act and the rules and regulations thereunder applicable to them with respect to the disposition of all securities covered by each Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the selling Holders thereof (including sales by any Participating Broker-Dealer);

(c)in the case of a Shelf Registration, (i) notify each Holder of Registrable Securities, at least five business days prior to filing, that a Shelf Registration Statement with respect to the Registrable Securities is being filed and advising such Holders that the distribution of Registrable Securities will be made in accordance with the method selected by the Majority Holders participating in the Shelf Registration; (ii) furnish to each Holder of Registrable Securities and to each underwriter of an underwritten offering of Registrable Securities, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or underwriter may reasonably request, including financial statements and schedules and, if the Holder so requests, all exhibits in order to facilitate the public sale or other disposition of the Registrable Securities; and (iii) hereby consent to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of Registrable Securities in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto;

(d)use its reasonable best efforts to register or qualify the Registrable Securities under all applicable state securities or “blue sky” laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement and each underwriter of an underwritten offering of Registrable Securities shall reasonably request by the time the applicable Registration Statement is declared effective by the SEC, and do any and all other acts and things which may be reasonably necessary or advisable to enable each such Holder and underwriter to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; provided, however, that the Company shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), or (ii) take any action which would subject it to general service of process or taxation in any such jurisdiction where it is not then so subject;

(e)notify promptly each Holder of Registrable Securities under a Shelf Registration or any Participating Broker-Dealer who has notified the Company that it is utilizing the Exchange Offer Registration Statement as provided in paragraph (f) below and, if requested by such Holder or Participating Broker-Dealer, confirm such advice in writing promptly (i) when a Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective, (ii) of any request by the SEC or any state securities authority for post-effective amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) in the case of a Shelf Registration, if, between the effective date of a Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the offering cease to be true and correct in all material respects, (v) of the happening of any event or the discovery of any facts during the period a Shelf Registration Statement is effective which makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein not misleading, (vi) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities or the Exchange Securities, as the case may be, for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and (vii) of any determination by the Company that a post-effective amendment to such Registration Statement would be appropriate;

(f)(A)  in the case of the Exchange Offer Registration Statement (i) include in the Exchange Offer Registration Statement a section entitled “Plan of Distribution” which section shall be reasonably acceptable to the Representatives on behalf of the Participating Broker-Dealers, and which shall contain a summary statement of the positions taken or policies made by the staff of the SEC with respect to the potential “underwriter” status of any broker-dealer that holds Registrable Securities acquired for its own account as a result of market-making activities or other trading activities and that will be the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Securities to be received by such broker-dealer in the Exchange Offer, whether such positions or policies have been publicly disseminated by the staff of the SEC or such positions or policies, in the reasonable judgment of the Representatives on behalf of the Participating Broker-Dealers and its counsel, represent the prevailing views of the staff of the SEC, including a statement that any such broker-dealer who receives Exchange Securities for Registrable Securities pursuant to the Exchange Offer may be deemed a statutory underwriter and must deliver a prospectus

meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities, (ii) furnish to each Participating Broker-Dealer who has delivered to the Company the notice referred to in Section 3(e), without charge, as many copies of each Prospectus included in the Exchange Offer Registration Statement, including any preliminary prospectus, and any amendment or supplement thereto, as such Participating Broker-Dealer may reasonably request, (iii) hereby consent to the use of the Prospectus forming part of the Exchange Offer Registration Statement or any amendment or supplement thereto, by any Person subject to the prospectus delivery requirements of the SEC, including all Participating Broker-Dealers, in connection with the sale or transfer of the Exchange Securities covered by the Prospectus or any amendment or supplement thereto, and (iv) include in the transmittal letter or similar documentation to be executed by an exchange offeree in order to participate in the Exchange Offer (x) the following provision:

“If the exchange offeree is a broker-dealer holding Registrable Securities acquired for its own account as a result of market-making activities or other trading activities, it will deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of Exchange Securities received in respect of such Registrable Securities pursuant to the Exchange Offer;” and

(y) a statement to the effect that by a broker-dealer making the acknowledgment described in clause (x) and by delivering a Prospectus in connection with the exchange of Registrable Securities, the broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the 1933 Act; and

(B)in the case of any Exchange Offer Registration Statement, the Company agrees to deliver to the Initial Purchasers on behalf of the Participating Broker-Dealers upon the effectiveness of the Exchange Offer Registration Statement an officers’ certificates substantially in the form customarily delivered in a public offering of debt securities;

(g)(i)  in the case of an Exchange Offer, furnish counsel for the Initial Purchasers and (ii) in the case of a Shelf Registration, furnish counsel for the Holders of Registrable Securities copies of any comment letters received from the SEC or any other request by the SEC or any state securities authority for amendments or supplements to a Registration Statement and Prospectus or for additional information;

(h)make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment;

(i)in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, and each underwriter, if any, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto, including financial statements and schedules (without documents incorporated therein by reference and all exhibits thereto, unless requested);

(j)in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends; and enable such Registrable Securities to be in such denominations (consistent with the provisions of the Indenture) and registered in such names as the selling Holders or the underwriters, if any, may reasonably request at least three business days prior to the closing of any sale of Registrable Securities;

(k)in the case of a Shelf Registration, upon the occurrence of any event or the discovery of any facts, each as contemplated by Sections 3(e)(v) and 3(e)(vi) hereof, as promptly as practicable after the occurrence of such an event, use its reasonable best efforts to prepare a supplement or post-effective amendment to the Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities or Participating Broker-Dealers, such Prospectus will not contain at the time of such delivery any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or will remain so qualified.  At such time as such public disclosure is otherwise made or the Company determines that such disclosure is not necessary, in each case to correct any misstatement of a material fact or to include any omitted material fact, the Company agrees promptly to notify each Holder of such determination and to furnish each Holder such number of copies of the Prospectus as amended or supplemented, as such Holder may reasonably request;

(l)in the case of a Shelf Registration, a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus after initial filing of a Registration Statement, provide copies of such document to the Initial Purchasers on behalf of such Holders; and make representatives of the Company as shall be reasonably requested by the Holders of Registrable Securities, or the Initial Purchasers on behalf of such Holders, available for discussion of such document;

(m)obtain a CUSIP number for all Exchange Securities, Private Exchange Securities or Registrable Securities, as the case may be, not later than the effective date of a Registration Statement, and provide the Trustee with printed certificates for the Exchange Securities, Private Exchange Securities or the Registrable Securities, as the case may be, in a form eligible for deposit with the Depositary;

(n)(i)  cause the Indenture to be qualified under the TIA in connection with the registration of the Exchange Securities or Registrable Securities, as the case may be, (ii) cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and (iii) execute, and use its reasonable best efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner;

(o)in the case of a Shelf Registration, enter into agreements (including underwriting agreements) and take all other customary and appropriate actions in order to expedite or facilitate the disposition of such Registrable Securities and in such connection whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration:

(i)  make such representations and warranties to the Holders of such Registrable Securities and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings as may be reasonably requested by them;

(ii)  obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, and the holders of a majority in principal amount of the Registrable Securities being sold) addressed to each selling Holder and the underwriters, if any, covering the matters customarily covered in opinions requested in sales of securities or underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters;

(iii)  obtain “cold comfort” letters and updates thereof from the Company’s independent certified public accountants (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements are, or are required to be, included in the Registration Statement) addressed to the underwriters, if any, and use reasonable efforts to have

such letter addressed to the selling Holders of Registrable Securities (to the extent consistent with Statement on Auditing Standards No. 72 of the American Institute of Certified Public Accounts), such letters to be in customary form and covering matters of the type customarily covered in “cold comfort” letters to underwriters in connection with similar underwritten offerings;

 (iv)  enter into a securities sales agreement with the Holders and an agent of the Holders providing for, among other things, the appointment of such agent for the selling Holders for the purpose of soliciting purchases of Registrable Securities, which agreement shall be in form, substance and scope customary for similar offerings;

  (v)  if an underwriting agreement is entered into, cause the same to set forth indemnification provisions and procedures substantially equivalent to the indemnification provisions and procedures set forth in Section 4 hereof with respect to the underwriters and all other parties to be indemnified pursuant to said Section or, at the request of any underwriters, in the form customarily provided to such underwriters in similar types of transactions; and

 (vi)  deliver such documents and certificates as may be reasonably requested and as are customarily delivered in similar offerings to the Holders of a majority in principal amount of the Registrable Securities being sold and the managing underwriters, if any.

The above shall be done at (i) the effectiveness of such Registration Statement (and each post-effective amendment thereto) and (ii) each closing under any underwriting or similar agreement as and to the extent required thereunder;

(p)in the case of a Shelf Registration or if a Prospectus is required to be delivered by any Participating Broker-Dealer in the case of an Exchange Offer, make available for inspection by representatives of the Holders of the Registrable Securities, any underwriters participating in any disposition pursuant to a Shelf Registration Statement, any Participating Broker-Dealer and any counsel or accountant retained by any of the foregoing, all financial and other records, pertinent corporate documents and properties of the Company reasonably requested by any such persons, and cause the respective officers, directors, employees, and any other agents of the Company to supply all information reasonably requested by any such representative, underwriter, special counsel or accountant in connection with a Registration Statement, and make such

representatives of the Company available for discussion of such documents as shall be reasonably requested by the Initial Purchasers;

(q)(i)  in the case of an Exchange Offer Registration Statement, a reasonable time prior to the filing of any Exchange Offer Registration Statement, any Prospectus forming a part thereof, any amendment to an Exchange Offer Registration Statement or amendment or supplement to such Prospectus, provide copies of such document to the Initial Purchasers and to counsel to the Holders of Registrable Securities and make such changes in any such document prior to the filing thereof as the Initial Purchasers or counsel to the Holders of Registrable Securities may reasonably request and, except as otherwise required by applicable law, not file any such document in a form to which the Initial Purchasers on behalf of the Holders of Registrable Securities and counsel to the Holders of Registrable Securities shall not have previously been advised and furnished a copy of or to which the Initial Purchasers on behalf of the Holders of Registrable Securities or counsel to the Holders of Registrable Securities shall reasonably object, and make the representatives of the Company available for discussion of such documents as shall be reasonably requested by the Initial Purchasers; and

(ii)  in the case of a Shelf Registration, a reasonable time prior to filing any Shelf Registration Statement, any Prospectus forming a part thereof, any amendment to such Shelf Registration Statement or amendment or supplement to such Prospectus, provide copies of such document to the Holders of Registrable Securities, to the Initial Purchasers, to counsel for the Holders and to the underwriter or underwriters of an underwritten offering of Registrable Securities, if any, make such changes in any such document prior to the filing thereof as the Initial Purchasers, the counsel to the Holders or the underwriter or underwriters reasonably request and not file any such document in a form to which the Majority Holders, the Initial Purchasers on behalf of the Holders of Registrable Securities, counsel for the Holders of Registrable Securities or any underwriter shall not have previously been advised and furnished a copy of or to which the Majority Holders, the Initial Purchasers on behalf of the Holders of Registrable Securities, counsel to the Holders of Registrable Securities or any underwriter shall reasonably object, and make the representatives of the Company available for discussion of such document as shall be reasonably requested by the Holders of Registrable Securities, the Initial Purchasers on behalf of such Holders, counsel for the Holders of Registrable Securities or any underwriter.

(r)in the case of a Shelf Registration, use its best efforts to cause all Registrable Securities to be listed on any securities exchange on which similar debt securities issued by the Company are then listed if requested by the Majority Holders, or

if requested by the underwriter or underwriters of an underwritten offering of Registrable Securities, if any;

(s)in the case of a Shelf Registration, use its reasonable best efforts to cause the Registrable Securities to be rated by the appropriate rating agencies, if so requested by the Majority Holders, or if requested by the underwriter or underwriters of an underwritten offering of Registrable Securities, if any;

(t)otherwise comply with all applicable rules and regulations of the SEC and make available to its security holders, as soon as reasonably practicable, an earnings statement covering at least 12 months which shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder;

(u)cooperate and assist in any filings required to be made with the NASD and, in the case of a Shelf Registration, in the performance of any due diligence investigation by any underwriter and its counsel (including any “qualified independent underwriter” that is required to be retained in accordance with the rules and regulations of the NASD); and

(v)upon consummation of an Exchange Offer or a Private Exchange, obtain a customary opinion of counsel to the Company addressed to the Trustee for the benefit of all Holders of Registrable Securities participating in the Exchange Offer or Private Exchange, and which includes an opinion that (i) the Company has duly authorized, executed and delivered the Exchange Securities and/or Private Exchange Securities, as applicable, and the related indenture, and (ii) each of the Exchange Securities and related indenture constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its respective terms (with customary exceptions).

In the case of a Shelf Registration Statement, the Company may (as a condition to such Holder’s participation in the Shelf Registration) require each Holder of Registrable Securities to furnish to the Company such information regarding the Holder and the proposed distribution by such Holder of such Registrable Securities as the Company may from time to time reasonably request in writing.

In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Company of the happening of any event or the discovery of any facts, each of the kind described in Section 3(e)(v) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Registration Statement until such Holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(k) hereof, and, if so directed by the Company,

such Holder will deliver to the Company (at its expense) all copies in such Holder’s possession, other than permanent file copies then in such Holder’s possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice.

In the event that the Company fails to effect the Exchange Offer or file any Shelf Registration Statement and maintain the effectiveness of any Shelf Registration Statement as provided herein, the Company shall not file any Registration Statement with respect to any securities (within the meaning of Section 2(1) of the 1933 Act) of the Company other than Registrable Securities.

If any of the Registrable Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the underwriter or underwriters and manager or managers that will manage such offering will be selected by the Majority Holders of such Registrable Securities included in such offering and shall be acceptable to the Company.  No Holder of Registrable Securities may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder’s Registrable Securities on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.

4.Indemnification; Contribution.

(a)The Company agrees to indemnify and hold harmless the Initial Purchasers, each Holder, each Participating Broker-Dealer, each Person who participates as an underwriter (any such Person being an “Underwriter”) and each Person, if any, who controls any Holder or Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:

(i)  against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment or supplement thereto) pursuant to which Exchange Securities or Registrable Securities were registered under the 1933 Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material

fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

(ii)  against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission;  provided that (subject to Section 4(d) below) any such settlement is effected with the written consent of the Company; and

(iii)  against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by any indemnified party), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above;

provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by any Holder or Underwriter expressly for use in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto).

(b)Each Holder severally, but not jointly, agrees to indemnify and hold harmless the Company, the Initial Purchasers, each Underwriter and the other selling Holders, and each of their respective directors and officers, and each Person, if any, who controls the Company, the Initial Purchasers, any Underwriter or any other selling Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 4(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Shelf Registration Statement (or any amendment thereto) or any Prospectus included therein (or any amendment or supplement thereto) in reliance upon and in conformity with written information with respect to such Holder furnished to the Company by such Holder expressly for use in the Shelf Registration Statement (or any amendment thereto) or such Prospectus (or any amendment or supplement thereto); provided, however, that no such Holder shall be liable for any claims hereunder in excess of the amount of net proceeds

received by such Holder from the sale of Registrable Securities pursuant to such Shelf Registration Statement.

(c)Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure so to notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement.  An indemnifying party may participate at its own expense in the defense of such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party.  In no event shall the indemnifying party or parties be liable for the fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 4 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

(d)If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 4(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.

(e)If the indemnification provided for in this Section 4 is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages

and expenses incurred by such indemnified party, as incurred, in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Holders and the Initial Purchasers on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.

The relative fault of the Company on the one hand and the Holders and the Initial Purchasers on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, the Holders or the Initial Purchasers and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

The Company, the Holders and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 4 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 4. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 4 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission.

Notwithstanding the provisions of this Section 4, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Securities sold by it were offered exceeds the amount of any damages which such Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.

No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

For purposes of this Section 4, each Person, if any, who controls an Initial Purchaser or Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such Initial Purchaser or Holder, and each director of the Company, and each Person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company.  The Initial Purchasers’ respective obligations to contribute pursuant to this Section 7 are several in proportion

to the principal amount of Securities set forth opposite their respective names in Schedule A to the Purchase Agreement and not joint.

5.Miscellaneous.

5.1Rule 144 and Rule 144A.  For so long as the Company is subject to the reporting requirements of Section 13 or 15 of the 1934 Act, the Company covenants that it will file the reports required to be filed by it under the 1933 Act and Section 13(a) or 15(d) of the 1934 Act and the rules and regulations adopted by the SEC thereunder.  If the Company ceases to be so required to file such reports, the Company covenants that it will upon the request of any Holder of Registrable Securities (a) make publicly available such information as is necessary to permit sales pursuant to Rule 144 under the 1933 Act, (b) deliver such information to a prospective purchaser as is necessary to permit sales pursuant to Rule 144A under the 1933 Act and it will take such further action as any Holder of Registrable Securities may reasonably request, and (c) take such further action that is reasonable in the circumstances, in each case, to the extent required from time to time to enable such Holder to sell its Registrable Securities without registration under the 1933 Act within the limitation of the exemptions provided by (i) Rule 144 under the 1933 Act, as such Rule may be amended from time to time, (ii) Rule 144A under the 1933 Act, as such Rule may be amended from time to time, or (iii) any similar rules or regulations hereafter adopted by the SEC.  Upon the request of any Holder of Registrable Securities, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements.

5.2No Inconsistent Agreements.  The Company has not entered into and the Company will not after the date of this Agreement enter into any agreement which is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof.  The rights granted to the Holders hereunder do not and will not for the term of this Agreement in any way conflict with the rights granted to the holders of the Company’s other issued and outstanding securities under any such agreements.

5.3Amendments and Waivers.  The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Securities affected by such amendment, modification, supplement, waiver or departure.

5.4Notices.  All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, registered first-class

mail, telex, telecopier, or any courier guaranteeing overnight delivery (a) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 5.4, which address initially is the address set forth in the Purchase Agreement with respect to the Initial Purchasers; and (b) if to the Company, initially at the Company’s address set forth in the Purchase Agreement, and thereafter at such other address of which notice is given in accordance with the provisions of this Section 5.4.

All such notices and communications shall be deemed to have been duly given:  at the time delivered by hand, if personally delivered; two business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery.

Copies of all such notices, demands, or other communications shall be concurrently delivered by the person giving the same to the Trustee under the Indenture, at the address specified in such Indenture.

5.5Successor and Assigns.  This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or the Indenture.  If any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such person shall be entitled to receive the benefits hereof.

5.6Third Party Beneficiaries.  The Initial Purchasers (even if the Initial Purchasers are not Holders of Registrable Securities) shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Holders, on the other hand, and shall have the right to enforce such agreements directly to the extent they deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder.  Each Holder of Registrable Securities shall be a third party beneficiary to the agreements made hereunder between the Company, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to

enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights hereunder.

5.7.Specific Enforcement.  Without limiting the remedies available to the Initial Purchasers and the Holders, the Company acknowledges that any failure by the Company to comply with its obligations under Sections 2.1 through 2.4 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it would not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company’s obligations under Sections 2.1 through 2.4 hereof.

5.8.Restriction on Resales.  Until the expiration of two years after the original issuance of the Securities, the Company will not, and will cause its “affiliates” (as such term is defined in Rule 144(a)(1) under the 1933 Act) not to, resell any Securities which are “restricted securities” (as such term is defined under Rule 144(a)(3) under the 1933 Act) that have been reacquired by any of them and shall immediately upon any purchase of any such Securities submit such Securities to the Trustee for cancellation.

5.9Counterparts.  This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

5.10Headings.  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

5.11GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.

5.12Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

			BALTIMORE GAS AND ELECTRIC
			COMPANY
			By:	/s/ Jeanne M. Blondia
				Name: Jeanne M. Blondia
				Title:	Treasurer and Assistant
					Secretary
Confirmed and accepted as
of the date first above
written:
BANC OF AMERICA SECURITIES LLC
By:		/s/ Peter J. Carbone
Name: Peter J. Carbone
Title: Vice President
BARCLAYS CAPITAL INC.
By:	/s/ Pamela Kendall
Name: Pamela Kendall
Title: Director
CITIGROUP GLOBAL MARKETS INC.
By:	/s/ Brian D. Bednarkski
Name: Brian D. Bednarkski
Title: Director

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
		INCORPORATED
By:	/s/ Jeff Kulik
Name: Jeff Kulik
Title: Managing Director

For themselves and as Representative(s) of the other Initial Purchasers named in Schedule A hereto.

EX-10.(A)

EXHIBIT 10(a)

Constellation Energy Group, Inc.

Deferred Compensation Plan

For Non-Employee Directors

1.Objective.  The objective of this Plan is to offer a portion of the Compensation of non-employee Directors of Constellation Energy Group in the form of Stock Units, thereby promoting a greater identity of interest between Constellation Energy Group’s non-employee Directors and its stockholders, and to enable such Directors to defer receipt of their Compensation that is payable in cash.

2.Definitions.  As used herein, the following terms will have the meaning specified below:

“Annual Retainer” means the amount payable by Constellation Energy Group to a Director as annual compensation for performance of services as a Director, and includes Committee Chair retainers.  All other amounts (including without limitation Board/committee meeting fees, and expense reimbursements) shall be excluded in calculating the amount of the Annual Retainer.

“Board” means the Board of Directors of Constellation Energy Group.

“Cash Account” means an account by that name established pursuant to Section 7.  The maintenance of Cash Accounts is for bookkeeping purposes only.

“Change in Control” means the occurrence of any one of the following events:

(i)individuals who, on January 24, 2003, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to January 24, 2003, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of Constellation Energy Group (the “Company”) in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on

behalf of any person other than the Board shall be deemed to be an Incumbent Director;

(ii)any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions:  (A) by the Company or any corporation with respect to which the Company owns a majority of the outstanding shares of common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors (a “Subsidiary Company”), (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary Company, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition by Plan participant or any group of persons including Plan participant (or any entity controlled by Plan participant or any group of persons including Plan participant);

(iii)consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiary Companies, (a “Business Combination”), unless immediately following such Business Combination:  (A) more than 60% of the total voting power of (x) the corporation resulting from such Business Combination (the “Surviving Corporation”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit

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plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B), and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or

(iv)the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company, or the consummation of a sale of all or substantially all of the Company’s assets.

Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.

“Committee” means the Compensation Committee of the Board.

“Common Stock” means the common stock, without par value, of Constellation Energy Group.

“Compensation” means any Annual Retainer and meeting fees payable by Constellation Energy Group to a participant in his/her capacity as a Director.  Compensation excludes expense reimbursements paid by Constellation Energy Group to a participant in his/her capacity as a Director.

“Constellation Energy Group” means Constellation Energy Group, Inc., a Maryland corporation, or its successor.

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“Deferred Cash Compensation” means any cash Compensation that is voluntarily deferred by a participant pursuant to Section 6.

“Director” means a member of the Board who is not an employee of Constellation Energy Group or any of its subsidiaries/ affiliates.

“Disability” or “Disabled” means that the Plan Administrator has determined that the participant is unable to fulfill his/her responsibilities of Board membership because of illness or injury.  For purposes of this Plan, a participant’s eligibility to participate shall be deemed to have terminated on the date he/she is determined by the Plan Administrator to be Disabled.

“Earnings” means, with respect to the Cash Account, hypothetical interest credited to the Cash Account.

“Earnings” means, with respect to the Stock Account, hypothetical dividends credited to the Stock Account.

“Fair Market Value” means, as of any specified date, the average closing price of a share of Common Stock, reported in “New York Stock Exchange Composite Transactions” as published in the Eastern Edition of The Wall Street Journal averaged for the most recent 20 days during which Common Stock was traded on the New York Stock Exchange (including such valuation date if a trading date).

“Plan Accounts” means a participant’s Cash Account and/or Stock Account.  The maintenance of Plan Accounts is for bookkeeping purposes only.

“Plan Administrator” means, as set forth in Section 3, the Board.

“Stock Account” means an account by that name established pursuant to Section 8.  The maintenance of Stock Accounts is for bookkeeping purposes only.

“Stock Unit(s)” means the share equivalents credited to a Participant’s Stock Account pursuant to Section 8.  The use of Stock Units is for bookkeeping purposes only; the Stock Units are not actual shares of Common Stock.  Constellation Energy Group will not reserve or otherwise set aside any Common Stock for or to any Stock Account.

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3.Plan Administration.

(i)Plan Administrator - The Plan is administered by the Board, who has sole authority to interpret the Plan, and, in general, to make all other determinations advisable for the administration of the Plan to achieve its stated objective.  Decisions by the Plan Administrator shall be final and binding upon all persons for all purposes.  The Plan Administrator shall have the power to delegate all or any part of its non-discretionary duties to one or more designees, and to withdraw such authority, by written designation.

(ii)Amendment - - This Plan may be amended from time to time or suspended or terminated at any time, at the written direction of the Plan Administrator.  However, amendments required to keep the Plan in compliance with applicable laws and regulations may be made by the Vice President — Human Resources of Constellation Energy Group (or other vice president succeeding to that function) on advice of counsel.  Nothing herein creates a vested right.

(iii)Indemnification - - The Plan Administrator (and its designees), Chairman of the Board, Chief Executive Officer, President, and Vice President-Human Resources of Constellation Energy Group and all other employees of Constellation Energy Group or its subsidiaries/affiliates whose assigned duties include matters under the Plan, shall be indemnified by Constellation Energy Group or its subsidiaries /affiliates or from proceeds under insurance policies purchased by Constellation Energy Group or its subsidiaries/affiliates, against any and all liabilities arising by reason of any act or failure to act made in good faith pursuant to the provisions of the Plan, including expenses reasonably incurred in the defense of any related claim.

4.Eligibility and Participation.

(i)Mandatory participation - A Director, at the discretion of the Board, may be required at such times designated by the Board to participate in this Plan with respect to the receipt of all or part of his/her Compensation in the form of Stock Units under Section 5 of the Plan.

(ii)Voluntary participation - A Director is eligible to participate in the Plan by electing to defer all or certain portions of the participant’s Compensation, that is payable in cash, under Section 6 of the Plan, while so classified.

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(iii)Termination of participation - Eligibility to participate shall terminate on the date the participant ceases to be a Director.  Notwithstanding termination of eligibility, such person with Plan Accounts will remain a participant of the Plan, solely for purposes of the administration of existing Plan Accounts, and no additional Stock Units will be granted and no further deferrals of cash Compensation under the Plan will be permitted.

5.Mandatory Stock Units.  To the extent designated from time to time by the Board as set forth in Section 4(i), the Stock Account of a participant will be credited on January 1 of each applicable calendar year with Stock Units equal to the number of shares of Common Stock (including fractions of a share) that could have been purchased, with the applicable percentage (as designated by the Board) of the participant’s Annual Retainer for such calendar year, at Fair Market Value on January 1.

If a participant initially becomes a Director during such applicable calendar year, the Stock Account of the participant for such calendar year will be credited, on the date that is the first day of the calendar month after the participant initially becomes a Director, with Stock Units equal to the number of shares of Common Stock (including fractions of a share) that could have been purchased at Fair Market Value on such date, with an amount equal to (i) the applicable percentage (as designated by the Board) of the participant’s Annual Retainer multiplied by (ii) a fraction the numerator of which is the number of calendar months in the calendar year on and after the date the participant initially becomes a Director (counting a partial month as a full month), and the denominator of which is 12.

The Stock Account will be maintained pursuant to Section 8.

6.Cash Compensation Deferral Election.  A participant may elect to defer none, all, fifty percent (50%), or seventy-five percent (75%) of his/her other Compensation that is payable in cash (i.e., one hundred percent (100%) of all other Compensation that is not subject to any mandatory Stock Units). A participant’s cash Compensation deferral election with respect to the Annual Retainer shall specify whether the deferred Annual Retainer is to be credited to the Cash Account or to the Stock Account.  All other Cash Compensation that a participant elects to defer will be credited to the Cash Account.

Such election shall be made by written notification to the Vice President-Human Resources of Constellation Energy Group

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(or other vice president succeeding to that function).  Such election shall be made prior to the calendar year during which the applicable cash Compensation is payable, and shall be effective as of the first day of such calendar year.  If a participant initially becomes a Director during a calendar year, the election for such calendar year must be made within thirty (30) calendar days after the date the participant initially becomes a Director, and shall be effective with respect to Compensation earned after the date the election is received by the Vice President-Human Resources of Constellation Energy Group (or other vice president succeeding to that function).  Elections under this Section shall remain in effect for all succeeding calendar years until revoked.  Elections may be revoked by written notification to the Vice President-Human Resources of Constellation Energy Group (or other vice president succeeding to that function), and shall be effective as of the first day of the calendar year following the calendar year during which the revocation is received by such Vice President.

Notwithstanding anything herein contained to the contrary, the Plan Administrator shall have the right in its sole discretion to permit a participant to defer other percentages of his/her Annual Retainer and/or other Compensation that is payable in cash.

7.Cash Accounts.  The Board may specify that cash Compensation that consists of the Annual Retainer that a participant has elected to defer into the Cash Account is credited to the participant’s Cash Account on January 1 (or if later, the first day of the first month after the participant becomes a Director).  All other cash Compensation that a participant has elected to defer is credited to the participant’s Cash Account on each date such cash Compensation would otherwise have been paid to the Director.  A participant’s Cash Account shall be credited with earnings at the rate earned by the T. Rowe Price Stable Value Fund under the Constellation Energy Group, Inc. Employee Savings Plan, or such other fund as shall replace this fund in the Constellation Energy Group, Inc. Employee Savings Plan from time to time, and computed in the same manner as under such plan.  Earnings are credited to the Cash Account commencing on the date the applicable Deferred Cash Compensation is credited to the Cash Account.  If a participant ceases to be a Director prior to December 31 of any calendar year, the participant will forfeit a pro-rated amount of the Annual Retainer that was credited to the Cash Account during the calendar year.  The amount forfeited shall equal the Annual Retainer amount credited during the calendar year times a

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fraction, the numerator of which is the number of full calendar months in the calendar year after the participant’s Board membership ceased, and the denominator of which is 12 (or, for a participant who became a Director during the calendar year, the number of months during the calendar year after the participant became a Director (including the month Board membership commenced).

8.Stock Accounts.  The Board may specify that cash Compensation that consists of the Annual Retainer that a participant has elected to defer into the Stock Account is credited to the participant’s Stock Account on January 1 (or if later, the first day of the first month after the participant becomes a Director).  A participant’s Stock Account shall be credited with Stock Units equal to the number of shares of Common Stock (including fractions of a share) that could have been purchased with such Deferred Cash Compensation, at Fair Market Value on such date.  Grants of mandatory Stock Units are credited to the Stock Account as set forth in Section 5.

If a participant ceases to be a Director prior to December 31 of any calendar year, the participant will forfeit a pro-rated amount of the Annual Retainer that was credited to the Stock Account during the calendar year.  The amount forfeited shall equal the Annual Retainer amount credited during the calendar year times a fraction, the numerator of which is the number of full calendar months in the calendar year after the participant’s Board membership ceased, and the denominator of which is 12 (or, for a participant who became a Director during the calendar year, the number of months during the calendar year after the participant became a Director (including the month Board membership commenced)).

As of any dividend distribution date for the Common Stock, the participant’s Stock Account shall be credited with additional Stock Units equal to the number of shares of Common Stock (including fractions of a share) that could have been purchased, at the closing price of a share of Common Stock on such date as reported in “New York Stock Exchange Composite Transactions” as published in the Eastern Edition of The Wall Street Journal, with the amount which would have been paid as dividends on that number of shares (including fractions of a share) of Common Stock which is equal to the number of Stock Units then credited to the participant’s Stock Account.

In the event of any change in the outstanding shares of Common Stock by reason of any stock dividend or split,

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recapitalization, combination or exchange of shares or other similar changes in the Common Stock, then appropriate adjustments shall be made in the number of Stock Units in each participant’s Stock Account.  Such adjustments shall be made effective on the date of the change related to the Common Stock.

9.Distributions of Plan Accounts.  Distributions of Plan Accounts shall be made in cash only, from the general assets of Constellation Energy Group.

A participant may elect (by notification in the form and manner established by the Vice President-Human Resources of Constellation Energy Group (or other vice president succeeding to that function) from time to time) to begin distributions (i) in the calendar year following the calendar year that eligibility to participate terminates, (ii) in the calendar year following the calendar year in which a participant attains age 70, if later, or (iii) any calendar year between (i) and (ii).  Such election must be made prior to the end of the calendar year in which eligibility to participate terminates.  Alternatively, a participant who reaches age 70 while still a Director may elect to begin distributions, in the calendar year following the calendar year that the participant reaches age 70, of amounts in his/her Plan Accounts as of the end of the calendar year the participant reaches age 70.  Such election must be made prior to the end of the calendar year in which the participant reaches age 70, and a distribution election to receive any subsequently deferred amounts beginning in the calendar year following the calendar year that eligibility to participate terminates, must be made prior to the end of the calendar year in which eligibility to participate terminates.

A participant may elect (by notification in the form and manner established by the Vice President-Human Resources of Constellation Energy Group (or other vice president succeeding to that function) from time to time) to receive distributions in a single payment or in annual installments during a period not to exceed fifteen years.  The single payment or the first installment payment, whichever is applicable, shall be made within the first sixty (60) calendar days of the calendar year elected for distribution.  Subsequent installments, if any, shall be made within the first sixty (60) calendar days of each succeeding calendar year until the participant’s Plan Accounts have been paid out.

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In the event applicable elections are not timely made, a participant shall receive a distribution in a single payment within the first sixty (60) calendar days of the calendar year following the calendar year that eligibility to participate terminates.

Earnings are credited to the Cash Account through the date of distribution, and amounts held for installment payments shall continue to be credited with Earnings.  The value of the Cash Account that is payable in cash on the date of the single payment distribution is equal to the balance in the Cash Account on the date that is no earlier than five (5) calendar days prior to the day of such distribution (“Distribution Valuation Date”).  The amount of any cash distribution to be made in installments from the Cash Account will be determined by multiplying (i)  the balance in such Cash Account on the Distribution Valuation Date by (ii)  a fraction, the numerator of which is one and the denominator of which is the number of installments in which distributions remain to be made (including the current distribution).

If a participant dies or becomes Disabled, the entire unpaid balance of his/her Plan Accounts shall be paid to the beneficiary(ies) designated by the participant by notification in the form and manner established by the Vice President-Human Resources of Constellation Energy Group (or other vice president succeeding to that function) from time to time or, if no designation was made, in the event of death, to the estate of the participant, and in the event of Disability, to the participant.  Payment shall be made within sixty (60) calendar days after notice of death or Disability is received by such Vice President, unless prior to the participant’s death or Disability, the participant elected (in the form and manner established by the Vice President-Human Resources of Constellation Energy Group (or other vice president succeeding to that function) from time to time) a delayed and/or installment distribution option for such beneficiary(ies); provided, however that (i) such a distribution option election shall be effective only if the value of the participant’s Plan Accounts is more than $50,000 on the date of the participant’s death or Disability; and (ii) the final distribution must be made to such beneficiary(ies) no later than 15 years after the participant’s death or Disability.  After the end of the calendar year that a participant’s eligibility to participate terminates, a distribution option election for a particular beneficiary is irrevocable; provided, however, that the participant may make a distribution option election for a new beneficiary who is initially designated after the

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participant’s eligibility to participate terminates, and such election is irrevocable with respect to the new beneficiary.

The value of the Stock Account, which is equal to the number of Stock Units in the Stock Account multiplied by the Fair Market Value on the date of the participant’s death or Disability, is transferred to the Cash Account on such date.  Earnings are credited to the Cash Account through the date of distribution, and amounts held for installment payments shall continue to be credited with Earnings.  The value of the Cash Account that is payable in cash on the date of the single payment distribution is equal to the balance in the Cash Account on the date that is no earlier than five (5) calendar days prior to the day of such distribution (“Beneficiary Distribution Valuation Date”).  The amount of any cash distribution to be made in installments from the Cash Account will be determined by multiplying (i) the balance in such Cash Account on the Beneficiary Distribution Valuation Date by (ii) a fraction, the numerator of which is one and the denominator of which is the number of installments in which distributions remain to be made (including the current distribution).

Upon the death of a participant’s beneficiary for whom a delayed and/or installment distribution option was elected, the entire unpaid balance of the participant’s Cash Account shall be paid to the beneficiary(ies) designated by the participant’s beneficiary by notification in the form and manner established by the Vice President-Human Resources of Constellation Energy Group (or other vice president succeeding to that function) from time to time or, if no designation was made, to the estate of the participant’s beneficiary.  Payment shall be made within sixty (60) calendar days after notice of death is received by such Vice President.  The value of the Cash Account that is payable in cash is equal to the balance in the Cash Account on the date that is no earlier than five (5) calendar days prior to the day of such distribution.

Notwithstanding anything herein contained to the contrary, the Plan Administrator shall have the right in its sole discretion to (i) vary the manner and timing of distributions of a participant or beneficiary entitled to a distribution under this Section 9, and may make such distributions in a single payment or over a shorter or longer period of time than that elected by a participant; and (ii) vary the period during which the closing price of Common Stock is referenced to determine the value of the Stock Account that is transferred to the Cash Account on the

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date on which the participant’s eligibility to participate terminates.  Any affected participants will not participate in exercising such discretion.

10.Beneficiaries. A participant shall have the right to designate, change or rescind a beneficiary(ies) who is to receive a distribution(s) pursuant to Section 9 in the event of the death or Disability of the participant.  A participant’s beneficiary(ies) for whom a delayed and/or installment distribution option was elected shall have the right to designate a beneficiary(ies) who is to receive a distribution pursuant to Section 9 in the event of the death of the participant’s beneficiary(ies).

Any designation, change or recision of the designation of beneficiary shall be made by notification in the form and manner established by the Vice President-Human Resources of Constellation Energy Group (or other vice president succeeding to that function) from time to time.  The last designation of beneficiary received by such Vice President shall be controlling over any testamentary or purported disposition by the participant (or, if applicable, the participant’s beneficiary(ies)), provided that no designation, recision or change thereof shall be effective unless received by such Vice President prior to the death or Disability (whichever is applicable) of the participant (or, if applicable, the death of the participant’s beneficiary(ies)).

If the designated beneficiary is the estate, or the executor or administrator of the estate, of the participant (or, if applicable, the participant’s beneficiary(ies)), a distribution pursuant to Section 9 may be made to the person(s) or entity (including a trust) entitled thereto under the will of the participant (or, if applicable, the participant’s beneficiary(ies)), or, in the case of intestacy, under the laws relating to intestacy.

11.Valuation of Plan Accounts.  The Plan Administrator shall cause the value of a participant’s Plan Accounts to be determined and reported to Constellation Energy Group and the participant at least once per year as of the last business day of the calendar year.  The value of the Stock Account will equal the number of Stock Units in the Stock Account multiplied by the closing price of a share of Common Stock on the last business day of the calendar year as reported in “New York Stock Exchange Composite Transactions” as published in the Eastern Edition of The Wall Street Journal.  The value of the Cash Account will equal the

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balance in the Cash Account on the last business day of the calendar year.

12.Withdrawals.  No withdrawals of Plan Accounts may be made, except a participant may at any time request a hardship withdrawal from his/her Plan Accounts if he/she has incurred an unforeseeable financial emergency.  An unforeseeable financial emergency is defined as severe financial hardship to the participant resulting from a sudden and unexpected illness or accident of the participant (or of his/her dependents), loss of the participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the participant.  The need to send a child to college or the desire to purchase a home are not considered to be unforeseeable emergencies.  The circumstance that will constitute an unforeseeable emergency will depend upon the facts of each case.

A hardship withdrawal will be permitted by the Plan Administrator only as necessary to satisfy an immediate and heavy financial need.  A hardship withdrawal may be permitted only to the extent reasonably necessary to satisfy the financial need.  Payment may not be made to the extent that such hardship is or may be relieved (i) through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of the participant’s assets, to the extent the liquidation of such assets would not itself cause severe financial hardship, or (iii) by cessation of deferrals under the Plan.

The request for hardship withdrawal shall be made by notification in the form and manner established by the Plan Administrator from time to time.  Such hardship withdrawal will be permitted only with approval of the Plan Administrator.  The participant will receive a lump sum payment after the Plan Administrator has had reasonable time to consider and then approve the request.

The value of the Stock Account for purposes of processing a hardship cash withdrawal is equal to the number of Stock Units in the Stock Account multiplied by the Fair Market Value on the date on which the hardship withdrawal is processed.  The value of the Cash Account for purposes of processing a hardship cash withdrawal is equal to the balance in the Cash Account on the date on which the hardship withdrawal is processed.

13.Change in Control.  The terms of this Section 13 shall immediately become operative, without further action or

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consent by any person or entity, upon a Change in Control, and once operative shall supersede and control over any other provisions of this Plan.  Upon the occurrence of a Change in Control followed within one year of the date of such Change in Control by the participant’s cessation of Board membership for any reason, such participant shall be paid the value of his/her Plan Accounts in a single, lump sum cash payment.  The value of the Stock Account, which is equal to the number of Stock Units in the Stock Account multiplied by the Fair Market Value on the date of the participant’s cessation of Board membership, is transferred to the Cash Account on such date.  Earnings are credited to the Cash Account through the date of distribution.  The value of the Cash Account that is payable in cash on the date of the single lump sum cash payment is equal to the balance in the Cash Account on the date that is no earlier than five (5) calendar days prior to the day of such distribution.  Such payment shall be made as soon as practicable, but in no event later than thirty (30) calendar days after the date of the participant’s cessation of Board membership.  On or after a Change in Control, no action, including, but not by way of limitation, the amendment, suspension or termination of the Plan, shall be taken which would affect the rights of any participant or the operation of this Plan with respect to the balance in the participant’s Plan Accounts.

14.Withholding.  Constellation Energy Group may withhold to the extent required by law all applicable income and other taxes from amounts deferred or distributed under the Plan.

15.Copies of Plan Available.  Copies of the Plan and any and all amendments thereto shall be made available to all participants during normal business hours at the office of the Plan Administrator.

16.Miscellaneous.

(i)Inalienability of benefits - Except as may otherwise be required by law or court order, the interest of each participant or beneficiary under the Plan cannot be sold, pledged, assigned, alienated or transferred in any manner or be subject to attachment or other legal process of whatever nature; provided, however, that any applicable taxes may be withheld from any cash benefit payment made under this Plan.

(ii)Controlling law - The Plan and its administration shall be governed by the laws of the State of Maryland, except to the extent preempted by federal law.

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(iii)Gender and number - A masculine pronoun when used herein refers to both men and women and words used in the singular are intended to include the plural, and vice versa, whenever appropriate.

(iv)Titles and headings - Titles and headings to articles and sections in the Plan are placed herein solely for convenience of reference and in any case of conflict, the text of the Plan rather than such titles and headings shall control.

(v)References to law - All references to specific provisions of any federal or state law, rule or regulation shall be deemed to also include references to any successor provisions or amendments.

(vi)Funding and expenses - Benefits under the Plan are not vested or funded, and shall be paid out of the general assets of Constellation Energy Group.  To the extent that any person acquires a right to receive payments from Constellation Energy Group under this Plan, such rights shall be no greater than the right of any unsecured general creditor of Constellation Energy Group.  The expenses of administering the Plan will be borne by Constellation Energy Group.

(vii)Not a contract - - Participation in this Plan shall not constitute a contract of employment or Board membership between Constellation Energy Group and any person and shall not be deemed to be consideration for, or a condition of, continued employment or Board membership of any person.

(viii)Successors - - In the event Constellation Energy Group becomes a party to a merger, consolidation, sale of substantially all of its assets or any other corporate reorganization in which Constellation Energy Group will not be the surviving corporation or in which the holders of the common stock of Constellation Energy Group will receive securities of another corporation (in any such case, the “New Company”), then the New Company shall assume the rights and obligations of Constellation Energy Group under this Plan.

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Constellation Energy Group, Inc.
Deferred Compensation Plan
For Non-Employee Directors

Addendum

The Board of Directors of Constellation Energy Group, Inc. has authorized an amendment to the Constellation Energy Group, Inc. Deferred Compensation Plan for Non-Employee Directors, to be made effective January 1, 2005, to allow non-employee directors to defer all of their restricted stock award into deferred stock units.  The amount deferred is credited to the participant’s Stock Account on January 1 (or, if later, the first day of the first month after the participant becomes a Director).  A participant’s Stock Account shall be credited with Stock Units equal to the number of shares of Common Stock (including fractions of a share) that could have been purchased with the value of such deferred restricted stock award, at Fair Market Value on such date.

If a participant ceases to be a Director prior to December 31 of any calendar year, the participant will forfeit a pro-rated amount of the deferred restricted stock award that was credited to the Stock Account during the calendar year.  The amount forfeited shall equal the amount of the deferred restricted stock award credited during the calendar year times a fraction, the numerator of which is the number of full calendar months in the calendar year after the participant’s Board membership ceased, and the denominator of which is 12 (or, for a participant who became a Director during the calendar year, the number of months during the calendar year after the participant became a Director (including the month Board membership commenced)).

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EX-10.(B)

EXHIBIT No. 10 (b)

This document constitutes part of a prospectus covering securities

that have been registered under the Securities Act of 1933.

Constellation Energy Group, Inc.
Amended and Restated Executive Long-Term Incentive Plan
(Plan)

1.Purpose.  The purpose of this Plan is to increase shareholder value by providing a long-term incentive to reward officers and key employees of the Company and its Subsidiaries, who are mainly responsible for the continued growth, development, and financial success of the Company and its Subsidiaries, and for the continued profitable performance of the Company and its Subsidiaries.  The Plan is also designed to permit the Company and its Subsidiaries to attract and retain talented and motivated directors, officers and key employees and to increase their ownership of Company common stock.  The Plan also provides the ability to award long-term incentives that qualify for federal income tax deduction.

2.Definitions.  All singular terms defined in this Plan will include the plural and vice versa.  As used herein, the following terms will have the meaning specified below:

“Adjusted EBIT” means EBIT, subject to, and/or after giving effect to, any adjustments applicable pursuant to Section 9A(iv) at the time Business Criteria and Performance Target(s) are established for any Year or Years.

“Adjusted EPS” means EPS, subject to, and/or after giving effect to, any adjustments applicable pursuant to Section 9A(iv) at the time Business Criteria and Performance Target(s) are established for any Year or Years.

“Adjusted Net Income” means Net Income, subject to, and/or after giving effect to, any adjustments applicable pursuant to Section 9A(iv) at the time Business Criteria and Performance Target(s) are established for any Year or Years.

“Adjusted Return on Assets” means Return on Assets subject to, and/or after giving effect to, any adjustments applicable pursuant to Section 9A(iv) at the time Business Criteria and Performance Target(s) are established for any Year or Years.

“Adjusted Return on Equity” means Return on Equity, subject to, and/or after giving effect to, any adjustments applicable pursuant to Section 9A(iv) at the time Business Criteria and Performance Target(s) are established for any Year or Years.

“Award” means individually or collectively, Restricted Stock, Restricted Stock Units, Options, Performance Units, Stock Appreciation Rights, Dividend Equivalents, or Equity granted under this Plan.

“Board” means the Board of Directors of the Company.

“Book Value” means the book value of a share of Stock determined in accordance with the Company’s regular accounting practices as of the last business

1

day of the month immediately preceding the month in which a Stock Appreciation Right is exercised as provided in Section 10.

“Business Criteria” means any one or any combination of Net Income, Adjusted Net Income, Return on Equity, Adjusted Return on Equity, Return on Assets, Adjusted Return on Assets, Total Shareholder Return, Stock Fair Market Value, EBIT, Adjusted EBIT, EPS or Adjusted EPS.

“Code” means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code will be deemed to include any amendments or successor provisions to such section and any regulations promulgated thereunder.

“Committee” means the Committee on Management of the Board; provided, however, that if such Committee fails to satisfy the disinterested administration provisions of Section 16b-3 of the 1934 Act or the outside director provisions of Section 162(m)(4)(C) of the Code, “Committee” shall mean a committee of directors of the Company who satisfy the requirements of such Sections.

“Company” means Constellation Energy Group, Inc., a Maryland corporation, or its successor, including any “New Company” as provided in Section 15I.

“Covered Award” means any Award granted under the Plan on or after December 18, 2005.

“Date of Grant” means the date on which the granting of an Award is authorized by the Committee or such later date as may be specified by the Committee in such authorization.

“Date of Retirement” means the date of Retirement.

“Disability” means the determination that a Participant is “disabled” under the Company disability plan in effect at that time.

“Dividend Equivalent” means an Award granted under Section 11.

“EBIT” for any Year means the consolidated earnings before income taxes of the Company, as reported in the consolidated financial statements of the Company for the Year.

“Eligible Person” means any person who satisfies all of the requirements of Section 5.

“EPS” for any Year means diluted earnings per share of the Company, as reported in the Company’s consolidated financial statements for the Year.

“Equity” means an Award granted under Section 12.

“Excluded Transactions” has the meaning set forth in Section 13.

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“Exercise Period” means the period or periods during which a Stock Appreciation Right is exercisable as described in Section 10.

“Fair Market Value” means the average of the highest and lowest price at which the Stock was sold regular way on the New York Stock Exchange-Composite Transactions on a specified date; provided, however, that notwithstanding the foregoing, solely for purposes of determining the Option price per share of Stock under Section 8C for Option grants made after October 19, 2006, “Fair Market Value” means the price at which the Stock was last sold on the New York Stock Exchange-Composite Transactions on the Date of Grant.

“Incentive Stock Option” means an incentive stock option within the meaning of Section 422 of the Code.

“Net Income” for any Year means the consolidated net income of the Company, as reported in the consolidated financial statements of the Company for the Year.

“1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Option” or “Stock Option” means either a nonqualified stock option or an incentive stock option granted under Section 8.

“Option Period” or “Option Periods” means the period or periods during which an Option is exercisable as described in Section 8.

“Participant” means an individual who has been granted an Award under this Plan.

“Pension Plan” means the Pension Plan of Constellation Energy Group, Inc. as may be amended from time to time.

“Performance-Based” means that in determining the amount of a Restricted Stock or Restricted Stock Unit Award payout, the Committee will take into account the Performance Targets.

“Performance Period” means the taxable year of the Company or any other period designated by the Committee with respect to which an Award may be granted.

“Performance Target(s)” means the specific objective goal or goals that are timely set in writing by the Committee pursuant to Section 9A(ii) for each Participant for the applicable Performance Period in respect of any one or more of the Business Criteria.

“Performance Unit” means a unit of measurement equivalent to such amount or measure as defined by the Committee which may include, but is not limited to, dollars, market value shares, or book value shares.

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“Plan Administrator” means, as set forth in Section 4, the Committee.

“Restricted Stock” means Stock issued in the name of a Participant that bears a restrictive legend prohibiting sale, transfer, pledge or hypothecation of the Stock until the expiration of the restriction period.

“Restricted Stock Unit” means a right granted under Section 7 that is denominated in shares of stock, each of which represents a right to receive the value of a share of stock (or a percentage of such value, which percentage may be higher than 100%) upon the terms and conditions set forth by the Committee.

“Retirement” means retirement on or after the “Early Retirement Date” (as such term is defined in the Pension Plan or a Subsidiary’s retirement or pension plan).

“Return on Assets” means Net Income divided by the average of the total assets of the Company at the end of the four fiscal quarters of the Year, as reported by the Company in its consolidated financial statements.

“Return on Equity” means the Net Income divided by the average of the common shareholders equity of the Company at the end of each of the four fiscal quarters of the Year, as reported by the Company in its consolidated financial statements.

“Service-Based” means that in determining the amount of a Restricted Stock or Restricted Stock Unit Award payout, the Committee will take into account only the period of time that the Participant performed services for the Company or its Subsidiaries since the Date of Grant.

“Stock” means the common stock, without par value, of the Company.

“Stock Appreciation Right” means an Award granted under Section 10.

“Subsidiary(ies)” means any entity that is directly or indirectly controlled by the Company or any entity, including an acquired entity, in which the Company has a significant equity interest, as determined by the Committee, in its discretion.

“Termination” means resignation or discharge from employment with the Company or any of its Subsidiaries except in the event of death, Disability, or Retirement.

“Total Shareholder Return” means the sum of the change in the Fair Market Value of the Stock plus the value of reinvested dividends and cash equivalents, over the Performance Period.

“Year” means a fiscal year of the Company commencing on or after January 1, 2002 that constitutes all or part of the applicable Performance Period.

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3.Effective Date, Duration and Stockholder Approval.

A.Effective Date and Stockholder Approval.  Subject to the approval of the Plan by a majority of the outstanding shares of Stock voted at the 2002 Annual Meeting of Stockholders, the Plan will be effective as of January 1, 2002. The Plan was most recently amended and restated effective as of October 19, 2006.

B.Period for Grants of Awards.  Awards may be made as provided herein for a period of 10 years after January 1, 2002.

C.Termination.  The Plan will continue in effect until all matters relating to the payment of outstanding Awards and administration of the Plan have been settled.

4.Plan Administration.  The Committee is the Plan Administrator and has sole authority (except as specified otherwise herein) to determine all questions of interpretation and application of the Plan, or of the terms and conditions pursuant to which Awards are granted, exercised or forfeited under the Plan provisions, and, in general, to make all determinations advisable for the administration of the Plan to achieve its stated purpose. Without limiting the generality of the foregoing, the Plan Administrator may modify, amend, extend or renew outstanding Awards, or accept the surrender of outstanding Awards and substitute new Awards (provided, however, that, except as provided in Section 15H of the Plan, any modification that would materially adversely affect any outstanding Award shall not be made without the consent of the Participant, and provided, further, that no modification, amendment or substitution that results in repricing a Stock Option to a lower exercise price, other than to reflect an adjustment made pursuant to Section 15H, shall be made without prior stockholder approval).

The Plan Administrator’s determinations under the Plan (including without limitation, determinations of the persons to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and any agreements evidencing such Awards) need not be uniform and may be made by the Administrator selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated. Such determinations shall be final and not subject to further appeal.

The Committee may delegate its authority under the Plan with respect to Participants who are not directors or executive officers.

5.Eligibility.  Each officer, key employee or director of the Company and its Subsidiaries may be designated by the Committee as a Participant, from time to time, with respect to one or more Awards. No officer, employee or director of the Company or its Subsidiaries shall have any right to be granted an Award under this Plan. The Plan Administrator may also grant Awards to individuals in connection with hiring (as an officer, key employee or director), retention or otherwise, prior to the date the individual first performs services for the Company or a Subsidiary; provided,

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however, that such Awards shall not become vested or exercisable prior to the date the individual first commences performance of such services.

6.Grant of Awards and Limitation of Number of Shares Awarded.  The Committee may, from time to time, grant Awards to one or more Eligible Persons, provided that subject to any adjustment pursuant to Section 15H, the aggregate number of shares of Stock subject to Awards that may be delivered under this Plan may not exceed eight million (8,000,000) shares. Shares delivered by the Company under the Plan may be authorized and unissued Stock, Stock held in the treasury of the Company, or Stock purchased on the open market (including private purchases) in accordance with applicable securities laws.

Any shares of Stock covered by an Award (or portion of an Award) granted under the Plan that is forfeited or canceled, expires or is settled in cash, including the settlement of tax withholding obligations using shares, shall be deemed not to have been delivered for purposes of determining the maximum number of shares available for delivery under the Plan. Likewise, if any Option granted under the Plan is exercised by tendering shares of Stock to the Company as full or partial payment for such exercise under the Plan, only the number of shares issued net of the shares tendered shall be deemed delivered for purposes of determining the maximum number of shares available for delivery under the Plan.

The maximum number of shares of Stock that may be issued in conjunction with Service-Based Restricted Stock or Restricted Stock Unit Awards under Section 7 of the Plan, Performance-Based Restricted Stock or Restricted Stock Unit or Performance Unit Awards under Section 9 of the Plan and Equity Awards under Section 12 of the Plan shall in the aggregate be eight hundred thousand (800,000). The maximum number of shares of Stock subject to Awards of any combination that may be granted during any calendar year under the Plan to any one person is two million (2,000,000); provided, however, that to the extent the maximum permissible award is not made in a year, such amount may be carried over to subsequent years. Such per-individual limit shall not be adjusted to effect a restoration of shares of Stock with respect to which the related Award is terminated, surrendered or canceled.

The Plan Administrator may permit or require a recipient of an Award to defer all or part of such individual’s receipt of the payment of cash or the delivery of Stock that would otherwise be due to such individual by virtue of the exercise of, payment of, or lapse or waiver of restrictions respecting, any Award. If any such payment deferral is required or permitted, the Plan Administrator shall, in its sole discretion, establish rules and procedures for such payment deferrals.

7.Service-Based Restricted Stock and Restricted Stock Unit Awards.

A.Grants of Service-Based Restricted Shares or Units.  One or more shares of Restricted Stock or Restricted Stock Units may be granted to any Eligible Person.  The Service-Based Restricted Stock will be issued or Restricted Stock Unit granted to the Participant on the Date of Grant without the payment of consideration by the Participant.  The Service-Based Restricted Stock will be issued or Restricted

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Stock Unit granted in the name of the Participant and will bear a restrictive legend prohibiting sale, transfer, pledge or hypothecation of the Service-Based Restricted Stock or Restricted Stock Unit until the expiration of the restriction period.

The Committee may also impose such other restrictions and conditions on the Service-Based Restricted Stock or Restricted Stock Unit as it deems appropriate.

Upon issuance to the Participant of the Service-Based Restricted Stock the Participant will have the right to vote the Service-Based Restricted Stock. Upon issuance to the Participant of the Restricted Stock or grant of the Restricted Stock Unit and subject to the Committee’s discretion, the Participant will have the right to receive the cash dividends (or Dividend Equivalents as provided in Section 11) distributable with respect to such shares or units, with such dividends or Dividend Equivalents treated as compensation to the Participant. The Committee, in its sole discretion, may direct the accumulation and payment of distributable dividends to the Participant at such times, and in such form and manner, as determined by the Committee.

B.Restriction Period.  At the time a Service-Based Restricted Stock or Restricted Stock Unit Award is granted, the Committee will establish a restriction period applicable to such Award which will be not less than one year and not more than ten years. Each Restricted Stock or Restricted Stock Unit Award may have a different restriction period, at the discretion of the Committee.

C.Forfeiture or Payout of Award.  In the event a Participant ceases employment (or ceases Board membership in the case of a director) during a restriction period, a Service-Based Restricted Stock or Restricted Stock Unit Award is subject to forfeiture or payout (i.e., removal of restrictions) as follows: (a) Termination—the Service-Based Restricted Stock or Restricted Stock Unit Award is completely forfeited; or (b) Retirement, Disability or death—payout of the Service-Based Restricted Stock or Restricted Stock Unit Award is prorated for service during the period; provided, however, that the Committee may modify the above if it determines at its sole discretion that special circumstances warrant such modification.

Any shares of Service-Based Restricted Stock which are forfeited will be transferred to the Company.

Upon completion of the restriction period, all Award restrictions will expire and new certificates representing the Award will be issued (the payout) without the restrictive legend described in Section 7A.

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D.Waiver of Section 83(b) Election.  Unless otherwise directed by the Committee, as a condition of receiving an Award of Service-Based Restricted Stock, a Participant must waive in writing the right to make an election under Section 83(b) of the Code to report the value of the Service-Based Restricted Stock as income on the Date of Grant.

8.Stock Options.

A.Grants of Options.  One or more Options may be granted to any Eligible Person on the Date of Grant without the payment of consideration by the Participant.

B.Stock Option Agreement.  Each Option granted under the Plan will be evidenced by a “Stock Option Agreement” between the Company and the Participant containing provisions determined by the Committee, including, without limitation, provisions to qualify Incentive Stock Options as such under Section 422 of the Code if directed by the Committee at the Date of Grant; provided, however, that each Incentive Stock Option Agreement must include the following terms and conditions: (i) that the Options are exercisable, either in total or in part, with a partial exercise not affecting the exercisability of the balance of the Option; (ii) every share of Stock purchased through the exercise of an Option will be paid for in full at the time of the exercise; (iii) each Option will cease to be exercisable, as to any share of Stock, at the earliest of (a) the Participant’s purchase of the Stock to which the Option relates, (b) the Participant’s exercise of a related Stock Appreciation Right, or (c) the lapse of the Option; (iv) Options will not be transferable by the Participant except by Will or the laws of descent and distribution and will be exercisable during the Participant’s lifetime only by the Participant or by the Participant’s guardian or legal representative; and (v) notwithstanding any other provision, in the event of a public tender for all or any portion of the Stock or in the event that any proposal to merge or consolidate the Company with another company is submitted to the stockholders of the Company for a vote, the Committee, in its sole discretion, may declare any previously granted Options to be immediately exercisable.

C.Option Price.  The Option price per share of Stock will be set by the grant, but will be not less than 100% of the Fair Market Value at the Date of Grant.

D.Form of Payment.  At the time of the exercise of the Option, the Option price will be payable in cash or in other shares of Stock or in a combination of cash and other shares of Stock, in a form and manner as required by the Committee in its sole discretion. When Stock is used in full or partial payment of the Option price, it will be valued at the Fair Market Value on the applicable date.

E.Other Terms and Conditions.  The Option will become exercisable in such manner and within such Option Period or Periods, not to exceed 10 years from its Date of Grant, as set forth in the Stock Option Agreement upon payment in full. Except as otherwise provided in this Plan or in the Stock Option Agreement, any Option may be exercised in whole or in part at any time.

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F.Lapse of Option.  An Option will lapse upon the earlier of: (i) 10 years from the Date of Grant, or (ii) at the expiration of the Option Period set by the grant. If the Participant ceases employment (or ceases Board membership in the case of a director) within the Option Period and prior to the lapse of the Option, the Option will lapse as follows: (a) Termination–any unvested Option will lapse on the effective date of the Termination and any vested Option will lapse 90 days after the effective date of the Termination; or (b) Retirement, Disability or death—any unvested Option will lapse on the effective date of the Retirement, Disability or death and any vested Option will lapse on the earlier of 60 months after the effective date of the Retirement, Disability or death or at the expiration of the Option Period set by the Grant; provided, however, that the Committee may modify the above if it determines in its sole discretion that special circumstances warrant such modification.

G.Individual Limitation.  In the case of an Incentive Stock Option, the aggregate Fair Market Value of the Stock for which Incentive Stock Options (whether under this Plan or another arrangement) in any calendar year are first exercisable will not exceed $100,000 with respect to such calendar year (or such other individual limit as may be in effect under the Code on the Date of Grant) plus any unused portion of such limit as the Code may permit to be carried over.

9.Performance-Based Restricted Stock or Restricted Stock Units/Performance Units.

A.Provision for Awards.

(i)General.  For Awards under this Section 9, the Committee will establish (a) Performance Target(s) relative to the applicable Business Criteria, (b) the applicable Performance Period and (c) the applicable number of shares of Performance-Based Restricted Stock, Performance-Based Restricted Stock Units or Performance Units that are the subject of the Award. The applicable Performance Period and Performance Target(s) shall be determined by the Committee consistent with the terms of the Plan and Section 162(m) of the Code. Notwithstanding the fact that the Performance Target(s) have been attained, the Committee may pay an Award under this Section 9 of less than the amount determined by the formula or standard established pursuant to Section 9A(ii) or may pay no Award at all.

(ii)Selection of Performance Target(s).  The specific Performance Target(s) with respect to the Business Criteria must be established by the Committee in advance of the deadlines applicable under Section 162(m) of the Code and while the performance relating to the Performance Target(s) remains substantially uncertain within the meaning of Section 162(m) of the Code. The Performance Target(s) with respect to any Performance Period may be established on a cumulative basis or in the alternative, and may be established on a stand-alone basis with respect to the Company or on a relative basis with respect to any peer companies or index selected by the Committee. At the time the Performance Target(s) are selected, the Committee shall provide, in terms of an objective formula or standard for each Participant, the method of

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computing the specific amount that will represent the maximum amount of Award payable to the Participant if the Performance Target(s) are attained. The objective formula or standard shall preclude the use of discretion to increase the amount of any Award earned pursuant to the terms of the Award.

(iii)Effect of Mid-Year Commencement of Service.  If services as an executive officer or director commence after the adoption of the Plan and the Performance Target(s) are established for a Performance Period, the Committee may grant an Award that is proportionately adjusted based on the period of actual service during the Year, and the amount of any Award paid to such person shall not exceed that proportionate amount of the applicable maximum individual Award under Section 6.

(iv)Adjustments.  To preserve the intended incentives and benefits of an Award based on Adjusted EPS, Adjusted Net Income, Adjusted Return on Assets or Adjusted Return on Equity, the Committee may determine at the time the Performance Targets are established that certain adjustments shall apply to the objective formula or standard with respect to the applicable Performance Target to take into account, in whole or in part, in any manner specified by the Committee, any one or more of the following with respect to the Performance Period: (i) the gain, loss, income or expense resulting from changes in accounting principles that become effective during the Performance Period; (ii) the gain, loss, income or expense reported publicly by the Company with respect to the Performance Period that are extraordinary or unusual in nature or infrequent in occurrence, excluding gains or losses on the early extinguishment of debt; (iii) the gains or losses resulting from, and the direct expenses incurred in connection with, the disposition of a business, in whole or in part or the sale of investments or non-core assets; (iv) gain or loss from all or certain claims and/or litigation and all or certain insurance recoveries relating to claims or litigation; (v) the impact of impairment of tangible or intangible assets; (vi) the impact of restructuring or business recharacterization activities, including but not limited to reductions in force, that are reported publicly by the Company; and (vii) the impact of investments or acquisitions made during the year or, to the extent provided by the Committee, any prior year. Each of the adjustments described in this Section 9A(iv) may relate to the Company as a whole or any part of the Company’s business or operations, as determined by the Committee at the time the Performance Targets are established. The adjustments are to be determined in accordance with generally accepted accounting principles and standards, unless another objective method of measurement is designated by the Committee. In addition to the foregoing, the Committee shall adjust any Business Criteria, Performance Targets or other features of an Award that relate to or are wholly or partially based on the number of, or the value of, any stock of the Company, to reflect any stock dividend or split, recapitalization, combination or exchange of shares or other similar changes in such stock.

(v)Committee Discretion to Determine Award.  The Committee has the sole discretion to determine the standard or formula pursuant to which each

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Participant’s Award shall be calculated, whether all or any portion of the amount so calculated will be paid, and the specific amount (if any) to be paid to each Participant, subject in all cases to the terms, conditions and limits of the Plan. To this same extent, the Committee may at any time establish (and, once established, rescind, waive or amend) additional conditions and terms of payment of Awards (including but not limited to the achievement of other financial, strategic or individual goals, which may be objective or subjective) as it may deem desirable in carrying out the purposes of the Plan. The Committee may not, however, increase the maximum amount permitted to be paid to any individual under the Plan or pay Awards under this Section 9 if the applicable Performance Target(s) have not been satisfied.

B.Performance-Based Restricted Stock or Restricted Stock Unit Awards.

(i)Grants of Performance-Based Restricted Stock or Restricted Stock Units.Subject to Section 9A, one or more shares of Performance-Based Restricted Stock or Restricted Stock Units may be granted to any Eligible Person. The Performance-Based Restricted Stock or Restricted Stock Unit will be issued to the Participant on the Date of Grant without the payment of consideration by the Participant. The Performance-Based Restricted Stock or Restricted Stock Unit will be issued in the name of the Participant and will bear a restrictive legend prohibiting sale, transfer, pledge or hypothecation of the Performance-Based Restricted Stock or Restricted Stock Unit until the expiration of the restriction period.

The Committee may also impose such other restrictions and conditions on the Performance-Based Restricted Stock or Restricted Stock Unit as it deems appropriate.

Upon issuance to the Participant of the Performance-Based Restricted Stock, the Participant will have the right to vote the Performance-Based Restricted Stock. Upon issuance to the Participant of the Performance-Based Restricted Stock or Restricted Stock Unit and subject to the Committee’s discretion, the Participant will have the right to receive the cash dividends (or Dividend Equivalents as provided in Section 11) distributable with respect to such shares or units, with such dividends or Dividend Equivalents treated as compensation to the Participant. The Committee, in its sole discretion, may direct the accumulation and payment of distributable dividends to the Participant at such times, and in such form and manner, as determined by the Committee.

(ii)Restriction Period.At the time a Performance-Based Restricted Stock or Restricted Stock Unit Award is granted, the Committee will establish a restriction period applicable to such Award which will be not less than one year and not more than ten years. Each Performance-Based Restricted Stock or Restricted Stock Unit Award may have a different restriction period, at the discretion of the Committee.

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(iii)Waiver of Section 83(b) Election.Unless otherwise directed by the Committee, as a condition of receiving an Award of Performance-Based Restricted Stock, a Participant must waive in writing the right to make an election under Section 83(b) of the Code to report the value of the Performance-Based Restricted Stock as income on the Date of Grant.

C.Performance Units.  Subject to Section 9A, one or more Performance Units may be earned by an Eligible Person based on the achievement of preestablished performance objectives during a Performance Period.

D.Forfeiture or Payout of Award.  As soon as practicable after the end of each Performance Period, the Committee will determine whether the Performance Targets and other material terms of the Award were satisfied. The Committee’s determination of all such matters will be final and conclusive.

As soon as practicable after the date the Committee makes the above determination, the Committee will determine the Award payment for each Participant. Before any payments are made under this Section 9, the Committee shall be responsible for certifying in writing to the Company that the applicable Performance Targets have been met.

In the event a Participant ceases employment (or ceases Board membership in the case of a director) during a Performance Period, the Performance-Based Restricted Stock, Performance-Based Restricted Stock Unit or Performance Unit Award is subject to forfeiture or payout as follows: (a) Termination—the Performance-Based Restricted Stock, Performance-Based Restricted Stock Unit or Performance Unit Award is completely forfeited; or (b) Retirement, Disability or death—payout of the Performance-Based Restricted Stock, Performance-Based Restricted Stock Unit or Performance Unit Award is prorated taking into account factors including, but not limited to, service and the performance of the Participant during the portion of the Performance Period before employment ceased; provided, however, that the Committee may modify the above if it determines in its sole discretion that special circumstances warrant such modification.

Any shares of Performance-Based Restricted Stock which are forfeited will be transferred to the Company.

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E.Form and Timing of Payment.  With respect to shares of Performance-Based Restricted Stock or Restricted Stock Units for which restrictions lapse, new certificates will be issued (the payout) without the restrictive legend described in Section 9B(i).  Each Performance Unit is payable in cash or shares of Stock or in a combination of cash and Stock, as determined by the Committee in its sole discretion. Such payment will be made as soon as practicable after the Award payment is determined.

10.Stock Appreciation Rights.

A.Grants of Stock Appreciation Rights.   Stock Appreciation Rights may be granted under the Plan in conjunction with an Option either at the Date of Grant or by amendment or may be separately granted. Stock Appreciation Rights will be subject to such terms and conditions not inconsistent with the Plan as the Committee may impose.

B.Right to Exercise; Exercise Period.  A Stock Appreciation Right issued pursuant to an Option will be exercisable to the extent the Option is exercisable; both such Stock Appreciation Right and the Option to which it relates will not be exercisable during the six months following their respective Dates of Grant except in the event of the Participant’s Disability or death. A Stock Appreciation Right issued independent of an Option will be exercisable pursuant to such terms and conditions established in the grant. Notwithstanding such terms and conditions, in the event of a public tender for all or any portion of the Stock or in the event that any proposal to merge or consolidate the Company with another company is submitted to the stockholders of the Company for a vote, the Committee, in its sole discretion, may declare any previously granted Stock Appreciation Right immediately exercisable.

C.Failure to Exercise.  If on the last day of the Option Period, in the case of a Stock Appreciation Right granted pursuant to an Option, or the specified Exercise Period, in the case of a Stock Appreciation Right issued independent of an Option, the Participant has not exercised a Stock Appreciation Right, then such Stock Appreciation Right will be deemed to have been exercised by the Participant on the last day of the Option Period or Exercise Period.

D.Payment.  An exercisable Stock Appreciation Right granted pursuant to an Option will entitle the Participant to surrender unexercised the Option or any portion thereof to which the Stock Appreciation Right is attached, and to receive in exchange for the Stock Appreciation Right payment (in cash or Stock or a combination thereof as described below) equal to either of the following amounts, determined in the sole discretion of the Committee at the Date of Grant: (1) the excess of the Fair Market Value of one share of Stock at the date of exercise over the Option price, times the number of shares called for by the Stock Appreciation Right (or portion thereof) which is so surrendered, or (2) the excess of the Book Value of one share of Stock at the date of exercise over the Book Value of one share of Stock at the Date of Grant of the related Option, times the number of shares called for by the Stock Appreciation Right. Upon exercise of a Stock Appreciation Right not granted pursuant to an Option, the Participant will receive for each Stock Appreciation Right payment

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(in cash or Stock or a combination thereof as described below) equal to either of the following amounts, determined in the sole discretion of the Committee at the Date of Grant: (1) the excess of the Fair Market Value of one share of Stock at the date of exercise over the Fair Market Value of one share of Stock at the Date of Grant of the Stock Appreciation Right, times the number of shares called for by the Stock Appreciation Right, or (2) the excess of the Book Value of one share of Stock at the date of exercise of the Stock Appreciation Right over the Book Value of one share of Stock at the Date of Grant of the Stock Appreciation Right, times the number of shares called for by the Stock Appreciation Right.

The Committee may direct the payment in settlement of the Stock Appreciation Right to be in cash or Stock or a combination thereof. Alternatively, the Committee may permit the Participant to elect to receive cash in full or partial settlement of the Stock Appreciation Right, provided that (i) the Committee must consent to or disapprove such election and (ii) unless the Committee directs otherwise, the election and the exercise must be made during the period beginning on the 3rd business day following the date of public release of quarterly or year-end earnings and ending on the 12th business day following the date of public release of quarterly or year-end earnings. The value of the Stock to be received upon exercise of a Stock Appreciation Right shall be the Fair Market Value of the Stock on the trading day preceding the date on which the Stock Appreciation Right is exercised. To the extent that a Stock Appreciation Right issued pursuant to an Option is exercised, such Option shall be deemed to have been exercised, and shall not be deemed to have lapsed.

E.Nontransferable.  A Stock Appreciation Right will not be transferable by the Participant except by Will or the laws of descent and distribution and will be exercisable during the Participant’s lifetime only by the Participant or by the Participant’s guardian or legal representative.

F.Lapse of a Stock Appreciation Right.  A Stock Appreciation Right will lapse upon the earlier of: (i) 10 years from the Date of Grant; or (ii) at the expiration of the Exercise Period as set by the grant. If the Participant ceases employment (or ceases Board membership in the case of a director) within the Exercise Period and prior to the lapse of the Stock Appreciation Right, the Stock Appreciation Right will lapse as follows: (a) Termination—any unvested Stock Appreciation Right will lapse on the effective date of the Termination and any vested Stock Appreciation Right will lapse 90 days after the effective date of the Termination; or (b) Retirement, Disability or death—any unvested Stock Appreciation Right will lapse on the effective date of the Retirement, Disability or death and any vested Stock Appreciation Right will lapse on the earlier of 60 months after the effective date of the Retirement, Disability or death or at the expiration of the Exercise Period set by the grant; provided, however, that the Committee may modify the above if it determines in its sole discretion that special circumstances warrant such modification.

11.Dividend Equivalents.

A.Grants of Dividend Equivalents.  Dividend Equivalents may be granted under the Plan in conjunction with an Option or a separately awarded Stock

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Appreciation Right, at the Date of Grant or by amendment, without consideration by the Participant. Dividend Equivalents may also be granted under the Plan in conjunction with Performance-Based Restricted Stock, Performance-Based Restricted Stock Units or Performance Units, at any time during the Performance Period, without consideration by the Participant.

B.Payment.  Each Dividend Equivalent will entitle the Participant to receive an amount equal to the dividend actually paid with respect to a share of Stock on each dividend payment date from the Date of Grant to the date the Dividend Equivalent lapses as set forth in Section 11D. The Committee, in its sole discretion, may direct the payment of such amount at such times and in such form and manner as determined by the Committee.

C.Nontransferable.  A Dividend Equivalent will not be transferable by the Participant.

D.Lapse of a Dividend Equivalent.  Each Dividend Equivalent will lapse on the earlier of (i) the date of the lapse of the related Option or Stock Appreciation Right; (ii) the date of the exercise of the related Option or Stock Appreciation Right; (iii) the end of the Performance Period (or if earlier, the date the Participant ceases employment) of the related Performance Units or Performance-Based Restricted Stock or Restricted Stock Unit Award; or (iv) the lapse date established by the Committee on the Date of Grant of the Dividend Equivalent.

12.Equity.  One or more shares of Stock may be granted to any Eligible Person, in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by law, as the Committee shall determine. An Equity Award may be denominated in Stock or other securities, stock-equivalent units, securities or debentures convertible into Stock, or any combination of the foregoing and may be paid in Stock or other securities, in cash, or in a combination of Stock or other securities and cash, all as determined in the sole discretion of the Committee. Unless the Committee determines otherwise, the vesting period for Equity Awards shall be at least three years.

13.Accelerated Award Payout/Exercise.

A.Change in Control.  Notwithstanding anything in this Plan document to the contrary, a Participant is entitled to an accelerated payout (as set forth in Section 13B) with respect to any previously granted Award upon the happening of a change in control; provided, that, except as otherwise expressly provided to the contrary in the applicable grant agreement, a Participant will not be entitled to an accelerated vesting or payout of any Covered Awards in connection with the consummation of the transactions contemplated by the Agreement and Plan of Merger dated as of December 18, 2005 by and among FPL Group, Inc., CF Merger Corporation and the Company (the “Excluded Transactions”), and such Covered Awards shall remain outstanding in accordance with their terms following the consummation of the Excluded Transactions, subject to any adjustments made by the Plan Administrator in accordance with the provisions of Section 15.

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A change in control for purposes of this Section 13 means the occurrence of any one of the following events:

(i)individuals who, on January 24, 2003, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to January 24, 2003, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

(ii)any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a change in control by virtue of any of the following acquisitions: (A) by the Company or any corporation with respect to which the Company owns a majority of the outstanding shares of common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors (a “Subsidiary Company”), (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary Company, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition by Participant or any group of persons including Participant (or any entity controlled by Participant or any group of persons including Participant);

(iii)consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiary Companies (a “Business Combination”), unless immediately following such Business Combination: (A) more than 60% of the total voting power of (x) the corporation resulting from such Business Combination (the “Surviving Corporation”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable,

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is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B), and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or

(iv)the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company, or the consummation of a sale of all or substantially all of the Company’s assets.

Notwithstanding the foregoing, a change in control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a change in control of the Company shall then occur.

B.Amount of Award Subject to Accelerated Payout.  The amount of a Participant’s previously granted Award that will be paid or exercisable upon the happening of a change in control (or if earlier upon the termination of the Participant’s employment with the Company or a Subsidiary if it is reasonably demonstrated that such termination (i) was at the request of a third party who has taken steps reasonably calculated to effect a change in control or (ii) otherwise arose in connection with or anticipation of a change in control) will be determined as follows, provided, that, except as otherwise expressly provided to the contrary in the applicable grant agreement, a Participant will not be entitled to an accelerated vesting or payout of any Covered Awards under this Section 13B in connection with the consummation of the Excluded Transactions:

Service-Based Restricted Stock or Restricted Stock Unit Awards.  The Participant will be entitled to an accelerated Award payout, and the amount of the payout will be based on the number of shares of Service-Based Restricted Stock or Restricted Stock Units that were issued on the Date of Grant.

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Stock Option Awards and Stock Appreciation Rights.  Any previously granted Stock Option Awards or Stock Appreciation Rights will be immediately vested, any gain will be immediately paid in cash, and the Stock Option Awards and/or Stock Appreciation Rights will then lapse.

Performance-Based Restricted Stock or Restricted Stock Units/Performance Units.  The Participant will be entitled to an accelerated Award payout, and the amount of the payout will be based on the number of shares of Performance-Based Restricted Stock or Restricted Stock Units/Performance Units subject to the Award as established on the Date of Grant, prorated based on the number of months of the Performance Period that have elapsed as of the payout date, and assuming that maximum performance was achieved.

Equity Awards.  Any previously granted Equity Award will be immediately vested.

Covered Awards.  Except as may be expressly provided to the contrary in the applicable grant agreement, Covered Awards shall not vest or be subject to immediate payout as a result of the consummation of the Excluded Transactions, but will remain outstanding in accordance with their terms following the consummation of the Excluded Transactions, subject to any adjustments made by the Plan Administrator in accordance with the provisions of Section 15.

C.Timing of Accelerated Payout/Option Period/Exercise Period.  The accelerated payout set forth in Section 13B will be made in cash within 30 days after the date of the change in control. When Stock is related to the Award, the amount of cash will be determined based on the Fair Market Value of Stock on the payout date.

14.Amendment of Plan.

The Committee may at any time and from time to time alter, amend, suspend or terminate the Plan in whole or in part, except (i) no such action may be taken without stockholder approval which materially increases the number of securities which may be issued pursuant to the Plan (except as provided in Section 15H), extends the period for granting Options under the Plan or materially modifies the requirements as to eligibility for participation in the Plan; (ii) no such action may be taken without the consent of the Participant to whom any Award was previously granted, which adversely affects the rights of such Participant concerning such Award, except as such termination or amendment of the Plan is required by statute, or rules and regulations promulgated thereunder; and (iii) no such action that would require the consent of the Board and/or the stockholders of the Company pursuant to Section 162(m) of the Code or the 1934 Act, or any other applicable law, rule, or regulation, shall be effective without such consent. Notwithstanding the foregoing, the Committee may amend the Plan as desirable at the discretion of the Committee to address any issues concerning (i) Section 162(m) of the Code, or (ii) maintaining an exemption under rule 16b-3 of the 1934 Act.

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15.Miscellaneous Provisions.

A.Nontransferability.  No benefit provided under this Plan shall be subject to alienation or assignment by a Participant (or by any person entitled to such benefit pursuant to the terms of this Plan), nor shall it be subject to attachment or other legal process except (i) to the extent specifically mandated and directed by applicable state or federal statute; (ii) as requested by the Participant (or by any person entitled to such benefit pursuant to the terms of this Plan), and approved by the Committee, to satisfy income tax withholding; and (iii) as requested by the Participant and approved by the Committee, to members of the Participant’s family, or a trust established by the Participant for the benefit of family members.

B.No Employment Right.  Participation in this Plan shall not constitute a contract of employment between the Company or any Subsidiary and any person and shall not be deemed to be consideration for, or a condition of, continued employment of any person.

C.Tax Withholding.  The Company or a Subsidiary may withhold any applicable federal, state or local taxes at such time and upon such terms and conditions as required by law or determined by the Company or a Subsidiary. Subject to compliance with any requirements of applicable law, the Committee may permit or require a Participant to have any portion of any withholding or other taxes payable in respect to a distribution of Stock satisfied through the payment of cash by the Participant to the Company or a Subsidiary, the retention by the Company or a Subsidiary of shares of Stock, or delivery of previously owned shares of the Participant’s Stock, having a Fair Market Value equal to the withholding amount.

D.Fractional Shares.  Any fractional shares concerning Awards shall be eliminated at the time of payment or payout by rounding down for fractions of less than one-half and rounding up for fractions of equal to or more than one-half. No cash settlements shall be made with respect to fractional shares eliminated by rounding.

E.Government and Other Regulations.  The obligation of the Company to make payment of Awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by any government agencies as may be required. The Company shall be under no obligation to register under the Securities Act of 1933, as amended (“Act”), any of the shares of Stock issued, delivered or paid in settlement under the Plan. If Stock awarded under the Plan may in certain circumstances be exempt from registration under the Act, the Company may restrict its transfer in such manner as it deems advisable to ensure such exempt status.

F.Indemnification.  Each person who is or at any time serves as a member of the Committee (and each person or Committee to whom the Committee or any member thereof has delegated any of its authority or power under this Plan) shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit, or proceeding to which such person may be a party or in which such person may be involved by reason of any

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action or failure to act under the Plan; and (ii) any and all amounts paid by such person in satisfaction of judgment in any such action, suit, or proceeding relating to the Plan. Each person covered by this indemnification shall give the Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person’s own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Charter or By-Laws of the Company or any of its Subsidiaries, as a matter of law, or otherwise, or any power that the Company may have to indemnify such person or hold such person harmless.

G.Reliance on Reports.  Each member of the Committee (and each person or Committee to whom the Committee or any member thereof has delegated any of its authority or power under this Plan) shall be fully justified in relying or acting in good faith upon any report made by the independent public accountants of the Company and its Subsidiaries and upon any other information furnished in connection with the Plan. In no event shall any person who is or shall have been a member of the Committee be liable for any determination made or other action taken or any omission to act in reliance upon any such report or information or for any action taken, including the furnishing of information, or failure to act, if in good faith.

H.Changes in Capital Structure.  In the event of any change in the outstanding shares of Stock by reason of any stock dividend or split, recapitalization, combination or exchange of shares or other similar changes in the Stock, then appropriate adjustments shall be made in the shares of Stock theretofore awarded to the Participants and in the aggregate number of shares of Stock which may be awarded pursuant to the Plan. Such adjustments shall be conclusive and binding for all purposes. Additional shares of Stock issued to a Participant as the result of any such change shall bear the same restrictions as the shares of Stock to which they relate.

I.Company Successors.  In the event the Company becomes a party to a merger, consolidation, sale of substantially all of its assets or any other corporate reorganization in which the Company will not be the surviving corporation or in which the holders of the Stock will receive securities of another corporation (in any such case, the “New Company”), then the New Company shall assume the rights and obligations of the Company under this Plan.

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J.Governing Law.  All matters relating to the Plan or to Awards granted hereunder shall be governed by the laws of the State of Maryland, without regard to the principles of conflict of laws.

K.Relationship to Other Benefits.  Any Awards under this Plan are not considered compensation for purposes of determining benefits under any pension, profit sharing, or other retirement or welfare plan, or for any other general employee benefit program.

L.Expenses.  The expenses of administering the Plan shall be borne by the Company and its Subsidiaries.

M.Titles and Headings.  The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933.

You may obtain without charge, upon written or oral request, a copy of documents incorporated by reference in the Registration Statement on file with the Securities and Exchange Commission pertaining to the securities offered under the Executive Long-Term Incentive Plan. In addition you may obtain, without charge, upon written or oral request, a copy of documents that are required to be delivered under Rule 428(b) of the Securities Act including our annual report to shareholders or annual report on Form 10-K and a copy of the documents that comprise the prospectus.

To make a request for any of these documents, you may telephone or write:

Corporate Secretary
750 East Pratt Street
18th Floor
Baltimore, Maryland 21202
(410) 783-3600

21

2002 Executive Long-Term Incentive Plan

Appendix

Additional Information

The Plan is not subject to any provisions of the Employee Retirement Income Security Act of 1974, and the Plan is not qualified under Section 401(a) of the Internal Revenue Code.

Participants may obtain additional information about the Plan by contacting:

Manager – Executive Compensation

Constellation Energy Group, Inc.

750 East Pratt Street

5th Floor

Baltimore, MD  21202

410-783-3244

After each grant is made, participants will be furnished with information about the amount of the grant.  Participants have access to information about their outstanding grants.

In general, grants subject to restrictions are taxable to participants when the restrictions lapse, and deductible by Constellation Energy at such time, based on the fair market value of the awards when the restrictions lapse.  Grants not subject to restrictions are taxable/deductible at fair market value on the grant date.  Additionally, options are subject to other special tax provisions.

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FORM OF SERVICE-BASED RESTRICTED STOCK AWARD AGREEMENT

[DATE]

Recipient Name

Recipient Title

Company

Company Address

City, State Zip Code

RE:  Service-Based Restricted Stock Award

Dear Recipient:

Effective date, The Board of Directors Compensation Committee, (The Committee), granted you [#] service-based restricted shares of CEG Common Stock (the “Award”) pursuant to Section 7 of the Constellation Energy Group, Inc. Executive Long–Term Incentive Plan (the “Plan”).  In addition to other provisions of the Plan (a copy of which is provided to you with this letter), your Award is subject to the following conditions:

1.The Plan restriction period for these shares expires as show on the restriction lapse dates in the table below:

# Shares Granted	Share Grant Date	Restriction Period	Restriction Lapse Date	Aggregate Shares Lapsed
[#]	mm/dd/yy	[one to five years]	[one to five years after Share Grant Date]	[#]

2.The Plan requires that as a condition to receiving your Award, you waive in writing the right to make an election under Section 83(b) of the Internal Revenue Code of 1986 with respect to your Award (see Section 7D of the Plan).  Your execution of this letter will constitute your waiver to make such election under Section 83(b).  This waiver means that you will not have the option of electing to be taxed on the restricted shares at the time of the grant.  Instead, you will be taxed on the restricted shares at the time the Plan restrictions are removed (see Attachment A).  This waiver allows the Company to treat dividends paid to you during the period of the Plan restrictions as compensation, thereby giving the Company a tax deduction for such amounts.

3.As provided in the Plan, until the Plan restriction period expires, you may not sell, transfer, pledge or hypothecate the Award shares.  CEG will hold the shares for safekeeping until the restriction lapse, unless you let us know that you want a stock certificate for the Award.  If you prefer a certificate, it will be issued in your name with a legend to the effect that you may not sell, transfer, pledge, or hypothecate the Award shares and that the shares are subject to certain conditions under the Plan.

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4.If you contemplate the sale or transfer (for example to a family member) of any shares after the restriction period expires, you should contact the SEC-related persons specified below for advice on the timing of any sale or transfer and any reporting obligations you may have.

Please read the Plan carefully as it contains many other provisions relating to your Award.  If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign the enclosed copy of this letter and return it in the envelope provided.

Sincerely,

[NAME]

[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of Recipient Date

24

This document constitutes part of a prospectus covering securities
that have been registered under the Securities Act of 1933.

ATTACHMENT A

CONSTELLATION ENERGY GROUP, INC.

INCOME TAX CONSEQUENCES TO PARTICIPANTS

FOR SERVICE-BASED RESTRICTED STOCK AWARDS

Set forth is a brief overview of certain income tax consequences associated with your Service-Based Restricted Stock Award (“the Award”).

Stock

Because the Plan places certain restrictions on the Award which could lead to forfeiture of the shares prior to lifting the Plan restrictions and because you have agreed to waive the Section 83(b) election(1), the value of the restricted stock is not taxed to you when the initial grant is made.  Rather, the stock is taxable to you at the time the restrictions are removed.  The amount subject to income tax is the fair market value of the stock on the day that the Plan restrictions are removed.  This amount is treated as compensation subject to withholding of income taxes, Medicare taxes and, if applicable, Social Security taxes.  You are not taxed on the value of any stock forfeited.

For purposes of determining the gain or loss on any sale of the stock received pursuant to this Award, your basis in the stock is the amount that you included in taxable income when the Plan restrictions were removed.  Your tax holding period, for purposes of determining whether a gain or loss on a sale is long-term or short-term, begins on the day after the day that the Plan restrictions were removed.

Dividends

The dividends during the restriction period will be automatically reinvested in additional shares of company common stock.  These shares will be subject to the same restrictions as the originally awarded shares and will vest accordingly.  For tax purposes, the dividends on the restricted stock will not be taxable as dividend income.  Rather, the accumulated shares of stock will be taxable to you in the same manner as stated above.

After the Plan restrictions on the stock are removed, the dividends are treated as regular dividend income (generally not subject to tax withholding).

Tax Planning

You may wish to consult your tax advisor in the year the restrictions are lifted from the Award if you have questions regarding the impact of the Award on your tax withholding or if you have questions about the applicable capital gains holding period and rates for this Award.

25

(1) The Plan requires that as a condition to receiving a Restricted Stock Award, you must waive in writing the right to make an election under Section 83(b) of the Internal Revenue Code of 1986 with respect to your Award (see Section 7 D of the Plan).  This waiver means that you will not have the option of electing to be taxed on the restricted shares at the time of grant.  Instead, you will be taxed on the restricted shares at the time the Plan restrictions are removed.  This allows the Company to treat dividends paid during the period of Plan restrictions as compensation, thereby giving the Company a tax deduction for such amounts.

26

This document constitutes part of a prospectus covering securities
that have been registered under the Securities Act of 1933.

FORM OF PERFORMANCE UNIT AGREEMENT

[date]

TO: «First» «MI» «Last»

Effective [Date], as part of the [3 CALENDAR YEAR PERFORMANCE PERIOD] Long-Term Incentive Program, you were granted [#] performance units (the “Units”) under the Constellation Energy Group, Inc. Executive Long—Term Incentive Plan (the “Plan”).  In addition to other provisions of the Plan, your award is subject to the conditions set forth in this document.

Target Grant (# Units)	Grant Date	Performance Period	Vesting Date
[#]	[MM/DD/YY]	[3-Year Period]	[End of 3-Year Period]

Under current tax law, you are not subject to tax on your Units until the Vesting Date.

1.     Each Unit is worth $1. The final award payout on the Vesting Date will be based on Constellation Energy Group’s relative Total Shareholder Return (“TSR”) performance over the Performance Period as set forth below. TSR is defined as the stock price change from [BEGINNING TO END OF 3 CALENDAR YEAR PERFORMANCE PERIOD] and dividends during that period that are reinvested on the ex-dividend date (date stock trades without its dividend) at the closing price on that date.

The Plan Administrator will determine the award payout soon after the conclusion of the Performance Period. The performance measures used to determine the award payout are as follows:

·      Primary Measure: Constellation Energy TSR for the Performance Period is compared to the TSR performance results of large and mid-size investment grade companies within the Dow Jones Electric Utilities Index (DJEUI) on [END OF PERFORMANCE PERIOD].  In the DJEUI, companies that are rated ‘non-investment grade’ by both Moody’s and S&P rating agencies on [END OF PERFORMANCE PERIOD] are excluded.

·      Secondary Measure: If Constellation Energy’s percentile rank for the Primary Measure is below the [   ] percentile, then a comparison will be made to the TSR performance results of investment grade companies in the S&P 500 Index on [END OF PERFORMANCE PERIOD].

		Primary Measure		Secondary
		TSR v. DJEUI Large & Mid-Cap Investment Grade Companies		Measure TSR v. S&P 500 Index Comparison Group
Performance Level	Total Shareholder Return	Payout vs. Target		Payout vs. Target
<Threshold	<[    ] Percentile	[    ]	%	[    ]	%
Threshold	[    ] Percentile	[    ]	%	[    ]	%
Target	[    ] Percentile	[    ]	%	[    ]	%
Stretch	[    ] Percentile	[    ]	%	[    ]	%

Payout levels interpolated between points.

Secondary measure applies only if performance vs. primary measure is below threshold.

27

2.The award payout amount is determined by multiplying the “Payout vs. Target” percentage by the number of Units (worth $1 each) that you were granted.  This award payout amount may be settled, in the sole discretion of the Plan Administrator, in either restricted or unrestricted stock or stock units, or cash (or any combination thereof).

3.Under current tax law, you will be subject to tax on the Vesting Date on the award payout amount.  The Company will be required to withhold applicable taxes at such time.  If the award payout is settled in stock or stock units, the Company will withhold the required number of shares or units to pay these taxes.

4.As provided in the Plan, until the Vesting Date, you may not sell, transfer, or pledge the Units.

Please read the Plan carefully as it contains many other provisions relating to your award.  If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign this letter and return it in the envelope provided, and keep a copy for your records.

Sincerely,

[NAME]

[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of «First» «MI» «Last» DATE

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FORM OF STOCK UNIT AWARD WITH SALE RESTRICTION AGREEMENT

[DATE]

Recipient Name

Recipient Title

Company

Company Address

City, State Zip Code

RE:  Stock Unit Award with Sale Restriction

Dear Recipient:

Effective date, as part of your [PERFORMANCE YEAR] annual incentive and in recognition of your performance during [PERFORMANCE YEAR], you were granted [#] restricted Constellation Energy Group, Inc. (the “Company”) common stock units with sale restrictions (“Deferred Shares”) under the Constellation Energy Group, Inc. Executive Long-Term Incentive Plan (the “Plan”).  In addition to other provisions of the Plan, your award is subject to the following conditions:

1.Each Deferred Share entitles you to receive on the Restriction Lapse Date (set forth below) one share of Constellation Energy Group common stock (“Common Stock”).  Under current tax law, you are not subject to tax on your Deferred Shares until the Restriction Lapse Date (see paragraph 4 below).

2.During the Restriction Period (set forth below), on any date that Constellation Energy Group pays dividends with respect to the Common Stock, the Company shall credit you with a number of Deferred Shares equal to (i) the number of your Deferred Shares on the dividend record date times (ii) the dividend rate per share, divided by (iii) the per share reinvestment price.  These dividend-based additional Deferred Shares shall be subject to the same rules and restrictions as Deferred Shares originally granted to you.

3.The Restriction Period for your Deferred Shares expires on the Restriction Lapse Date as shown in the table below:

# Deferred Shares  Granted	Deferred  Share Grant Date	Restriction Period	Restriction Lapse  Date
[#]	[MM/DD/YY]	[5 years]	[5 years after  Grant Date]

Your Deferred Shares are fully and immediately vested, however, during the Restriction Period, you may not sell, transfer, or pledge the Deferred Shares.  During the Restriction Period, you will have no voting rights with respect to the Deferred Shares.  The Restriction Period remains in effect irrespective of your employment status.

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4.Following the Restriction Lapse Date, the Company shall cause to be issued to you a certificate for shares of Common Stock equal to the number of your Deferred Shares (including dividend-based additional Deferred Shares).  Under current tax law, you will be subject to tax on the Restriction Lapse Date based on an amount equal to the number of shares of Common Stock issued to you times the Fair Market Value per share (i.e., the average of the high and low price of the Common Stock on the Restriction Lapse Date).  The Company will be required to withhold applicable taxes at such time, and will withhold the required number of shares to pay these taxes.  The total shares you receive will be rounded to the nearest whole share.  You should consult your tax advisor regarding any tax issues.

Please read the Plan carefully as it contains many other provisions relating to your award.  If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign the enclosed copy of this letter and return it in the envelope provided.

Sincerely,

[NAME]

[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of Recipient DATE

30

This document constitutes part of a prospectus covering securities
that have been registered under the Securities Act of 1933.

FORM OF
STOCK OPTION AGREEMENT

This Stock Option Agreement (“Agreement”) is subject to the terms and conditions of the Constellation Energy Group, Inc. Executive Long-Term Incentive Plan (the “Plan”).  The «Administrator» Constellation Energy Group, Inc. (the “Plan Administrator”) has authorized the option grant under this Agreement by and between Participant (designated below) and Constellation Energy Group, Inc. (“Constellation Energy”).

1. Grant of Option.

(a) The “Participant” is «First» «Middle» «Last».

(b) The date of the grant is «GrantDate» (“Grant Date”).

(c) The number of shares subject to the option (“Option Shares”) are «Grant» shares of Constellation Energy common stock (“Stock”).

(d) The exercise price is [OptionPrice = fair market value of stock on grant date] per share of Stock (“Exercise Price”).

This Agreement specifies the terms of the option (“Option”) granted to Participant to purchase the Option Shares at the Exercise Price set forth above. The Option is not intended to constitute an “incentive stock option” as that term is used in Internal Revenue Code section 422.  The “Option Period” is the period during which the Option is exercisable as provided in this Agreement.

2. Installment Exercise.

Subject to the terms of this Agreement, the Option will be exercisable in installments according to the following schedule (each a “Vesting Date”):

INSTALLMENT	VESTING DATE APPLICABLE TO INSTALLMENT
[1/3 of Option Shares] Options	[One year after Grant Date]
[1/3 of Option Shares] Options	[Two years after Grant Date]
[1/3 of Option Shares] Options	[Three years after Grant Date]

3. Termination of Option.

(a)           Except as provided in paragraph 3(b) below, the Option will terminate upon the earlier to occur of: (1) when all Option Shares have been exercised; or (2) ten (10) years from the Grant Date (“Expiration Date”).

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(b)           If Participant ceases employment, the Option will terminate as to any unvested Option Shares on the effective date of Participant’s employment Termination (as defined in the Plan) and as to vested Option Shares 90 days after such effective date; provided that if Participant ceases employment because of Participant’s Retirement, Disability (each as defined in the Plan), or death, the Option will terminate as to any unvested Option Shares on the effective date of the Retirement, Disability or death, and as to vested Option Shares, the Option will remain exercisable until the earlier of 60 months after such effective date or the Expiration Date.

(c)           In the event of Participant’s death during the Option Period, vested Option Shares may be exercised by Participant’s legal representative(s), or by other person(s) authorized under Participant’s will.  Alternatively, if Participant fails to make testamentary disposition of the Option or dies intestate, such vested Option Shares may be exercised by persons(s) entitled to receive the Option Shares under the applicable laws of descent and distribution.

(d)           A transfer of Participant’s employment between Constellation Energy and any Subsidiary of Constellation Energy, or between Subsidiaries of Constellation Energy, will not be considered an employment Termination.

4. Exercise of Option.

(a)           Subject to this Agreement and the Plan, the Option may be exercised in whole or in part by the method specified by the Plan Administrator from time to time or by contacting [NAME] at [PHONE NUMBER(S)].

(b)           On or before the exercise date specified pursuant to paragraph 4(a), Participant must fully pay the Exercise Price and the tax withholding obligation for the Option Shares exercised in U.S. dollars by cash or by check payable to Constellation Energy Group, Inc.  All or a portion of the Exercise Price and tax withholding obligation may also be paid by Participant: (i) subject to the terms of paragraph 4(c) below, by delivery of shares of Stock owned by Participant and acceptable to the Plan Administrator having an aggregate Fair Market Value (as defined in paragraph 6 below) on the date of exercise that is equal to the amount of cash that would otherwise be required; or (ii) by authorizing a third party to sell the Option Shares (or a sufficient portion of the Option Shares), and immediately remit to Constellation Energy the Exercise Price and any tax withholding resulting from such exercise.  Further, tax withholding up to the minimum required withholding rate (but not in excess of that rate) may also be satisfied through a holdback by Constellation Energy of some of the Option Shares that would otherwise be deliverable to Participant by reason of the Option exercise.  The Option will cease to be exercisable, as to the portion exercised, when Participant purchases the Stock to which the exercised portion of the Option relates.

(c)           Other shares of Stock owned by Participant may be delivered to satisfy the Exercise Price, or to satisfy Participant’s tax withholding obligation above the minimum withholding rate, only if the shares have been held by Participant for at least six months before delivery, except that there shall be no holding period imposed for shares purchased by Participant for cash on the open market.  Use of previously-owned shares shall be effected by actual delivery of the Stock certificates to Constellation Energy, and by completing an affidavit available from Constellation Energy affirming that Participant owns the necessary shares and that any applicable holding period has been satisfied.

(d)           Participant is required to comply with Constellation Energy’s Insider Trading Policy at all times, including in connection with exercise of the Option. The Option may not be exercised by Participant during any blackout or prohibited trading period established by Constellation Energy or applicable to Participant, nor shall the Option be exercisable if and to the extent Constellation Energy determines that such exercise would violate applicable state or Federal securities laws or the rules and

32

regulations of any securities exchange on which the Stock is traded.  If Constellation Energy makes such a determination, it will use all reasonable efforts to comply with such laws, rules or regulations.  In making any such determinations, Constellation Energy may rely on the opinion of counsel for Constellation Energy.

(e)           As soon as practicable after the exercise date, Constellation Energy will deliver to Participant a Stock certificate or certificates (or other evidence of ownership) for the purchased Option Shares.

5.  Tax Withholding.

Constellation Energy will have the right to withhold any applicable federal, state or local taxes, deductions or withholdings due with respect to the Option or its exercise in such form and manner as provided in the Plan.

6. Fair Market Value.

The “Fair Market Value” of a share of Stock is the average of the highest and lowest sale price per share of Stock on the New York Stock Exchange-Composite Transactions on the applicable date of reference, or if there are no sales on such date, then the average of such highest and lowest sale price on the last previous day on which sales are reported.

7. No Rights of Stockholders.

Participant does not have any of the rights and privileges of a stockholder of Constellation Energy with respect to any shares of Stock purchasable or issuable upon the exercise of the Option, in whole or in part, before the date of exercise and purchase of the Option Shares.

8. Non-Transferability of Option.

The Option is not transferable, except for a transfer to Participant’s family member or to a trust established for the benefit of Participant’s family members which has been approved by the Plan Administrator as provided in the Plan, or in case of Participant’s death, by will or the laws of descent and distribution, nor shall the Option be subject to attachment, execution or other similar process.  During Participant’s lifetime, the Option is exercisable only by Participant, any guardian or legal representative of Participant, or a family member or trustee of a trust established for the benefit of Participant’s family members to whom the Option has been transferred in accordance with the Plan.  In the event of (a) any attempt by Participant to alienate, assign, pledge, hypothecate or otherwise dispose of the Option, except as provided in this Agreement, or (b) the levy of any attachment, execution or similar process upon the rights or interest conferred under this Agreement, Constellation Energy may terminate the Option by notice to Participant and it will become null and void.

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9. Employment Not Affected.

Neither this Agreement nor the grant of the Option constitutes a contract of employment between Constellation Energy or any Subsidiary and Participant, and neither will be deemed to be consideration for, or a condition of, continued employment of Participant.

10. Incorporation of Plan by Reference.

The Option is granted pursuant to the terms of the Plan, the terms of which are incorporated in this Agreement by reference.  The Option will in all respects be interpreted in accordance with the Plan.  All capitalized terms, which are not otherwise defined in this Agreement, will have the meaning specified in the Plan.  The Plan Administrator will interpret and construe the Plan and this Agreement, and its interpretations and determinations will be conclusive and binding on the parties and any other person claiming an interest with respect to any issue arising under this Agreement.

11.  Severability.

The provisions of this Agreement are severable.  If any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions will nevertheless be binding and enforceable.

IN WITNESS WHEREOF, Constellation Energy Group, Inc. and Participant have executed this Stock Option Agreement effective as of the Grant Date.

Constellation Energy Group, Inc	ACCEPTED AND AGREED TO:
[NAME]	By:
		«First» «Middle» «Last»
[TITLE, DEPARTMENT]

34

EX-10.(C)

EXHIBIT No. 10 (c)

This document constitutes part of a prospectus covering securities
that have been registered under the Securities Act of 1933.

Constellation Energy Group, Inc.
Amended and Restated 2002 Senior Management Long-Term Incentive Plan
(Plan)

1.Purpose.  The purpose of this Plan is to increase shareholder value by providing a long-term incentive to reward certain executives, senior management level and key employees of the Company and its Subsidiaries, whose responsibilities include the continued growth, development, and financial success of the Company and its Subsidiaries, and the continued profitable performance of the Company and its Subsidiaries. The Plan is also designed to permit the Company and its Subsidiaries to attract and retain talented and motivated executive, senior management and key employees and to increase their ownership of Company common stock.

2.Definitions.  All singular terms defined in this Plan will include the plural and vice versa. As used herein, the following terms will have the meaning specified below:

“Award” means individually or collectively, Restricted Stock, Restricted Stock Units, Options, Performance Units, Stock Appreciation Rights, Dividend Equivalents, or Equity granted under this Plan.

“Board” means the Board of Directors of the Company.

“Book Value” means the book value of a share of Stock determined in accordance with the Company’s regular accounting practices as of the last business day of the month immediately preceding the month in which a Stock Appreciation Right is exercised as provided in Section 10.

“Code” means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code will be deemed to include any amendments or successor provisions to such section and any regulations promulgated thereunder.

“Company” means Constellation Energy Group, Inc., a Maryland corporation, or its successor, including any “New Company” as provided in Section 15I.

“Covered Award” means any Award granted under the Plan on or after December 18, 2005.

“Date of Grant” means the date on which the granting of an Award is authorized by the Plan Administrator or such later date as may be specified by the Plan Administrator in such authorization.

“Date of Retirement” means the date of Retirement.

“Disability” means the determination that a Participant is “disabled” under the Company disability plan in effect at that time.

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“Dividend Equivalent” means an Award granted under Section 11.

“Eligible Person” means any person who satisfies all of the requirements of Section 5.

“Equity” means an Award granted under Section 12.

“Excluded Transactions” has the meaning set forth in Section 13.

“Exercise Period” means the period or periods during which a Stock Appreciation Right is exercisable as described in Section 10.

“Fair Market Value” means the average of the highest and lowest price at which the Stock was sold regular way on the New York Stock Exchange-Composite Transactions on a specified date; provided, however, that notwithstanding the foregoing, solely for purposes of determining the Option price per share of Stock under Section 8C for Option grants made after October 19, 2006, “Fair Market Value” means the price at which the Stock was last sold on the New York Stock Exchange-Composite Transactions on the Date of Grant.

“Incentive Stock Option” means an incentive stock option within the meaning of Section 422 of the Code.

“1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Option” or “Stock Option” means either a nonqualified stock option or an incentive stock option granted under Section 8.

“Option Period” or “Option Periods” means the period or periods during which an Option is exercisable as described in Section 8.

“Participant” means an individual who has been granted an Award under this Plan.

“Pension Plan” means the Pension Plan of Constellation Energy Group, Inc. as may be amended from time to time.

“Performance-Based” means that in determining the amount of a Restricted Stock or Restricted Stock Unit Award payout, the Plan Administrator will take into account the performance of the Participant, the Company, one or more Subsidiaries, or any combination thereof.

“Performance Period” means the taxable year of the Company or any other period designated by the Plan Administrator with respect to which an Award may be granted.

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“Performance Unit” means a unit of measurement equivalent to such amount or measure as defined by the Plan Administrator which may include, but is not limited to, dollars, market value shares, or book value shares.

“Plan Administrator” means, as set forth in Section 4, the Chief Executive Officer of the Company.

“Restricted Stock” means Stock issued in the name of a Participant that bears a restrictive legend prohibiting sale, transfer, pledge or hypothecation of the Stock until the expiration of the restriction period.

“Restricted Stock Unit” means a right granted under Section 7 that is denominated in shares of stock, each of which represents a right to receive the value of a share of stock (or a percentage of such value, which percentage may be higher than 100%) upon the terms and conditions set forth by the Committee.

“Retirement” means retirement on or after the “Early Retirement Date” (as such term is defined in the Pension Plan or a Subsidiary’s retirement or pension plan).

“Service-Based” means that in determining the amount of a Restricted Stock or Restricted Stock Unit Award payout, the Plan Administrator will take into account only the period of time that the Participant performed services for the Company or its Subsidiaries since the Date of Grant.

“Stock” means the common stock, without par value, of the Company.

“Stock Appreciation Right” means an Award granted under Section 10.

“Subsidiary(ies)” means any entity that is directly or indirectly controlled by the Company or any entity, including an acquired entity, in which the Company has a significant equity interest, as determined by the Plan Administrator, in his/her discretion.

“Termination” means resignation or discharge from employment with the Company or any of its Subsidiaries except in the event of death, Disability, or Retirement.

“Year” means a fiscal year of the Company commencing on or after January 1, 2002 that constitutes all or part of the applicable Performance Period.

3.Effective Date, Duration and Stockholder Approval.

A.Effective Date and Stockholder Approval.  The Plan became effective as of May 24, 2002, and was most recently amended and restated effective as of October 19, 2006.

B.Period for Grants of Awards.  Awards may be made as provided herein for a period of 10 years after May 24, 2002.

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C.Termination.  The Plan will continue in effect until all matters relating to the payment of outstanding Awards and administration of the Plan have been settled.

4.Plan Administration.  The Chief Executive Officer is the Plan Administrator and has sole authority (except as specified otherwise herein) to determine all questions of interpretation and application of the Plan, or of the terms and conditions pursuant to which Awards are granted, exercised or forfeited under the Plan provisions, and, in general, to make all determinations advisable for the administration of the Plan to achieve its stated purpose. Without limiting the generality of the foregoing, the Plan Administrator may modify, amend, extend or renew outstanding Awards, or accept the surrender of outstanding Awards and substitute new Awards (provided, however, that, except as provided in Section 15H of the Plan, any modification that would materially adversely affect any outstanding Award shall not be made without the consent of the Participant, and provided, further, that no modification, amendment or substitution that results in repricing a Stock Option to a lower exercise price, other than to reflect an adjustment made pursuant to Section 15H, shall be made without prior stockholder approval).

The Plan Administrator’s determinations under the Plan (including without limitation, determinations of the persons to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and any agreements evidencing such Awards) need not be uniform and may be made by the Administrator selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated. Such determinations shall be final and not subject to further appeal.

The Plan Administrator may delegate his/her authority under the Plan.

5.Eligibility.  Each officer (who is not a participant under the Company’s Executive Long-Term Incentive Plan), senior management level or key employee of the Company and its Subsidiaries may be designated by the Plan Administrator as a Participant, from time to time, with respect to one or more Awards. No employee of the Company or its Subsidiaries shall have any right to be granted an Award under this Plan. The Plan Administrator may also grant Awards to individuals in connection with hiring (as an officer, senior management level or key employee), retention or otherwise, prior to the date the individual first performs services for the Company or a Subsidiary; provided, however, that such Awards shall not become vested or exercisable prior to the date the individual first commences performance of such services.

6.Grant of Awards and Limitation of Number of Shares Awarded.  The Plan Administrator may, from time to time, grant Awards to one or more Eligible Persons, provided that subject to any adjustment pursuant to Section 15H, the aggregate number of shares of Stock subject to Awards that may be delivered under this Plan may not exceed four million (4,000,000) shares. Shares delivered by the Company under the Plan may be authorized and unissued Stock, Stock held in the treasury of the

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Company, or Stock purchased on the open market (including private purchases) in accordance with applicable securities laws.

Any shares of Stock covered by an Award (or portion of an Award) granted under the Plan that is forfeited or canceled, expires or is settled in cash, including the settlement of tax withholding obligations using shares, shall be deemed not to have been delivered for purposes of determining the maximum number of shares available for delivery under the Plan. Likewise, if any Option granted under the Plan is exercised by tendering shares of Stock to the Company as full or partial payment for such exercise under the Plan, only the number of shares issued net of the shares tendered shall be deemed delivered for purposes of determining the maximum number of shares available for delivery under the Plan.

The Plan Administrator may permit or require a recipient of an Award to defer all or part of such individual’s receipt of the payment of cash or the delivery of Stock that would otherwise be due to such individual by virtue of the exercise of, payment of, or lapse or waiver of restrictions respecting, any Award. If any such payment deferral is required or permitted, the Plan Administrator shall, in his/her sole discretion, establish rules and procedures for such payment deferrals.

7.Service-Based Restricted Stock and Restricted Stock Unit Awards.

A.Grants of Service-Based Restricted Shares or Units.  One or more shares of Restricted Stock or Restricted Stock Units may be granted to any Eligible Person. The Service-Based Restricted Stock will be issued or Restricted Stock Unit granted to the Participant on the Date of Grant without the payment of consideration by the Participant. The Service-Based Restricted Stock will be issued or Restricted Stock Unit granted in the name of the Participant and will bear a restrictive legend prohibiting sale, transfer, pledge or hypothecation of the Service-Based Restricted Stock or Restricted Stock Unit until the expiration of the restriction period.

The Plan Administrator may also impose such other restrictions and conditions on the Service-Based Restricted Stock or Restricted Stock Unit as he/she deems appropriate.

Upon issuance to the Participant of the Service-Based Restricted Stock, the Participant will have the right to vote the Service-Based Restricted Stock. Upon issuance to the Participant of the Restricted Stock or grant of the Restricted Stock Unit and subject to the Plan Administrator’s discretion, the Participant will have the right to receive the cash dividends (or Dividend Equivalents as provided in Section 11) distributable with respect to such shares or units, with such dividends or Dividend Equivalents treated as compensation to the Participant. The Plan Administrator, in his/her sole discretion, may direct the accumulation and payment of distributable dividends to the Participant at such times, and in such form and manner, as determined by the Plan Administrator.

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B.Restriction Period.  At the time a Service-Based Restricted Stock or Restricted Stock Unit Award is granted, the Plan Administrator will establish a restriction period applicable to such Award which will be not less than one year and not more than ten years. Each Restricted Stock or Restricted Stock Unit Award may have a different restriction period, at the discretion of the Plan Administrator.

C.Forfeiture or Payout of Award.  In the event a Participant ceases employment during a restriction period, a Service-Based Restricted Stock or Restricted Stock Unit Award is subject to forfeiture or payout (i.e., removal of restrictions) as follows: (a) Termination—the Service-Based Restricted Stock or Restricted Stock Unit Award is completely forfeited; or (b) Retirement, Disability or death—payout of the Service-Based Restricted Stock or Restricted Stock Unit Award is prorated for service during the period; provided, however, that the Plan Administrator may modify the above if he/she determines at his/her sole discretion that special circumstances warrant such modification.

Any shares of Service-Based Restricted Stock which are forfeited will be transferred to the Company.

Upon completion of the restriction period, all Award restrictions will expire and new certificates representing the Award will be issued (the payout) without the restrictive legend described in Section 7A.

D.Waiver of Section 83(b) Election.  Unless otherwise directed by the Plan Administrator, as a condition of receiving an Award of Service-Based Restricted Stock, a Participant must waive in writing the right to make an election under Section 83(b) of the Code to report the value of the Service-Based Restricted Stock as income on the Date of Grant.

8.Stock Options.

A.Grants of Options.  One or more Options may be granted to any Eligible Person on the Date of Grant without the payment of consideration by the Participant.

B.Stock Option Agreement.  Each Option granted under the Plan will be evidenced by a “Stock Option Agreement” between the Company and the Participant containing provisions determined by the Plan Administrator, including, without limitation, provisions to qualify Incentive Stock Options as such under Section 422 of the Code if directed by the Plan Administrator at the Date of Grant; provided, however, that each Incentive Stock Option Agreement must include the following terms and conditions: (i) that the Options are exercisable, either in total or in part, with a partial exercise not affecting the exercisability of the balance of the Option; (ii) every share of Stock purchased through the exercise of an Option will be paid for in full at the time of the exercise; (iii) each Option will cease to be exercisable, as to any share of Stock, at the earliest of (a) the Participant’s purchase of the Stock to which the Option relates, (b) the Participant’s exercise of a related Stock Appreciation Right, or (c) the lapse of the Option; (iv) Options will not be transferable by the

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Participant except by Will or the laws of descent and distribution and will be exercisable during the Participant’s lifetime only by the Participant or by the Participant’s guardian or legal representative; and (v) notwithstanding any other provision, in the event of a public tender for all or any portion of the Stock or in the event that any proposal to merge or consolidate the Company with another company is submitted to the stockholders of the Company for a vote, the Plan Administrator, in his/her sole discretion, may declare any previously granted Options to be immediately exercisable.

C.Option Price.  The Option price per share of Stock will be set by the grant, but will be not less than 100% of the Fair Market Value at the Date of Grant.

D.Form of Payment.  At the time of the exercise of the Option, the Option price will be payable in cash or in other shares of Stock or in a combination of cash and other shares of Stock, in a form and manner as required by the Plan Administrator in his/her sole discretion. When Stock is used in full or partial payment of the Option price, it will be valued at the Fair Market Value on the applicable date.

E.Other Terms and Conditions.  The Option will become exercisable in such manner and within such Option Period or Periods, not to exceed 10 years from its Date of Grant, as set forth in the Stock Option Agreement upon payment in full. Except as otherwise provided in this Plan or in the Stock Option Agreement, any Option may be exercised in whole or in part at any time.

F.Lapse of Option.  An Option will lapse upon the earlier of: (i) 10 years from the Date of Grant, or (ii) at the expiration of the Option Period set by the grant. If the Participant ceases employment within the Option Period and prior to the lapse of the Option, the Option will lapse as follows: (a) Termination—any unvested Option will lapse on the effective date of the Termination and any vested Option will lapse 90 days after the effective date of the Termination; or (b) Retirement, Disability or death—any unvested Option will lapse on the effective date of the Retirement, Disability or death and any vested Option will lapse on the earlier of 60 months after the effective date of the Retirement, Disability or death or at the expiration of the Option Period set by the Grant; provided, however, that the Plan Administrator may modify the above if he/she determines in his/her sole discretion that special circumstances warrant such modification.

G.Individual Limitation.  In the case of an Incentive Stock Option, the aggregate Fair Market Value of the Stock for which Incentive Stock Options (whether under this Plan or another arrangement) in any calendar year are first exercisable will not exceed $100,000 with respect to such calendar year (or such other individual limit as may be in effect under the Code on the Date of Grant) plus any unused portion of such limit as the Code may permit to be carried over.

9.Performance-Based Restricted Stock or Restricted Stock Units/Performance Units.

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A.Provision for Awards.  The Plan Administrator will determine a Performance Period and will determine the performance objectives for each Participant’s target performance award and the number of shares of Performance-Based Restricted Stock, Performance-Based Restricted Stock Units or Performance Units subject to each target performance award. Performance objectives may vary from Participant to Participant and will be based upon such performance criteria or combination of factors as the Plan Administrator deems appropriate, which may include, but not be limited to, the performance of the Participant, the Company, one or more Subsidiaries, or any combination thereof. Performance Periods may overlap and Participants may participate simultaneously with respect to Performance Units or Performance-Based Restricted Stock or Performance-Based Restricted Stock Units for which different Performance Periods are prescribed.

If during the course of a Performance Period significant events occur as determined in the sole discretion of the Plan Administrator which the Plan Administrator expects to have a substantial effect on a performance objective during such period, the Plan Administrator may revise such objective.

B.Performance-Based Restricted Stock Awards or Restricted Stock Unit Awards.

(i)Grants of Performance-Based Restricted Stock or Restricted Stock Units.  Subject to Section 9A, one or more shares of Performance-Based Restricted Stock or Restricted Stock Unit may be granted to any Eligible Person. The Performance-Based Restricted Stock or Restricted Stock Unit will be issued to the Participant on the Date of Grant without the payment of consideration by the Participant. The Performance-Based Restricted Stock or Restricted Stock Unit will be issued in the name of the Participant and will bear a restrictive legend prohibiting sale, transfer, pledge or hypothecation of the Performance-Based Restricted Stock or Restricted Stock Unit until the expiration of the restriction period.

The Plan Administrator may also impose such other restrictions and conditions on the Performance-Based Restricted Stock or Restricted Stock Unit as he/she deems appropriate.

Upon issuance to the Participant of the Performance-Based Restricted Stock, the Participant will have the right to vote the Performance-Based Restricted Stock. Upon issuance to the Participant of the Performance-Based Restricted Stock or grant of the Restricted Stock Unit and subject to the Plan Administrator’s discretion, the Participant will have the right to receive the cash dividends (or Dividend Equivalents as provided in Section 11) distributable with respect to such shares or units, with such dividends or Dividend Equivalents treated as compensation to the Participant. The Plan Administrator, in his/her sole discretion, may direct the accumulation

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and payment of distributable dividends to the Participant at such times, and in such form and manner, as determined by the Plan Administrator.

(ii)Restriction Period.  At the time a Performance-Based Restricted Stock or Restricted Stock Unit Award is granted, the Plan Administrator will establish a restriction period applicable to such Award which will be not less than one year and not more than ten years. Each Performance-Based Restricted Stock or Restricted Stock Unit Award may have a different restriction period, at the discretion of the Plan Administrator.

(iii)Waiver of Section 83(b) Election.  Unless otherwise directed by the Plan Administrator, as a condition of receiving an Award of Performance-Based Restricted Stock, a Participant must waive in writing the right to make an election under Section 83(b) of the Code to report the value of the Performance-Based Restricted Stock as income on the Date of Grant.

C.Performance Units.  Subject to Section 9A, one or more Performance Units may be earned by an Eligible Person based on the achievement of preestablished performance objectives during a Performance Period.

D.Forfeiture or Payout of Award.  As soon as practicable after the end of each Performance Period, the Plan Administrator will determine whether the performance objectives and other material terms of the Award were satisfied. The Plan Administrator’s determination of all such matters will be final and conclusive.

As soon as practicable after the date the Plan Administrator makes the above determination, the Plan Administrator will determine the Award payment for each Participant.

In the event a Participant ceases employment during a Performance Period, the Performance-Based Restricted Stock, Performance-Based Restricted Stock Unit or Performance Unit Award is subject to forfeiture or payout as follows: (a) Termination—the Performance-Based Restricted Stock, Performance-Based Restricted Stock Unit or Performance Unit Award is completely forfeited; or (b) Retirement, Disability or death—payout of the Performance-Based Restricted Stock, Performance-Based Restricted Stock Unit or Performance Unit Award is prorated taking into account factors including, but not limited to, service and the performance of the Participant during the portion of the Performance Period before employment ceased; provided, however, that the Plan Administrator may modify the above if he/she determines in his/her sole discretion that special circumstances warrant such modification.

Any shares of Performance-Based Restricted Stock which are forfeited will be transferred to the Company.

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E.Form and Timing of Payment.  With respect to shares of Performance-Based Restricted Stock or Restricted Stock Units for which restrictions lapse, new certificates will be issued (the payout) without the restrictive legend described in Section 9B(i). Each Performance Unit is payable in cash or shares of Stock or in a combination of cash and Stock, as determined by the Plan Administrator in his/her sole discretion. Such payment will be made as soon as practicable after the Award payment is determined.

10.Stock Appreciation Rights.

A.Grants of Stock Appreciation Rights.  Stock Appreciation Rights may be granted under the Plan in conjunction with an Option either at the Date of Grant or by amendment or may be separately granted. Stock Appreciation Rights will be subject to such terms and conditions not inconsistent with the Plan as the Plan Administrator may impose.

B.Right to Exercise; Exercise Period.  A Stock Appreciation Right issued pursuant to an Option will be exercisable to the extent the Option is exercisable; both such Stock Appreciation Right and the Option to which it relates will not be exercisable during the six months following their respective Dates of Grant except in the event of the Participant’s Disability or death. A Stock Appreciation Right issued independent of an Option will be exercisable pursuant to such terms and conditions established in the grant. Notwithstanding such terms and conditions, in the event of a public tender for all or any portion of the Stock or in the event that any proposal to merge or consolidate the Company with another company is submitted to the stockholders of the Company for a vote, the Plan Administrator, in his/her sole discretion, may declare any previously granted Stock Appreciation Right immediately exercisable.

C.Failure to Exercise.  If on the last day of the Option Period, in the case of a Stock Appreciation Right granted pursuant to an Option, or the specified Exercise Period, in the case of a Stock Appreciation Right issued independent of an Option, the Participant has not exercised a Stock Appreciation Right, then such Stock Appreciation Right will be deemed to have been exercised by the Participant on the last day of the Option Period or Exercise Period.

D.Payment.  An exercisable Stock Appreciation Right granted pursuant to an Option will entitle the Participant to surrender unexercised the Option or any portion thereof to which the Stock Appreciation Right is attached, and to receive in exchange for the Stock Appreciation Right payment (in cash or Stock or a combination thereof as described below) equal to either of the following amounts, determined in the sole discretion of the Plan Administrator at the Date of Grant: (1) the excess of the Fair Market Value of one share of Stock at the date of exercise over the Option price, times the number of shares called for by the Stock Appreciation Right (or portion thereof) which is so surrendered, or (2) the excess of the Book Value of one share of Stock at the date of exercise over the Book Value of one share of Stock at the Date of Grant of the related Option, times the number of shares called for by the Stock Appreciation Right. Upon exercise of a Stock Appreciation Right not granted

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pursuant to an Option, the Participant will receive for each Stock Appreciation Right payment (in cash or Stock or a combination thereof as described below) equal to either of the following amounts, determined in the sole discretion of the Plan Administrator at the Date of Grant: (1) the excess of the Fair Market Value of one share of Stock at the date of exercise over the Fair Market Value of one share of Stock at the Date of Grant of the Stock Appreciation Right, times the number of shares called for by the Stock Appreciation Right, or (2) the excess of the Book Value of one share of Stock at the date of exercise of the Stock Appreciation Right over the Book Value of one share of Stock at the Date of Grant of the Stock Appreciation Right, times the number of shares called for by the Stock Appreciation Right.

The Plan Administrator may direct the payment in settlement of the Stock Appreciation Right to be in cash or Stock or a combination thereof. Alternatively, the Plan Administrator may permit the Participant to elect to receive cash in full or partial settlement of the Stock Appreciation Right, provided that (i) the Plan Administrator must consent to or disapprove such election and (ii) unless the Plan Administrator directs otherwise, the election and the exercise must be made during the period beginning on the 3rd business day following the date of public release of quarterly or year-end earnings and ending on the 12th business day following the date of public release of quarterly or year-end earnings. The value of the Stock to be received upon exercise of a Stock Appreciation Right shall be the Fair Market Value of the Stock on the trading day preceding the date on which the Stock Appreciation Right is exercised. To the extent that a Stock Appreciation Right issued pursuant to an Option is exercised, such Option shall be deemed to have been exercised, and shall not be deemed to have lapsed.

E.Nontransferable.  A Stock Appreciation Right will not be transferable by the Participant except by Will or the laws of descent and distribution and will be exercisable during the Participant’s lifetime only by the Participant or by the Participant’s guardian or legal representative.

F.Lapse of a Stock Appreciation Right.  A Stock Appreciation Right will lapse upon the earlier of: (i) 10 years from the Date of Grant; or (ii) at the expiration of the Exercise Period as set by the grant. If the Participant ceases employment within the Exercise Period and prior to the lapse of the Stock Appreciation Right, the Stock Appreciation Right will lapse as follows: (a) Termination—any unvested Stock Appreciation Right will lapse on the effective date of the Termination and any vested Stock Appreciation Right will lapse 90 days after the effective date of the Termination; or (b) Retirement, Disability or death—any unvested Stock Appreciation Right will lapse on the effective date of the Retirement, Disability or death and any vested Stock Appreciation Right will lapse on the earlier of 60 months after the effective date of the Retirement, Disability or death or at the expiration of the Exercise Period set by the grant; provided, however, that the Plan Administrator may modify the above if he/she determines in his/her sole discretion that special circumstances warrant such modification.

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11.Dividend Equivalents.

A.Grants of Dividend Equivalents.  Dividend Equivalents may be granted under the Plan in conjunction with an Option or a separately awarded Stock Appreciation Right, at the Date of Grant or by amendment, without consideration by the Participant. Dividend Equivalents may also be granted under the Plan in conjunction with Performance-Based Restricted Stock, Performance-Based Restricted Stock Units or Performance Units, at any time during the Performance Period, without consideration by the Participant.

B.Payment.  Each Dividend Equivalent will entitle the Participant to receive an amount equal to the dividend actually paid with respect to a share of Stock on each dividend payment date from the Date of Grant to the date the Dividend Equivalent lapses as set forth in Section 11D. The Plan Administrator, in his/her sole discretion, may direct the payment of such amount at such times and in such form and manner as determined by the Plan Administrator.

C.Nontransferable.  A Dividend Equivalent will not be transferable by the Participant.

D.Lapse of a Dividend Equivalent.  Each Dividend Equivalent will lapse on the earlier of (i) the date of the lapse of the related Option or Stock Appreciation Right; (ii) the date of the exercise of the related Option or Stock Appreciation Right; (iii) the end of the Performance Period (or if earlier, the date the Participant ceases employment) of the related Performance Units or Performance-Based Restricted Stock or Restricted Stock Unit Award; or (iv) the lapse date established by the Plan Administrator on the Date of Grant of the Dividend Equivalent.

12.Equity.  One or more shares of Stock may be granted to any Eligible Person, in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by law, as the Plan Administrator shall determine. An Equity Award may be denominated in Stock or other securities, stock-equivalent units, securities or debentures convertible into Stock, or any combination of the foregoing and may be paid in Stock or other securities, in cash, or in a combination of Stock or other securities and cash, all as determined in the sole discretion of the Plan Administrator. Unless the Plan Administrator determines otherwise, the vesting period for Equity Awards shall be at least three years.

13.Accelerated Award Payout/Exercise.

A.Change in Control.  Notwithstanding anything in this Plan document to the contrary, a Participant is entitled to an accelerated payout (as set forth in Section 13B) with respect to any previously granted Award upon the happening of a change in control; provided, that, except as otherwise expressly provided to the contrary in the applicable grant agreement, a Participant will not be entitled to an accelerated vesting or payout of any Covered Awards in connection with the

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consummation of the transactions contemplated by the Agreement and Plan of Merger dated as of December 18, 2005 by and among FPL Group, Inc., CF Merger Corporation and the Company (the “Excluded Transactions”), and such Covered Awards shall remain outstanding in accordance with their terms following the consummation of the Excluded Transactions, subject to any adjustments made by the Plan Administrator in accordance with the provisions of Section 15.

A change in control for purposes of this Section 13 means the occurrence of any one of the following events:

(i)individuals who, on January 24, 2003, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to January 24, 2003, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

(ii)any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a change in control by virtue of any of the following acquisitions: (A) by the Company or any corporation with respect to which the Company owns a majority of the outstanding shares of common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors (a “Subsidiary Company”), (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary Company, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition by Participant or any group of persons including Participant (or any entity controlled by Participant or any group of persons including Participant);

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(iii)consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiary Companies, (a “Business Combination”), unless immediately following such Business Combination: (A) more than 60% of the total voting power of (x) the corporation resulting from such Business Combination (the “Surviving Corporation”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B), and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or

(iv)the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company, or the consummation of a sale of all or substantially all of the Company’s assets.

Notwithstanding the foregoing, a change in control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a change in control of the Company shall then occur.

B.Amount of Award Subject to Accelerated Payout.    The amount of a Participant’s previously granted Award that will be paid or exercisable upon the

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happening of a change in control will be determined as follows, provided, that, except as otherwise expressly provided to the contrary in the applicable grant agreement, a Participant will not be entitled to an accelerated vesting or payout of any Covered Awards under this Section 13B in connection with the consummation of the Excluded Transactions:

Service-Based Restricted Stock or Restricted Stock Unit Awards.    The Participant will be entitled to an accelerated Award payout, and the amount of the payout will be based on the number of shares of Service-Based Restricted Stock or Restricted Stock Units that were issued on the Date of Grant.

Stock Option Awards and Stock Appreciation Rights.    Any previously granted Stock Option Awards or Stock Appreciation Rights will be immediately vested, any gain will be immediately paid in cash, and the Stock Option Awards and/or Stock Appreciation Rights will then lapse.

Performance-Based Restricted Stock or Restricted Stock Units/Performance Units.    The Participant will be entitled to an accelerated Award payout, and the amount of the payout will be based on the number of shares of Performance-Based Restricted Stock or Restricted Stock Units/Performance Units subject to the Award as established on the Date of Grant, prorated based on the number of months of the Performance Period that have elapsed as of the payout date, and assuming that maximum performance was achieved.

Equity Awards.    Any previously granted Equity Award will be immediately vested.

Covered Awards.  Except as may be expressly provided to the contrary in the applicable grant agreement, Covered Awards shall not vest or be subject to immediate payout as a result of the consummation of the Excluded Transactions, but will remain outstanding in accordance with their terms following the consummation of the Excluded Transactions, subject to any adjustments made by the Plan Administrator in accordance with the provisions of Section 15.

C.Timing of Accelerated Payout/Option Period/Exercise Period.    The accelerated payout set forth in Section 13B will be made in cash within 30 days after the date of the change in control. When Stock is related to the Award, the amount of cash will be determined based on the Fair Market Value of Stock on the payout date.

14.Amendment of Plan.

The Plan Administrator may at any time and from time to time alter, amend, suspend or terminate the Plan in whole or in part, except no such action may be taken without the consent of the Participant to whom any Award was previously granted, which adversely affects the rights of such Participant concerning such Award, except as such

15

termination or amendment of the Plan is required by statute, or rules and regulations promulgated thereunder.

15.Miscellaneous Provisions.

A.Nontransferability.    No benefit provided under this Plan shall be subject to alienation or assignment by a Participant (or by any person entitled to such benefit pursuant to the terms of this Plan), nor shall it be subject to attachment or other legal process except (i) to the extent specifically mandated and directed by applicable state or federal statute; (ii) as requested by the Participant (or by any person entitled to such benefit pursuant to the terms of this Plan), and approved by the Plan Administrator, to satisfy income tax withholding; and (iii) as requested by the Participant and approved by the Plan Administrator, to members of the Participant’s family, or a trust established by the Participant for the benefit of family members.

B.No Employment Right.    Participation in this Plan shall not constitute a contract of employment between the Company or any Subsidiary and any person and shall not be deemed to be consideration for, or a condition of, continued employment of any person.

C.Tax Withholding.    The Company or a Subsidiary may withhold any applicable federal, state or local taxes at such time and upon such terms and conditions as required by law or determined by the Company or a Subsidiary. Subject to compliance with any requirements of applicable law, the Plan Administrator may permit or require a Participant to have any portion of any withholding or other taxes payable in respect to a distribution of Stock satisfied through the payment of cash by the Participant to the Company or a Subsidiary, the retention by the Company or a Subsidiary of shares of Stock, or delivery of previously owned shares of the Participant’s Stock, having a Fair Market Value equal to the withholding amount.

D. Fractional Shares.    Any fractional shares concerning Awards shall be eliminated at the time of payment or payout by rounding down for fractions of less than one-half and rounding up for fractions of equal to or more than one-half. No cash settlements shall be made with respect to fractional shares eliminated by rounding.

E.Government and Other Regulations.    The obligation of the Company to make payment of Awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by any government agencies as may be required. The Company shall be under no obligation to register under the Securities Act of 1933, as amended (“Act”), any of the shares of Stock issued, delivered or paid in settlement under the Plan. If Stock awarded under the Plan may in certain circumstances be exempt from registration under the Act, the Company may restrict its transfer in such manner as it deems advisable to ensure such exempt status.

F.Indemnification.    The Plan Administrator (and his/her designees) shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit, or proceeding to which

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such person may be a party or in which such person may be involved by reason of any action or failure to act under the Plan; and (ii) any and all amounts paid by such person in satisfaction of judgment in any such action, suit, or proceeding relating to the Plan. Each person covered by this indemnification shall give the Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person’s own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Charter or By-Laws of the Company or any of its Subsidiaries, as a matter of law, or otherwise, or any power that the Company may have to indemnify such person or hold such person harmless.

G.Reliance on Reports.    The Plan Administrator (and each person to whom the Plan Administrator has delegated any of his/her authority or power under this Plan) shall be fully justified in relying or acting in good faith upon any report made by the independent public accountants of the Company and its Subsidiaries and upon any other information furnished in connection with the Plan. In no event shall the Plan Administrator (or each person to whom the Plan Administrator has delegated any of his/her authority or power under this Plan) be liable for any determination made or other action taken or any omission to act in reliance upon any such report or information or for any action taken, including the furnishing of information, or failure to act, if in good faith.

H.Changes in Capital Structure.    In the event of any change in the outstanding shares of Stock by reason of any stock dividend or split, recapitalization, combination or exchange of shares or other similar changes in the Stock, then appropriate adjustments shall be made in the shares of Stock theretofore awarded to the Participants and in the aggregate number of shares of Stock which may be awarded pursuant to the Plan. Such adjustments shall be conclusive and binding for all purposes. Additional shares of Stock issued to a Participant as the result of any such change shall bear the same restrictions as the shares of Stock to which they relate.

I.Company Successors.    In the event the Company becomes a party to a merger, consolidation, sale of substantially all of its assets or any other corporate reorganization in which the Company will not be the surviving corporation or in which the holders of the Stock will receive securities of another corporation (in any such case, the “New Company”), then the New Company shall assume the rights and obligations of the Company under this Plan.

J.Governing Law.    All matters relating to the Plan or to Awards granted hereunder shall be governed by the laws of the State of Maryland, without regard to the principles of conflict of laws.

K.Relationship to Other Benefits.    Any Awards under this Plan are not considered compensation for purposes of determining benefits under any pension, profit sharing, or other retirement or welfare plan, or for any other general employee benefit program.

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L.Expenses.    The expenses of administering the Plan shall be borne by the Company and its Subsidiaries.

M.Titles and Headings.    The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

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This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933.

You may obtain without charge, upon written or oral request, a copy of documents incorporated by reference in the Registration Statement on file with the Securities and Exchange Commission pertaining to the securities offered under the 2002 Senior Management Long-Term Incentive Plan. In addition you may obtain, without charge, upon written or oral request, a copy of documents that are required to be delivered under Rule 428(b) of the Securities Act including our annual report to shareholders or annual report on Form 10-K and a copy of the documents that comprise the prospectus.

To make a request for any of these documents, you may telephone or write:

Corporate Secretary
750 East Pratt Street
18th Floor
Baltimore, Maryland 21202
(410) 783-3600

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2002 Senior Management Long-Term Incentive Plan
Appendix

Additional Information

The Plan is not subject to any provisions of the Employee Retirement Income Security Act of 1974, and the Plan is not qualified under Section 401(a) of the Internal Revenue Code.

Participants may obtain additional information about the Plan by contacting:

Manager — Executive Compensation
Constellation Energy Group, Inc.
750 East Pratt Street
5th Floor
Baltimore, MD 21202
410-783-3244

After each grant is made, participants will be furnished with information about the amount of the grant.  Participants have access to information about their outstanding grants.

In general, grants subject to restrictions are taxable to participants when the restrictions lapse, and deductible by Constellation Energy at such time, based on the fair market value of the awards when the restrictions lapse.  Grants not subject to restrictions are taxable/deductible at fair market value on the grant date.  Additionally, options are subject to other special tax provisions.

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FORM OF SERVICE-BASED RESTRICTED STOCK AWARD AGREEMENT

[DATE]

Recipient Name
Recipient Title
Company
Company Address
City, State Zip Code

RE:  Service-Based Restricted Stock Award

Dear Recipient:

Effective date, The Board of Directors Compensation Committee, (The Committee), granted you [#] service-based restricted shares of CEG Common Stock (the “Award”) pursuant to Section 7 of the Constellation Energy Group, Inc. 2002 Senior Management Long—Term Incentive Plan (the “Plan”).  In addition to other provisions of the Plan (a copy of which is provided to you with this letter), your Award is subject to the following conditions:

1.The Plan restriction period for these shares expires as show on the restriction lapse dates in the table below:

# Shares Granted	Share Grant Date	Restriction Period	Restriction Lapse Date	Aggregate Shares Lapsed
[#]	mm/dd/yy	[one to five years]	[one to five years after Share Grant Date]	[#]

2.The Plan requires that as a condition to receiving your Award, you waive in writing the right to make an election under Section 83(b) of the Internal Revenue Code of 1986 with respect to your Award (see Section 7D of the Plan).  Your execution of this letter will constitute your waiver to make such election under Section 83(b).  This waiver means that you will not have the option of electing to be taxed on the restricted shares at the time of the grant.  Instead, you will be taxed on the restricted shares at the time the Plan restrictions are removed (see Attachment A).  This waiver allows the Company to treat dividends paid to you during the period of the Plan restrictions as compensation, thereby giving the Company a tax deduction for such amounts.

3.As provided in the Plan, until the Plan restriction period expires, you may not sell, transfer, pledge or hypothecate the Award shares.  CEG will hold the shares for safekeeping until the restriction lapse, unless you let us know that you want a stock certificate for the Award.  If you prefer a certificate, it will be issued in your name with a legend to the effect that you may not sell, transfer, pledge, or hypothecate the Award shares and that the shares are subject to certain conditions under the Plan.

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4.If you contemplate the sale or transfer (for example to a family member) of any shares after the restriction period expires, you should contact the SEC-related persons specified below for advice on the timing of any sale or transfer and any reporting obligations you may have.

Please read the Plan carefully as it contains many other provisions relating to your Award.  If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign the enclosed copy of this letter and return it in the envelope provided.

Sincerely,

[NAME]
[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of Recipient Date

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This document constitutes part of a prospectus covering securities

that have been registered under the Securities Act of 1933.

ATTACHMENT A

CONSTELLATION ENERGY GROUP, INC.

INCOME TAX CONSEQUENCES TO PARTICIPANTS

FOR SERVICE-BASED RESTRICTED STOCK AWARDS

Set forth is a brief overview of certain income tax consequences associated with your Service-Based Restricted Stock Award (“the Award”).

Stock

Because the Plan places certain restrictions on the Award which could lead to forfeiture of the shares prior to lifting the Plan restrictions and because you have agreed to waive the Section 83(b) election(1), the value of the restricted stock is not taxed to you when the initial grant is made.  Rather, the stock is taxable to you at the time the restrictions are removed.  The amount subject to income tax is the fair market value of the stock on the day that the Plan restrictions are removed.  This amount is treated as compensation subject to withholding of income taxes, Medicare taxes and, if applicable, Social Security taxes.  You are not taxed on the value of any stock forfeited.

For purposes of determining the gain or loss on any sale of the stock received pursuant to this Award, your basis in the stock is the amount that you included in taxable income when the Plan restrictions were removed.  Your tax holding period, for purposes of determining whether a gain or loss on a sale is long-term or short-term, begins on the day after the day that the Plan restrictions were removed.

Dividends

The dividends during the restriction period will be automatically reinvested in additional shares of company common stock.  These shares will be subject to the same restrictions as the originally awarded shares and will vest accordingly.  For tax purposes, the dividends on the restricted stock will not be taxable as dividend income.  Rather, the accumulated shares of stock will be taxable to you in the same manner as stated above.

After the Plan restrictions on the stock are removed, the dividends are treated as regular dividend income (generally not subject to tax withholding).

Tax Planning

You may wish to consult your tax advisor in the year the restrictions are lifted from the Award if you have questions regarding the impact of the Award on your tax withholding or if you have questions about the applicable capital gains holding period and rates for this Award.

(1)  The Plan requires that as a condition to receiving a Restricted Stock Award, you must waive in writing the right to make an election under Section 83(b) of the Internal Revenue Code of 1986 with respect to your Award (see Section 7 D of the Plan).  This waiver means that you will not have the option of electing to be taxed on the restricted shares at the time of grant.  Instead, you will be taxed on the restricted shares at the time the Plan restrictions are removed.  This

23

allows the Company to treat dividends paid during the period of Plan restrictions as compensation, thereby giving the Company a tax deduction for such amounts.

24

This document constitutes part of a prospectus covering securities

that have been registered under the Securities Act of 1933.

FORM OF PERFORMANCE UNIT AGREEMENT

[date]

TO: «First» «MI» «Last»

Effective [Date], as part of the [3 CALENDAR YEAR PERFORMANCE PERIOD] Long-Term Incentive Program, you were granted [#] performance units (the “Units”) under the Constellation Energy Group, Inc. 2002 Senior Management Long—Term Incentive Plan (the “Plan”).  In addition to other provisions of the Plan, your award is subject to the conditions set forth in this document.

Target Grant (# Units)	Grant Date	Performance Period	Vesting Date
[#]	[MM/DD/YY]	[3-Year Period]	[End of 3-Year Period]

Under current tax law, you are not subject to tax on your Units until the Vesting Date.

1.Each Unit is worth $1. The final award payout on the Vesting Date will be based on Constellation Energy Group’s relative Total Shareholder Return (“TSR”) performance over the Performance Period as set forth below. TSR is defined as the stock price change from [BEGINNING TO END OF 3 CALENDAR YEAR PERFORMANCE PERIOD] and dividends during that period that are reinvested on the ex-dividend date (date stock trades without its dividend) at the closing price on that date.

The Plan Administrator will determine the award payout soon after the conclusion of the Performance Period. The performance measures used to determine the award payout are as follows:

·Primary Measure: Constellation Energy TSR for the Performance Period is compared to the TSR performance results of large and mid-size investment grade companies within the Dow Jones Electric Utilities Index (DJEUI) on [END OF PERFORMANCE PERIOD].  In the DJEUI, companies that are rated ‘non-investment grade’ by both Moody’s and S&P rating agencies on [END OF PERFORMANCE PERIOD] are excluded.

·Secondary Measure: If Constellation Energy’s percentile rank for the Primary Measure is below the [   ] percentile, then a comparison will be made to the TSR performance results of investment grade companies in the S&P 500 Index on [END OF PERFORMANCE PERIOD].

		Primary Measure
		TSR v. DJEUI Large & Mid- Cap Investment Grade Companies		Secondary Measure TSR v. S&P 500 Index Comparison Group
Performance Level	Total Shareholder Return	Payout vs. Target		Payout vs. Target
<Threshold	<[  ] Percentile	[  ]	%	[  ]	%
Threshold	[  ] Percentile	[  ]	%	[  ]	%
Target	[  ] Percentile	[  ]	%	[  ]	%
Stretch	[  ] Percentile	[  ]	%	[  ]	%

Payout levels interpolated between points.

Secondary measure applies only if performance vs. primary measure is below threshold.

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2.The award payout amount is determined by multiplying the “Payout vs. Target” percentage by the number of Units (worth $1 each) that you were granted.  This award payout amount may be settled, in the sole discretion of the Plan Administrator, in either restricted or unrestricted stock or stock units, or cash (or any combination thereof).

3.Under current tax law, you will be subject to tax on the Vesting Date on the award payout amount.  The Company will be required to withhold applicable taxes at such time.  If the award payout is settled in stock or stock units, the Company will withhold the required number of shares or units to pay these taxes.

4.As provided in the Plan, until the Vesting Date, you may not sell, transfer, or pledge the Units.

Please read the Plan carefully as it contains many other provisions relating to your award.  If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign this letter and return it in the envelope provided, and keep a copy for your records.

Sincerely,

[NAME]
[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of «First» «MI» «Last» DATE

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FORM OF STOCK UNIT AWARD WITH SALE RESTRICTION AGREEMENT

[DATE]

Recipient Name
Recipient Title
Company
Company Address
City, State Zip Code

RE:  Stock Unit Award with Sale Restriction

Dear Recipient:

Effective date, as part of your [PERFORMANCE YEAR] annual incentive and in recognition of your performance during [PERFORMANCE YEAR], you were granted [#] restricted Constellation Energy Group, Inc. (the “Company”) common stock units with sale restrictions (“Deferred Shares”) under the Constellation Energy Group, Inc. 2002 Senior Management Long-Term Incentive Plan (the “Plan”).  In addition to other provisions of the Plan, your award is subject to the following conditions:

1.Each Deferred Share entitles you to receive on the Restriction Lapse Date (set forth below) one share of Constellation Energy Group common stock (“Common Stock”).  Under current tax law, you are not subject to tax on your Deferred Shares until the Restriction Lapse Date (see paragraph 4 below).

2.During the Restriction Period (set forth below), on any date that Constellation Energy Group pays dividends with respect to the Common Stock, the Company shall credit you with a number of Deferred Shares equal to (i) the number of your Deferred Shares on the dividend record date times (ii) the dividend rate per share, divided by (iii) the per share reinvestment price.  These dividend-based additional Deferred Shares shall be subject to the same rules and restrictions as Deferred Shares originally granted to you.

3.The Restriction Period for your Deferred Shares expires on the Restriction Lapse Date as shown in the table below:

# Deferred Shares Granted	Deferred Share Grant Date	Restriction Period	Restriction Lapse Date
[#]	[MM/DD/YY]	[5 years]	[5 years after Grant Date]

Your Deferred Shares are fully and immediately vested, however, during the Restriction Period, you may not sell, transfer, or pledge the Deferred Shares.  During the Restriction Period, you will have no voting rights with respect to the Deferred Shares.  The Restriction Period remains in effect irrespective of your employment status.

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4.Following the Restriction Lapse Date, the Company shall cause to be issued to you a certificate for shares of Common Stock equal to the number of your Deferred Shares (including dividend-based additional Deferred Shares).  Under current tax law, you will be subject to tax on the Restriction Lapse Date based on an amount equal to the number of shares of Common Stock issued to you times the Fair Market Value per share (i.e., the average of the high and low price of the Common Stock on the Restriction Lapse Date).  The Company will be required to withhold applicable taxes at such time, and will withhold the required number of shares to pay these taxes.  The total shares you receive will be rounded to the nearest whole share.  You should consult your tax advisor regarding any tax issues.

Please read the Plan carefully as it contains many other provisions relating to your award.  If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign the enclosed copy of this letter and return it in the envelope provided.

Sincerely,

[NAME]
[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of Recipient Date

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This document constitutes part of a prospectus covering securities

that have been registered under the Securities Act of 1933.

FORM OF
STOCK OPTION AGREEMENT

This Stock Option Agreement (“Agreement”) is subject to the terms and conditions of the Constellation Energy Group, Inc. 2002 Senior Management Long-Term Incentive Plan (the “Plan”).  The «Administrator» Constellation Energy Group, Inc. (the “Plan Administrator”) has authorized the option grant under this Agreement by and between Participant (designated below) and Constellation Energy Group, Inc. (“Constellation Energy”).

1. Grant of Option.

(a) The “Participant” is «First» «Middle» «Last».

(b) The date of the grant is «GrantDate» (“Grant Date”).

(c) The number of shares subject to the option (“Option Shares”) are «Grant» shares of Constellation Energy common stock (“Stock”).

(d) The exercise price is [OptionPrice = fair market value of stock on grant date] per share of Stock (“Exercise Price”).

This Agreement specifies the terms of the option (“Option”) granted to Participant to purchase the Option Shares at the Exercise Price set forth above. The Option is not intended to constitute an “incentive stock option” as that term is used in Internal Revenue Code section 422.  The “Option Period” is the period during which the Option is exercisable as provided in this Agreement.

2. Installment Exercise.

Subject to the terms of this Agreement, the Option will be exercisable in installments according to the following schedule (each a “Vesting Date”):

INSTALLMENT	VESTING DATE APPLICABLE TO INSTALLMENT
[1/3 of Option Shares] Options	[One year after Grant Date]
[1/3 of Option Shares] Options	[Two years after Grant Date]
[1/3 of Option Shares] Options	[Three years after Grant Date]

3. Termination of Option.

(a)Except as provided in paragraph 3(b) below, the Option will terminate upon the earlier to occur of: (1) when all Option Shares have been exercised; or (2) ten (10) years from the Grant Date (“Expiration Date”).

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(b)If Participant ceases employment, the Option will terminate as to any unvested Option Shares on the effective date of Participant’s employment Termination (as defined in the Plan) and as to vested Option Shares 90 days after such effective date; provided that if Participant ceases employment because of Participant’s Retirement, Disability (each as defined in the Plan), or death, the Option will terminate as to any unvested Option Shares on the effective date of the Retirement, Disability or death, and as to vested Option Shares, the Option will remain exercisable until the earlier of 60 months after such effective date or the Expiration Date.

(c)In the event of Participant’s death during the Option Period, vested Option Shares may be exercised by Participant’s legal representative(s), or by other person(s) authorized under Participant’s will.  Alternatively, if Participant fails to make testamentary disposition of the Option or dies intestate, such vested Option Shares may be exercised by persons(s) entitled to receive the Option Shares under the applicable laws of descent and distribution.

(d)A transfer of Participant’s employment between Constellation Energy and any Subsidiary of Constellation Energy, or between Subsidiaries of Constellation Energy, will not be considered an employment Termination.

4. Exercise of Option.

(a)Subject to this Agreement and the Plan, the Option may be exercised in whole or in part by the method specified by the Plan Administrator from time to time or by contacting [NAME] at [PHONE NUMBER(S)].

(b)On or before the exercise date specified pursuant to paragraph 4(a), Participant must fully pay the Exercise Price and the tax withholding obligation for the Option Shares exercised in U.S. dollars by cash or by check payable to Constellation Energy Group, Inc.  All or a portion of the Exercise Price and tax withholding obligation may also be paid by Participant: (i) subject to the terms of paragraph 4(c) below, by delivery of shares of Stock owned by Participant and acceptable to the Plan Administrator having an aggregate Fair Market Value (as defined in paragraph 6 below) on the date of exercise that is equal to the amount of cash that would otherwise be required; or (ii) by authorizing a third party to sell the Option Shares (or a sufficient portion of the Option Shares), and immediately remit to Constellation Energy the Exercise Price and any tax withholding resulting from such exercise.  Further, tax withholding up to the minimum required withholding rate (but not in excess of that rate) may also be satisfied through a holdback by Constellation Energy of some of the Option Shares that would otherwise be deliverable to Participant by reason of the Option exercise.  The Option will cease to be exercisable, as to the portion exercised, when Participant purchases the Stock to which the exercised portion of the Option relates.

(c)Other shares of Stock owned by Participant may be delivered to satisfy the Exercise Price, or to satisfy Participant’s tax withholding obligation above the minimum withholding rate, only if the shares have been held by Participant for at least six months before delivery, except that there shall be no holding period imposed for shares purchased by Participant for cash on the open market.  Use of previously-owned shares shall be effected by actual delivery of the Stock certificates to Constellation Energy, and by completing an affidavit available from Constellation Energy affirming that Participant owns the necessary shares and that any applicable holding period has been satisfied.

(d)Participant is required to comply with Constellation Energy’s Insider Trading Policy at all times, including in connection with exercise of the Option. The Option may not be exercised by Participant during any blackout or prohibited trading period established by Constellation Energy or applicable to Participant, nor shall the Option be exercisable if and to the extent Constellation Energy determines that such exercise would violate applicable state or Federal securities laws or the rules and

30

regulations of any securities exchange on which the Stock is traded.  If Constellation Energy makes such a determination, it will use all reasonable efforts to comply with such laws, rules or regulations.  In making any such determinations, Constellation Energy may rely on the opinion of counsel for Constellation Energy.

(e)As soon as practicable after the exercise date, Constellation Energy will deliver to Participant a Stock certificate or certificates (or other evidence of ownership) for the purchased Option Shares.

5.  Tax Withholding.

Constellation Energy will have the right to withhold any applicable federal, state or local taxes, deductions or withholdings due with respect to the Option or its exercise in such form and manner as provided in the Plan.

6. Fair Market Value.

The “Fair Market Value” of a share of Stock is the average of the highest and lowest sale price per share of Stock on the New York Stock Exchange-Composite Transactions on the applicable date of reference, or if there are no sales on such date, then the average of such highest and lowest sale price on the last previous day on which sales are reported.

7. No Rights of Stockholders.

Participant does not have any of the rights and privileges of a stockholder of Constellation Energy with respect to any shares of Stock purchasable or issuable upon the exercise of the Option, in whole or in part, before the date of exercise and purchase of the Option Shares.

8. Non-Transferability of Option.

The Option is not transferable, except for a transfer to Participant’s family member or to a trust established for the benefit of Participant’s family members which has been approved by the Plan Administrator as provided in the Plan, or in case of Participant’s death, by will or the laws of descent and distribution, nor shall the Option be subject to attachment, execution or other similar process.  During Participant’s lifetime, the Option is exercisable only by Participant, any guardian or legal representative of Participant, or a family member or trustee of a trust established for the benefit of Participant’s family members to whom the Option has been transferred in accordance with the Plan.  In the event of (a) any attempt by Participant to alienate, assign, pledge, hypothecate or otherwise dispose of the Option, except as provided in this Agreement, or (b) the levy of any attachment, execution or similar process upon the rights or interest conferred under this Agreement, Constellation Energy may terminate the Option by notice to Participant and it will become null and void.

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9. Employment Not Affected.

Neither this Agreement nor the grant of the Option constitutes a contract of employment between Constellation Energy or any Subsidiary and Participant, and neither will be deemed to be consideration for, or a condition of, continued employment of Participant.

10. Incorporation of Plan by Reference.

The Option is granted pursuant to the terms of the Plan, the terms of which are incorporated in this Agreement by reference.  The Option will in all respects be interpreted in accordance with the Plan.  All capitalized terms, which are not otherwise defined in this Agreement, will have the meaning specified in the Plan.  The Plan Administrator will interpret and construe the Plan and this Agreement, and its interpretations and determinations will be conclusive and binding on the parties and any other person claiming an interest with respect to any issue arising under this Agreement.

11.  Severability.

The provisions of this Agreement are severable.  If any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions will nevertheless be binding and enforceable.

IN WITNESS WHEREOF, Constellation Energy Group, Inc. and Participant have executed this Stock Option Agreement effective as of the Grant Date.

Constellation Energy Group, Inc	ACCEPTED AND AGREED TO:
[NAME]	By:
	«First» «Middle» «Last»
[TITLE, DEPARTMENT]

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EX-10.(D)

EXHIBIT No. 10 (d)

This document constitutes part of a prospectus covering securities
that have been registered under the Securities Act of 1933.

Constellation Energy Group, Inc.
Amended and Restated Management Long-Term Incentive Plan
(Plan)

1.Objective.  The objective of this Plan is to increase shareholder value by providing a long-term incentive to reward management level and other designated employees of Constellation Energy and its Subsidiaries, whose responsibilities include the continued growth, development, and financial success of Constellation Energy and its Subsidiaries, for the continued profitable performance of Constellation Energy and its Subsidiaries.  The Plan is also designed to assist Constellation Energy and its Subsidiaries to retain talented and motivated management level and other designated employees and to increase their ownership of Constellation Energy common stock.

2.Definitions.  All singular terms defined in this Plan will include the plural and vice versa.  As used herein, the following terms will have the meaning specified below:

“Award” means individually or collectively, Restricted Stock, Restricted Stock Units, Options, Performance Units, Stock Appreciation Rights, or Dividend Equivalents granted under this Plan.

“Board” means the Board of Directors of Constellation Energy.

“Book Value” means the book value of a share of Stock determined in accordance with Constellation Energy’s regular accounting practices as of the last business day of the month immediately preceding the month in which a Stock Appreciation Right is exercised as provided in Section 10.

“Constellation Energy” means Constellation Energy Group, Inc., a Maryland corporation, or its successor, including any “New Company” as provided in Section 14I.

“Code” means the Internal Revenue Code of 1986, as amended.  Reference in the Plan to any section of the Code will be deemed to include any amendments or successor provisions to such section and any regulations promulgated thereunder.

“Covered Award” means any Award granted under the Plan on or after November 28, 2005.

“Date of Grant” means the date on which the granting of an Award is authorized by the Plan Administrator or such later date as may be specified by the Plan Administrator in such authorization.

“Date of Retirement” means the date of Retirement or Early Retirement.

“Disability” means the determination that a Participant is “disabled” under the Constellation Energy disability plan in effect at that time.

“Dividend Equivalent” means an award granted under Section 11.

“Early Retirement” means retirement prior to the Normal Retirement Date.

“Earned Performance Award” means an actual award of a specified number of Performance Units (or shares of Restricted Stock or Restricted Stock Unit, as the context requires) which the Plan Administrator has determined have been earned and are payable (or, in the case of Restricted Stock or Restricted Stock Units, earned and with respect to which restrictions will lapse) for a particular Performance Period.

“Eligible Employee” means any person employed by Constellation Energy or a Subsidiary on a regularly scheduled basis who satisfies all of the requirements of Section 5.

“Excluded Transactions” has the meaning set forth in Section 12.

“Exercise Period” means the period or periods during which a Stock Appreciation Right is exercisable as described in Section 10.

“Fair Market Value” means the average of the highest and lowest price at which the Stock was sold regular way on the New York Stock Exchange-Composite Transactions on a specified date; provided, however, that notwithstanding the foregoing, solely for purposes of determining the Option price per share of Stock under Section 8C for Option grants made after October 19, 2006, “Fair Market Value” means the price at which the Stock was last sold on the New York Stock Exchange-Composite Transactions on the Date of Grant.

“Incentive Stock Option” means an incentive stock option within the meaning of Section 422 of the Code.

“1934 Act” means the Securities Exchange Act of 1934, as amended.

“Normal Retirement Date” is the retirement date as described in the Pension Plan or a Subsidiary’s retirement or pension plan.

“Option” or “Stock Option” means either a nonqualified stock option or an incentive stock option granted under Section 8.

“Option Period” or “Option Periods” means the period or periods during which an Option is exercisable as described in Section 8.

“Participant” means an employee of Constellation Energy or a Subsidiary who has been granted an Award under this Plan.

“Pension Plan” means the Pension Plan of Constellation Energy Group, Inc. as may be amended from time to time.

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“Performance-Based” means that in determining the amount of a Restricted Stock or Restricted Stock Unit Award payout, the Plan Administrator will take into account the performance of the Participant, Constellation Energy, one or more Subsidiaries, or any combination thereof.

“Performance Period” means a period of time, established by the Plan Administrator at the time an Award is granted, during which corporate and/or individual performance is measured.

“Performance Unit” means a unit of measurement equivalent to such amount or measure as defined by the Plan Administrator which may include, but is not limited to, dollars, market value shares, or book value shares.

“Plan Administrator” means, as set forth in Section 4, the Chief Executive Officer of Constellation Energy.

“Restricted Stock” means an Award granted under Section 7.

“Restricted Stock Unit” means a right granted under Section 7 that is denominated in shares of stock, each of which represents a right to receive the value of a share of stock (or a percentage of such value, which percentage may be higher than 100%) upon the terms and conditions set forth by the Committee.

“Retirement” means retirement on or after the “Normal Retirement Date” (as such term is defined in the Pension Plan or a Subsidiary’s retirement or pension plan).

“Service-Based” means that in determining the amount of a Restricted Stock or Restricted Stock Unit Award payout, the Plan Administrator will take into account only the period of time that the Participant performed services for Constellation Energy or its Subsidiaries since the Date of Grant.

“Stock” means the common stock, without par value, of Constellation Energy.

“Stock Appreciation Right” means an Award granted under Section 10.

“Subsidiary(ies)” means any corporation of which 20% or more of its outstanding voting stock or voting power is beneficially owned, directly or indirectly, by Constellation Energy.

“Target Performance Award” means a targeted award of a specified number of Performance Units (or shares of Restricted Stock or Restricted Stock Unit, as the context requires) which may be earned and payable (or, in the case of Restricted Stock or Restricted Stock Unit, earned and with respect to which restrictions will lapse) based upon the performance objectives for a particular Performance Period, all as determined by the Plan Administrator.  The Target Performance Award will be a factor in the Plan Administrator’s ultimate determination of the Earned Performance Award.

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“Termination” means resignation or discharge from employment with Constellation Energy or any of its Subsidiaries except in the event of death, Disability, Retirement or Early Retirement.

3.Effective Date and Duration.

A.Effective Date.  The Plan became effective as of February 1, 1998, and was most recently amended and restated effective as of October 19, 2006.

B.Period for Grants of Awards.  Awards may be made as provided herein for a period of 10 years after February 1, 1998.

C.Grants Outstanding.  Grants outstanding at the effective time of the share exchange between Constellation Energy and the common stockholders of Baltimore Gas and Electric Company (BGE) were converted from BGE common stock-based grants to Constellation Energy common stock-based grants.

4.Plan Administration.  The Chief Executive Officer of Constellation Energy is the Plan Administrator and has sole authority (except as specified otherwise herein) to determine all questions of interpretation and application of the Plan, or of the terms and conditions pursuant to which Awards are granted, exercised or forfeited under the Plan provisions, and, in general, to make all determinations advisable for the administration of the Plan to achieve its stated objective.  Such determinations shall be final and not subject to further appeal.  The Plan Administrator shall have the power to delegate all or any part of his/her duties to one or more designees, and to withdraw such authority, by written designation.

5.Eligibility.  Each employee of Constellation Energy who holds a management level position, and other employees of Constellation Energy and its Subsidiaries, may be designated by the Plan Administrator as a Participant, from time to time, with respect to one or more Awards.  No employee of Constellation Energy or its Subsidiaries shall have any right to be granted an Award under this Plan.

6.Grant of Awards and Limitation of Number of Shares Awarded.  The Plan Administrator may, from time to time, grant Awards to one or more Eligible Employees, provided that (i) subject to any adjustment pursuant to Section 14H, the aggregate number of shares of Stock subject to Awards under this Plan may not exceed three million (3,000,000) shares; (ii) to the extent that an Award lapses or the rights of the Participant to whom it was granted terminate, any shares of Stock subject to such Award shall again be available for the grant of an Award under the Plan; and (iii) shares delivered by Constellation Energy under the Plan may be authorized and unissued Stock, Stock held in the treasury of Constellation Energy, or Stock purchased on the open market (including private purchases) in accordance with applicable securities laws.

7.Restricted Stock and Restricted Stock Unit Awards.

A.Grants of Restricted Shares or Units.  One or more shares of Restricted Stock or Restricted Stock Units may be granted to any Eligible Employee.  The

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Restricted Stock will be issued or Restricted Stock Unit granted to the Participant on the Date of Grant without the payment of consideration by the Participant.  The Restricted Stock will be issued or Restricted Stock Unit granted either in the name of the Participant or in an agent account on behalf of one or more Participants, and will bear a restrictive legend prohibiting sale, transfer, pledge or hypothecation of the Restricted Stock or Restricted Stock Unit until the expiration of the restriction period.

The Plan Administrator may also impose such other restrictions and conditions on the Restricted Stock or Restricted Stock Unit as it deems appropriate, and will designate the grant as either a Service-Based or Performance-Based Award.

Upon issuance to the Participant of the Restricted Stock, the Participant will have the right to vote the Restricted Stock.  Upon issuance to the Participant of the Restricted Stock or grant of the Restricted Stock Unit and subject to the Plan Administrator’s discretion, the Participant will have the right to receive the cash dividends (or Dividend Equivalents as provided in Section 11) distributable with respect to such shares or units, with such dividends or Dividend Equivalents treated as compensation to the Participant.  The Plan Administrator, in his/her sole discretion, may direct the accumulation and payment of distributable dividends to the Participant at such times, and in such form and manner, as determined by the Plan Administrator.

B.Service-Based Award.

i.Restriction Period.  At the time a Service-Based Restricted Stock or Restricted Stock Unit Award is granted, the Plan Administrator will establish a restriction period applicable to such Award which will be not less than one year and not more than ten years.  Each Restricted Stock or Restricted Stock Unit Award may have a different restriction period, at the discretion of the Plan Administrator.

ii.Forfeiture or Payout of Award.  In the event a Participant ceases employment during a restriction period, a Restricted Stock or Restricted Stock Unit Award is subject to forfeiture or payout (i.e., removal of restrictions) as follows: (a) Termination—the Restricted Stock or Restricted Stock Unit Award is completely forfeited; (b) Retirement, Disability or death—payout of the Restricted Stock or Restricted Stock Unit Award is prorated for service during the period; or (c) Early Retirement—if at the Participant’s request, the payout or forfeiture of the Restricted Stock or Restricted Stock Unit Award is determined at the discretion of the Plan Administrator, or if at Constellation Energy’s request, payout of the Restricted Stock or Restricted Stock Unit Award is prorated for service during the period; provided, however, that the Plan Administrator may modify the above if it determines at his/her sole discretion that special circumstances warrant such modification.

Any shares of Restricted Stock which are forfeited will be transferred to Constellation Energy.

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Upon completion of the restriction period, all Award restrictions will expire and certificates representing the Award will be issued (the payout) without the restrictive legend described in Section 7A.

C.Performance-Based Award.

i.Restriction Period.  At the time a Performance-Based Restricted Stock or Restricted Stock Unit Award is granted, the Plan Administrator will establish a restriction period applicable to such Award which will be not less than one year and not more than ten years.  Each Restricted Stock or Restricted Stock Unit Award may have a different restriction period, at the discretion of the Plan Administrator.  The Plan Administrator will also establish a Performance Period.

ii.Performance Objectives.  The Plan Administrator will determine, no later than 90 days after the beginning of each Performance Period, the performance objectives for each Participant’s Target Performance Award and the number of shares of Restricted Stock or Restricted Stock Units for each Target Performance Award that will be issued on the Date of Grant.  Performance objectives may vary from Participant to Participant and will be based upon such performance criteria or combination of factors as the Plan Administrator deems appropriate, which may include, but not be limited to, the performance of the Participant, Constellation Energy, one or more Subsidiaries, or any combination thereof.  Performance Periods may overlap and Participants may participate simultaneously with respect to Performance-Based Restricted Stock or Restricted Stock Unit Awards for which different Performance Periods are prescribed.

If, during the course of a Performance Period significant events occur as determined in the sole discretion of the Plan Administrator, which the Plan Administrator expects to have a substantial effect on a performance objective during such period, the Plan Administrator may revise such objective.

iii.Forfeiture or Payout of Award.  As soon as practicable after the end of each Performance Period, the Plan Administrator will determine whether the performance objectives and other material terms of the Award were satisfied.  The Plan Administrator’s determination of all such matters will be final and conclusive.

As soon as practicable after the later of (i) the date the Plan Administrator makes the above determination, or (ii) the completion of the restriction period, the Plan Administrator will determine the Earned Performance Award for each Participant.  Such determination may result in forfeiture of all or some shares of Restricted Stock or Restricted Stock Units (if Target Performance Award performance objectives were not

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attained), or the issuance of additional shares of Stock or Restricted Stock Units (if Target Performance Award performance objectives were exceeded), and will be based upon such factors as the Plan Administrator determines at his/her sole discretion, but including the Target Performance Award performance objectives.

In the event a Participant ceases employment during a restriction period, the Restricted Stock or Restricted Stock Unit Award is subject to forfeiture or payout (i.e., removal of restrictions) as follows: (a) Termination—the Restricted Stock or Restricted Stock Unit Award is completely forfeited; (b) Retirement, Disability or death—payout of the Restricted Stock or Restricted Stock Unit Award is prorated taking into account factors including, but not limited to, service during the period; and the performance of the Participant during the portion of the Performance Period before employment ceased; or (c) Early Retirement—if at the Participant’s request, the payout or forfeiture of the Restricted Stock or Restricted Stock Unit Award is determined at the discretion of the Plan Administrator, or if at Constellation Energy’s request, payout of the Restricted Stock or Restricted Stock Unit Award is prorated taking into account factors including, but not limited to, service during the period and the performance of the Participant during the portion of the Performance Period before employment ceased; provided, however, that the Plan Administrator may modify the above if it determines at his/her sole discretion that special circumstances warrant such modification.

Any shares of Restricted Stock which are forfeited will be transferred to Constellation Energy.

With respect to shares of Restricted Stock or Restricted Stock Units for which restrictions lapse, certificates will be issued (the payout) without the restrictive legend described in Section 7A.  Certificates will also be issued for additional Stock, if any, awarded to the Participant because Target Performance Award performance objectives were exceeded.

D.Waiver of Section 83(b) Election.  Unless otherwise directed by the Plan Administrator, as a condition of receiving an Award of Restricted Stock, a Participant must waive in writing the right to make an election under Section 83(b) of the Code to report the value of the Restricted Stock as income on the Date of Grant.

8.Stock Options

A.Grants of Options.  One or more Options may be granted to any Eligible Employee on the Date of Grant without the payment of consideration by the Participant.

B.Stock Option Agreement.  Each Option granted under the Plan will be evidenced by a “Stock Option Agreement” between Constellation Energy and the

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Participant containing provisions determined by the Plan Administrator, including, without limitation, provisions to qualify Incentive Stock Options as such under Section 422 of the Code if directed by the Plan Administrator at the Date of Grant; provided, however, that each Incentive Stock Option Agreement must include the following terms and conditions: (i) that the Options are exercisable, either in total or in part, with a partial exercise not affecting the exercisability of the balance of the Option; (ii) every share of Stock purchased through the exercise of an Option will be paid for in full at the time of the exercise; (iii) each Option will cease to be exercisable, as to any share of Stock, at the earliest of (a) the Participant’s purchase of the Stock to which the Option relates, (b) the Participant’s exercise of a related Stock Appreciation Right, or (c) the lapse of the Option; (iv) Options will not be transferable by the Participant except by Will or the laws of descent and distribution and will be exercisable during the Participant’s lifetime only by the Participant or by the Participant’s guardian or legal representative; and (v) notwithstanding any other provision, in the event of a public tender for all or any portion of the Stock or in the event that any proposal to merge or consolidate Constellation Energy with another company is submitted to the stockholders of Constellation Energy for a vote, the Plan Administrator, in his\her sole discretion, may declare any previously granted Option to be immediately exercisable.

C.Option Price.  The Option price per share of Stock will be set by the grant, but will be not less than 100% of the Fair Market Value at the Date of Grant.

D.Form of Payment.  At the time of the exercise of the Option, the Option price will be payable in cash or in other shares of Stock or in a combination of cash and other shares of Stock, in a form and manner as required by the Plan Administrator in his/her sole discretion.  When Stock is used in full or partial payment of the Option price, it will be valued at the Fair Market Value on the date the Option is exercised.

E.Other Terms and Conditions.  The Option will become exercisable in such manner and within such Option Period or Periods, not to exceed 10 years from its Date of Grant, as set forth in the Stock Option Agreement upon payment in full.  Except as otherwise provided in this Plan or in the Stock Option Agreement, any Option may be exercised in whole or in part at any time.

F.Lapse of Option.  An Option will lapse upon the earlier of: (i) 10 years from the Date of Grant, or (ii) at the expiration of the Option Period set by the grant.  If the Participant ceases employment within the Option Period and prior to the lapse of the Option, the Option will lapse as follows: (a) Termination—the Option will lapse on the effective date of the Termination; or (b) Retirement, Early Retirement, or Disability—the Option will lapse at the expiration of the Option Period set by the grant; provided, however, that the Plan Administrator may modify the above if he/she determines in his/her sole discretion that special circumstances warrant such modification.  If the Participant dies within the Option Period and prior to the lapse of the Option, the Option will lapse at the expiration of the Option Period set by the grant unless it is exercised before such time by the Participant’s legal representative(s) or by the person(s) entitled to do so under the Participant’s Will or, if the Participant fails to make testamentary

8

disposition of the Option or dies intestate, by the person(s) entitled to receive the Option under the applicable laws of descent and distribution.

G.Individual Limitation.  In the case of an Incentive Stock Option, the aggregate Fair Market Value of the Stock for which Incentive Stock Options (whether under this Plan or another arrangement) in any calendar year are first exercisable will not exceed $100,000 with respect to such calendar year (or such other individual limit as may be in effect under the Code on the Date of Grant) plus any unused portion of such limit as the Code may permit to be carried over.

9.Performance Units.

A.Performance Units.  One or more Performance Units may be earned by an Eligible Employee based on the achievement of preestablished performance objectives during a Performance Period.

B.Performance Period and Performance Objectives.  The Plan Administrator will determine a Performance Period and will determine, no later than 90 days after the beginning of each Performance Period, the performance objectives for each Participant’s Target Performance Award and the number of Performance Units subject to each Target Performance Award.  Performance objectives may vary from Participant to Participant and will be based upon such performance criteria or combination of factors as the Plan Administrator deems appropriate, which may include, but not be limited to, the performance of the Participant, Constellation Energy, one or more Subsidiaries, or any combination thereof.  Performance Periods may overlap and Participants may participate simultaneously with respect to Performance Units for which different Performance Periods are prescribed.

If during the course of a Performance Period significant events occur as determined in the sole discretion of the Plan Administrator which the Plan Administrator expects to have a substantial effect on a performance objective during such period, the Plan Administrator may revise such objective.

C.Forfeiture or Payout of Award.  As soon as practicable after the end of each Performance Period, the Plan Administrator will determine whether the performance objectives and other material terms of the Award were satisfied.  The Plan Administrator’s determination of all such matters will be final and conclusive.

As soon as practicable after the date the Plan Administrator makes the above determination, the Plan Administrator will determine the Earned Performance Award for each Participant.  Such determination may result in an increase or decrease in the number of Performance Units payable based upon such Participant’s Target Performance Award, and will be based upon such factors as the Plan Administrator determines in his/her sole discretion, but including the Target Performance Award performance objectives.

In the event a Participant ceases employment during a Performance Period, the Performance Unit Award is subject to forfeiture or payout as follows: (a) Termination—the Performance Unit Award is completely forfeited; (b) Retirement, Disability or

9

death—payout of the Performance Unit Award is prorated taking into account factors including, but not limited to, service and the performance of the Participant during the portion of the Performance Period before employment ceased; or (c) Early Retirement—if at the Participant’s request, the payout or forfeiture of the Performance Unit Award is determined at the discretion of the Plan Administrator, or if at Constellation Energy’s request, payout of the Performance Unit Award is prorated taking into account factors including, but not limited to, service and the performance of the Participant during the portion of the Performance Period before employment ceased; provided, however, that the Plan Administrator may modify the above if it determines in his/her sole discretion that special circumstances warrant such modification.

D.Form and Timing of Payment.  Each Performance Unit is payable in cash or shares of Stock or in a combination of cash and Stock, as determined by the Plan Administrator in his/her sole discretion.  Such payment will be made as soon as practicable after the Earned Performance Award is determined.

10.Stock Appreciation Rights.

A.Grants of Stock Appreciation Rights.  Stock Appreciation Rights may be granted under the Plan in conjunction with an Option either at the Date of Grant or by amendment or may be separately granted.  Stock Appreciation Rights will be subject to such terms and conditions not inconsistent with the Plan as the Plan Administrator may impose.

B.Right to Exercise; Exercise Period.  A Stock Appreciation Right issued pursuant to an Option will be exercisable to the extent the Option is exercisable; both such Stock Appreciation Right and the Option to which it relates will not be exercisable during the six months following their respective Dates of Grant except in the event of the Participant’s Disability or death.  A Stock Appreciation Right issued independent of an Option will be exercisable pursuant to such terms and conditions established in the grant.  Notwithstanding such terms and conditions, in the event of a public tender for all or any portion of the Stock or in the event that any proposal to merge or consolidate Constellation Energy with another company is submitted to the stockholders of Constellation Energy for a vote, the Plan Administrator, in his/her sole discretion, may declare any previously granted Stock Appreciation Right immediately exercisable.

C.Failure to Exercise.  If on the last day of the Option Period, in the case of a Stock Appreciation Right granted pursuant to an Option, or the specified Exercise Period, in the case of a Stock Appreciation Right issued independent of an Option, the Participant has not exercised a Stock Appreciation Right, then such Stock Appreciation Right will be deemed to have been exercised by the Participant on the last day of the Option Period or Exercise Period.

D.Payment.  An exercisable Stock Appreciation Right granted pursuant to an Option will entitle the Participant to surrender unexercised the Option or any portion thereof to which the Stock Appreciation Right is attached, and to receive in exchange for the Stock Appreciation Right payment (in cash or Stock or a combination thereof as

10

described below) equal to either of the following amounts, determined in the sole discretion of the Plan Administrator at the Date of Grant: (1) the excess of the Fair Market Value of one share of Stock at the date of exercise over the Option price, times the number of shares called for by the Stock Appreciation Right (or portion thereof) which is so surrendered, or (2) the excess of the Book Value of one share of Stock at the date of exercise over the Book Value of one share of Stock at the Date of Grant of the related Option, times the number of shares called for by the Stock Appreciation Right.  Upon exercise of a Stock Appreciation Right not granted pursuant to an Option, the Participant will receive for each Stock Appreciation Right payment (in cash or Stock or a combination thereof as described below) equal to either of the following amounts, determined in the sole discretion of the Plan Administrator at the Date of Grant: (1) the excess of the Fair Market Value of one share of Stock at the date of exercise over the Fair Market Value of one share of Stock at the Date of Grant of the Stock Appreciation Right, times the number of shares called for by the Stock Appreciation Right, or (2) the excess of the Book Value of one share of Stock at the date of exercise of the Stock Appreciation Right over the Book Value of one share of Stock at the Date of Grant of the Stock Appreciation Right, times the number of shares called for by the Stock Appreciation Right.

The Plan Administrator may direct the payment in settlement of the Stock Appreciation Right to be in cash or Stock or a combination thereof.  Alternatively, the Plan Administrator may permit the Participant to elect to receive cash in full or partial settlement of the Stock Appreciation Right, provided that (i) the Plan Administrator must consent to or disapprove such election and (ii) unless the Plan Administrator directs otherwise, the election and the exercise must be made during the period beginning on the 3rd business day following the date of public release of quarterly or year-end earnings and ending on the 12th business day following the date of public release of quarterly or year-end earnings.  The value of the Stock to be received upon exercise of a Stock Appreciation Right shall be the Fair Market Value of the Stock on the trading day preceding the date on which the Stock Appreciation Right is exercised.  To the extent that a Stock Appreciation Right issued pursuant to an Option is exercised, such Option shall be deemed to have been exercised, and shall not be deemed to have lapsed.

E.Nontransferable.  A Stock Appreciation Right will not be transferable by the Participant except by Will or the laws of descent and distribution and will be exercisable during the Participant’s lifetime only by the Participant or by the Participant’s guardian or legal representative.

F.Lapse of a Stock Appreciation Right.  A Stock Appreciation Right will lapse upon the earlier of: (i) 10 years from the Date of Grant; or (ii) at the expiration of the Exercise Period as set by the grant.  If the Participant ceases employment within the Exercise Period and prior to the lapse of the Stock Appreciation Right, the Stock Appreciation Right will lapse as follows: (a) Termination—the Stock Appreciation Right will lapse on the effective date of the Termination; or (b) Retirement, Early Retirement, or Disability—the Stock Appreciation Right will lapse at the expiration of the Exercise Period set by the grant; provided, however, that the Plan Administrator may modify the above if he/she determines in his/her sole discretion that special circumstances warrant

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such modification.  If the Participant dies within the Exercise Period and prior to the lapse of the Stock Appreciation Right, the Stock Appreciation Right will lapse at the expiration of the Exercise Period set by the grant unless it is exercised before such time by the Participant’s legal representative(s) or by the person(s) entitled to do so under the Participant’s Will or, if the Participant fails to make testamentary disposition of the Stock Appreciation Right or dies intestate, by the person(s) entitled to receive the Stock Appreciation Right under the applicable laws of descent and distribution.

11.Dividend Equivalents.

A.Grants of Dividend Equivalents.  Dividend Equivalents may be granted under the Plan in conjunction with an Option or a separately awarded Stock Appreciation Right, at the Date of Grant or by amendment, without consideration by the Participant.  Dividend Equivalents may also be granted under the Plan in conjunction with Performance Units, at any time during the Performance Period, without consideration by the Participant.  Dividend Equivalents will be granted under a Performance-Based Restricted Stock or Restricted Stock Unit Award in conjunction with additional shares of Stock issued if Target Performance Award performance objectives are exceeded.

B.Payment.  Each Dividend Equivalent will entitle the Participant to receive an amount equal to the dividend actually paid with respect to a share of Stock on each dividend payment date from the Date of Grant to the date the Dividend Equivalent lapses as set forth in Section 11D.  The Plan Administrator, in his/her sole discretion, may direct the payment of such amount at such times and in such form and manner as determined by the Plan Administrator.

C.Nontransferable.  A Dividend Equivalent will not be transferable by the Participant.

D.Lapse of a Dividend Equivalent.  Each Dividend Equivalent will lapse on the earlier of (i) the date of the lapse of the related Option or Stock Appreciation Right; (ii) the date of the exercise of the related Option or Stock Appreciation Right; (iii) the end of the Performance Period (or if earlier, the date the Participant ceases employment) of the related Performance Units or Performance-Based Restricted Stock or Restricted Stock Unit Award; or (iv) the lapse date established by the Plan Administrator on the Date of Grant of the Dividend Equivalent.

12.Accelerated Award Payout/Exercise.

A.Change in Control.  Notwithstanding anything in this Plan document to the contrary, a Participant is entitled to an accelerated payout or accelerated Option or Exercise Period (as set forth in Section 12B) with respect to any previously granted Award upon the happening of a change in control; provided, that, except as otherwise expressly provided to the contrary in the applicable grant agreement, a Participant will not be entitled to an accelerated payout or accelerated Option or Exercise Period of any Covered Awards in connection with the consummation of the transactions contemplated by the Agreement and Plan of Merger dated as of December 18, 2005 by and among FPL

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Group, Inc., CF Merger Corporation and the Company (the “Excluded Transactions”), and such Covered Awards shall remain outstanding in accordance with their terms following the consummation of the Excluded Transactions, subject to any adjustments made by the Plan Administrator in accordance with the provisions of Section 14.

A change in control for purposes of this Section 12 means the occurrence of any one of the following events:

i.individuals who, on January 24, 2003, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to January 24, 2003, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of Constellation Energy Group (the “Company”) in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

ii.any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a change in control by virtue of any of the following acquisitions: (A) by the Company or any corporation with respect to which the Company owns a majority of the outstanding shares of common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors (a “Subsidiary Company”), (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary Company, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition by Participant or any group of persons including Participant (or any entity controlled by Participant or any group of persons including Participant);

iii.consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company

13

or any of its Subsidiary Companies, (a “Business Combination”), unless immediately following such Business Combination: (A) more than 60% of the total voting power of (x) the corporation resulting from such Business Combination (the “Surviving Corporation”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B), and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or

iv.the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company, or the consummation of a sale of all or substantially all of the Company’s assets.

Notwithstanding the foregoing, a change in control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a change in control of the Company shall then occur.

B.Amount of Award Subject to Accelerated Payout/Option Period/Exercise Period.  The amount of a Participant’s previously granted Award that will be paid or exercisable upon the happening of a change in control will be determined as follows, provided, that, except as otherwise expressly provided to the contrary in the applicable grant agreement, a Participant will not be entitled to an accelerated vesting, exercisability

14

or payout of any Covered Awards under this Section 12B in connection with the consummation of the Excluded Transactions:

Restricted Stock or Restricted Stock Unit Awards.  The Participant will be entitled to an accelerated Award payout, and the amount of the payout will be based on the number of shares of Restricted Stock or Restricted Stock Units that were issued on the Date of Grant, prorated based on the number of months of the restriction period that have elapsed as of the payout date.  Also, with respect to Performance-Based Restricted Stock or Restricted Stock Unit Awards, in determining the amount of the payout, maximum performance achievement will be assumed.

Stock Option Awards and Stock Appreciation Rights.  Any previously granted Stock Option Awards or Stock Appreciation Rights will be immediately exercisable.

Performance Units.  The Participant will be entitled to an accelerated Award payout, and the amount of the payout will be based on the number of Performance Units subject to the Target Performance Award as established on the Date of Grant, prorated based on the number of months of the Performance Period that have elapsed as of the payout date, and assuming that maximum performance was achieved.

Covered Awards.  Except as may be expressly provided to the contrary in the applicable grant agreement, Covered Awards shall not be immediately vested or exercisable or subject to immediate or accelerated payout, Option Period or Exercise Period as a result of the consummation of the Excluded Transactions, but will remain outstanding in accordance with their terms following the consummation of the Excluded Transactions, subject to any adjustments made by the Plan Administrator in accordance with the provisions of Section 14.

C.Timing of Accelerated Payout/Option Period/Exercise Period.  The accelerated payout set forth in Section 12B will be made in cash within 30 days after the date of the change in control.  The accelerated Option Period/Exercise Period set forth in Section 12B will begin on the date of the change in control, and applicable payments will be in cash.  When Stock is related to the Award, the amount of cash will be determined based on the Fair Market Value of Stock on the payout or exercise date, whichever is applicable.

13.Amendment of Plan.

The Plan Administrator may at any time and from time to time alter, amend, suspend or terminate the Plan in whole or in part, except no such action may be taken without the consent of the Participant to whom any Award was previously granted, which adversely affects the rights of such Participant concerning such Award, except as such termination or amendment of the Plan is required by statute, or rules and regulations

15

promulgated thereunder.

14.Miscellaneous Provisions.

A.Nontransferability.  No benefit provided under this Plan shall be subject to alienation or assignment by a Participant (or by any person entitled to such benefit pursuant to the terms of this Plan), nor shall it be subject to attachment or other legal process except (i) to the extent specifically mandated and directed by applicable state or federal statute, (ii) as requested by the Participant (or by any person entitled to such benefit pursuant to the terms of this Plan), and approved by the Plan Administrator, to satisfy income tax withholding, and (iii) as requested by the Participant and approved by the Plan Administrator, to members of the Participant’s family, or a trust established by the Participant for the benefit of family members.

B.No Employment Right.  Participation in this Plan shall not constitute a contract of employment between Constellation Energy or any Subsidiary and any person and shall not be deemed to be consideration for, or a condition of, continued employment of any person.

C.Tax Withholding.  Constellation Energy or a Subsidiary may withhold any applicable federal, state or local taxes at such time and upon such terms and conditions as required by law or determined by Constellation Energy or a Subsidiary.  Subject to compliance with any requirements of applicable law, the Plan Administrator may permit or require a Participant to have any portion of any withholding or other taxes payable in respect to a distribution of Stock satisfied through the payment of cash by the Participant to Constellation Energy or a Subsidiary, the retention by Constellation Energy or a Subsidiary of shares of Stock, or delivery of previously owned shares of the Participant’s Stock, having a Fair Market Value equal to the withholding amount.

D.Fractional Shares.  Any fractional shares concerning Awards shall be eliminated at the time of payment or payout by rounding down for fractions of less than one-half and rounding up for fractions of equal to or more than one-half.  No cash settlements shall be made with respect to fractional shares eliminated by rounding.

E.Government and Other Regulations.  The obligation of Constellation Energy to make payment of Awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by any government agencies as may be required.  Constellation Energy shall be under no obligation to register under the Securities Act of 1933, as amended (“Act”), any of the shares of Stock issued, delivered or paid in settlement under the Plan.  If Stock awarded under the Plan may in certain circumstances be exempt from registration under the Act, Constellation Energy may restrict its transfer in such manner as it deems advisable to ensure such exempt status.  The Plan is not subject to any provisions of the Employee Retirement Income Security Act of 1974.

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F.Indemnification.  The Plan Administrator (and his/her designees), and Constellation Energy’s Chairman of the Board, and President and all other employees of Constellation Energy or its Subsidiaries whose assigned duties include matters under the Plan, shall be indemnified by Constellation Energy or its Subsidiaries or from proceeds under insurance policies purchased by Constellation Energy or its Subsidiaries against any and all liabilities arising by reason of any act or failure to act made in good faith pursuant to the provisions of the Plan, including expenses reasonably incurred in the defense of any related claim.

G.Changes in Capital Structure.  In the event of any change in the outstanding shares of Stock by reason of any stock dividend or split, recapitalization, combination or exchange of shares or other similar changes in the Stock, then appropriate adjustments shall be made in the shares of Stock theretofore awarded to the Participants and in the aggregate number of shares of Stock which may be awarded pursuant to the Plan.  Such adjustments shall be conclusive and binding for all purposes.  Additional shares of Stock issued as the result of any such change shall bear the same restrictions as the shares of Stock to which they relate.

H.Constellation Energy Successors.  In the event Constellation Energy becomes a party to a merger, consolidation, sale of substantially all of its assets or any other corporate reorganization in which Constellation Energy will not be the surviving corporation or in which the holders of the Stock will receive securities of another corporation (in any such case, the “New Company”), then the New Company shall assume the rights and obligations of Constellation Energy under this Plan.

I.Governing Law.  All matters relating to the Plan or to Awards granted hereunder shall be governed by the laws of the State of Maryland, without regard to the principles of conflict of laws.

J.Relationship to Other Benefits.  Any Awards under this Plan are not considered compensation for purposes of determining benefits under any pension, profit sharing, or other retirement or welfare plan, or for any other general employee benefit program.

K.Expenses.  The expenses of administering the Plan shall be borne by Constellation Energy and its Subsidiaries.

L.Titles and Headings.  The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

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This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933.

You may obtain without charge, upon written or oral request, a copy of documents incorporated by reference in the Registration Statement on file with the Securities and Exchange Commission pertaining to the securities offered under the Management Long-Term Incentive Plan.  In addition you may obtain, without charge, upon written or oral request, a copy of documents that are required to be delivered under Rule 428(b) of the Securities Act including our annual report to shareholders or annual report on Form 10-K and a copy of the documents that comprise the prospectus.

To make a request for any of these documents, you may telephone or write:

Corporate Secretary
750 East Pratt Street
18th Floor
Baltimore, Maryland 21202
(410) 783-3600

18

1998 Management Long-Term Incentive Plan
Appendix

Additional Information

The Plan is not subject to any provisions of the Employee Retirement Income Security Act of 1974, and the Plan is not qualified under Section 401(a) of the Internal Revenue Code.

Participants may obtain additional information about the Plan by contacting:

Manager — Executive Compensation
Constellation Energy Group, Inc.
750 East Pratt Street
5th Floor
Baltimore, MD 21202
410-783-3244

After each grant is made, participants will be furnished with information about the amount of the grant.  Participants have access to information about their outstanding grants.

In general, grants subject to restrictions are taxable to participants when the restrictions lapse, and deductible by Constellation Energy at such time, based on the fair market value of the awards when the restrictions lapse.  Grants not subject to restrictions are taxable/deductible at fair market value on the grant date.  Additionally, options are subject to other special tax provisions.

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FORM OF SERVICE-BASED RESTRICTED STOCK AWARD AGREEMENT

[DATE]

Recipient Name
Recipient Title
Company
Company Address
City, State Zip Code

RE:  Service-Based Restricted Stock Award

Dear Recipient:

Effective date, The Board of Directors Compensation Committee, (The Committee), granted you [#] service-based restricted shares of CEG Common Stock (the “Award”) pursuant to Section 7 of the Constellation Energy Group, Inc. Management Long—Term Incentive Plan (the “Plan”).  In addition to other provisions of the Plan (a copy of which is provided to you with this letter), your Award is subject to the following conditions:

1.The Plan restriction period for these shares expires as show on the restriction lapse dates in the table below:

# Shares Granted	Share Grant Date	Restriction Period	Restriction Lapse Date	Aggregate Shares Lapsed
[#]	mm/dd/yy	[one to five years]	[one to five years after Share Grant Date]	[#]

2.The Plan requires that as a condition to receiving your Award, you waive in writing the right to make an election under Section 83(b) of the Internal Revenue Code of 1986 with respect to your Award (see Section 7D of the Plan).  Your execution of this letter will constitute your waiver to make such election under Section 83(b).  This waiver means that you will not have the option of electing to be taxed on the restricted shares at the time of the grant.  Instead, you will be taxed on the restricted shares at the time the Plan restrictions are removed (see Attachment A).  This waiver allows the Company to treat dividends paid to you during the period of the Plan restrictions as compensation, thereby giving the Company a tax deduction for such amounts.

3.As provided in the Plan, until the Plan restriction period expires, you may not sell, transfer, pledge or hypothecate the Award shares.  CEG will hold the shares for safekeeping until the restriction lapse, unless you let us know that you want a stock certificate for the Award.  If you prefer a certificate, it will be issued in your name with a legend to the effect that you may not sell, transfer, pledge, or hypothecate the Award shares and that the shares are subject to certain conditions under the Plan.

4.If you contemplate the sale or transfer (for example to a family member) of any shares after the restriction period expires, you should contact the SEC-related persons specified below for advice on the

20

timing of any sale or transfer and any reporting obligations you may have.

5.In the event of Retirement, Disability (each as defined in the Plan) or death before the Award shares vest, a prorated portion of the shares will vest based on service after the Grant Date (see Table).  In the event of employment Termination (as defined in the Plan) for any other reason, any unvested Award shares will be forfeited.

6.Awards are not eligible compensation for benefit purposes.

7.Neither this Agreement nor the Award constitutes a contract of employment between Constellation Energy or any Subsidiary and you, and neither will be deemed to be consideration for, or a condition of, your continued employment.

8.The Award is granted pursuant to the terms of the Plan, the terms of which are incorporated in this Agreement by reference.  The Award will in all respects be interpreted in accordance with the Plan.  All capitalized terms, which are not otherwise defined in this Agreement, will have the meaning specified in the Plan.  The Plan Administrator will interpret and construe the Plan and this agreement, and its interpretations and determinations will be conclusive and binding on the parties and any other person claiming an interest with respect to any issue arising under this Agreement.

9.The provisions of this Agreement are severable.  If any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions will nevertheless be binding and enforceable.

Please read the Plan carefully as it contains many other provisions relating to your Award.  If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign the enclosed copy of this letter and return it in the envelope provided.

Sincerely,

[NAME]
[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of Recipient Date

21

ATTACHMENT A

CONSTELLATION ENERGY GROUP, INC.

INCOME TAX CONSEQUENCES TO PARTICIPANTS
FOR SERVICE-BASED RESTRICTED STOCK AWARDS

Set forth is a brief overview of certain income tax consequences associated with your Service-Based Restricted Stock Award (“the Award”).

Stock

Because the Plan places certain restrictions on the Award which could lead to forfeiture of the shares prior to lifting the Plan restrictions and because you have agreed to waive the Section 83(b) election(1), the value of the restricted stock is not taxed to you when the initial grant is made.  Rather, the stock is taxable to you at the time the restrictions are removed.  The amount subject to income tax is the fair market value of the stock on the day that the Plan restrictions are removed.  This amount is treated as compensation subject to withholding of income taxes, Medicare taxes and, if applicable, Social Security taxes.  You are not taxed on the value of any stock forfeited.

For purposes of determining the gain or loss on any sale of the stock received pursuant to this Award, your basis in the stock is the amount that you included in taxable income when the Plan restrictions were removed.  Your tax holding period, for purposes of determining whether a gain or loss on a sale is long-term or short-term, begins on the day after the day that the Plan restrictions were removed.

Dividends

The dividends during the restriction period will be automatically reinvested in additional shares of company common stock.  These shares will be subject to the same restrictions as the originally awarded shares and will vest accordingly.  For tax purposes, the dividends on the restricted stock will not be taxable as dividend income.  Rather, the accumulated shares of stock will be taxable to you in the same manner as stated above.

After the Plan restrictions on the stock are removed, the dividends are treated as regular dividend income (generally not subject to tax withholding).

Tax Planning

You may wish to consult your tax advisor in the year the restrictions are lifted from the Award if you have questions regarding the impact of the Award on your tax withholding or if you have questions about the applicable capital gains holding period and rates for this Award.

(1) The Plan requires that as a condition to receiving a Restricted Stock Award, you must waive in writing the right to make an election under Section 83(b) of the Internal Revenue Code of 1986 with respect to your Award (see Section 7 D of the Plan).  This waiver means that you will not have the option of electing to be taxed on the restricted shares at the time of grant.  Instead, you will be taxed on the restricted shares at the time the Plan restrictions are removed.  This allows the Company to treat dividends paid during the period of Plan restrictions as compensation, thereby giving the Company a tax deduction for such amounts.

22

FORM OF PERFORMANCE UNIT AGREEMENT

[date]

TO: «First» «MI» «Last»

Effective [Date], as part of the [3 CALENDAR YEAR PERFORMANCE PERIOD] Long-Term Incentive Program, you were granted [#] performance units (the “Units”) under the Constellation Energy Group, Inc. Management Long—Term Incentive Plan (the “Plan”).  In addition to other provisions of the Plan, your award is subject to the conditions set forth in this document.

Target Grant (# Units)	Grant Date	Performance Period	Vesting Date
[#]	[MM/DD/YY]	[3-Year Period]	[End of 3- Year Period]

Under current tax law, you are not subject to tax on your Units until the Vesting Date.

1.Each Unit is worth $1. The final award payout on the Vesting Date will be based on Constellation Energy Group’s relative Total Shareholder Return (“TSR”) performance over the Performance Period as set forth below. TSR is defined as the stock price change from [BEGINNING TO END OF 3 CALENDAR YEAR PERFORMANCE PERIOD] and dividends during that period that are reinvested on the ex-dividend date (date stock trades without its dividend) at the closing price on that date.

The Plan Administrator will determine the award payout soon after the conclusion of the Performance Period. The performance measures used to determine the award payout are as follows:

·Primary Measure: Constellation Energy TSR for the Performance Period is compared to the TSR performance results of large and mid-size investment grade companies within the Dow Jones Electric Utilities Index (DJEUI) on [END OF PERFORMANCE PERIOD].  In the DJEUI, companies that are rated ‘non-investment grade’ by both Moody’s and S&P rating agencies on [END OF PERFORMANCE PERIOD] are excluded.

·Secondary Measure: If Constellation Energy’s percentile rank for the Primary Measure is below the [   ] percentile, then a comparison will be made to the TSR performance results of investment grade companies in the S&P 500 Index on [END OF PERFORMANCE PERIOD].

		Primary Measure
		TSR v. DJEUI Large & Mid- Cap Investment Grade Companies		Secondary Measure TSR v. S&P 500 Index Comparison Group
Performance Level	Total Shareholder Return	Payout vs. Target		Payout vs. Target
<Threshold	<[  ] Percentile	[  ]	%	[  ]	%
Threshold	[  ] Percentile	[  ]	%	[  ]	%
Target	[  ] Percentile	[  ]	%	[  ]	%
Stretch	[  ] Percentile	[  ]	%	[  ]	%

Payout levels interpolated between points.

Secondary measure applies only if performance vs. primary measure is below threshold.

23

2.The award payout amount is determined by multiplying the “Payout vs. Target” percentage by the number of Units (worth $1 each) that you were granted.  This award payout amount may be settled, in the sole discretion of the Plan Administrator, in either restricted or unrestricted stock or stock units, or cash (or any combination thereof).

3.Under current tax law, you will be subject to tax on the Vesting Date on the award payout amount.  The Company will be required to withhold applicable taxes at such time.  If the award payout is settled in stock or stock units, the Company will withhold the required number of shares or units to pay these taxes.

4.As provided in the Plan, until the Vesting Date, you may not sell, transfer, or pledge the Units.

5.Awards are not eligible compensation for benefit purposes.

6.Neither this Agreement nor the Award constitutes a contract of employment between Constellation Energy or any Subsidiary and you, and neither will be deemed to be consideration for, or a condition of, your continued employment.

7.The Award is granted pursuant to the terms of the Plan, the terms of which are incorporated in this Agreement by reference.  The Award will in all respects be interpreted in accordance with the Plan.  All capitalized terms, which are not otherwise defined in this Agreement, will have the meaning specified in the Plan.  The Plan Administrator will interpret and construe the Plan and this agreement, and its interpretations and determinations will be conclusive and binding on the parties and any other person claiming an interest with respect to any issue arising under this Agreement.

8.The provisions of this Agreement are severable.  If any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions will nevertheless be binding and enforceable.

Please read the Plan carefully as it contains many other provisions relating to your award.  If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign this letter and return it in the envelope provided, and keep a copy for your records.

Sincerely,

[NAME]
[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of «First» «MI» «Last» DATE

24

FORM OF STOCK UNIT AWARD WITH SALE RESTRICTION
AGREEMENT

[DATE]

Recipient Name
Recipient Title
Company
Company Address
City, State Zip Code

RE:  Stock Unit Award with Sale Restriction

Dear Recipient:

Effective date, as part of your [PERFORMANCE YEAR] annual incentive and in recognition of your performance during [PERFORMANCE YEAR], you were granted [#] restricted Constellation Energy Group, Inc. (the “Company”) common stock units with sale restrictions (“Deferred Shares”) under the Constellation Energy Group, Inc. Management Long-Term Incentive Plan (the “Plan”).  In addition to other provisions of the Plan, your award is subject to the following conditions:

1.Each Deferred Share entitles you to receive on the Restriction Lapse Date (set forth below) one share of Constellation Energy Group common stock (“Common Stock”).  Under current tax law, you are not subject to tax on your Deferred Shares until the Restriction Lapse Date (see paragraph 4 below).

2.During the Restriction Period (set forth below), on any date that Constellation Energy Group pays dividends with respect to the Common Stock, the Company shall credit you with a number of Deferred Shares equal to (i) the number of your Deferred Shares on the dividend record date times (ii) the dividend rate per share, divided by (iii) the per share reinvestment price.  These dividend-based additional Deferred Shares shall be subject to the same rules and restrictions as Deferred Shares originally granted to you.

3.The Restriction Period for your Deferred Shares expires on the Restriction Lapse Date as shown in the table below:

# Deferred Shares Granted	Deferred Share Grant Date	Restriction Period	Restriction LapseDate
[#]	[MM/DD/YY]	[5 years]	[5 years after Grant Date]

Your Deferred Shares are fully and immediately vested, however, during the Restriction Period, you may not sell, transfer, or pledge the Deferred Shares.  During the Restriction Period, you will have no voting rights with respect to the Deferred Shares.  The Restriction Period remains in effect irrespective of your employment status.

25

4.Following the Restriction Lapse Date, the Company shall cause to be issued to you a certificate for shares of Common Stock equal to the number of your Deferred Shares (including dividend-based additional Deferred Shares).  Under current tax law, you will be subject to tax on the Restriction Lapse Date based on an amount equal to the number of shares of Common Stock issued to you times the Fair Market Value per share (i.e., the average of the high and low price of the Common Stock on the Restriction Lapse Date).  The Company will be required to withhold applicable taxes at such time, and will withhold the required number of shares to pay these taxes.  The total shares you receive will be rounded to the nearest whole share.  You should consult your tax advisor regarding any tax issues.

5.Awards are not eligible compensation for benefit purposes.

6.Neither this Agreement nor the Award constitutes a contract of employment between Constellation Energy or any Subsidiary and you, and neither will be deemed to be consideration for, or a condition of, your continued employment.

7.The Award is granted pursuant to the terms of the Plan, the terms of which are incorporated in this Agreement by reference.  The Award will in all respects be interpreted in accordance with the Plan.  All capitalized terms, which are not otherwise defined in this Agreement, will have the meaning specified in the Plan.  The Plan Administrator will interpret and construe the Plan and this agreement, and its interpretations and determinations will be conclusive and binding on the parties and any other person claiming an interest with respect to any issue arising under this Agreement.

8.The provisions of this Agreement are severable.  If any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions will nevertheless be binding and enforceable.

Please read the Plan carefully as it contains many other provisions relating to your award.  If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign the enclosed copy of this letter and return it in the envelope provided.

Sincerely,

[NAME]
[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of Recipient Date

26

FORM OF
STOCK OPTION AGREEMENT

This Stock Option Agreement (“Agreement”) is subject to the terms and conditions of the Constellation Energy Group, Inc. Management Long-Term Incentive Plan (the “Plan”).  The «Administrator» Constellation Energy Group, Inc. (the “Plan Administrator”) has authorized the option grant under this Agreement by and between Participant (designated below) and Constellation Energy Group, Inc. (“Constellation Energy”).

1. Grant of Option.

(a) The “Participant” is «First» «Middle» «Last».

(b) The date of the grant is «GrantDate» (“Grant Date”).

(c) The number of shares subject to the option (“Option Shares”) are «Grant» shares of Constellation Energy common stock (“Stock”).

(d) The exercise price is [OptionPrice = fair market value of stock on grant date] per share of Stock (“Exercise Price”).

This Agreement specifies the terms of the option (“Option”) granted to Participant to purchase the Option Shares at the Exercise Price set forth above. The Option is not intended to constitute an “incentive stock option” as that term is used in Internal Revenue Code section 422.  The “Option Period” is the period during which the Option is exercisable as provided in this Agreement.

2. Installment Exercise.

Subject to the terms of this Agreement, the Option will be exercisable in installments according to the following schedule (each a “Vesting Date”):

INSTALLMENT	VESTING DATE APPLICABLE TO INSTALLMENT
[1/3 of Option Shares] Options	[One year after Grant Date]
[1/3 of Option Shares] Options	[Two years after Grant Date]
[1/3 of Option Shares] Options	[Three years after Grant Date]

3. Termination of Option.

(a)           Except as provided in paragraph 3(b) below, the Option will terminate upon the earlier to occur of: (1) when all Option Shares have been exercised; or (2) ten (10) years from the Grant Date (“Expiration Date”).

(b)           If Participant ceases employment, the Option will terminate as to any unvested Option Shares on the effective date of Participant’s employment Termination (as defined in the Plan) and as to vested Option Shares 90 days after such effective date; provided that if Participant ceases employment

27

because of Participant’s Retirement, Disability (each as defined in the Plan), or death, the Option will terminate as to any unvested Option Shares on the effective date of the Retirement, Disability or death, and as to vested Option Shares, the Option will remain exercisable until the earlier of 60 months after such effective date or the Expiration Date.

(c)           In the event of Participant’s death during the Option Period, vested Option Shares may be exercised by Participant’s legal representative(s), or by other person(s) authorized under Participant’s will.  Alternatively, if Participant fails to make testamentary disposition of the Option or dies intestate, such vested Option Shares may be exercised by persons(s) entitled to receive the Option Shares under the applicable laws of descent and distribution.

(d)           A transfer of Participant’s employment between Constellation Energy and any Subsidiary of Constellation Energy, or between Subsidiaries of Constellation Energy, will not be considered an employment Termination.

4. Exercise of Option.

(a)           Subject to this Agreement and the Plan, the Option may be exercised in whole or in part by the method specified by the Plan Administrator from time to time or by contacting [NAME] at [PHONE NUMBER(S)].

(b)           On or before the exercise date specified pursuant to paragraph 4(a), Participant must fully pay the Exercise Price and the tax withholding obligation for the Option Shares exercised in U.S. dollars by cash or by check payable to Constellation Energy Group, Inc.  All or a portion of the Exercise Price and tax withholding obligation may also be paid by Participant: (i) subject to the terms of paragraph 4(c) below, by delivery of shares of Stock owned by Participant and acceptable to the Plan Administrator having an aggregate Fair Market Value (as defined in paragraph 6 below) on the date of exercise that is equal to the amount of cash that would otherwise be required; or (ii) by authorizing a third party to sell the Option Shares (or a sufficient portion of the Option Shares), and immediately remit to Constellation Energy the Exercise Price and any tax withholding resulting from such exercise.  Further, tax withholding up to the minimum required withholding rate (but not in excess of that rate) may also be satisfied through a holdback by Constellation Energy of some of the Option Shares that would otherwise be deliverable to Participant by reason of the Option exercise.  The Option will cease to be exercisable, as to the portion exercised, when Participant purchases the Stock to which the exercised portion of the Option relates.

(c)           Other shares of Stock owned by Participant may be delivered to satisfy the Exercise Price, or to satisfy Participant’s tax withholding obligation above the minimum withholding rate, only if the shares have been held by Participant for at least six months before delivery, except that there shall be no holding period imposed for shares purchased by Participant for cash on the open market.  Use of previously-owned shares shall be effected by actual delivery of the Stock certificates to Constellation Energy, and by completing an affidavit available from Constellation Energy affirming that Participant owns the necessary shares and that any applicable holding period has been satisfied.

(d)           Participant is required to comply with Constellation Energy’s Insider Trading Policy at all times, including in connection with exercise of the Option. The Option may not be exercised by Participant during any blackout or prohibited trading period established by Constellation Energy or applicable to Participant, nor shall the Option be exercisable if and to the extent Constellation Energy determines that such exercise would violate applicable state or Federal securities laws or the rules and regulations of any securities exchange on which the Stock is traded.  If Constellation Energy makes such a determination, it will use all reasonable efforts to comply with such laws, rules or regulations.  In

28

making any such determinations, Constellation Energy may rely on the opinion of counsel for Constellation Energy.

(e)           As soon as practicable after the exercise date, Constellation Energy will deliver to Participant a Stock certificate or certificates (or other evidence of ownership) for the purchased Option Shares.

5.  Tax Withholding.

Constellation Energy will have the right to withhold any applicable federal, state or local taxes, deductions or withholdings due with respect to the Option or its exercise in such form and manner as provided in the Plan.

6. Fair Market Value.

The “Fair Market Value” of a share of Stock is the average of the highest and lowest sale price per share of Stock on the New York Stock Exchange-Composite Transactions on the applicable date of reference, or if there are no sales on such date, then the average of such highest and lowest sale price on the last previous day on which sales are reported.

7. No Rights of Stockholders.

Participant does not have any of the rights and privileges of a stockholder of Constellation Energy with respect to any shares of Stock purchasable or issuable upon the exercise of the Option, in whole or in part, before the date of exercise and purchase of the Option Shares.

8. Non-Transferability of Option.

The Option is not transferable, except for a transfer to Participant’s family member or to a trust established for the benefit of Participant’s family members which has been approved by the Plan Administrator as provided in the Plan, or in case of Participant’s death, by will or the laws of descent and distribution, nor shall the Option be subject to attachment, execution or other similar process.  During Participant’s lifetime, the Option is exercisable only by Participant, any guardian or legal representative of Participant, or a family member or trustee of a trust established for the benefit of Participant’s family members to whom the Option has been transferred in accordance with the Plan.  In the event of (a) any attempt by Participant to alienate, assign, pledge, hypothecate or otherwise dispose of the Option, except as provided in this Agreement, or (b) the levy of any attachment, execution or similar process upon the rights or interest conferred under this Agreement, Constellation Energy may terminate the Option by notice to Participant and it will become null and void.

9. Employment Not Affected.

Neither this Agreement nor the grant of the Option constitutes a contract of employment between Constellation Energy or any Subsidiary and Participant, and neither will be deemed to be consideration for, or a condition of, continued employment of Participant. Awards are not eligible compensation for benefit purposes.

29

10. Incorporation of Plan by Reference.

The Option is granted pursuant to the terms of the Plan, the terms of which are incorporated in this Agreement by reference.  The Option will in all respects be interpreted in accordance with the Plan.  All capitalized terms, which are not otherwise defined in this Agreement, will have the meaning specified in the Plan.  The Plan Administrator will interpret and construe the Plan and this Agreement, and its interpretations and determinations will be conclusive and binding on the parties and any other person claiming an interest with respect to any issue arising under this Agreement.

11.  Severability.

The provisions of this Agreement are severable.  If any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions will nevertheless be binding and enforceable.

IN WITNESS WHEREOF, Constellation Energy Group, Inc. and Participant have executed this Stock Option Agreement effective as of the Grant Date.

Constellation Energy Group, Inc	ACCEPTED AND AGREED TO:
[NAME]	By:
		«First» «Middle» «Last»
[TITLE, DEPARTMENT]

30

EX-12.(A)

Exhibit 12(a)

CONSTELLATION ENERGY GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

	9 Months Ended			12 Months Ended
	September 2006			December 2005		December 2004		December 2003		December 2002		December 2001
	(In millions)
Income from Continuing Operations (Before Extraordinary Loss and Cumulative Effects of Changes in Accounting Principles)		$	530.6	$	606.7	$	566.8	$	456.7	$	515.4		$	119.2
Taxes on Income, Including Tax Effect for BGE Preference Stock Dividends		251.6		195.6		148.7		242.1		292.6			53.1
Adjusted Income		$	782.2	$	802.3	$	715.5	$	698.8	$	808.0		$	172.3
Fixed Charges:
Interest and Amortization of Debt Discount and Expense and Premium on all Indebtedness		$	229.6	$	297.5	$	315.9	$	325.6	$	265.9		$	222.6
Earnings Required for BGE Preference Stock Dividends		16.1		21.6		21.4		21.7		21.8			21.4
Capitalized Interest		10.1		10.0		9.7		11.7		42.5			55.9
Interest Factor in Rentals		3.3		6.1		4.1		3.5		2.1			2.0
Total Fixed Charges		$	259.1	$	335.2	$	351.1	$	362.5	$	332.3		$	301.9
Amortization of Capitalized Interest		$	3.5	$	4.4	$	3.5	$	2.7	$	1.3		$	0.3
Earnings (1)		$	1,034.7	$	1,131.9	$	1,060.4	$	1,052.3	$	1,099.1		$	418.6
Ratio of Earnings to Fixed Charges		3.99		3.38		3.02		2.90		3.31			1.39

(1)Earnings are deemed to consist of income from continuing operations (before extraordinary items, cumulative effects of changes in accounting principles, and income (loss) from discontinued operations) that includes earnings of Constellation Energy’s consolidated subsidiaries, equity in the net income of unconsolidated subsidiaries, income taxes (including deferred income taxes, investment tax credit adjustments, and the tax effect of BGE’s preference stock dividends), and fixed charges (including the amortization of capitalized interest but excluding the capitalization of interest).

EX-12.(B)

Exhibit 12(b)

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARIES

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED AND PREFERENCE DIVIDEND REQUIREMENTS

	9 Months Ended			12 Months Ended
	September 2006			December 2005			December 2004			December 2003			December 2002			December 2001
	(In millions)
Income from Continuing Operations (Before Extraordinary Loss)		$	132.3		$	189.0		$	166.3		$	163.2		$	143.1		$	97.3
Taxes on Income		83.3			119.9			102.5			105.2			93.3			60.3
Adjusted Income		215.6			$	308.9		$	268.8		$	268.4		$	236.4		$	157.6
Fixed Charges:
Interest and Amortization of Debt Discount and Expense and Premium on all Indebtedness		$	73.3		$	95.6		$	97.3		$	112.8		$	142.1		$	158.8
Interest Factor in Rentals		0.2			0.3			0.5			0.7			0.5			0.7
Total Fixed Charges		$	73.5		$	95.9		$	97.8		$	113.5		$	142.6		$	159.5
Preferred and Preference
Dividend Requirements: (1)
Preferred and Preference Dividends		$	9.9		$	13.2		$	13.2		$	13.2		$	13.2		$	13.2
Income Tax Required		6.3			8.4			8.1			8.6			8.6			8.2
Total Preferred and Preference Dividend Requirements		$	16.2		$	21.6		$	21.3		$	21.8		$	21.8		$	21.4
Total Fixed Charges and Preferred and Preference Dividend Requirements		$	89.7		$	117.5		$	119.1		$	135.3		$	164.4		$	180.9
Earnings (2)		$	289.1		$	404.8		$	366.6		$	381.9		$	379.0		$	317.1
Ratio of Earnings to Fixed Charges		3.93			4.22			3.75			3.36			2.66			1.99
Ratio of Earnings to Combined Fixed Charges and Preferred and Preference Dividend Requirements		3.22			3.45			3.08			2.82			2.31			1.75

(1)Preferred and preference dividend requirements consist of an amount equal to the pre-tax earnings that would be required to meet dividend requirements on preferred stock and preference stock.

(2)Earnings are deemed to consist of income from continuing operations (before extraordinary items) that includes earnings of BGE’s consolidated subsidiaries, income taxes (including deferred income taxes and investment tax credit adjustments), and fixed charges other than capitalized interest.

EX-31.(A)

Exhibit 31(a)

CONSTELLATION ENERGY GROUP, INC.

CERTIFICATION

I, Mayo A. Shattuck III, certify that:

1.I have reviewed this report on Form 10-Q of Constellation Energy Group, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2006

/s/ MAYO A. SHATTUCK III

Chairman of the Board, President, and Chief Executive Officer

EX-31.(B)

Exhibit 31(b)

CONSTELLATION ENERGY GROUP, INC.

CERTIFICATION

I, E. Follin Smith, certify that:

1.I have reviewed this report on Form 10-Q of Constellation Energy Group, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2006

/s/ E. FOLLIN SMITH

Executive Vice President, Chief Financial Officer, and

Chief Administrative Officer

EX-31.(C)

Exhibit 31(c)

BALTIMORE GAS AND ELECTRIC COMPANY

CERTIFICATION

I, Kenneth W. DeFontes, Jr., certify that:

1.I have reviewed this report on Form 10-Q of Baltimore Gas and Electric Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2006

s/ KENNETH W. DEFONTES, JR.

President and Chief Executive Officer

EX-31.(D)

Exhibit 31(d)

BALTIMORE GAS AND ELECTRIC COMPANY

CERTIFICATION

I, E. Follin Smith, certify that:

1.I have reviewed this report on Form 10-Q of Baltimore Gas and Electric Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2006

/s/ E. FOLLIN SMITH

Senior Vice President and Chief Financial Officer

EX-32.(A)

Exhibit 32(a)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Mayo A. Shattuck III, Chairman of the Board, President, and Chief Executive Officer of Constellation Energy Group, Inc., certify pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that to my knowledge:

(i)     The accompanying Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

(ii)    The information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Constellation Energy Group, Inc.

/s/ MAYO A. SHATTUCK III

Mayo A. Shattuck III

Chairman of the Board, President, and

Chief Executive Officer

Date: November 8, 2006

EX-32.(B)

Exhibit 32(b)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, E. Follin Smith, Executive Vice President, Chief Financial Officer, and Chief Administrative Officer of Constellation Energy Group, Inc., certify pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that to my knowledge:

(i)     The accompanying Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

(ii)    The information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Constellation Energy Group, Inc.

/s/ E. FOLLIN SMITH

E. Follin Smith

Executive Vice President, Chief Financial Officer, and

Chief Administrative Officer

Date: November 8, 2006

EX-32.(C)

Exhibit 32(c)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Kenneth W. DeFontes, Jr., President and Chief Executive Officer of Baltimore Gas and Electric Company, certify pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that to my knowledge:

(i)     The accompanying Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

(ii)    The information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Baltimore Gas and Electric Company.

/s/ KENNETH W. DEFONTES, JR.

Kenneth W. DeFontes, Jr.
President and Chief Executive Officer

Date: November 8, 2006

EX-32.(D)

Exhibit 32(d)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, E. Follin Smith, Senior Vice President and Chief Financial Officer of Baltimore Gas and Electric Company, certify pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that to my knowledge:

(i)     The accompanying Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

(ii)    The information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Baltimore Gas and Electric Company.

/s/ E. FOLLIN SMITH

E. Follin Smith
Senior Vice President and Chief Financial Officer

Date: November 8, 2006