MidAmerican Energy Holdings Company Des Moines, Iowa 50309

Very truly yours,

MIDAMERICAN ENERGY HOLDINGS COMPANY

By:

/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇

Name:  ▇▇▇▇▇▇▇ ▇. ▇▇▇▇

Title:  President and Chief Executive Officer

Accepted and Agreed as of September17, 2008:

CONSTELLATION ENERGY GROUP, INC.

By:

/s/ Mayo ▇. ▇▇▇▇▇▇▇▇ III

Name:  Mayo ▇. ▇▇▇▇▇▇▇▇ III

Title:  Chairman, President and Chief Executive Officer

CONVERTIBLE
PREFERRED STOCK:

Issuer:

Constellation Energy Group, Inc., a Maryland corporation (“CEG” or the “Company”)

Purchaser:

MidAmerican Energy Holdings Company (“Purchaser”)

Type of Security:

Series A Convertible Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”).

Securities to be Purchased:

Purchaser would invest an aggregate of $1 billion (the “Invested Amount”) in exchange for shares of Series A Preferred Stock at purchase price of $100,000 per share upon the execution of the definitive purchase agreement and the receipt of any required regulatory approvals.

Terms of Series A Preferred Stock:

Dividends

8% per annum payable in cash, cumulative and compounding quarterly, payable when and as authorized by the Board of Directors of the Company (the “Board of Directors”) and prior and in preference to any other series or class of stock of the Company; restriction on payment of dividends on capital stock in any year unless all dividends on the Series A Preferred Stock have been paid in full. Such dividends shall be payable on the date prior to the payment date of the Company’s regular quarterly dividend.

Mandatory Conversion

Upon the occurrence of a Conversion Date (as defined below), the Series A Preferred Stock shall automatically convert into: (i) a number of shares of the Company’s Common Stock equal to 19.9% of the Company’s outstanding Common Stock on the date the Series A Preferred Stock Purchase Agreement is executed and (ii) $1 billion aggregate principal amount of the Company’s 14% Senior Notes having the terms described below under “Terms of 14% Senior Notes”. “Conversion Date” shall mean the first to occur of: (i) the date that is 6 months following the Purchaser’s exercise of the Limited Due Diligence Termination Right (as defined below) if the Company has not redeemed the Series A Preferred Stock by such date, (ii) the date the Merger Agreement is terminated (other than upon exercise of the Limited Due Diligence Termination Right or due to a breach of the agreement by the Purchaser) and (iii) the drop dead date of the Merger Agreement,

including any extension thereof by the Company or the Purchaser.

Treatment of Dividends on Conversion

Upon conversion of the Series A Preferred Stock, any accrued but unpaid dividends thereon would be paid to the holder of the converted shares in cash.

Liquidation Preference

Upon the occurrence of a Liquidation Event (as hereinafter defined), the holders of Series A Preferred Stock would be entitled to receive, in preference to the holders of the Common Stock and the holders of any other capital stock of the Company, an amount in cash equal to the Invested Amount plus all accrued but unpaid dividends thereon (the “Liquidation Preference”).

“Liquidation Event” would mean, (i) any liquidation, dissolution or winding up of the Company or (ii) a consolidation, merger, reorganization or other form of acquisition of the Company (including through a stock purchase) or a sale of all or substantially all of its assets, except in cases where the stockholders of the Company immediately prior to such transaction own more than 50% of the voting stock of the Company or, if applicable, the resulting or surviving corporation, immediately following such transaction; provided, however, that the consummation of the transactions contemplated by the Merger Agreement shall not be deemed to constitute a Liquidation Event.

Redemption at Option of Holder

At any time on or after the second anniversary of the initial issuance date of the Series A Preferred Stock, the holders of the Series A Preferred Stock would be entitled to require the Company to redeem the Series A Preferred Stock at an aggregate redemption price equal to the Liquidation Preference of the Series A Preferred Stock.

Redemption at Option of the Company

During the 6 month period following Purchaser’s exercise of the Limited Due Diligence Termination Right, the Company shall have the right to redeem the Series A Preferred Stock at an aggregate redemption price equal to the Liquidation Preference of the Series A Preferred Stock.

Voting Rights

Except as set forth below, holders of Series A Preferred Stock would not be entitled to vote on any matters presented to the holders of Common Stock.

Without the approval of the holders of a majority of the outstanding shares of Series A Preferred Stock, the Company would not, and would not permit any subsidiary to:

1.               in the case of the Company, alter or amend the preferences, privileges or rights of the Series A Preferred Stock or create any class of shares senior to or pari passu with the Series A Preferred Stock in any respect;

2.               liquidate or dissolve or file a voluntary petition for bankruptcy or adopt any plan for any of the foregoing;

3.               amend the Company’s or any subsidiary’s Charter or Bylaws or equivalent organizational documents;

4.               increase the amount of the Company’s regular quarterly cash dividend, pay any special dividend or distribution or otherwise repurchase or redeem any equity securities, other than as required by the terms of equity securities outstanding on the date of issuance of the Series A Preferred Stock or in the case of the Company, authorize or issue any shares of capital having a right to dividends (other than Common Stock) or redemption;

5.               permit the Company or any of its subsidiaries to incur any indebtedness for borrowed money, other than the incurrence by the Company of senior unsecured debt ranking pari passu with the Company’s existing senior unsecured debt in the ordinary course of business consistent with past practice and the Company’s current business plan and Baltimore Gas & Electric Company (“BGE”) may issue new debt consistent with both its past practices and regulatory approvals;

6.               take any action that require common shareholder approval if the dividend has not been paid for two consecutive quarters, excluding the election of directors and the ratification of the Company’s independent auditors; or

7.               other mutually agreed covenants.

Adjustments

The number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock shall be appropriately adjusted to give effect to any stock split, recapitalization, stock dividend or similar event.

Information Rights:

At any time that the Company is not required to file periodic reports with the SEC, the Company would be required to provide the

Purchaser the following information:

1.               consolidated unaudited monthly financial statements prepared in accordance with US GAAP (including an income statement, balance sheet, and cash flow statement, with comparisons to budget and prior year) within 30 days of month-end, consolidated unaudited quarterly financial statements prepared in accordance with US GAAP (including an income statement, balance sheet, and cash flow statement, with comparisons to budget and prior year) within 30 days of quarter-end, and annual consolidated audited financial statements within 90 days of fiscal year-end (certified by a “Big 4” accounting firm);

2.               customary notices of material events (e.g., litigation, etc.); and

3.               such other information and access as the Investors may reasonably request.

Registration Rights:

At the expense of the Company, the Purchaser would have the following demand and piggyback registration rights as to the Series A Preferred Stock (and the securities issuable upon conversion thereof): up to two (2) demand rights, unlimited S-3 registrations; and unlimited piggyback rights; standard underwriting control arrangements and lockup.

Contemporaneously with the issuance of the Common Stock upon conversion of the Series A Preferred Stock, the Company shall file and as promptly as practicable thereafter have declared effective, a resale registration statement on Form S-3 (or any successor form).

Board of Directors; Board Observer:

For so long as the Purchaser or its affiliates owns at least 33.3% of the shares of Series A Preferred Stock originally issued to it or 50% of the shares of Common Stock issued to Purchaser or its affiliates upon conversion of the Series A Preferred Stock, the Purchaser shall have the right to nominate to the Board of Directors one individual to the Board of Directors. The size of the board will be increased as necessary to provide for the foregoing board seat, and the individual designated by the Purchaser will be appointed to the Board of Directors to occupy such seat. So long as the Purchaser is entitled to nominate one member to the Board of Directors, such nominee would have the right to be a member of each committee of the Board of Directors established from time to time, subject to the terms of applicable law. The Board of Directors shall take all necessary actions to cause the Purchaser nominee to be appointed to the Board of Directors.

If the Purchaser chooses not to exercise its right to nominate a member to the Board of Directors, the Purchaser shall have the right to designate one person as an observer, which person would have

the right to attend and participate in all meetings of, and receive all material distributed to, the Board of Directors, subject to customary exceptions. Observer rights extend to committees.

Closing Conditions:

The purchase of the Series A Preferred Stock would be subject to customary conditions to closing, including negotiation, execution and delivery of definitive agreements setting forth the foregoing terms and containing customary representations, warranties, covenants and conditions, including the receipt of any required governmental consents and approvals, the waiver by each executive officer of the right to receive replacements options pursuant to such executive officer’s severance agreements upon the consummation of the Merger and the execution of the Merger Agreement by each of the parties thereto.

Transferability:

The Series A Preferred Stock (and Common Stock and 14% Senior Notes issued upon conversion thereof) shall be freely transferable, subject to compliance with applicable securities laws.

Terms of the 14% Senior Notes

Issuer

The 14% Senior Notes shall be issued by the Company.

Guarantors

The 14% Senior Notes shall be guaranteed by the Company’s subsidiaries, other than BGE.

Interest Rate

The principal amount of the 14% Senior Notes shall accrue interest at an annual rate of 14%. During the continuance of an Event of Default, interest shall accrue at a rate 3% greater than otherwise applicable. Interest shall be payable monthly in cash.

Maturity Date

The 14% Senior Notes shall mature and be due and payable in full on the first anniversary of the original issuance date of the notes.

Ranking

The 14% Senior Notes shall rank pari passu with the senior most unsecured debt of the Company.

Covenants

The 14% Senior Notes will include negative covenants restricting the Company from incurring senior or pari passu debt and the Company’s subsidiaries from incurring any debt, or the Company or its subsidiaries from making restricted payments, engaging in

fundamental changes (i.e., mergers, sales of assets, etc.) and other customary restrictions; provided, however, that the Company may refinance debt maturing within 6 months and the Company’s subsidiaries may refinance existing debt, in each case, in principal amounts and at rankings not to exceed the existing principal amount or rankings of the debt refinanced and Baltimore Gas & Electric Company may issue new debt consistent with both its past practices and regulatory approvals. The 14% Senior Notes will include customary affirmative covenants like information covenants.

Events of Default

Customary events of default including a cross default on debt of the Company and its subsidiaries.

Change of Control Offer

Upon a change of control (other than resulting from the Merger (as defined below)), the Company shall be required to offer to purchase the Notes at 101% of the outstanding aggregate principal amount thereof plus any unaccrued but unpaid interest thereon.

Expenses and Indemnification

Customary provisions providing for reimbursement of expenses and indemnification of the Holder.

Governing Law and Jurisdiction

New York law and New York courts

MERGER AGREEMENT

Structure:

A wholly owned subsidiary of Purchaser shall merge with and into the Company with the Company as the surviving corporation (the “Merger”).

Merger Consideration:

$26.50 per share of Common Stock. All outstanding preferred stock of the Company, other than the Series A Preferred Stock, shall be redeemed upon the closing of the Merger.

Representations and Warranties:

The Merger Agreement will contain representations and warranties reasonably acceptable to Purchaser.

Closing Conditions:

The Merger Agreement will contain customary closing conditions reasonably acceptable to Purchaser. The Merger will not be subject to a financing condition. Closing conditions will include (i) the senior unsecured debt of the Company must be rated investment grade with no less than a stable outlook by ▇▇▇▇▇’▇, S&P and

Fitch, (ii) that as of the closing date the Purchaser would not be entitled to exercise the Limited Due Diligence Termination Right (assuming such right was exercisable as of the closing date, the determination period runs from the June 30, 2008 to the closing date and that an adverse net economic change in excess of $400 million shall be deemed to be material for purposes of the closing condition) and (iii) the absence of a material adverse effect.

Regulatory Approvals:

The Company and the Purchaser will agree to cooperate to obtain all required regulatory approvals; provided, however, that in no event shall the Purchaser or Company agree to, without the prior written consent of the other party (which consent may be withheld in such party’s sole discretion), (i) capital expenditures, (ii) rate reductions or (iii) actions otherwise, individually or in aggregate, having an adverse effect on either the Purchaser or the Company, in each case in excess of an amount deemed acceptable to the Purchaser in its reasonable discretion.

Non-Solicitation; Special Meeting

From and after the date of the Merger Agreement, the Company shall be bound by a non-solicitation/no shop clause reasonably acceptable to Purchaser. Therefore, if the Company receives an unsolicited bona-fide acquisition proposal (to be defined in the Merger Agreement) prior to obtaining stockholder approval for the Merger, which constitutes a Superior Proposal (to be defined in the Merger Agreement), the Company may engage in discussions with and share information with the proposing party. The Company shall promptly notify the Purchaser of the material terms of any such proposal (including the identity of the party making the proposal) and keep the Purchaser informed on a current basis as to any significant changes or developments with respect to any proposal or other written or oral inquiries.

The Company may not terminate the Merger Agreement in order to accept a Superior Proposal prior to the holding of the stockholder meeting to approve the Merger and the other transactions contemplated by the Merger Agreement.

Following a stockholder vote rejecting the Merger and assuming stockholder approval of the Merger has not been obtained, the Company may terminate the Merger Agreement in order to accept a Superior Proposal, but only if (i) the Company nor its representatives have breached the non-solicitation covenants, (ii) the Company has provided the Purchaser with 5-business days advance notice in writing of its intent to do so and such Superior Proposal remains a Superior Proposal at the end of such 5-business day period and (iii) the Company has paid the Termination Fee to the Purchaser.

The Company shall be required to call and hold a Special Stockholders Meeting as promptly as practicable following the execution of the Merger Agreement for the purposes of obtaining

stockholder approval of the Merger and the other transactions contemplated by the Merger Agreement. The Company shall file the preliminary proxy statement relating to the Special Stockholders Meeting as promptly as practicable (but in any event within 30 days) following the execution of the Merger Agreement.

Covenants:

The Company will agree to operating covenants during the pendency of the Merger Agreement reasonably acceptable to Purchaser, including a restriction on the payment of dividends and a prohibition on the issuance of capital stock.

D&O Indemnification; Insurance:

The Purchaser will agree to continue the indemnification and exculpation provisions currently contained in the Company’s articles of incorporation or bylaws and shall agree to continue the current D&O policy for the benefit of the Company’s officers and directors for a period of 6 years following the closing of the Merger; provided, however, that the Purchaser shall not be required to pay premiums in excess of 150% of the current premiums paid by the Company.

Termination Fee:

In consideration for the purchase of the Series A Preferred Stock and the execution of the Merger Agreement, in the event the Merger Agreement is terminated for any reason, including without limitation, upon a withdrawal of the Board’s recommendation of the transactions contemplated by the Merger Agreement, the occurrence of the drop dead date, a termination to accept a Superior Proposal, a breach of the Merger Agreement by the Company or otherwise, other than upon exercise of the Limited Due Diligence Termination Right or due to a breach of the agreement by the Purchaser, the Company shall pay a termination fee of $175 million to the Purchaser contemporaneously with the termination of the Merger Agreement.

Limited Due Diligence Termination Right:

For a period of 14 days following the later of the execution of the Merger Agreement and the date the Company and the Purchaser agree that the Purchaser and its representatives have been given full access to the Company’s books and records relating to the retail and wholesale businesses, trading records and appropriate personnel, the Purchaser shall have the right to terminate the Merger Agreement if the Purchaser determines, in its sole discretion, that since June 30, 2008 either the retail and/or wholesale businesses or assets have materially deteriorated. The parties agree that an adverse change in the net economic value of such businesses or assets in excess of $200 million shall be deemed to be material for purposes of the Limited Due Diligence Termination Right.

Non-Survival:

The representations and warranties shall not survive the closing of the Merger.

Remedies:

The Purchaser shall be entitled to seek specific performance of the Company’s obligations under the agreement. The Company’s sole and exclusive recourse against the Purchaser and its affiliates shall be limited to a right to offset against any obligations under the Series A Preferred Stock or the securities issuable upon conversion thereof.

Drop Dead Date

9 months following the execution of the Merger Agreement, which date may be extended by the Purchaser or the Company for up to 3 months.

Governing Law for Merger

Maryland